DoD's $9.6M engine procurement shows limited competition, raising value concerns

Contract Overview

Contract Amount: $9,607,982 ($9.6M)

Contractor: AM General LLC

Awarding Agency: Department of Defense

Start Date: 2025-04-15

End Date: 2026-06-30

Contract Duration: 441 days

Daily Burn Rate: $21.8K/day

Competition Type: NOT COMPETED

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: ENGINE,WITH CONTAIN NSN: 2815-01-439-8164 FOB ORIGIN 463 EA

Place of Performance

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

State: Indiana Government Spending

Plain-Language Summary

Department of Defense obligated $9.6 million to AM GENERAL LLC for work described as: ENGINE,WITH CONTAIN NSN: 2815-01-439-8164 FOB ORIGIN 463 EA Key points: 1. The contract's sole-source nature limits price discovery and potentially inflates costs. 2. Lack of competition suggests potential risks in contractor performance and innovation. 3. The fixed-price contract type offers some cost certainty but may not reflect true market value. 4. This procurement falls within the 'Other Engine Equipment Manufacturing' sector, indicating specialized needs. 5. The contract duration of 441 days is standard for this type of equipment delivery.

Value Assessment

Rating: questionable

The awarded price of $9.6 million for 463 engines averages to approximately $20,751 per unit. Without a competitive bidding process, it is difficult to benchmark this price against market rates or similar government contracts. The sole-source award raises concerns about whether the government secured the best possible value, as there was no direct comparison of offers. Further analysis would require access to historical pricing for similar engines or data from other agencies procuring comparable equipment.

Cost Per Unit: Approximately $20,751 per unit (463 units / $9,607,981.54)

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one vendor, AM General LLC, was solicited. This approach bypasses the standard competitive bidding process, which typically involves multiple vendors submitting proposals. While sole-source awards can be justified in specific circumstances (e.g., unique capabilities, urgent needs), they inherently limit price negotiation and comparison, potentially leading to higher costs for the government.

Taxpayer Impact: The lack of competition means taxpayers may be paying a premium, as there was no opportunity for multiple companies to bid and drive down the price through a competitive process.

Public Impact

The primary beneficiaries are the Department of Defense, which will receive essential engine components for its operations. The services delivered involve the supply of 463 specialized engines. The geographic impact is primarily within Indiana, where the contractor is located and potentially where the engines will be manufactured or shipped from. Workforce implications may include job retention or creation at AM General LLC and its supply chain partners in Indiana.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price discovery and potential cost savings.
Lack of competition may reduce incentives for contractor efficiency and innovation.
Absence of multiple bids makes it difficult to assess fair market value.
Potential for overpayment due to lack of competitive pressure.

Positive Signals

Fixed-price contract provides cost certainty for the government.
Contract specifies a clear delivery schedule, aiding in planning.
Award to a known entity (AM General LLC) may imply some level of established capability.

Sector Analysis

This contract falls under the 'Other Engine Equipment Manufacturing' industry (NAICS 333618). This sector is characterized by the production of engines and turbines, excluding aircraft and automotive engines. The market often involves specialized components for various industrial, military, and commercial applications. Government procurements in this area can be substantial, particularly for defense applications, but are often subject to stringent specifications and limited supplier bases, sometimes leading to less competitive environments.

Small Business Impact

This contract does not appear to have a small business set-aside (SS is false, SB is false). Therefore, there are no direct subcontracting requirements mandated for small businesses within this specific award. The impact on the small business ecosystem is indirect, as AM General LLC, the prime contractor, may or may not engage small businesses in its own supply chain for fulfilling this order.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contracting and procurement regulations, managed by the Defense Logistics Agency. Accountability measures are embedded in the contract terms, including delivery schedules and specifications. Transparency is limited due to the sole-source nature of the award. Inspector General jurisdiction would apply if any fraud, waste, or abuse is suspected.

Related Government Programs

Defense Logistics Agency Engine Procurement
Military Vehicle Component Contracts
Specialized Industrial Equipment Acquisition
Department of Defense Engine Supply Chain

Risk Flags

Sole-source award
Lack of competitive bidding
Potential for inflated pricing
Limited transparency in price discovery

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $9.6 million to AM GENERAL LLC. ENGINE,WITH CONTAIN NSN: 2815-01-439-8164 FOB ORIGIN 463 EA

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 $9.6 million.

What is the period of performance?

Start: 2025-04-15. End: 2026-06-30.

What is AM General LLC's track record with similar sole-source engine contracts awarded by the DoD?

AM General LLC has a long history of supplying vehicles and components to the U.S. military, including engines. While specific data on past sole-source engine contracts is not readily available in this dataset, their established relationship with the Department of Defense suggests a degree of familiarity and capability. However, the absence of competitive bidding in this instance means that direct comparisons of their pricing and performance on similar sole-source awards are difficult to ascertain without further investigation into historical contract data. It is crucial to examine if previous sole-source awards to AM General for comparable engines resulted in fair pricing and timely delivery to assess potential risks and value for this current contract.

How does the per-unit cost of these engines compare to market rates for similar commercial or military engines?

The per-unit cost of approximately $20,751 for these engines is difficult to benchmark definitively without knowing the exact specifications and intended use. Commercial engines of similar power output can range significantly in price, from tens of thousands to hundreds of thousands of dollars, depending on complexity, efficiency, and intended application. Military-grade engines often command a premium due to ruggedization, specialized performance requirements, and lower production volumes compared to commercial counterparts. Given the sole-source nature of this award, it's challenging to determine if this price reflects true market value or if a competitive process could have yielded a lower cost. Further research into publicly available pricing for comparable military engines or engines with similar technical specifications would be necessary for a more accurate comparison.

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

The primary risks associated with a sole-source award are a lack of price competition, which can lead to inflated costs for the government and taxpayers. Without multiple bids, there is less incentive for the contractor to offer the lowest possible price or to innovate to improve efficiency. Furthermore, reliance on a single source can create vulnerabilities in the supply chain; if the sole provider experiences production issues, delays, or quality problems, the government has limited alternative options. This can also reduce the government's leverage in negotiating terms and conditions, potentially impacting delivery schedules or warranty provisions. Finally, it raises questions about whether the government is truly obtaining the best value available in the market.

What is the historical spending pattern for 'Other Engine Equipment Manufacturing' by the Defense Logistics Agency?

Historical spending data for the 'Other Engine Equipment Manufacturing' category by the Defense Logistics Agency (DLA) would provide valuable context for this $9.6 million procurement. Analyzing past DLA spending in this sector can reveal trends in contract values, types of engines procured, and the prevalence of competitive versus sole-source awards. For instance, if the DLA typically awards numerous competitive contracts in this area with significantly lower per-unit costs, it would heighten concerns about the current sole-source award. Conversely, if sole-source awards are common due to specialized requirements or limited suppliers, it might suggest this procurement aligns with historical practices, though value concerns would still persist. Understanding the volume and average cost of similar procurements over several fiscal years is essential for assessing the reasonableness of this contract.

What are the implications of the 'IN' (Indiana) state code for this contract's performance and oversight?

The 'IN' state code indicates that the contract's origin or performance location is associated with Indiana. For this specific contract, it likely signifies that AM General LLC, the contractor, is based in Indiana, or that the engines will be manufactured or shipped from Indiana. This has implications for oversight, as the Defense Logistics Agency (DLA) may have regional contracting officers or personnel in Indiana responsible for monitoring contract performance, ensuring compliance with terms, and conducting site visits if necessary. It also suggests potential economic benefits for the state of Indiana through job creation and business activity related to this defense contract. However, the state code itself does not inherently alter the fundamental risks or value propositions of the contract, which are more directly influenced by its sole-source nature and pricing.

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: $9,607,982

Exercised Options: $9,607,982

Current Obligation: $9,607,982

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SPRDL124D0056

IDV Type: IDC

Timeline