"Will it survive sequestration?" For the Army's Armored Multi-Purpose Vehicle, or AMPR, this question has often been met with doubt. But, on Nov. 26, the Army released the final performance specifications for the AMPR's engineering and manufacturing development phase, or EMD. Considering this contract could be worth billions, this is good news for General Dynamics (NYSE:GD) or BAE Systems (LSE:BA).
Bradley vs. Stryker
Since the Vietnam era, the Army has relied on the M113 as one of its most widely used armored multi-purpose vehicles. Unfortunately, the M113 is now old and outdated, and the Army is looking to replace it with the new AMPR. To be more specific, over 13 years, the Army wants to purchase 2,907 new AMPRs at $1.8 million apiece. As such, the purchase price alone could be around $5.2 billion.
The next phase of development is the EMD phase, which is where the Army will award $458 million to one contractor, which will then build 29 prototypes that the Army can test. Following that, the Army will award one contractor the three-year low-rate initial production, or LRIP, contract, worth an estimated $1.68 billion. Following a successful LRIP, full-rate production of the AMPR will begin. More importantly, only one defense contractor can take home the final prize. Consequently, according to Defense News, "BAE is offering a variant of its turretless Bradley, while General Dynamics is offering either its wheeled double V-hull Stryker, or a newer tracked version of the Stryker."
What to watch
The Army said it plans to award the AMPR EMD contract in May, but there have been a number of delays on this program. Still, the Army said it's committed to procuring a new AMDR. That's great news for either General Dynamics or BAE, because the AMPR is a very lucrative contract, and whoever wins will see a welcome boost to its bottom line. Right now it's too early to predict a winner, as both contractors have significant experience when it comes to armored personnel carriers. Consequently, this is something investors should keep a close eye on.
Fool contributor Katie Spence has no position in any stocks mentioned. Follow her on Twitter: @TMFKSpence. The Motley Fool owns shares of General Dynamics. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.