U.S. GAO affirms Army decision to skip vehicle prototype

(Adds BAE comment)

By Andrea Shalal

WASHINGTON, April 25 (Reuters) - The Government Accountability Office on Friday told lawmakers the U.S. Army made a "sound" decision when it decided to skip prototypes in a $6 billion competition for a new combat vehicle that was unsuccessfully challenged by General Dynamics Corp (NYSE: GD - news) .

The GAO, the investigative arm of Congress, said the Army had taken other actions to reduce cost and risk on the new vehicle program, including reducing requirements and opting to modify an existing vehicle.

General Dynamics says the terms of the competition favor the tracked Bradley Fighting Vehicle made by Britain's BAE Systems (LSE: BA.L - news) Plc over its wheeled Stryker (Berlin: SYK.BE - news) vehicle, but the Army earlier this month rejected a protest filed by General Dynamics.

The GAO agency is required by law to review any Pentagon decision to waive a 2009 federal law that is aimed at saving money and time by requiring competitive prototypes before work starts on any new major weapons programs.

In this case, GAO said, the Army had concluded that it would cost between $198 million to $341 million to build up to six vehicle prototypes and would add 19 to 31 months to the program's schedule while generating no benefits.

The Pentagon notified Congress last November that it had waived the prototyping requirement for the Army's Armored Multi-Purpose Vehicle (AMPV) program due to "excessive cost," triggering a mandatory review by GAO.

GAO said that in justifying the lack of prototypes, the Army and Pentagon cited market research that found the requirements for the new vehicle could be met by modifying existing combat vehicles with mission packages that had already been fielded and prototyped.

The agency said it reviewed the Army's cost-benefit analysis and found it be consistent with Pentagon guidelines. It said the Army could have more fully evaluated the potential benefits of reducing development risks through prototyping but that its decision to skip prototypes for the new vehicle appeared sound.

General Dynamics spokesman Pete Keating said the GAO report provided further evidence that the Army wanted to use the BAE vehicle and was not open to other entrants.

"This is clear evidence that the competition and requirements are structured in such a way that ... we could not compete," Keating said. He said the Army had also rebuffed General Dynamics' efforts to obtain data on the Bradley vehicles so it could produce its own modified version.

Several lawmakers who back General Dynamics have said they hope to draft legislation that would require the Army to buy a mixed fleet of modified Bradley and Stryker vehicles for the new armored combat vehicle program.

Brian Roehrkasse, spokesman for BAE Systems, said the GAO report was consistent with the Army's statements that it plans to select a single vendor for development of the new vehicle.

"Clearly the Army expects the offerings to compete on their substantiated performance and values the importance of a low risk, cost effective solution that meets the Army's critical survivability requirements," he said.

(Reporting by Andrea Shalal; Editing by Steve Orlofsky and Andrew Hay)