An excellent report.
For Army, a clash over supply, demand
Contractors stymied amid shortage of armored vehicles
By Ross Kerber, Boston Globe Staff | December 30, 2004
Tom Briggs was surprised to hear Defense Secretary Donald Rumsfeld cite capacity constraints to explain the shortage of vehicle armor in Iraq.
Briggs is vice president of Protective Armored Systems Inc. in Lee, which has made 16,000 bulletproof windows for Army Humvees and is waiting for more contracts. Like other armor executives who say they've got idled capacity, Briggs said he's been frustrated by the slow pace of Army orders.
"You watch the evening news and Rumsfeld says you can't get the people to do the work, and that's not true," Briggs said.
Such complaints have put heat on the Army to explain itself, in the wake of Rumsfeld's Dec. 8 statement that the work was going as fast as possible.
Yet Army officials say they don't need the help. Instead they have set up a $4.1 billion armor industry that's a mix of federal weapons depots and a few big privately owned factories. So far this empire has sent 15,263 armored Humvees and armor kits to Iraq and Afghanistan, or 69 percent of the total needed. By July it is scheduled to deliver armor for most transport vehicles in the region as well.
"It's a big success story that, frankly, the guys have gotten a bum rap on," said Gary Motsek, a senior civilian executive at the Army Materiel Command at Fort Belvoir, Va., which oversees the production.
The two competing views on the Army's procurement strategy, from both the insiders and contractors like Briggs, will be at the center of congressional hearings next year. "The question, and it's a legitimate one when it comes to protecting our troops, is: Why not enlist everyone who could contribute to a solution and make it happen now?" said Jim Ludes, a defense aide to Senator John F. Kerry, a Massachusetts Democrat.
The starting point in the debate, Ludes and Motsek agree, are two key decisions Army officials made in mid-2003 and stuck with since. The first was a decision to keep orders within a network of current suppliers rather than bring new contractors into the mix.
This is known as "sole-sourcing," and led to a massive boost of orders for a few companies, notably Armor Holdings Inc. of Jacksonville, Fla.
The company's O'Gara-Hess unit produces what are known as "up-armored" Humvees, which add more than a ton of bulletproof windows and steel plating to the basic Humvee made by AM General LLC of South Bend, Ind. Before the war began, O'Gara-Hess was making 30 up-armored Humvees a month, mostly for military policing duties and scouting. As of December it had vastly expanded its factory near Cincinnati and was producing 450 of the trucks per month. In all there were 5,910 in Iraq by mid-December, approaching the total of 8,105 that commanders want.
New suppliers might have set up additional large factories to armor Humvees too, but the Army passed. For one thing, the service hasn't purchased from O'Gara-Hess the design data that would make it easier for another contractor to set up a factory. Smaller companies are left with the business of supplying components, not complete vehicles.
"For better or worse, it has made it more difficult for the Army to go to alternate sources," said Marc A. King, vice president for armor operations of Ceradyne Inc. of Costa Mesa, Calif., which supplies ceramic body armor plates and some kits for vehicles.
Army officials say it made sense to stay with O'Gara-Hess at the time since the total number of up-armored Humvees that Central Command thought it needed rose slowly, as the insurgency worsened, to 8,105 today from 1,407. Until recently it seemed O'Gara-Hess could produce all the trucks before other factories would be ready, Army officials say.
"Every time we get close to the duck as he's flying and we're catching up and we're trying to get a lead on him, the thing's upped," Army Chief of Staff Peter J. Schoomaker told Congress on Nov. 17.
In hindsight, the production plans may have been the wrong call, said Robert F. Mecredy, head of Armor Holdings' defense group. "If in the spring of 2003 someone would have told me we need 10,000 or 20,000 of these things, they probably would have taken a different approach," he said.
As roadside bombs and ambushes took a toll on US troops last year, the Army also decided it needed armor kits to add to Humvees and transport trucks already fielded.
That led to the second key decision, to send out much of this work to maintenance depots and arsenals in places like Watervliet, N.Y.
Known as the "Ground Systems Industrial Enterprise," this network had made 9,135 of the armor kits as of Dec. 13, covering 67 percent of the Humvees already in the theater. Frederick Smith, who directs the depot system from Rock Island, Ill., said the biggest constraint is tight supplies of items like bulletproof steel.
Hiring private contractors would have taken months just to sign contracts, said Smith and others, whereas the depots were cranking out some armor kits within three weeks. That was just what planners hoped when they funded the depots during the Cold War, to provide an industrial "surge" capacity in wartime.
All the central planning hasn't sat well with some who believe the private sector could do the work better, or at least provide competition to make the depots more efficient. As long as the depots can count on getting the Army's surges, companies have few incentives prepared to make armor quickly, critics fear.
"I wish there was a better way to inject competition in the work that goes to the depots," said Kenneth D. Beeks, vice president for policy at a trade group in Washington, Business Executives for National Security.
Others suspect the Army will cite the armoring work to defend the facilities next year during a base-closure review known as the BRAC. Army officials say they've hardly ignored private companies. Subcontractors like Protective Armored Systems in Lee make more than 50 key components for the armoring effort.
Also, the private sector's ideas don't always work out: Of the 207 new armor systems companies have proposed to the Army since last year, just 10 or so passed tests to see whether they could stop both bullets and bombs, said Motsek, the Army materiel command executive.
Commentators like Mark Shields of CNN have compared the Army's performance unfavorably to the industrial output of the World War II era, a time of massive conversions of American factories to produce tanks, planes, and bombs.
Pierre Chao, a former financial analyst now studying the defense industry at the Center for Strategic & International Studies, a Washington think tank, said the comparison is flawed because it took years for the country's factories to spin up against the Nazi threat.
Still, Chao said, "The lesson the Humvee issue has brought out is that sitting in DC in a planning office, you can't imagine everything that will come up. So you need a system rapid enough to spool for things you can't imagine."
That there are still unarmored vehicles in Iraq, he said, shows "we haven't got a system that can react that fast."
Ross Kerber can be reached at kerber@globe.com.
© Copyright 2004 The New York Times Company
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