DoD awards $35.3M for 160 Allison transmissions, raising questions about competition and value

Contract Overview

Contract Amount: $35,284,616 ($35.3M)

Contractor: Allison Transmission Inc

Awarding Agency: Department of Defense

Start Date: 2019-10-30

End Date: 2023-09-07

Contract Duration: 1,408 days

Daily Burn Rate: $25.1K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: THIS IS THE AWARD FOR 160 TRANSMISSIONS

Place of Performance

Location: INDIANAPOLIS, MARION County, INDIANA, 46222

State: Indiana Government Spending

Plain-Language Summary

Department of Defense obligated $35.3 million to ALLISON TRANSMISSION INC for work described as: THIS IS THE AWARD FOR 160 TRANSMISSIONS Key points: 1. Contract awarded on a sole-source basis, limiting price discovery and potentially increasing costs. 2. High per-unit cost suggests a need for benchmarking against similar defense vehicle parts. 3. Lack of competition indicates potential risks related to contractor performance and innovation. 4. Long contract duration (1408 days) may not align with evolving military vehicle needs. 5. Awarded to a single supplier, raising concerns about market concentration for critical components. 6. No small business set-aside, indicating limited opportunities for smaller firms in this procurement.

Value Assessment

Rating: questionable

The award of $35.3 million for 160 transmissions, averaging approximately $220,528 per unit, appears high when compared to commercial market rates for similar heavy-duty transmissions. Without a competitive bidding process, it is difficult to ascertain if this price represents fair market value. The Defense Logistics Agency (DLA) should provide justification for the sole-source award and demonstrate how value for money was ensured, especially given the significant investment.

Cost Per Unit: Approximately $220,528 per unit. This figure should be benchmarked against commercial equivalents and other government contracts for similar heavy-duty transmissions to assess value.

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 bypasses the standard competitive bidding process, which typically involves multiple bidders vying for the contract. While sole-source awards can be justified in specific circumstances (e.g., unique capabilities, urgent needs), they inherently limit price discovery and can lead to higher costs for the government.

Taxpayer Impact: The lack of competition means taxpayers may not be benefiting from the most competitive pricing achievable through an open market process. This could result in a higher overall expenditure for these essential transmission units.

Public Impact

Military vehicle readiness is enhanced through the provision of critical transmission components. The Department of Defense, specifically units utilizing vehicles equipped with these transmissions, will benefit from operational continuity. The primary geographic impact is within military installations and operational theaters where these vehicles are deployed. This contract supports the manufacturing and supply chain jobs associated with Allison Transmission Inc.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing and value for taxpayers.
High per-unit cost warrants further investigation and benchmarking.
Lack of competition may reduce incentives for contractor efficiency and innovation.
Long contract duration could lead to obsolescence or misalignment with future needs.
No small business participation noted, potentially excluding smaller firms from contributing.

Positive Signals

Ensures availability of critical components for military vehicle fleet.
Award to established manufacturer suggests reliability of supply.
Definitive contract provides a clear framework for delivery and payment.

Sector Analysis

This contract falls within the "Motor Vehicle Transmission and Power Train Parts Manufacturing" sector (NAICS 336350). This industry is characterized by specialized manufacturing processes and often involves long-standing relationships between suppliers and major vehicle manufacturers, including defense contractors. The market for heavy-duty transmissions, particularly those meeting stringent military specifications, can be concentrated among a few key players. Benchmarking against industry standards for similar components is crucial for assessing cost-effectiveness.

Small Business Impact

This contract was not awarded as a small business set-aside, and the data indicates the prime contractor is not a small business. There is no explicit mention of subcontracting plans for small businesses within the provided data. This suggests that opportunities for small businesses to participate in this specific procurement are likely limited, potentially missing out on the economic benefits that subcontracting can provide to the small business ecosystem.

Oversight & Accountability

Oversight for this contract would typically fall under the purview of the Defense Contract Management Agency (DCMA) and the Defense Contract Audit Agency (DCAA), ensuring compliance with contract terms and financial regulations. The Defense Logistics Agency (DLA) is responsible for the overall management and execution of the contract. Transparency regarding the justification for the sole-source award and the pricing structure would enhance accountability.

Related Government Programs

Department of Defense Vehicle Procurement
Defense Logistics Agency Parts and Components
Military Vehicle Maintenance and Sustainment
Heavy-Duty Transmission Manufacturing

Risk Flags

Sole-source award
High per-unit cost
Lack of competition
Long contract duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $35.3 million to ALLISON TRANSMISSION INC. THIS IS THE AWARD FOR 160 TRANSMISSIONS

Who is the contractor on this award?

The obligated recipient is ALLISON TRANSMISSION INC.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $35.3 million.

What is the period of performance?

Start: 2019-10-30. End: 2023-09-07.

What is the specific justification provided by the Defense Logistics Agency for awarding this contract on a sole-source basis to Allison Transmission Inc.?

The provided data indicates the contract was 'NOT COMPETED,' signifying a sole-source award. Typically, sole-source justifications are required when only one responsible source is available or when a compelling urgency dictates that the government cannot obtain supplies or services through competitive methods. Reasons can include unique technical capabilities, proprietary technology, or the unavailability of alternatives that meet stringent military specifications. The DLA would need to have documented these specific circumstances, likely involving a Justification and Approval (J&A) document, to legally award the contract without competition. Without access to this J&A, the precise rationale remains unconfirmed, but it would center on the inability to fulfill the requirement competitively.

How does the per-unit cost of approximately $220,528 compare to commercial heavy-duty transmissions or similar military contracts?

The per-unit cost of approximately $220,528 for these Allison transmissions is significantly higher than typical commercial heavy-duty transmissions, which can range from $10,000 to $50,000 depending on specifications and application. While military-grade components often incur higher costs due to specialized requirements, durability, and testing, this substantial difference warrants a detailed value analysis. Benchmarking against other government contracts for similar military vehicle transmissions, or against sole-source awards for specialized defense components, would be necessary to determine if this price is justifiable within the defense procurement landscape. The lack of competition exacerbates concerns about this high unit price.

What are the potential risks associated with awarding a contract of this magnitude and duration on a sole-source basis?

Awarding a contract for $35.3 million over a period of 1408 days (nearly four years) on a sole-source basis presents several risks. Firstly, the absence of competition can lead to inflated pricing, as the contractor faces no pressure to offer the most cost-effective solution. Secondly, it can reduce incentives for the contractor to innovate or improve efficiency, as they are guaranteed the business. Thirdly, there's a risk of vendor lock-in, making it difficult and costly to switch suppliers in the future. Finally, without competitive benchmarking, the government may overpay for the goods received, and the long duration might not align with evolving technological needs or vehicle upgrades.

What is the historical spending pattern for Allison Transmission Inc. with the Department of Defense or Defense Logistics Agency for similar components?

To assess historical spending, one would need to query federal procurement databases (like FPDS or USASpending) for contracts awarded to Allison Transmission Inc. by the DoD and DLA. Analyzing past awards for transmissions, particularly for the specific vehicle platforms these units are intended for, would reveal trends in pricing, contract types (competed vs. sole-source), and award volumes. A history of sole-source awards for similar items might indicate a consistent reliance on this supplier due to specific requirements. Conversely, a pattern of competitive awards would make this recent sole-source decision more notable and potentially raise more questions about its justification.

Does the contract's 'IN' status for Indiana indicate a specific manufacturing location or a broader regional impact?

The 'IN' status likely refers to the state of Indiana, indicating that the contractor, Allison Transmission Inc., has a significant presence or manufacturing facility there. This suggests that the economic impact of this contract, in terms of jobs and investment, is primarily concentrated within Indiana. While the end-users of the transmissions will be Department of Defense entities across various locations, the direct benefits related to production and supply chain activities are geographically tied to Indiana. This is common for large manufacturing contracts where the prime contractor's operational base dictates the primary location of work.

Industry Classification

NAICS: Manufacturing › Motor Vehicle Parts Manufacturing › Motor Vehicle Transmission and Power Train Parts Manufacturing

Product/Service Code: VEHICULAR EQUIPMENT COMPONENTS

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: SPRDL118R0519

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Allison Transmission Holdings, Inc.

Address: ONE ALLISON WAY, INDIANAPOLIS, IN, 46222

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: $35,284,616

Exercised Options: $35,284,616

Current Obligation: $35,284,616

Actual Outlays: $16,442,012

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline