Army's $82B LOGCAP V awards reset defense services landscape

The Army’s award of its potential $82 billion “LOGCAP V” contract on Friday for global logistics and professional services certainly has high potential of reshaping the defense services market’s landscape.

Early indications are in that two of the four awardees are shaping up as the main beneficiaries of these awards by a wide margin, even when just looking at the initial batch of task orders.

As a recap from Friday: KBR, Vectrus, Fluor and a PAE-Parsons joint venture won positions on LOGCAP V out of six total bidders. The initial task orders to start this iteration of the Logistics Civil Augmentation Program contract are worth almost $3.5 billion combined to all awardees.

Fluor is an incumbent on the current LOGCAP IV contract. One other incumbent in DynCorp International missed out entirely on an award. Analysts are fairly certain that AECOM was the other bidder, and that a post-award protest from a disappointed competitor after the Army debriefs all is likely given the contract’s size and scope.

Bruce Herskovics, a senior analyst at Moody’s Investors Service, said in a statement that although the “final outcome is somewhat uncertain and existing LOGCAP IV will continue into 2020,” the new awards have certainly “re-ordered the defense contingency market.”

That reshaping of this particular piece of the government market owes to how the Army made this iteration of its LOGCAP vehicle different from the past.

For LOGCAP V, the Army made one award per regional command and a seventh standalone award for Afghanistan. That approach and growth in awardees was intended to help create more longer-term work for industry that includes both participation in planning processes and training exercises.

That is a different approach from LOGCAP IV, which has been heavily dependent on combat or other contingency operations like those in Iraq and Afghanistan. Task orders for the three awardees slowed down after withdrawals of forces from both regions.

KBR was chosen for Northern and European Commands plus Afghanistan. Vectrus was selected for Pacific Command and Central Command. Herskovics wrote those two companies appear to be the big winners for LOGCAP V given they were “named to the most desirable, high work flow regions.”

KBR’s initial task orders to begin LOGCAP V are valued at almost $1.9 billion while Vectrus’ first set is worth around $1.4 billion, according to a set of FedBizOpps award notices posted Friday.

Vectrus’ contract for base support services to the Army in Kuwait was rolled into LOGCAP V as a task order, so they got to bid on the contract vehicle as an incumbent. That so-called “K-BOSSS” contract was around 40 percent of Vectrus’ revenue last year. In LOGCAP V, Vectrus will also gain work in Iraq that will transition to them from KBR, Cowen & Co.’s government services analyst Lucy Guo wrote in a Monday research note.

Fluor was selected for Africa Command -- which Herskovics wrote is “historically a very low work flow region” – and was awarded an initial $137.2 million task order. The PAE-Parsons venture was chosen for Southern Command and awarded an initial $34.6 million task order.