Army awards $141M for 49 M88A2 Hercules vehicles, a sole-source procurement

Contract Overview

Contract Amount: $141,232,788 ($141.2M)

Contractor: BAE Systems Land & Armaments L.P.

Awarding Agency: Department of Defense

Start Date: 2013-08-21

End Date: 2018-02-05

Contract Duration: 1,629 days

Daily Burn Rate: $86.7K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: TO PROCURE 49 M88A2 HERCULES VEHICLES AND 3 SETS OF ASL SPARES.

Place of Performance

Location: YORK, YORK County, PENNSYLVANIA, 17408

State: Pennsylvania Government Spending

Plain-Language Summary

Department of Defense obligated $141.2 million to BAE SYSTEMS LAND & ARMAMENTS L.P. for work described as: TO PROCURE 49 M88A2 HERCULES VEHICLES AND 3 SETS OF ASL SPARES. Key points: 1. The contract value of $141.2 million for 49 vehicles suggests a per-unit cost of approximately $2.88 million. 2. This procurement was sole-source, indicating a lack of competitive bidding and potential for higher pricing. 3. The contract duration of over 4 years (1629 days) suggests a long-term need for these specialized vehicles. 4. The vehicles are for the Department of the Army, highlighting a significant defense procurement. 5. The contractor, BAE Systems Land & Armaments L.P., is a major defense manufacturer. 6. The contract type is Firm Fixed Price, which shifts cost risk to the contractor.

Value Assessment

Rating: fair

The per-unit cost of approximately $2.88 million for the M88A2 Hercules vehicles appears high, but without specific benchmarking data for this specialized military equipment, a definitive value assessment is challenging. Given the sole-source nature of the award, it is difficult to ascertain if competitive pricing pressures were fully leveraged. However, the firm-fixed-price structure provides cost certainty for the government.

Cost Per Unit: Approximately $2.88 million per vehicle.

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning it was not competed among multiple vendors. This typically occurs when only one vendor possesses the necessary capabilities, technology, or is the sole producer of the required item. The lack of competition limits the government's ability to solicit and evaluate alternative proposals, potentially impacting price negotiation and innovation.

Taxpayer Impact: Sole-source awards can lead to higher costs for taxpayers as the government may not benefit from the cost savings typically achieved through a competitive bidding process.

Public Impact

The primary beneficiaries are the U.S. Army, which will receive critical armored recovery vehicles. The services delivered include the procurement of 49 M88A2 Hercules vehicles and associated spare parts. The geographic impact is primarily within the United States, where the vehicles will be manufactured and potentially deployed. Workforce implications include employment at BAE Systems facilities involved in the production of these vehicles.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing and potentially increases cost to taxpayers.
Lack of competition may reduce incentives for contractor efficiency and innovation.
High per-unit cost requires careful justification and comparison to similar specialized equipment.

Positive Signals

Firm Fixed Price contract provides cost certainty for the government.
Procurement of critical military assets ensures operational readiness for the Army.
Contract awarded to an established defense contractor with experience in this product line.

Sector Analysis

The defense sector is characterized by long procurement cycles, high research and development costs, and specialized manufacturing requirements. The M88A2 Hercules is a vital piece of equipment for armored recovery operations, supporting main battle tanks. Spending in this sub-sector is driven by military modernization efforts and operational demands. Comparable spending benchmarks would involve other large-scale armored vehicle procurements or specialized military equipment contracts.

Small Business Impact

This contract does not appear to have a small business set-aside. Given the sole-source nature and the specialized manufacturing of armored vehicles, it is unlikely that significant subcontracting opportunities for small businesses were mandated or explored as part of a competitive process. The primary focus is on the prime contractor's capabilities.

Oversight & Accountability

The Department of the Army is responsible for overseeing this contract. Oversight mechanisms would include contract administration, performance monitoring, and financial audits. Transparency is facilitated through contract databases, but the sole-source nature limits public insight into the negotiation process. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

M88A1 Hercules Recovery Vehicle
Armored Vehicle Manufacturing
Military Vehicle Procurement
Defense Logistics Agency

Risk Flags

Sole-source award
Potential for higher cost due to lack of competition
High per-unit cost requires justification

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $141.2 million to BAE SYSTEMS LAND & ARMAMENTS L.P.. TO PROCURE 49 M88A2 HERCULES VEHICLES AND 3 SETS OF ASL SPARES.

Who is the contractor on this award?

The obligated recipient is BAE SYSTEMS LAND & ARMAMENTS L.P..

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $141.2 million.

What is the period of performance?

Start: 2013-08-21. End: 2018-02-05.

What is the historical spending trend for M88A2 Hercules vehicles by the Department of the Army?

Analyzing historical spending for M88A2 Hercules vehicles by the Department of the Army requires access to detailed procurement data over multiple fiscal years. Without specific historical data for this exact vehicle variant, it's challenging to establish a precise trend. However, the Army's consistent need for recovery vehicles suggests a recurring procurement pattern, often influenced by fleet age, operational tempo, and modernization programs. Sole-source awards, like the one detailed, can sometimes indicate a lack of available alternatives or a strategic decision to consolidate production with a specific manufacturer. Future spending will likely depend on the Army's overall force structure, budget allocations for ground vehicle modernization, and the operational readiness requirements of its armored formations.

How does the per-unit cost of the M88A2 Hercules compare to other specialized military recovery vehicles?

Benchmarking the per-unit cost of the M88A2 Hercules at approximately $2.88 million requires comparison with similar specialized military recovery vehicles. The M88A2 is a highly capable platform designed for heavy recovery operations, including towing disabled tanks and extracting vehicles from difficult terrain. Its advanced hydraulic systems, powerful engine, and robust construction contribute to its cost. Comparable vehicles might include other nation's heavy recovery vehicles or specialized engineering vehicles. However, direct comparisons are often difficult due to variations in capabilities, age of the design, quantity procured, and specific contract terms (e.g., inclusion of spares, training, or support packages). Given the sole-source nature of this award, it is plausible that the price reflects specific manufacturing costs and limited market competition rather than a fully optimized market rate.

What are the specific risks associated with a sole-source procurement of this magnitude?

Sole-source procurements of this magnitude, such as the $141.2 million award for M88A2 Hercules vehicles, carry several inherent risks. The primary risk is the potential for inflated pricing due to the absence of competitive pressure. Without competing bids, the government may pay more than it would in a fully competed scenario. Another risk is reduced incentive for the contractor to innovate or improve efficiency, as there is no direct competitor to outperform. Furthermore, sole-source awards can limit the government's visibility into alternative technologies or solutions that might be more cost-effective or capable. There's also a risk of vendor lock-in, where the government becomes dependent on a single supplier, potentially complicating future procurements or sustainment efforts.

What is BAE Systems Land & Armaments L.P.'s track record with similar military vehicle contracts?

BAE Systems Land & Armaments L.P. has a substantial and well-established track record in manufacturing and supplying military vehicles, including armored platforms and recovery systems, to the U.S. Department of Defense and allied nations. They are a primary producer of the M88 family of vehicles, having been involved in its development and production for many years. Their portfolio includes a wide range of tracked and wheeled combat vehicles, artillery systems, and support vehicles. This extensive experience suggests a deep understanding of the technical requirements, manufacturing processes, and logistical support necessary for such complex defense contracts. While specific contract performance details are often proprietary, BAE Systems is generally recognized as a major, capable supplier within the global defense industry.

What are the implications of the Firm Fixed Price (FFP) contract type for this procurement?

The Firm Fixed Price (FFP) contract type for the procurement of 49 M88A2 Hercules vehicles and spares has significant implications for both the government and the contractor. Under an FFP contract, the price is set and not subject to adjustment based on the contractor's cost experience. This provides the government with cost certainty, as the total expenditure is known upfront, assuming no contract modifications. It shifts the primary risk of cost overruns to the contractor, incentivizing them to manage their costs efficiently to maximize profit. For BAE Systems, this means they bear the responsibility for any unexpected increases in labor, materials, or other production costs. Conversely, if they can produce the vehicles more efficiently than anticipated, their profit margin increases. This contract type is generally preferred for well-defined requirements where cost and schedule risks can be reasonably estimated.

Industry Classification

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

Product/Service Code: MOTOR VEHICLES, CYCLES, TRAILERS

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: W56HZV13R0249

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: BAE Systems PLC

Address: 1100 BAIRS RD, YORK, PA, 17408

Business Categories: Category Business, Manufacturer of Goods, Not Designated a Small Business, Partnership or Limited Liability Partnership, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $141,232,788

Exercised Options: $141,232,788

Current Obligation: $141,232,788

Subaward Activity

Number of Subawards: 193

Total Subaward Amount: $75,172,014

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline