Awards Shift for Giant Military Support Contracts
Contracting giant KBR appears to be the big winner in the U.S. Army’s April 12 announcement of contractors for the latest Logistics Civil Augmentation Program (LOGCAP V) contract. with a ceiling of $82-billion, it covers logistics and construction support for the U.S. military and other agencies and entities globally for up to 10 years.
KBR gained contractor status in three regions, including Afghanistan, in what analysts say was an unexpected change that helped generate a 6% post-award stock boost for the firm.
Under the framework contract, from which firms gain work through individual task orders, KBR also will support European and North American commands.
In what appeared to surprise some analysts, Fluor Corp. was unsuccessful in retaining Afghanistan, held since 2008 and which analysts say had been one of its largest U.S. government contracts. In the new LOGCAP, analysts say Afghanistan support could generate about $1.4 billion in annual task orders for KBR.
Fluor was reselected as contractor for the Africa Command. Analyst Andrew Wittmann of Baird Equity Research speculated on revenue and earnings impacts for the firm in 2020, but others note its recent selection, along with five others, for a $975-million U.S. Navy “contingency”contract.
A Fluor spokesman did not confirm analyst and online speculation of a LOGCAP bid protest by the firm related to Afghanistan that could delay changes until year end.
DynCorp International, also an unsuccessful incumbent contractor in Afghanistan, reportedly filed a bid protest on April 24, according to Washington Technology, a defense services sector online publication.
AECOM is the second unsuccessful LOGCAP bidder, said the Colorado Springs Gazette
In a post-award report, Moody’s Investors Service said “for LOGCAP V, the Army prioritized past performance, proposal quality and capabilities ahead of price.”
Two new LOGCAP contractors also were selected. PAE and Parsons will support central and South America while Vectrus Systems gained two other contracts that Steven Fisher, construction analyst at investment firm UBS, says could generate about $1.4 billion in annual task orders.
The Gazette also said that Vectrus had held the Army's Kuwait-Base Operations and Security Support Services (K-BOSSS) contract, but it will be folded into the current LOGCAP contract.
K-BOSSS generated more than 40% of nearly $1.3 billion in revenue that the firm reported last year, the newspaper says.
Louis Berger Services, a unit of design firm WSP, announced that it is a key Vectrus subcontractor on its LOGCAP awards.