DoD's $168M Allison Transmission contract for fluid power components awarded without competition

Contract Overview

Contract Amount: $167,917,914 ($167.9M)

Contractor: Allison Transmission, Inc.

Awarding Agency: Department of Defense

Start Date: 2000-12-28

End Date: 2011-09-30

Contract Duration: 3,928 days

Daily Burn Rate: $42.7K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIXED PRICE REDETERMINATION

Sector: Defense

Place of Performance

Location: INDIANAPOLIS, MARION County, INDIANA, 46222

State: Indiana Government Spending

Plain-Language Summary

Department of Defense obligated $167.9 million to ALLISON TRANSMISSION, INC. for work described as: Key points: 1. Contract awarded on a fixed-price redetermination basis, suggesting potential for cost fluctuations. 2. Long contract duration of over 10 years indicates a sustained need for these components. 3. The absence of competition raises questions about price discovery and potential overpayment. 4. The contract's value is significant within the specialized manufacturing sector for fluid power components. 5. Focus on valve and hose fittings points to critical, potentially sole-source, sub-component needs.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to the lack of publicly available comparable data for specialized fluid power components awarded under similar terms. The fixed-price redetermination structure introduces uncertainty in the final cost. Without competitive bids, it's difficult to assess if the pricing reflects fair market value or if taxpayers received the best possible deal. The long duration and significant dollar amount warrant scrutiny regarding cost efficiency over the contract's life.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one vendor, Allison Transmission, Inc., was solicited. This approach is typically justified when a unique product or service is required, or when only one responsible source exists. However, the lack of competition limits the government's ability to explore alternative solutions or negotiate more favorable terms, potentially leading to higher costs.

Taxpayer Impact: Sole-source awards mean taxpayers do not benefit from the price reductions typically driven by competitive bidding processes. This can result in higher overall expenditure for the required components.

Public Impact

The Department of the Army benefits from a sustained supply of critical fluid power components for its operations. This contract supports the manufacturing sector, specifically in the production of specialized valves and hose fittings. The contract's impact is primarily within Indiana, where Allison Transmission, Inc. is located, potentially supporting local jobs. The defense industrial base benefits from the continued production of essential components for military equipment.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to inflated prices.
Fixed-price redetermination can obscure true costs.
Long contract duration increases exposure to potential cost overruns.
Limited transparency in sole-source award justification.

Positive Signals

Ensures a consistent supply of critical components for defense needs.
Supports a known manufacturer with a track record in the defense sector.
Contract provides long-term planning stability for the supplier.

Sector Analysis

The market for fluid power components, particularly specialized ones for defense applications, is often characterized by a limited number of highly capable manufacturers. Allison Transmission, Inc. is a known entity in this space. While the overall market size for fluid power components is substantial, contracts for highly specific military-grade parts can operate as niche markets. This contract fits within the broader industrial manufacturing sector, specifically supporting defense supply chains.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb: false'. Furthermore, there is no explicit mention of subcontracting plans for small businesses. This suggests that the primary awardee is expected to fulfill the contract requirements directly, potentially limiting opportunities for small businesses to participate in this specific procurement.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Defense's contracting and financial management oversight mechanisms. Given its long duration and sole-source nature, regular reviews of performance and cost justification would be expected. Inspector General involvement could be triggered by allegations of fraud, waste, or abuse. Transparency is limited by the sole-source award, but reporting requirements for contract performance should still be in place.

Related Government Programs

Defense Logistics Agency (DLA) procurement of industrial components
Army vehicle and equipment sustainment contracts
Manufacturing support for military hardware
Specialized component sourcing for defense systems

Risk Flags

Lack of Competition
Long Contract Duration
Fixed-Price Redetermination Pricing

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $167.9 million to ALLISON TRANSMISSION, INC.. See the official description on USAspending.

Who is the contractor on this award?

The obligated recipient is ALLISON TRANSMISSION, INC..

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $167.9 million.

What is the period of performance?

Start: 2000-12-28. End: 2011-09-30.

What is the historical spending pattern for Allison Transmission, Inc. with the Department of Defense for similar fluid power components?

Analyzing historical spending for Allison Transmission, Inc. with the Department of Defense reveals a long-standing relationship. Prior to this $168 million contract, the company likely received numerous awards for transmission and related components. Without specific data on prior contracts for fluid power valves and hose fittings, it's difficult to establish a precise trend. However, Allison Transmission's established presence in the defense sector suggests consistent, albeit potentially varied in scope and value, engagements over the years. Further investigation into specific contract vehicles and award histories would be needed to quantify historical spending patterns and identify any significant shifts in procurement focus or value.

How does the fixed-price redetermination pricing structure typically impact cost certainty for the government compared to other contract types?

The fixed-price redetermination (FPR) pricing structure offers a unique balance between cost certainty and flexibility. Initially, a target price is set, and the contractor is reimbursed based on actual costs incurred, plus a fee. However, after a specified period or milestone, the price is 'redetermined' to a final fixed price based on the actual costs. This structure provides more flexibility for the contractor when costs are uncertain, potentially encouraging participation in high-risk projects. For the government, it offers some initial cost control but less certainty than a firm fixed-price (FFP) contract. The final price could be higher or lower than the initial target, making long-term budget forecasting more challenging compared to FFP. It's generally considered less cost-certain for the buyer than FFP but more flexible for the seller than FFP.

What are the primary risks associated with a sole-source award of this magnitude and duration?

A sole-source award of this magnitude ($168 million) and duration (over 10 years) carries significant risks. The most prominent risk is the lack of price competition, which can lead to the government paying a premium above fair market value. Without competing bids, there's less incentive for the contractor to offer the lowest possible price. Another risk is potential complacency; the contractor may face less pressure to innovate or improve efficiency since there's no direct competitor vying for future business. Furthermore, the long duration increases exposure to potential cost overruns if the initial pricing assumptions are inaccurate or if unforeseen market changes occur. There's also a risk of vendor lock-in, making it difficult and costly to switch suppliers even if performance or pricing becomes unsatisfactory.

What specific types of fluid power valves and hose fittings are likely covered under this contract, and why might they be considered sole-source?

The contract specifies 'Fluid Power Valve and Hose Fitting Manufacturing.' These components are critical for hydraulic and pneumatic systems used in various military platforms, such as vehicles, aircraft, and heavy equipment. They are likely specialized, high-performance parts designed to withstand extreme conditions (temperature, pressure, vibration) and meet stringent military specifications. Such components might be considered sole-source due to proprietary designs, unique manufacturing processes, or specific integration requirements with existing platforms where only one manufacturer possesses the necessary technical data, tooling, or certifications. For instance, a specific valve might be designed to interface precisely with a particular transmission or control system, making alternatives infeasible without significant redesign.

What are the implications for the defense industrial base when a critical component contract is awarded non-competitively?

Non-competitive awards for critical components can have mixed implications for the defense industrial base. On one hand, they ensure a stable supply chain for essential parts, supporting the operational readiness of military forces and the financial health of the awarded contractor. This stability can be crucial for maintaining specialized manufacturing capabilities. However, a pattern of non-competitive awards can stifle innovation and competition within the broader industrial base. It may discourage new entrants or smaller firms from developing competing technologies or processes, potentially leading to a less resilient and more expensive supply chain in the long run. It also concentrates critical capabilities within fewer firms, increasing systemic risk if that firm encounters difficulties.

Industry Classification

NAICS: Manufacturing › Other Fabricated Metal Product Manufacturing › Fluid Power Valve and Hose Fitting Manufacturing

Product/Service Code: VEHICULAR EQUIPMENT COMPONENTS

Competition & Pricing

Extent Competed: NOT COMPETED

Offers Received: 1

Pricing Type: FIXED PRICE REDETERMINATION (A)

Contractor Details

Parent Company: Allison Transmission Inc (UEI: 804407463)

Address: 4700 W 10TH ST, INDIANAPOLIS, IN, 46222

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $371,283,346

Exercised Options: $371,286,957

Current Obligation: $167,917,914

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline