$7 Billion Recompete Of Joint Light Tactical Vehicle Headed For Holiday-Season Award

If all goes according to plan, December 22 of this year will set the stage for a memorable holiday season in the nation’s military truck sector.

That’s the day the Army says it will award a contract for future production of the Joint Light Tactical Vehicle, a lightweight truck program first awarded to Oshkosh Corporation in 2015.

Unlike previous such vehicles, JLTV was designed to combine the protection of a light tank with the speed of a Baja racer, enabling it to keep up with heavy armored vehicles in the heat of battle.

That is quite a departure from the venerable jeep of World War Two vintage, from which JLTV is descended.

Prior to the global war on terror, the light tactical vehicles developed for the Army and Marine Corps seemed more like evolved versions of the jeep than vehicles suitable for carrying the fight to the enemy.

But combat in Southwest Asia revealed two big changes in the way future war might be conducted. First, the notion of front lines and rear areas largely disappeared in the fluid environment of counter-insurgency warfare. Second, adversaries began using improvised explosive devices that no conventional light vehicle could withstand.

JLTV was a response to these developments, a more heavily armored truck that could traverse virtually any terrain with ease while carrying more payload than previous such vehicles.

The basic idea was to create a modular system in four variants that could be easily equipped in diverse configurations depending on mission, and two different levels of armoring depending on what tactical circumstances dictated.

Oshkosh, a contributor to my think tank, won the initial competition in part because its offering proved to be six times more reliable than the next-closest entry.

The win was hardly unexpected: since securing its first truck contract from the Army in 1976, the Wisconsin-based company had gradually grown to become the dominant U.S. provider of heavy and medium tactical vehicles by consistently out-performing rivals on price and performance.

The JLTV win conferred a near-monopoly of military truck production on Oshkosh, and the company lived up to expectations by keeping production on schedule while delivering the vehicles and their trailers for 17% less than the Army had estimated would be the cost per vehicle.

However, it was always understood that the production contract would eventually be recompeted; Oshkosh committed at the outset to licensing its design so that rivals could compete on a level playing field.

So now that competition is underway. A solicitation was issued to industry in February, and final bids must be submitted by July 15. December 22 is the currently-planned date for announcing the winner that will receive a contract worth up to $7.3 billion for production through 2032.

This may well be the biggest tactical vehicle award of the current decade, and at least one other company—AM General—has signaled its intention to compete.

AM General is the builder of the lighter and less protected Humvee that JLTV was conceived to replace.

It now looks like Humvee will remain in the joint force for many years to come, but the Army plans to buy 50,000 JLTVs for its own use and up to 15,000 for the Marine Corps. In addition, seven or more overseas allies are expected to buy the heavier vehicle.

Contracts worth $7 billion do not come along very often in the trucking business, and Oshkosh has taken numerous steps to position itself for success in the recompete.

One such step was the unveiling of a diesel-electric JLTV hybrid in January that enables the vehicle to run on lithium-ion batteries when necessary without losing any mobility.

The electric JLTV would consume 20% less fuel than the conventional version, and would recharge its batteries off the diesel engine in 30 minutes, thus eliminating the need for battlefield charging infrastructure. It would be much quieter than other tactical vehicles whether moving or stationary, and could export up to 115 kilowatts of power for other purposes.

The irony is that the Army hasn’t even requested an electric version of JLTV for the recompete. Oshkosh’s move illustrates how competition encourages companies to innovate as a way of protecting their franchises.

Unlike other prospective competitors, Oshkosh builds a wide array of trucks and other heavy equipment for civil and commercial uses—everything fire trucks to concrete mixers to wreckers. It assembles JLTV on an integrated assembly line that exploits the fungibility of skills required to turn out diverse vehicles.

In order to displace Oshkosh from its incumbency on JLTV, a challenger would need convince the Army it can build the same vehicle for significantly less money, since the service seems to be happy with JLTV in its baseline configuration.

Army reviewers might look favorably on some new features such as driver-assist technology, but fundamentally the recompete is about whether companies like AM General can surpass Oshkosh in the efficiency with which they produce tens of thousands of light tactical vehicles.

That is a steep road to climb since any challenger would need to facilitize for production and assemble a reliable supply chain—steps Oshkosh has already taken.

If a company like General Motors Defense elected to compete, it might invest heavily in order to bring its offering to a level of parity with that of the incumbent. However, GM has not signaled a clear intent to play and it would have to weigh the potential returns from JLTV against all the other bets it is currently making.

Oshkosh at the moment looks to be the frontrunner, not only because the Army likes the product it is getting but also because challengers do not have a similar track record attesting to their ability to perform.

The company has other military-vehicle opportunities waiting in the wings, but JLTV is the must-win that defines the future of its defense unit.