DoD's $1.77B armored vehicle contract to Honeywell raises questions on competition and value

Contract Overview

Contract Amount: $1,773,472,789 ($1.8B)

Contractor: Honeywell International Inc.

Awarding Agency: Department of Defense

Start Date: 2005-12-16

End Date: 2022-08-31

Contract Duration: 6,102 days

Daily Burn Rate: $290.6K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Place of Performance

Location: PHOENIX, MARICOPA County, ARIZONA, 85034

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $1.77 billion to HONEYWELL INTERNATIONAL INC. for work described as: Key points: 1. Significant long-term spending on a critical defense component. 2. Sole-source award suggests limited market exploration. 3. Extended contract duration may indicate potential for cost overruns. 4. Firm Fixed Price contract type offers some cost certainty. 5. Lack of competition could impact price discovery and value for money. 6. Geographic concentration in Arizona for a major defense contract.

Value Assessment

Rating: questionable

The contract's value is difficult to benchmark due to its sole-source nature and long duration. While a firm fixed price offers some predictability, the absence of competitive bidding means there's no clear market comparison to assess if the pricing is optimal. The total obligated amount of $1.77 billion over nearly 17 years warrants scrutiny to ensure it aligns with evolving military needs and technological advancements. Without competitive pressure, there's a risk that costs may not be as efficiently managed as they could be in a more open market.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning it was not competed. This approach is typically used when only one responsible source can provide the required supplies or services. The lack of competition means that potential alternative suppliers or innovative solutions were not explored, which can limit price discovery and potentially lead to higher costs for the government. The rationale for the sole-source award would need to be thoroughly documented to justify the absence of a competitive process.

Taxpayer Impact: Taxpayers may be paying a premium due to the lack of competitive bidding. Without multiple offers, the government has less leverage to negotiate the best possible price, potentially leading to less efficient use of public funds.

Public Impact

Benefits the Department of Defense by providing essential armored vehicle components. Ensures the continued operation and maintenance of critical military hardware. Supports manufacturing and related jobs within Arizona. Contributes to the readiness and operational capability of the U.S. Army.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure, potentially inflating costs.
Long contract duration (over 16 years) increases risk of price escalation and obsolescence.
Lack of transparency in the sole-source justification.
Potential for contractor lock-in due to specialized nature of components.
Limited opportunities for small businesses to participate in subcontracting.

Positive Signals

Firm Fixed Price contract provides cost certainty for the government.
Long-term commitment ensures supply chain stability for critical defense needs.
Honeywell's established track record in defense manufacturing.
Contract supports domestic manufacturing and jobs in Arizona.

Sector Analysis

This contract falls within the Defense Industrial Base sector, specifically focusing on the manufacturing of military vehicles and their components. The market for such specialized defense manufacturing is often characterized by high barriers to entry, significant R&D investment, and a limited number of qualified suppliers. Spending in this category is critical for national security, but the nature of sole-source awards can make direct spending comparisons challenging. Benchmarking would typically involve analyzing historical spending on similar platforms or components, adjusted for inflation and technological changes.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. Furthermore, the 'ss': false flag suggests it's not a small business prime contractor. This means that opportunities for small businesses would primarily exist as subcontractors to Honeywell. The sole-source nature of the award may limit the visibility and accessibility of these subcontracting opportunities, potentially impacting the broader small business defense ecosystem.

Oversight & Accountability

Oversight for this contract would primarily reside with the Department of Defense's contracting officers and program managers. The Inspector General's office may conduct audits or investigations into the contract's performance, cost, and compliance. Transparency is limited due to the sole-source nature, but contract awards and modifications are typically reported in federal databases. Accountability relies on the DoD's ability to monitor performance and enforce contract terms.

Related Government Programs

Military Armored Vehicle Manufacturing
Defense Procurement
Army Vehicle Sustainment
Heavy Equipment Manufacturing
Sole-Source Defense Contracts

Risk Flags

Sole-source award
Long contract duration
Lack of competition
Potential for cost overruns
Limited transparency

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $1.77 billion to HONEYWELL INTERNATIONAL INC.. See the official description on USAspending.

Who is the contractor on this award?

The obligated recipient is HONEYWELL INTERNATIONAL INC..

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $1.77 billion.

What is the period of performance?

Start: 2005-12-16. End: 2022-08-31.

What is Honeywell International Inc.'s track record with similar sole-source defense contracts?

Honeywell International Inc. has a long history of supplying components and systems to the U.S. military across various platforms. While specific details on all sole-source contracts are not publicly itemized, their extensive portfolio includes work on aircraft systems, engines, and other defense-related technologies. The company's experience suggests a capacity to meet complex defense requirements. However, the nature of sole-source awards means that direct comparisons of their pricing and performance against competitive bids for similar sole-source contracts are difficult to ascertain without detailed internal DoD evaluations. The government relies on past performance reviews and audits to ensure value and quality in such long-term relationships.

How does the $1.77 billion total obligated amount compare to similar armored vehicle component contracts?

Direct comparison of the $1.77 billion obligated amount for this sole-source contract to similar armored vehicle component contracts is challenging due to the unique nature of sole-source awards and the specific components involved. Typically, competitive contracts allow for direct benchmarking of price per unit or total project cost against multiple bids. In this case, without competitive bids, it's difficult to definitively state if this amount represents optimal value. The long duration (over 16 years) also means the total obligated amount is spread over a significant period, making it distinct from shorter-term, competitively bid contracts for similar, albeit potentially less comprehensive, needs. Analysis would require comparing the scope, quantity, and technological sophistication of the components provided against historical data for comparable sole-source or sole-negotiated agreements within the DoD.

What are the primary risks associated with a sole-source award of this magnitude and duration?

The primary risks associated with a sole-source award of this magnitude ($1.77 billion) and duration (over 16 years) include potential for inflated costs due to lack of competition, reduced incentive for innovation from the contractor, and the risk of technological obsolescence if the components are not updated. There's also a risk of contractor lock-in, where the government becomes heavily reliant on a single supplier, making it difficult and costly to switch providers even if performance or pricing becomes unfavorable. Furthermore, the extended timeline increases the possibility of unforeseen cost increases related to labor, materials, or changing regulatory requirements, which may not be fully mitigated by the firm fixed-price structure if scope changes occur.

How effective is the Firm Fixed Price (FFP) contract type in managing costs for long-term defense manufacturing?

The Firm Fixed Price (FFP) contract type is generally effective in providing cost certainty for the government, as the price is set and not subject to adjustment based on the contractor's actual costs. This shifts the risk of cost overruns to the contractor. For long-term defense manufacturing, FFP can be beneficial in budgeting and financial planning. However, its effectiveness can be diminished if the initial price is not well-negotiated due to a lack of competition, or if significant scope changes are required over the contract's life, which may necessitate contract modifications. While FFP aims to cap costs, the absence of competitive pressure in a sole-source scenario can still lead to a higher baseline price than might be achieved through open bidding.

What are the historical spending patterns for military armored vehicle components by the Department of Defense?

Historical spending patterns for military armored vehicle components by the Department of Defense are substantial, reflecting the ongoing need to equip and maintain ground forces. This spending encompasses a wide range of items, from major subsystems like engines and transmissions to specialized armor plating and electronic systems. While specific aggregate figures for 'armored vehicle components' can be difficult to isolate due to varied procurement categories, the overall defense budget consistently allocates significant funds towards vehicle modernization, sustainment, and upgrades. Contracts for these components often span multiple years and can involve both competitive and sole-source awards, depending on the criticality, uniqueness, and availability of suppliers for specific technologies. The trend generally shows sustained investment driven by operational requirements and technological advancements.

What is the significance of the contract being awarded in Arizona (AZ)?

The significance of this contract being awarded to a contractor located in Arizona (AZ) relates to economic impact and industrial base considerations. Defense contracts awarded to specific states can stimulate local economies through job creation, investment in manufacturing facilities, and support for ancillary businesses. Arizona has a notable presence in the aerospace and defense sector, and contracts like this reinforce its position within the national defense industrial base. From a strategic perspective, geographic distribution of critical defense manufacturing can also be a factor in ensuring supply chain resilience, although a sole-source award to a single location might also present concentration risks.

Industry Classification

NAICS: Manufacturing › Other Transportation Equipment Manufacturing › Military Armored Vehicle, Tank, and Tank Component Manufacturing

Product/Service Code: ENGINES AND TURBINES AND COMPONENT

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: W56HZV05R0954

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Honeywell International Inc

Address: 111 S 34TH ST, PHOENIX, AZ, 85034

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: $171,206,758

Exercised Options: $1,180,925,913

Current Obligation: $1,773,472,789

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline