Department of Defense awards $177.6M contract for FMS DO FOR IRAQ, with AM GENERAL LLC as the sole provider

Contract Overview

Contract Amount: $177,628,923 ($177.6M)

Contractor: AM General LLC

Awarding Agency: Department of Defense

Start Date: 2017-09-13

End Date: 2020-03-06

Contract Duration: 905 days

Daily Burn Rate: $196.3K/day

Competition Type: NOT COMPETED

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: FMS DO FOR IRAQ

Place of Performance

Location: SOUTH BEND, ST JOSEPH County, INDIANA, 46617

State: Indiana Government Spending

Plain-Language Summary

Department of Defense obligated $177.6 million to AM GENERAL LLC for work described as: FMS DO FOR IRAQ Key points: 1. Contract awarded on a sole-source basis, raising questions about potential price overruns and lack of competitive pressure. 2. The contract duration of 905 days suggests a significant, ongoing need for these military vehicles. 3. The firm-fixed-price structure aims to control costs, but without competition, the baseline price may not be optimal. 4. Performance context is limited due to the sole-source nature, making direct comparisons difficult. 5. This contract falls within the Defense sector, specifically focusing on armored vehicle manufacturing. 6. The absence of small business set-asides indicates a focus on large prime contractors for this specialized requirement.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to its sole-source nature and the specific nature of military vehicle production for foreign military sales. Without competitive bids, it's difficult to ascertain if the $177.6 million represents a fair market price. The fixed-price contract type offers some cost certainty, but the lack of competition means taxpayers may not be receiving the best possible value. Further analysis would require access to internal cost data or comparable sole-source awards for similar specialized military equipment.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning it was not competed among multiple vendors. This typically occurs when only one vendor possesses the necessary capabilities, technology, or is the only approved source for a specific item. The lack of competition limits price discovery and may result in higher costs for the government compared to a fully competed contract. The rationale for sole-sourcing should be thoroughly documented to ensure it was justified.

Taxpayer Impact: Sole-source awards mean taxpayers do not benefit from the cost savings typically achieved through competitive bidding. This can lead to higher overall spending for the same goods or services.

Public Impact

The primary beneficiaries are the Iraqi armed forces, who will receive essential military armored vehicles. The contract delivers critical components and potentially complete armored vehicles necessary for military operations. The geographic impact is primarily in Indiana, where AM General LLC is located, supporting its manufacturing operations and workforce. Workforce implications include job retention and potential expansion at AM General's facilities, contributing to the skilled manufacturing labor in the region.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure, potentially leading to higher costs for taxpayers.
Lack of transparency in pricing due to no competitive bidding process.
Dependence on a single contractor for critical military hardware can pose supply chain risks.
Foreign Military Sales contracts can sometimes involve complex pricing structures and oversight challenges.

Positive Signals

Firm-fixed-price contract provides cost certainty for the awarded amount.
AM General LLC is an established manufacturer of military vehicles, suggesting technical capability.
Contract supports a foreign military partner, aligning with U.S. foreign policy and security objectives.

Sector Analysis

The defense industrial base, particularly the armored vehicle manufacturing sector, is characterized by high barriers to entry due to specialized technology, significant capital investment, and stringent regulatory requirements. Contracts like this are crucial for maintaining domestic manufacturing capabilities for essential military equipment. Spending in this sector is often driven by geopolitical needs and modernization programs. Comparable spending benchmarks would typically involve other large-scale contracts for armored vehicles or related defense systems, often awarded through competitive processes.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. The prime contractor, AM General LLC, is a large business. There is no explicit information provided regarding subcontracting plans for small businesses. Without specific subcontracting goals or reporting, the direct impact on the small business ecosystem for this particular contract is unclear, though large prime contractors often engage small businesses for component manufacturing or specialized services.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contracting and financial management oversight mechanisms. As a Foreign Military Sales (FMS) case, there may be additional oversight from the Defense Security Cooperation Agency (DSCA) and potentially the Department of State, depending on the specifics of the FMS agreement. Inspector General jurisdiction would apply to investigate fraud, waste, and abuse. Transparency is generally limited for sole-source defense contracts, especially those involving FMS.

Related Government Programs

Foreign Military Sales (FMS)
Armored Vehicle Procurement
Defense Manufacturing Contracts
Department of the Army Contracts
Military Armored Vehicle Manufacturing

Risk Flags

Sole-source award
Lack of competitive bidding
Potential for cost overruns
Limited transparency

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $177.6 million to AM GENERAL LLC. FMS DO FOR IRAQ

Who is the contractor on this award?

The obligated recipient is AM GENERAL LLC.

Which agency awarded this contract?

Awarding agency: Department of Defense (Department of the Army).

What is the total obligated amount?

The obligated amount is $177.6 million.

What is the period of performance?

Start: 2017-09-13. End: 2020-03-06.

What is the track record of AM General LLC in fulfilling similar defense contracts, particularly sole-source awards?

AM General LLC has a long history of producing military vehicles, most notably the High Mobility Multipurpose Wheeled Vehicle (HMMWV). They have been a significant supplier to the U.S. military and international partners. While specific details on their sole-source award track record are not publicly detailed in this data, their established position as a primary manufacturer of certain armored vehicles suggests they have experience navigating sole-source justifications. Past performance on large contracts, including those for foreign military sales, would be a key factor in assessing their reliability and capability. However, without access to detailed performance reviews or contract histories beyond this single award, a comprehensive assessment of their track record is limited.

How does the $177.6 million contract value compare to similar armored vehicle procurements, considering it's a sole-source award?

Direct comparison of this $177.6 million sole-source award to similar armored vehicle procurements is challenging. Sole-source contracts inherently lack the price discovery mechanism of competition, meaning the awarded price may not reflect the lowest possible market rate. To benchmark effectively, one would need to compare it against other sole-source awards for comparable vehicle types and quantities, or against competitively bid contracts for similar platforms, adjusting for differences in specifications, quantities, and contract duration. Given the specialized nature of military hardware and FMS requirements, prices can vary significantly. The absence of competitive bids means this figure should be viewed with caution regarding its value-for-money proposition.

What are the primary risks associated with a sole-source award for military hardware like armored vehicles?

The primary risks associated with a sole-source award for military hardware include potential for inflated pricing due to lack of competition, reduced incentive for the contractor to innovate or improve efficiency, and a potential lack of transparency in cost justification. There's also a strategic risk if the sole-source contractor faces production issues, financial instability, or geopolitical challenges, as there are no immediate alternative suppliers. For taxpayers, the risk is paying a premium for essential equipment. For the military end-user, the risk is potential delays or supply chain disruptions if the single source cannot meet demand or quality standards.

What is the significance of this contract within the broader context of U.S. foreign military sales and defense industrial base strategy?

This contract is significant as it represents a direct contribution to the military capabilities of a foreign partner (Iraq) through the U.S. Foreign Military Sales (FMS) program. FMS is a key tool of U.S. foreign policy, aimed at enhancing the security of allies and promoting interoperability. From a defense industrial base perspective, such contracts help sustain critical manufacturing capabilities within the U.S., supporting specialized jobs and technological expertise in sectors like armored vehicle production. It underscores the U.S. role in global security and its commitment to supporting partner nations' defense needs, while also bolstering the economic health of domestic defense contractors.

How does the contract duration (905 days) influence the assessment of its value and risk?

The contract duration of 905 days (approximately 2.5 years) indicates a substantial, long-term requirement for the specified military vehicles or components. For value assessment, a longer duration can sometimes allow for economies of scale in production and potentially lower per-unit costs if negotiated effectively. However, it also extends the period over which costs are incurred, increasing the overall financial commitment. From a risk perspective, a longer duration amplifies the risks associated with sole-sourcing; any issues with the contractor's performance, financial stability, or supply chain become more impactful over an extended period. It also means the government is locked into this specific solution for a considerable time, potentially missing out on newer technologies or more cost-effective alternatives that might emerge.

What are the implications of the 'FMS DO FOR IRAQ' designation for contract oversight and reporting?

The 'FMS DO FOR IRAQ' designation signifies that this contract is part of the Foreign Military Sales program, specifically for the benefit of Iraq. This means oversight and reporting may involve multiple U.S. government entities, including the Department of Defense (specifically the Army in this case), the Defense Security Cooperation Agency (DSCA), and potentially the Department of State. FMS cases often have specific financial reporting requirements and may be subject to congressional notification and oversight. The pricing and terms are negotiated to ensure they are fair to both the U.S. government and the partner nation, often aiming to recover U.S. government costs plus a small administrative fee. This designation also implies that the end-use of the equipment is intended for the Iraqi military, with associated end-use monitoring requirements.

Industry Classification

NAICS: Manufacturing › Other Transportation Equipment Manufacturing › Military Armored Vehicle, Tank, and Tank Component Manufacturing

Product/Service Code: MOTOR VEHICLES, CYCLES, TRAILERS

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Macandrews & Forbes Holdings Inc. (UEI: 878304849)

Address: 105 N NILES AVE, SOUTH BEND, IN, 46617

Business Categories: Category Business, Limited Liability Corporation, Manufacturer of Goods, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $246,069,266

Exercised Options: $177,628,923

Current Obligation: $177,628,923

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: W56HZV17D0071

IDV Type: IDC

Timeline