Read before Apr 15 Wayne
Defense Acquisitions: Army Purchased Truck Trailers That Cannot be Used
as Planned (Letter Report, 10/27/1999, GAO/NSIAD-00-15).
Pursuant to a congressional request, GAO provided information on the
Army's purchase of the High Mobility Trailers, focusing on the: (1)
factors leading to the substantial increase in the contract unit price
of the trailers; (2) reasons the trailers cannot be used as planned and
the cost to the Army for required modifications; and (3) Army's
acquisition strategy and plans to procure additional trailers.
GAO noted that: (1) the Army has paid a much higher unit price for the
High Mobility Trailers than it originally expected primarily because it
awarded a $50.6 million, 5-year, multiyear contract to produce 7,563
trailers and then decided not to fund the fourth year of the contract;
(2) a program official said that the Army did not fund the fourth year
of the contract because of other higher funding priorities; (3) rather
than cancel the final 2 years of the contract, the Army and the
contractor agreed to a restructured contract; (4) the restructured
contract reduced annual production quantities; extended production a
year; and increased the price of each cargo trailer by 57 percent, from
$6,710 to $10,521, and each chassis trailer by 50 percent, from $3,560
to $5,334; (5) the increase in the unit price was attributed primarily
to spreading overhead costs over fewer units, allowing for higher labor
and material costs, and an increase in the contractor's profit
percentage; (6) most of the 6,700 High Mobility Trailers the Army has
purchased are: (a) not usable because of a safety problem; and (b) not
suitable because they damage the light and heavy trucks towing them; (7)
in addition to damaging the truck, the Army found that the trailer
drawbar could break, causing a safety problem; (8) if it breaks, the
trailer can disconnect from the truck or overturn; (9) to make the
trailers usable and suitable, the Army needs to make two modifications
to the trailers and one modification to each type of truck; (10) it has
identified a trailer modification that will cost an additional $640 for
each trailer and a truck modification that will cost an additional $250
for each heavy truck; (11) the Army's acquisition strategy
underestimated the risks; (12) the Army, based on its belief that only
minor modifications to an existing trailer design were required, entered
into a multiyear production contract without demonstrating that the
design would meet its requirements; (13) further, the contract required
the contractor to design, produce, and deliver trailers within 150 days
of contract award; (14) the Army subsequently found that the contractor
could not meet the contract's original delivery schedule, the trailers
initially did not pass testing, and initial trailer design required
significant modifications; (15) it plans to award a competitively bid,
5-year requirements contract sometime after fiscal year 2002 begins to
acquire 18,412 more High Mobility Trailers; and (16) the Army is in the
early stages of planning for this contract and has not worked out many
of the details.
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