WASHINGTON (Reuters) - Oshkosh Corp shares fell more than 11 percent on Monday after a U.S. watchdog recommended the Pentagon reevaluate a contract for the company to build trucks for the Army.
The Government Accountability Office (GAO) reversed the Defense Department by upholding separate protests by rivals BAE Systems Plc and Navistar International Corp.
Navistar shares rose 5 percent on the New York Stock Exchange while BAE shares closed up 1.14 percent on the London Stock Exchange. Oshkosh shares fell $4.64 to close at $36.32.
The investigative arm of Congress found the challenge was valid in key areas of procurement practice, but did not recommend a new bid on the contract for up to 23,000 trucks and support equipment valued by analysts at about $2 billion.
"Our review of the record led us to conclude that the Army's evaluation was flawed," Michael Golden, the GAO's managing associate general counsel for procurement, said in a statement.
The GAO recommended that the Army reevaluate the selection and terminate the contract only if Oshkosh is found "to not offer the best value."
Oshkosh chief executive Robert Bohn said the decision focused on two issues: Oshkosh's production capabilities and Navistar's past performance.
"We believe that when these narrow issues are reconsidered, the Army's decision to award Oshkosh Corporation the (contract) will be maintained," Bohn said in a statement.
Oshkosh said it would move forward with the truck program, which includes a new paint facility.
Jim McAleese, a defense consultant, said the GAO report effectively left Oshkosh with the lowest offer and a "technically acceptable" truck proposal.
But the Army still has to decide how to address the matter. It has 60 days to respond to the GAO findings that did not recommend one bid over another.
Oshkosh was awarded the contract in August and the protests were lodged the following month on technical issues and pricing.
BAE builds the current mid-size truck in Sealy, Texas, plant and said it was pleased with the GAO results.
"We look forward to reviewing the full GAO report and its recommendations so we can fully consider the implications for our business and our options for moving forward," said Bob Murphy, BAE Systems Land & Armaments unit.
Archie Massicotte, president of Navistar Defense, said the company welcomed the decision and would "wait for further direction from the Army" on what may be required to move forward.
(Reporting by John Crawley; editing by Gunna Dickson and Andre Grenon)