DoD's $370M contract for speed changers awarded to Timken Gears & Services Inc. shows fair value

Contract Overview

Contract Amount: $369,503,423 ($369.5M)

Contractor: Timken Gears & Services Inc.

Awarding Agency: Department of Defense

Start Date: 2010-06-18

End Date: 2019-04-30

Contract Duration: 3,238 days

Daily Burn Rate: $114.1K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: MRG SHIPSET

Place of Performance

Location: KING OF PRUSSIA, MONTGOMERY County, PENNSYLVANIA, 19406

State: Pennsylvania Government Spending

Plain-Language Summary

Department of Defense obligated $369.5 million to TIMKEN GEARS & SERVICES INC. for work described as: MRG SHIPSET Key points: 1. The contract demonstrates a commitment to acquiring specialized industrial components essential for naval operations. 2. Competition dynamics appear healthy, with a full and open solicitation process. 3. Risk indicators are moderate, given the long duration and fixed-price nature of the contract. 4. Performance context suggests a need for reliable, high-speed drive systems within the Navy's fleet. 5. Sector positioning places this contract within the broader industrial manufacturing and defense support landscape.

Value Assessment

Rating: good

The contract's value appears reasonable when considering the specialized nature of high-speed industrial drives and gear manufacturing. While specific per-unit cost benchmarks are not readily available without more granular data, the total award amount of over $369 million for a nearly 9-year period suggests a consistent need and a negotiated price that likely reflects market conditions for such complex equipment. The firm fixed-price structure also provides cost certainty for the government, indicating a potentially good value proposition.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under a full and open competition, indicating that multiple bidders were likely considered. This competitive process is crucial for ensuring that the government receives the best possible pricing and quality for its procurements. The presence of multiple potential suppliers in the market for speed changers and related industrial drives suggests a healthy competitive environment.

Taxpayer Impact: A full and open competition generally leads to more competitive pricing, which benefits taxpayers by ensuring that government funds are used efficiently and effectively.

Public Impact

Naval operations benefit from the acquisition of critical components for maintaining and upgrading fleet readiness. The services delivered include the manufacturing and supply of specialized speed changers and industrial high-speed drives. Geographic impact is primarily centered around the contractor's facilities and naval bases receiving the equipment. Workforce implications include employment at Timken Gears & Services Inc. and its supply chain partners.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Long contract duration (over 9 years) could introduce risks related to technological obsolescence or changing operational requirements.
Firm fixed-price contracts can sometimes lead to less flexibility if unforeseen issues arise during production or delivery.
Reliance on a single contractor for a critical component could pose supply chain risks if not managed proactively.

Positive Signals

Full and open competition suggests a robust market and potential for competitive pricing.
The firm fixed-price contract provides cost certainty for the Department of Defense.
The sustained award over a long period indicates a consistent need and likely satisfaction with the contractor's performance.

Sector Analysis

This contract falls within the industrial machinery and equipment manufacturing sector, specifically focusing on high-speed drive systems and gear manufacturing. This is a critical sub-sector that supports various industrial applications, including defense. The market for such specialized components is often characterized by a limited number of highly capable manufacturers. Comparable spending benchmarks would typically involve other large-scale procurements of industrial equipment for defense or heavy industry, where significant investment is required for specialized, durable machinery.

Small Business Impact

There is no indication from the provided data that this contract included small business set-asides or specific subcontracting goals for small businesses. The nature of specialized industrial high-speed drive manufacturing often involves large, established companies with significant manufacturing capabilities. Further analysis would be needed to determine if small businesses were involved in the supply chain or as subcontractors.

Oversight & Accountability

The contract is managed by the Department of the Navy, a component of the Department of Defense. Oversight mechanisms would typically include contract administration, performance reviews, and quality assurance processes. Transparency is generally maintained through contract award databases and reporting requirements. Inspector General jurisdiction would apply to any allegations of fraud, waste, or abuse related to the contract.

Related Government Programs

Naval Ship Systems
Industrial Machinery Manufacturing
Defense Industrial Base
Propulsion Systems
Gear Manufacturing

Risk Flags

Long-term contract duration
Firm Fixed Price structure
Specialized industrial components

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $369.5 million to TIMKEN GEARS & SERVICES INC.. MRG SHIPSET

Who is the contractor on this award?

The obligated recipient is TIMKEN GEARS & SERVICES INC..

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $369.5 million.

What is the period of performance?

Start: 2010-06-18. End: 2019-04-30.

What is the historical spending pattern for speed changers and industrial high-speed drives by the Department of Defense?

Analyzing historical spending for speed changers and industrial high-speed drives by the Department of Defense (DoD) reveals a consistent requirement for these components, particularly within naval and aviation platforms. While this specific contract with Timken Gears & Services Inc. represents a significant single award, the DoD's overall expenditure in related machinery and equipment manufacturing is substantial, often spanning multiple years and various defense agencies. Historical data indicates that procurements in this category are driven by fleet modernization, maintenance, and the need for reliable, high-performance systems. The trend often shows a preference for long-term contracts with established manufacturers capable of meeting stringent military specifications. Without access to a comprehensive historical database of all such procurements, it's challenging to provide exact aggregate figures, but the nature of the equipment suggests ongoing, significant investment to ensure operational readiness and technological superiority.

How does the per-unit cost of these speed changers compare to similar commercial or industrial applications?

Determining the precise per-unit cost comparison for these specialized speed changers is challenging without detailed specifications and volume data. However, industrial high-speed drives and speed changers for defense applications are typically engineered to meet rigorous military standards for durability, performance under extreme conditions, and reliability, which often results in a higher cost compared to standard commercial or industrial equivalents. Factors such as specialized materials, advanced engineering, extensive testing, and compliance with strict quality control protocols contribute to the elevated price. While the total contract value is substantial, the long duration and the critical nature of the application suggest that the negotiated price likely reflects a balance between performance requirements and market competitiveness for such niche, high-specification equipment. Benchmarking against commercial products would require identifying functionally similar but less rigorously specified units.

What are the primary risks associated with a firm fixed-price contract of this duration?

A firm fixed-price (FFP) contract, especially one spanning over nine years like this one, presents several key risks. For the government, the primary risk is that the contractor may not be incentivized to control costs beyond what is necessary to meet the contract's minimum requirements, potentially leading to less innovation or efficiency gains if the initial price was set too high. Conversely, if unforeseen cost increases occur for the contractor (e.g., material price spikes, labor cost escalation), they bear the brunt of that risk, which could potentially lead to quality compromises or contractor financial distress if not adequately managed. For the contractor, the risk lies in accurately estimating all future costs over such a long period. Market fluctuations, technological advancements making the product less desirable, or changes in operational requirements could render the FFP terms unfavorable. Additionally, the long duration increases the possibility of scope creep or the need for contract modifications, which can complicate the FFP structure.

What is the track record of Timken Gears & Services Inc. in fulfilling large defense contracts?

Timken Gears & Services Inc., as part of The Timken Company, has a long-standing reputation in the industrial manufacturing sector, including providing components for demanding applications. While specific details on their track record with large defense contracts are not provided in this data snippet, The Timken Company is known for its expertise in engineered bearings and power transmission products. Their involvement in supplying critical components like speed changers suggests a capability to meet the stringent requirements of defense procurements. Companies operating in this space typically undergo rigorous vetting and performance evaluations by agencies like the Department of Defense. A contract of this magnitude and duration awarded under full and open competition implies that Timken Gears & Services Inc. likely demonstrated a strong technical capability, competitive pricing, and a reliable performance history to secure such a significant award.

How does the competition level for this contract influence price discovery and potential savings?

The fact that this contract was awarded under 'full and open competition' is a significant positive indicator for price discovery and potential taxpayer savings. This means that all responsible sources were permitted to submit a bid, fostering a competitive environment where multiple companies could vie for the contract. In such scenarios, bidders are incentivized to offer their most competitive pricing and best value propositions to win the award. This process typically leads to more efficient price discovery, as the market forces of supply and demand are allowed to operate freely. The presence of multiple bidders likely drove down the final negotiated price compared to what might have been achieved through a sole-source or limited competition. Therefore, the full and open competition strategy employed here is expected to have maximized potential savings for the government and, by extension, the taxpayers.

What are the implications of this contract for the broader defense industrial base?

This contract has several implications for the broader defense industrial base. Firstly, it signifies a continued demand for specialized industrial components within the defense sector, supporting manufacturers like Timken Gears & Services Inc. and their supply chains. Secondly, the award under full and open competition suggests a healthy market for these types of products, indicating that there are multiple capable suppliers who can meet the stringent requirements of defense procurements. This competition helps maintain a robust and resilient industrial base capable of supporting national security needs. Thirdly, the long-term nature of the contract provides a degree of stability and predictability for the awarded contractor and its associated workforce, contributing to the overall health and readiness of the defense manufacturing ecosystem. It also underscores the importance of advanced manufacturing capabilities within the U.S.

Industry Classification

NAICS: Manufacturing › Engine, Turbine, and Power Transmission Equipment Manufacturing › Speed Changer, Industrial High-Speed Drive, and Gear Manufacturing

Product/Service Code: SHIP AND MARINE EQUIPMENT

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: N0002410R2310

Offers Received: 2

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: THE Timken Company (UEI: 004465100)

Address: 901 EAST 8TH AVE STE 100, KING OF PRUSSIA, PA, 19406

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Manufacturer of Goods, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $369,503,423

Exercised Options: $369,503,423

Current Obligation: $369,503,423

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline