I did stay at a Holiday Inn Express last night. Seriously, as a retired civilian employee of the military I can assure you this isn't as silly as it appears, largely because these reporters don't explain the whole story. I wasn't in the contracting business, but I was occasionally exposed to various purchasing actions. Most likely this is a development contract.
First, I won't address requests for proposals, bidding and such that settled on GM vs. Ford or whatever. When the buyer said they wanted an SUV meeting a set of criteria, I'm sure no one had an off-the-shelf model that would match up. GM won by convincing the buyer that their vehicle could be modified best. The $36M is mostly to design the changes. The 10 vehicles are low-rate limited to proof out the changes, performance, safety standards, emissions, documentation, components, maintenance, and who knows what else it would take to make a certifiable street legal vehicle that meets the buyer's criteria. I'd bet the contract has options to buy hundreds more at a much lower price if the buying agency is satisfied with the first ten.
I could be wrong, but that's my take.