DoD's $105M Engineering Services Contract with AM General LLC: A 7-Year Deal with No Competition

Contract Overview

Contract Amount: $104,628,278 ($104.6M)

Contractor: AM General LLC

Awarding Agency: Department of Defense

Start Date: 2007-10-04

End Date: 2014-04-03

Contract Duration: 2,373 days

Daily Burn Rate: $44.1K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Other

Official Description: ENGINEERING SERVICES

Place of Performance

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

State: Indiana Government Spending

Plain-Language Summary

Department of Defense obligated $104.6 million to AM GENERAL LLC for work described as: ENGINEERING SERVICES Key points: 1. The contract awarded to AM General LLC for engineering services represents a significant expenditure of $104.6 million. 2. The absence of competition raises questions about potential overspending and the lack of market-driven pricing. 3. The long duration of the contract (7 years) suggests a sustained need but also a missed opportunity for re-evaluation. 4. The sector is Engineering Services, a critical area for defense operations, but the procurement method is concerning.

Value Assessment

Rating: questionable

The contract's Cost Plus Fixed Fee structure, combined with a lack of competition over seven years, makes a direct pricing assessment difficult. Without benchmarks from competing bids, it's hard to determine if the fixed fee was optimal or if the government received the best value.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning no other vendors were considered. This significantly limits price discovery and potentially leads to higher costs than if competitive bids had been solicited.

Taxpayer Impact: The lack of competition likely resulted in higher costs for taxpayers, as there was no market pressure to drive down the price for these engineering services.

Public Impact

Taxpayers may have paid more than necessary due to the absence of competitive bidding. The long-term nature of the contract limits opportunities for other capable firms to compete for this work. The Department of Defense relied on a single vendor for critical engineering services for an extended period.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award
Long contract duration
Cost-plus contract type
Lack of small business participation

Positive Signals

Specific engineering services provided
Long-standing relationship with a known entity

Sector Analysis

Engineering services are crucial for the design, development, and maintenance of complex systems, particularly within the defense sector. Benchmarks for such services vary widely based on specialization, but competitive procurement typically ensures better value.

Small Business Impact

The data indicates that this contract did not involve small businesses, either as prime contractors or potentially as subcontractors. This represents a missed opportunity to support small business growth within the defense industrial base.

Oversight & Accountability

The sole-source nature of this contract warrants scrutiny regarding the justification for not competing the requirement. Oversight should focus on whether the fixed fee was appropriate and if the government received fair value over the contract's lifespan.

Related Government Programs

Engineering Services
Department of Defense Contracting
Department of the Army Programs

Risk Flags

Sole-source award lacks competition
Potential for inflated costs due to lack of market pressure
Long contract duration may not reflect current needs or pricing
Cost-plus contract type shifts cost risk to the government
No apparent small business participation

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $104.6 million to AM GENERAL LLC. ENGINEERING SERVICES

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 $104.6 million.

What is the period of performance?

Start: 2007-10-04. End: 2014-04-03.

What was the specific justification for awarding this contract on a sole-source basis, and was it adequately documented?

The justification for a sole-source award typically involves circumstances where only one responsible source can provide the required supplies or services. This could be due to unique capabilities, proprietary data, or urgent needs. Adequate documentation would include a detailed rationale, market research (or lack thereof), and approval from the appropriate contracting authority, demonstrating why competition was not feasible or not in the government's best interest.

How did the 'Cost Plus Fixed Fee' structure impact the overall cost and risk for the government over the seven-year period?

A Cost Plus Fixed Fee (CPFF) contract allows the contractor to recover all allowable costs plus a predetermined fixed fee. While the fee is fixed, the total cost can fluctuate based on actual expenses. Over seven years, this structure, especially without competition, could lead to cost overruns if not closely monitored. The government bears the risk of cost increases, while the contractor has less incentive to control costs beyond what's needed to achieve the fixed fee.

What was the process for determining the 'fixed fee' component, and how was its reasonableness assessed without competitive benchmarking?

Determining the reasonableness of a fixed fee in a sole-source CPFF contract typically involves analyzing the contractor's proposed costs, the complexity of the work, the level of risk assumed by the contractor, and the profit margins of similar companies in the industry. Government cost estimators would review these factors. However, without competitive bids, the assessment relies heavily on historical data, industry standards, and negotiation, making it inherently less robust than a price derived from a competitive process.

Industry Classification

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

Product/Service Code: SUPPORT SVCS (PROF, ADMIN, MGMT) › PROFESSIONAL SERVICES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: W56HZV07R0558

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, Corporate Entity Not Tax Exempt, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $104,628,278

Exercised Options: $104,628,278

Current Obligation: $104,628,278

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline