DoD awards $14.8M for engine components, raising questions about competition and value

Contract Overview

Contract Amount: $14,837,380 ($14.8M)

Contractor: AM General LLC

Awarding Agency: Department of Defense

Start Date: 2024-11-15

End Date: 2026-03-31

Contract Duration: 501 days

Daily Burn Rate: $29.6K/day

Competition Type: NOT COMPETED

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: DELIVERY ORDER TO ADD 715 EA NSN:2815-01-439-8164

Place of Performance

Location: SOUTH BEND, ST JOSEPH County, INDIANA, 46628

State: Indiana Government Spending

Plain-Language Summary

Department of Defense obligated $14.8 million to AM GENERAL LLC for work described as: DELIVERY ORDER TO ADD 715 EA NSN:2815-01-439-8164 Key points: 1. Contract awarded on a sole-source basis, limiting price discovery and potentially increasing costs. 2. High unit cost for engine components suggests a need for further benchmarking. 3. Limited competition raises concerns about contractor performance incentives. 4. Contract duration extends over 1.5 years, indicating a significant commitment of resources. 5. The award falls within the 'Other Engine Equipment Manufacturing' sector, a niche area. 6. No small business set-aside was utilized, potentially impacting small business participation.

Value Assessment

Rating: questionable

The per-unit cost for these engine components appears high when compared to similar defense procurements for parts of this nature. While specific benchmarking data is limited without more granular NSN details, the total award value for 715 units suggests a significant price per item. Further analysis is needed to determine if this pricing reflects market rates or if it represents a premium due to the sole-source nature of the award and specialized requirements.

Cost Per Unit: Approximately $20,751 per unit (calculated from $14,837,379.70 / 715 units). This figure requires further benchmarking against comparable NSNs and contract types.

Competition Analysis

Competition Level: sole-source

This contract was awarded using a sole-source justification, meaning only one vendor, AM General LLC, was solicited. This approach bypasses the competitive bidding process, which typically drives down prices and encourages innovation. Without competition, there is less pressure on the contractor to offer the most cost-effective solution, and the government may not be receiving the best possible value.

Taxpayer Impact: Taxpayers may be paying a premium for these engine components due to the lack of competitive bidding. The absence of multiple offers means the government could not leverage market forces to secure a lower price.

Public Impact

The Department of Defense benefits from the acquisition of critical engine components for its fleet. This contract supports the operational readiness of military vehicles requiring these specific parts. The primary geographic impact is within the defense supply chain, potentially supporting maintenance facilities. Workforce implications are likely concentrated within AM General LLC's manufacturing and logistics operations.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure, potentially leading to higher costs.
High unit cost warrants further investigation into pricing benchmarks.
Lack of transparency in the sole-source justification process.
Extended contract duration could lock in potentially unfavorable pricing.

Positive Signals

AM General LLC is an established supplier with a track record in defense contracting.
The contract ensures the supply of essential components for military readiness.
Firm Fixed Price contract type provides cost certainty for the government.

Sector Analysis

This contract falls under the 'Other Engine Equipment Manufacturing' sector, which is a specialized segment within the broader industrial manufacturing landscape. The defense industry relies heavily on specialized component manufacturers like AM General LLC to maintain its vast fleet of vehicles and equipment. Comparable spending benchmarks for such niche defense components are often difficult to ascertain publicly due to proprietary information and the unique nature of military specifications. However, the overall defense industrial base represents a significant portion of federal procurement spending.

Small Business Impact

This contract was not awarded as a small business set-aside, nor does it appear to have specific subcontracting requirements for small businesses mentioned in the provided data. This means that opportunities for small businesses to participate in this specific procurement are limited. The focus is on the prime contractor, AM General LLC, which is a large business. The impact on the small business ecosystem for this particular award is therefore minimal, unless AM General LLC voluntarily engages small businesses in its supply chain.

Oversight & Accountability

Oversight for this contract will be managed by the Defense Logistics Agency (DLA), a key component of the Department of Defense responsible for logistics support. Accountability measures are inherent in the Firm Fixed Price contract type, which obligates the contractor to deliver the specified goods at the agreed-upon price. Transparency is limited due to the sole-source nature of the award. The Inspector General of the Department of Defense would have jurisdiction to investigate any potential fraud, waste, or abuse related to this contract.

Related Government Programs

Defense Logistics Agency Procurement
Military Vehicle Component Procurement
Engine and Engine Parts Manufacturing
Sole-Source Defense Contracts

Risk Flags

Sole-source award
High unit cost
Lack of competition

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $14.8 million to AM GENERAL LLC. DELIVERY ORDER TO ADD 715 EA NSN:2815-01-439-8164

Who is the contractor on this award?

The obligated recipient is AM GENERAL LLC.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $14.8 million.

What is the period of performance?

Start: 2024-11-15. End: 2026-03-31.

What is AM General LLC's track record with the Department of Defense, particularly concerning sole-source awards for engine components?

AM General LLC has a long-standing relationship with the Department of Defense, primarily known for its production of the HMMWV (Humvee). Their track record includes numerous contracts for vehicle manufacturing, maintenance, and parts. While specific data on their sole-source awards for engine components is not detailed here, their established position as a key defense contractor suggests a history of fulfilling such requirements. However, the reliance on sole-source awards, especially for recurring needs, can sometimes indicate a lack of competitive alternatives or a strategic decision to maintain a specific supplier relationship, which warrants scrutiny regarding long-term cost-effectiveness and potential for price escalation.

How does the per-unit cost of these engine components compare to similar items procured competitively by the DoD?

The calculated per-unit cost of approximately $20,751 for these engine components is a significant figure that necessitates comparison with competitively procured items. Without the specific National Stock Number (NSN) and detailed specifications, a direct like-for-like comparison is challenging. However, general benchmarks for specialized defense components can vary widely. If similar, less specialized engine parts are procured competitively, they might range from a few hundred to several thousand dollars per unit. The high cost here could be attributed to the specialized nature of the NSN, the specific performance requirements, or the premium associated with a sole-source award. Further investigation into the NSN's technical data sheet and market research reports would be crucial for a definitive value assessment.

What are the primary risks associated with awarding this contract on a sole-source basis?

The primary risks associated with this sole-source award include potential overpayment due to the absence of competitive pricing, reduced incentive for the contractor to innovate or improve efficiency, and a lack of transparency in the procurement process. Taxpayers may bear a higher cost than if the contract had been competed. Furthermore, over-reliance on a single supplier can create vulnerabilities in the supply chain if the contractor faces production issues or goes out of business. It also limits the government's ability to explore alternative technologies or suppliers that might offer better value or performance in the long run.

What is the expected impact of this contract on the operational readiness of the military assets it supports?

This contract is expected to positively impact operational readiness by ensuring the availability of critical engine components. These parts are essential for the maintenance and repair of military vehicles, directly contributing to their ability to function effectively in various operational environments. By securing a supply of these components, the Department of Defense can mitigate the risk of equipment downtime due to part shortages, thereby maintaining the readiness of its fleet. The timely delivery, as indicated by the contract's end date, is crucial for sustaining ongoing maintenance schedules and responding to emergent repair needs.

Are there historical spending patterns with AM General LLC for this specific NSN or similar components that indicate a trend in pricing or competition?

Analyzing historical spending patterns for this specific NSN (2815-01-439-8164) with AM General LLC would provide valuable context. If previous awards for this NSN were also sole-source and at similar or higher price points, it might suggest a consistent pricing strategy or a lack of viable alternatives. Conversely, if past procurements were competed and resulted in lower prices, it would highlight the potential cost disadvantage of the current sole-source award. Without access to historical contract data for this specific NSN, it's difficult to establish definitive trends. However, the current award's sole-source nature suggests a deviation from a potentially more competitive past or a deliberate choice to maintain a specific supplier relationship.

Industry Classification

NAICS: Manufacturing › Engine, Turbine, and Power Transmission Equipment Manufacturing › Other Engine Equipment Manufacturing

Product/Service Code: ENGINES AND TURBINES AND COMPONENT

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 5448 DYLAN DR, SOUTH BEND, IN, 46628

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: $14,837,380

Exercised Options: $14,837,380

Current Obligation: $14,837,380

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SPRDL124D0056

IDV Type: IDC

Timeline