DoD's $35M Vertical Turning Center contract awarded to PIETRO CARNAGHI USA INC shows strong competition

Contract Overview

Contract Amount: $35,151,176 ($35.2M)

Contractor: Pietro Carnaghi USA Inc

Awarding Agency: Department of Defense

Start Date: 2020-04-28

End Date: 2025-10-27

Contract Duration: 2,008 days

Daily Burn Rate: $17.5K/day

Competition Type: FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES

Number of Offers Received: 2

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: 8507282902!VERTICAL TURNING CENTER

Place of Performance

Location: ROCKFORD, WINNEBAGO County, ILLINOIS, 61109

State: Illinois Government Spending

Plain-Language Summary

Department of Defense obligated $35.2 million to PIETRO CARNAGHI USA INC for work described as: 8507282902!VERTICAL TURNING CENTER Key points: 1. The contract value of $35M appears reasonable given the specialized nature of vertical turning centers. 2. Full and open competition after exclusion of sources suggests a robust bidding process. 3. The contract duration of over 2000 days indicates a long-term need for this equipment. 4. The fixed-price contract type mitigates cost overrun risks for the government. 5. The award to PIETRO CARNAGHI USA INC suggests they are a key supplier in this niche market. 6. The North American Industry Classification System (NAICS) code 333517 points to machine tool manufacturing, a critical industrial capability.

Value Assessment

Rating: good

The contract value of approximately $35 million for a vertical turning center is substantial, reflecting the high cost of specialized industrial machinery. Benchmarking against similar large-scale machine tool procurements would be necessary for a precise value-for-money assessment. However, the firm fixed-price nature of the contract provides cost certainty to the government, which is a positive indicator. The duration of the contract (over 2000 days) suggests a significant investment and a long-term operational requirement.

Cost Per Unit: N/A

Competition Analysis

Competition Level: limited

The contract was awarded under 'FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES.' This indicates that while the competition was intended to be broad, certain sources were initially excluded, and then the remaining sources competed. The fact that there were two bidders suggests a degree of competition, but the exclusion of sources might limit the full potential for price discovery. Further details on the reasons for exclusion would clarify the competitive landscape.

Taxpayer Impact: The limited competition, even after an initial exclusion phase, may mean that taxpayers did not benefit from the lowest possible price that could have been achieved through a completely open and unrestricted bidding process.

Public Impact

This contract directly benefits the Department of Defense by providing essential machinery for manufacturing and maintenance operations. The vertical turning center will likely be used for producing or refurbishing critical components for military equipment. The geographic impact is centered in Illinois, where PIETRO CARNAGHI USA INC is located, potentially supporting local manufacturing jobs. The acquisition of advanced manufacturing equipment can enhance the U.S. industrial base's readiness and technological capabilities.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for limited competition due to initial exclusion of sources, impacting price optimization.
Long contract duration could lead to obsolescence if technology advances rapidly.
Reliance on a single supplier for a critical piece of equipment could pose supply chain risks.

Positive Signals

Firm fixed-price contract type minimizes the risk of cost overruns for the government.
Award to an established manufacturer suggests a high likelihood of successful delivery and performance.
The contract supports the U.S. industrial base and advanced manufacturing capabilities.

Sector Analysis

The machine tool manufacturing sector is a cornerstone of industrial economies, producing the equipment used to create a vast array of goods. This contract falls within the specialized segment of large, industrial machinery, specifically vertical turning centers, which are crucial for heavy manufacturing, aerospace, and defense applications. The market for such specialized equipment is often characterized by a limited number of highly capable manufacturers. Spending in this area by defense agencies is critical for maintaining and modernizing military hardware and supporting the defense industrial base.

Small Business Impact

The data indicates that small business participation (ss: false, sb: false) was not a primary focus or requirement for this specific contract. There is no indication of a small business set-aside. Therefore, the direct impact on small businesses through this contract is likely minimal, unless PIETRO CARNAGHI USA INC engages them as subcontractors, which is not specified in the provided data.

Oversight & Accountability

Oversight for this contract would typically be managed by the Defense Contract Management Agency (DCMA) and the Defense Contract Audit Agency (DCAA), ensuring compliance with contract terms and financial accountability. The firm fixed-price nature simplifies some aspects of financial oversight. Transparency is generally maintained through contract databases like FPDS-NG. Inspector General investigations could be initiated if any fraud, waste, or abuse is suspected.

Related Government Programs

Defense Manufacturing Equipment Procurement
Industrial Base Modernization Programs
Heavy Machinery Acquisition
DoD Supply Chain Management

Risk Flags

Potential for limited competition due to initial source exclusion.
Long-term contract duration may pose obsolescence risk.
Contractor financial viability over the contract term.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $35.2 million to PIETRO CARNAGHI USA INC. 8507282902!VERTICAL TURNING CENTER

Who is the contractor on this award?

The obligated recipient is PIETRO CARNAGHI USA INC.

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Logistics Agency).

What is the total obligated amount?

The obligated amount is $35.2 million.

What is the period of performance?

Start: 2020-04-28. End: 2025-10-27.

What is the typical lifespan and technological relevance of a vertical turning center procured by the DoD?

The typical lifespan of industrial machinery like vertical turning centers can range from 15 to 30 years or more, depending on maintenance, usage, and technological advancements. For the DoD, the relevance is tied to its ability to support the production and maintenance of critical defense components. While the core functionality of turning and facing operations remains constant, advancements in automation, control systems (CNC), tooling, and precision capabilities can significantly impact efficiency and output. The DoD's procurement strategy often balances acquiring state-of-the-art technology with ensuring long-term supportability and avoiding rapid obsolescence. Contracts with durations exceeding 2000 days (over 5 years) suggest an expectation of sustained relevance, possibly through upgrades or by focusing on fundamental, enduring manufacturing needs.

How does the 'FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES' contracting method compare to standard full and open competition?

Standard 'full and open competition' requires the government to provide all responsible prospective contractors an opportunity to submit proposals on a fair and equal basis. 'Full and open competition after exclusion of sources' is a variation where the agency initially excludes certain sources (e.g., due to specific requirements, past performance issues, or national security concerns) and then opens the competition to the remaining sources. This method aims to balance competition with specific agency needs or risk mitigation. While it allows for more bidders than a sole-source or limited competition, it is inherently less competitive than a truly unrestricted full and open process. The effectiveness and fairness depend heavily on the justification for the initial exclusion of sources.

What are the potential risks associated with a firm fixed-price contract for specialized machinery like this?

While firm fixed-price (FFP) contracts are generally favored for cost control, they can present risks for highly specialized or complex procurements. For the contractor, if the actual costs of production significantly exceed their estimates (due to unforeseen technical challenges, material price increases, or labor issues), their profit margin will be squeezed, potentially leading to financial distress or even default. For the government, if the initial price estimate was too high or if the contractor underestimated costs, the government might end up paying more than necessary compared to a cost-reimbursement contract where savings are shared. In this specific case, with a $35M contract and a duration of over 2000 days, the contractor bears substantial risk for cost fluctuations over the contract period.

What is the significance of the NAICS code 333517 (Machine Tool Manufacturing) in the context of this contract?

The North American Industry Classification System (NAICS) code 333517 specifically identifies establishments primarily engaged in manufacturing metalworking machine tools, including machine tools for machining metal or other materials, such as lathes, milling machines, grinding machines, and boring machines. A vertical turning center, like the one procured, falls squarely within this category. This code signifies that the contractor is a specialized manufacturer within the industrial equipment sector. For the DoD, procuring from this sector ensures access to the foundational equipment necessary for maintaining and advancing its manufacturing capabilities, which are critical for defense readiness and the broader industrial base.

How does the award value of $35M compare to typical spending on similar specialized industrial equipment by the DoD?

The award value of approximately $35 million for a single vertical turning center, especially one likely incorporating advanced capabilities for defense applications, is substantial but not necessarily out of line for high-end industrial capital equipment. Large, complex machine tools, particularly those with custom specifications or advanced automation required by sectors like aerospace and defense, can easily cost millions of dollars each. Multi-unit procurements or contracts encompassing installation, training, and long-term support can push total values into the tens of millions. Without specific benchmarks for comparable DoD procurements of similar scale and complexity, it's difficult to definitively state if $35M represents overpayment or excellent value, but it aligns with the high-cost nature of such specialized assets.

Industry Classification

NAICS: Manufacturing › Metalworking Machinery Manufacturing › Machine Tool Manufacturing

Product/Service Code: METALWORKING MACHINERY

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: SPE4A819R0003

Offers Received: 2

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 3445 PYRAMID DR, ROCKFORD, IL, 61109

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

Financial Breakdown

Contract Ceiling: $35,151,176

Exercised Options: $35,151,176

Current Obligation: $35,151,176

Actual Outlays: $19,156,393

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline