DoD awards $71.7M contract for M1A2 tank conversion kits to Saudi Arabia, with General Dynamics as sole provider

Contract Overview

Contract Amount: $71,709,279 ($71.7M)

Contractor: General Dynamics Land Systems Inc.

Awarding Agency: Department of Defense

Start Date: 2010-12-30

End Date: 2012-07-02

Contract Duration: 550 days

Daily Burn Rate: $130.4K/day

Competition Type: NOT AVAILABLE FOR COMPETITION

Number of Offers Received: 1

Pricing Type: COST NO FEE

Sector: Defense

Official Description: (42) MATERIAL SETS FOR THE CONVERSION OF M1A2 TANKS TO M1A2S CONFIGURATION FOR THE KINGDOM OF SAUDI ARABIA.

Place of Performance

Location: LIMA, ALLEN County, OHIO, 45804

State: Ohio Government Spending

Plain-Language Summary

Department of Defense obligated $71.7 million to GENERAL DYNAMICS LAND SYSTEMS INC. for work described as: (42) MATERIAL SETS FOR THE CONVERSION OF M1A2 TANKS TO M1A2S CONFIGURATION FOR THE KINGDOM OF SAUDI ARABIA. Key points: 1. Contract awarded to a single, established defense contractor, raising questions about competitive pricing. 2. Focus on tank modernization highlights ongoing investment in armored vehicle capabilities. 3. Significant value indicates a substantial upgrade program for allied military assets. 4. Limited competition suggests potential for higher costs compared to a more open bidding process. 5. Contract duration and delivery timeline will be key performance indicators. 6. Geographic focus on Saudi Arabia underscores international defense partnerships.

Value Assessment

Rating: fair

The contract value of $71.7 million for 42 material sets appears substantial. Without specific details on the components included in each 'material set' and the scope of work for conversion, a direct value-for-money assessment is challenging. However, given the sole-source nature, it is difficult to benchmark against competitive bids. The pricing structure is 'COST NO FEE,' which typically means the government reimburses the contractor for allowable costs but does not pay a fee on top of those costs. This can sometimes lead to less incentive for cost control compared to fixed-price contracts.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one vendor, General Dynamics Land Systems Inc., was considered. This typically occurs when a specific capability or technology is only available from a single source, or in cases of urgent need where competition is not feasible. The lack of competition means there was no opportunity for other companies to bid, potentially limiting price discovery and the government's ability to secure the best possible price through market forces.

Taxpayer Impact: Sole-source awards can result in higher costs for taxpayers as there is no competitive pressure to drive down prices. This necessitates robust oversight to ensure costs are reasonable and justified.

Public Impact

The primary beneficiary is the Kingdom of Saudi Arabia, receiving upgraded M1A2 tanks. The services delivered involve the conversion of existing M1A2 tanks to the M1A2S configuration. The geographic impact is concentrated in Saudi Arabia, enhancing its military capabilities. Workforce implications are likely within General Dynamics Land Systems' manufacturing and engineering divisions, potentially supporting skilled labor in the defense industrial base.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition, potentially increasing costs for taxpayers.
Lack of transparency in the specific components and services included in the 'material sets' hinders detailed value assessment.
The 'COST NO FEE' contract type may offer less incentive for cost efficiency compared to fixed-price arrangements.

Positive Signals

Addresses a critical modernization need for a key international partner.
Leverages the expertise of a sole provider with established experience in Abrams tank systems.
Supports ongoing U.S. foreign military sales objectives and defense industrial base capacity.

Sector Analysis

This contract falls within the Defense Industrial Base sector, specifically focusing on military armored vehicle manufacturing and modernization. The market for tank production and upgrades is highly specialized, dominated by a few large defense contractors. Spending in this area is driven by geopolitical needs, military modernization programs, and foreign military sales. Comparable spending benchmarks would involve other large-scale vehicle upgrade programs or new platform acquisitions for allied nations.

Small Business Impact

This contract does not appear to involve a small business set-aside. Given the specialized nature of tank manufacturing and the sole-source award to General Dynamics Land Systems Inc., it is unlikely that small businesses would be primary recipients of the prime contract. However, General Dynamics may engage small businesses as subcontractors for specific components or services, though this information is not detailed in the provided data.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contracting and program management offices. Given the sole-source nature and 'COST NO FEE' structure, rigorous oversight of incurred costs, compliance with contract terms, and delivery schedules would be crucial. The Defense Contract Audit Agency (DCAA) and potentially the Department of Defense Inspector General (DoDIG) would have jurisdiction to audit costs and investigate any potential fraud, waste, or abuse.

Related Government Programs

Foreign Military Sales (FMS)
Abrams Tank Production
Defense Article Modernization
Armored Vehicle Manufacturing
International Defense Cooperation

Risk Flags

Sole-source award
Lack of competitive pricing
Potential for cost overruns without strong oversight

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $71.7 million to GENERAL DYNAMICS LAND SYSTEMS INC.. (42) MATERIAL SETS FOR THE CONVERSION OF M1A2 TANKS TO M1A2S CONFIGURATION FOR THE KINGDOM OF SAUDI ARABIA.

Who is the contractor on this award?

The obligated recipient is GENERAL DYNAMICS LAND SYSTEMS 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 $71.7 million.

What is the period of performance?

Start: 2010-12-30. End: 2012-07-02.

What specific upgrades are included in the M1A2S configuration compared to the standard M1A2?

The M1A2S configuration is a Saudi-specific variant of the M1A2 Abrams tank. While the exact specifications are often classified or specific to the recipient nation's requirements, typical upgrades for export variants include enhancements to the fire control systems, communications equipment, and potentially armor packages tailored to regional threats. The 'material sets' procured under this contract likely contain the necessary components and kits for General Dynamics Land Systems to perform these conversions on the existing Saudi M1A2 fleet. The 'COST NO FEE' contract structure implies the government is reimbursing GDLS for the costs associated with procuring these components and performing the conversion work, without an additional profit margin on the costs themselves.

What is the typical profit margin or fee structure for 'COST NO FEE' contracts in defense?

A 'COST NO FEE' (CNF) contract is a type of cost-reimbursement contract where the contractor is reimbursed for allowable costs but does not receive a fee or profit. This structure is typically used in specific circumstances, such as when the contractor is a non-profit organization or when the work is considered a continuation of a previous effort where profit was not applicable. In the defense sector, CNF contracts are less common for major procurement programs compared to fixed-price or cost-plus-incentive-fee contracts. The absence of a fee means the contractor's incentive is primarily to recover their costs and fulfill the contract requirements, rather than to maximize profit. This can sometimes lead to less emphasis on cost control compared to contracts that include a profit margin.

How does the $71.7 million contract value compare to historical spending on M1A2 tank upgrades for Saudi Arabia?

Historical spending data for M1A2 tank upgrades specifically for Saudi Arabia is not readily available in the public domain without deeper research into Foreign Military Sales (FMS) cases. However, the $71.7 million award for 42 material sets suggests a significant investment per tank conversion, potentially averaging over $1.7 million per set. This figure needs to be contextualized with the specific nature of the upgrades. Saudi Arabia has been a long-standing operator of Abrams tanks and has previously procured upgrade packages. This contract likely represents a continuation or specific phase of their ongoing modernization efforts, and its value should be compared against the scope and complexity of the upgrades being performed.

What are the risks associated with sole-source defense contracts of this magnitude?

Sole-source defense contracts, especially those of significant value like $71.7 million, carry inherent risks. The primary risk is the lack of price competition, which can lead to inflated costs for the government and taxpayers. Without competing bids, there is less pressure on the contractor to offer the most cost-effective solution. Another risk is potential complacency from the contractor, as they face no direct threat of losing future business to competitors for this specific program. Furthermore, oversight becomes even more critical to ensure the contractor is performing efficiently and that costs are reasonable and allocable. The government must rely heavily on its own technical expertise and auditing capabilities to manage these risks effectively.

What is the track record of General Dynamics Land Systems Inc. in delivering Abrams tank systems and upgrades?

General Dynamics Land Systems Inc. (GDLS) has an extensive and well-established track record as the prime contractor for the M1 Abrams main battle tank. They have been responsible for the original design, production, and numerous upgrades and variants of the Abrams system for the U.S. Army and allied nations for decades. GDLS has consistently delivered complex armored vehicles and has significant experience in managing large-scale production and modernization programs. Their history includes fulfilling major foreign military sales contracts, demonstrating their capability to meet international requirements and specifications, including those for Saudi Arabia, which has been a key customer for Abrams tanks and related support.

Industry Classification

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

Product/Service Code: HARDWARE AND ABRASIVES

Competition & Pricing

Extent Competed: NOT AVAILABLE FOR COMPETITION

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: COST NO FEE (S)

Evaluated Preference: NONE

Contractor Details

Parent Company: General Dynamics Corp (UEI: 001381284)

Address: 38500 MOUND RD, STERLING HEIGHTS, MI, 10

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $71,709,279

Exercised Options: $71,709,279

Current Obligation: $71,709,279

Subaward Activity

Number of Subawards: 398

Total Subaward Amount: $93,634,371

Contract Characteristics

Cost or Pricing Data: NO

Timeline