DoD's $19.1M engineering services contract with AM General LLC awarded without competition

Contract Overview

Contract Amount: $19,132,080 ($19.1M)

Contractor: AM General LLC

Awarding Agency: Department of Defense

Start Date: 2007-09-14

End Date: 2012-03-31

Contract Duration: 1,660 days

Daily Burn Rate: $11.5K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: STS

Place of Performance

Location: SOUTH BEND, ST JOSEPH County, INDIANA, 46617

State: Indiana Government Spending

Plain-Language Summary

Department of Defense obligated $19.1 million to AM GENERAL LLC for work described as: STS Key points: 1. Contract awarded on a cost-plus-fixed-fee basis, which can lead to higher costs if not managed closely. 2. The contract was sole-sourced, raising questions about potential price overruns and lack of market pressure. 3. A long performance period of 1660 days suggests a significant, ongoing need for these engineering services. 4. The contract was awarded by the Department of the Army, indicating a specific military requirement. 5. The North American Industry Classification System (NAICS) code 541330 points to specialized engineering services. 6. The contract was awarded in 2007 and completed in 2012, providing historical context for current spending.

Value Assessment

Rating: questionable

Without a competitive bidding process, it is difficult to benchmark the value for money. The cost-plus-fixed-fee structure, while allowing flexibility, can incentivize cost escalation if not rigorously monitored. Comparing this to similar sole-sourced engineering contracts would be necessary to assess if the pricing was reasonable, but such data is not readily available for this specific historical award.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning AM General LLC was the only bidder considered. This lack of competition suggests that the agency may have had specific reasons for selecting this contractor, such as unique capabilities or prior performance. However, it also means that taxpayers did not benefit from the price discovery that typically occurs in a competitive procurement.

Taxpayer Impact: Sole-source awards can result in higher prices for taxpayers as there is no competitive pressure to drive down costs. This limits the government's ability to secure the best possible value.

Public Impact

The primary beneficiaries are the Department of Defense and the Department of the Army, receiving specialized engineering services. These services likely supported military readiness, vehicle development, or maintenance programs. The geographic impact is centered in Indiana, where AM General LLC is based, potentially supporting local jobs. The contract implies a need for skilled engineering professionals, contributing to the defense industrial workforce.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition and potentially increases costs for taxpayers.
Cost-plus-fixed-fee contract type carries inherent risks of cost overruns if not managed effectively.
Long contract duration could indicate potential for scope creep or evolving requirements without competitive re-evaluation.

Positive Signals

Award to a known entity (AM General LLC) suggests potential for established relationship and understanding of requirements.
The contract was awarded by the Department of the Army, indicating a direct alignment with military needs.
The specific NAICS code suggests specialized expertise was required and presumably delivered.

Sector Analysis

This contract falls within the Engineering Services sector, a critical component of the broader defense industrial base. Companies in this sector provide specialized technical expertise for design, development, and testing. The market size for defense engineering services is substantial, driven by the continuous need for technological advancement and platform sustainment within the military. This specific award to AM General LLC, a known defense contractor, aligns with typical spending patterns for specialized military engineering support.

Small Business Impact

There is no indication that this contract involved small business set-asides or subcontracting opportunities. As a sole-source award to a large prime contractor, it is unlikely to have directly benefited the small business ecosystem unless AM General LLC subcontracted portions to smaller firms, which is not specified.

Oversight & Accountability

Oversight for this contract would have been managed by the Department of the Army contracting and program management offices. Accountability measures would typically involve performance reviews, milestone tracking, and financial audits, especially given the cost-plus-fixed-fee structure. Transparency is limited due to the sole-source nature of the award, making public scrutiny of the procurement process challenging.

Related Government Programs

Defense Engineering Services
Military Vehicle Support Contracts
Department of the Army Procurement
Sole-Source Defense Contracts

Risk Flags

Sole-source award
Cost-plus-fixed-fee contract type
Long contract duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $19.1 million to AM GENERAL LLC. STS

Who is the contractor on this award?

The obligated recipient is AM GENERAL LLC.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $19.1 million.

What is the period of performance?

Start: 2007-09-14. End: 2012-03-31.

What was the specific engineering service provided under this contract?

The contract data indicates the NAICS code 541330, which corresponds to Engineering Services. While the specific nature of the engineering services is not detailed in the provided data, AM General LLC is known for its work in military vehicle design, development, and manufacturing. Therefore, it is highly probable that these services related to engineering support for military vehicles, potentially including design modifications, testing, technical documentation, or program management related to vehicle platforms.

Why was this contract awarded on a sole-source basis?

Sole-source awards are typically justified when only one responsible source is available or capable of meeting the agency's needs. For this contract, potential justifications could include unique proprietary technology held by AM General LLC, a critical need for specialized expertise directly tied to existing platforms they manufactured, or a situation where competition was deemed not feasible or not in the government's best interest due to urgency or specific program requirements. The Department of the Army would have had to document and approve this justification.

How does the cost-plus-fixed-fee (CPFF) structure compare to other contract types for similar services?

Cost-plus-fixed-fee contracts are often used when the scope of work is not precisely defined or is expected to evolve, as is common in research and development or complex engineering projects. Unlike fixed-price contracts, CPFF allows the contractor to recover all allowable costs plus a predetermined fixed fee representing profit. This contrasts with firm-fixed-price contracts, where the price is set regardless of actual costs, incentivizing efficiency. While CPFF offers flexibility, it carries a higher risk of cost overruns for the government compared to fixed-price arrangements, necessitating robust oversight.

What was the historical spending trend for similar engineering services by the Department of the Army around 2007-2012?

During the period of 2007-2012, the Department of Defense, including the Army, experienced significant spending due to ongoing conflicts in Iraq and Afghanistan, as well as modernization efforts. Spending on engineering services, particularly those related to vehicle support, logistics, and operational readiness, was substantial. While this specific $19.1 million contract is a single data point, overall defense spending on services was in the billions annually. The trend was generally upward in the earlier part of this period, driven by wartime needs, and potentially stabilizing or slightly decreasing towards the end as operations shifted.

What are the potential risks associated with a sole-source, cost-plus-fixed-fee contract of this duration?

The combination of sole-source award and CPFF structure for a long-duration contract presents several risks. The lack of competition means the government may not be achieving the lowest possible price. The CPFF structure, without stringent controls, can incentivize the contractor to incur higher costs to increase their fee base, although the fee itself is fixed. A long duration (1660 days) increases the exposure to these risks over time and raises the possibility of scope creep or requirements evolving without the benefit of competitive re-evaluation. Effective contract management, including detailed cost monitoring and performance reviews, is crucial to mitigate these risks.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Architectural, Engineering, and Related Services › Engineering Services

Product/Service Code: RESEARCH AND DEVELOPMENT › C – National Defense R&D Services

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: W56HZV07R0419

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Macandrews & Forbes Holdings Inc. (UEI: 878304849)

Address: 105 N NILES AVE, SOUTH BEND, IN, 46617

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $19,132,080

Exercised Options: $19,132,080

Current Obligation: $19,132,080

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline