Army awards $74.3M contract for M1A2 SEPv3 Abrams tank production components

Contract Overview

Contract Amount: $74,327,865 ($74.3M)

Contractor: General Dynamics Land Systems Inc.

Awarding Agency: Department of Defense

Start Date: 2016-09-29

End Date: 2018-11-30

Contract Duration: 792 days

Daily Burn Rate: $93.8K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: PROVIDE 45 SETS OF SEPV3 UNIQUE COMPONENTS FOR M1A2 SEPV3 PRODUCTION BUILD.

Place of Performance

Location: STERLING HEIGHTS, MACOMB County, MICHIGAN, 48310

State: Michigan Government Spending

Plain-Language Summary

Department of Defense obligated $74.3 million to GENERAL DYNAMICS LAND SYSTEMS INC. for work described as: PROVIDE 45 SETS OF SEPV3 UNIQUE COMPONENTS FOR M1A2 SEPV3 PRODUCTION BUILD. Key points: 1. Contract awarded to a single, established supplier, raising questions about price competitiveness. 2. Sole-source award suggests potential lack of market research or unique supplier capabilities. 3. Fixed-price contract type aims to control costs, but initial pricing needs benchmarking. 4. Production build components are critical for modernizing the Abrams fleet. 5. Contract duration of 792 days indicates a significant, multi-year effort. 6. Geographic concentration in Michigan for production could have local economic impacts.

Value Assessment

Rating: fair

The contract value of $74.3 million for M1A2 SEPv3 production components is substantial. Without specific per-unit cost data or comparisons to similar procurements for Abrams tank upgrades, it is difficult to definitively assess value for money. The sole-source nature of the award also limits the ability to benchmark against competitive bids. However, the firm-fixed-price structure provides cost certainty for the government.

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 solicited. This approach is typically used when only one responsible source is available or when a compelling justification exists for excluding competition. The lack of competition means the government did not benefit from potential price reductions or innovative solutions that might arise from multiple bidders.

Taxpayer Impact: Sole-source awards can lead to higher prices for taxpayers as there is no competitive pressure to drive down costs. This necessitates robust government negotiation and oversight to ensure a fair price.

Public Impact

The primary beneficiaries are the U.S. Army, which receives critical components for modernizing its main battle tanks. Services delivered include the production of unique components essential for the M1A2 SEPv3 upgrade package. The geographic impact is concentrated in Michigan, where General Dynamics Land Systems Inc. is located, potentially supporting local jobs and the defense industrial base. Workforce implications include skilled manufacturing and engineering roles required for advanced military vehicle production.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing and potential innovation.
Lack of transparency in the justification for sole-source procurement.
Potential for cost overruns if not rigorously managed due to lack of competition.

Positive Signals

Contract awarded to a known entity with experience in Abrams tank production.
Firm-fixed-price contract provides cost certainty.
Components are essential for maintaining and upgrading a critical military asset.

Sector Analysis

The defense industrial base, specifically the manufacturing of armored vehicles and their components, is a highly specialized sector. This contract falls under the 'Military Armored Vehicle, Tank, and Tank Component Manufacturing' industry. The market is characterized by a limited number of large prime contractors capable of producing such complex systems. Spending in this area is driven by modernization requirements and geopolitical security needs, often involving significant, long-term investments.

Small Business Impact

This contract does not appear to include specific small business set-aside provisions. As a sole-source award to a large prime contractor, the direct impact on small businesses is likely limited unless General Dynamics Land Systems Inc. intends to subcontract a portion of the work to small business suppliers. Further analysis would be needed to determine subcontracting plans and their potential impact on the small business ecosystem.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Army's contracting and program management offices. The firm-fixed-price nature of the contract provides a degree of cost control. Transparency regarding the justification for the sole-source award and ongoing performance monitoring would be key accountability measures. Inspector General jurisdiction would apply to any allegations of fraud, waste, or abuse.

Related Government Programs

M1 Abrams Tank System
Armored Vehicle Manufacturing
Defense Procurement
Military Vehicle Modernization
Department of the Army Contracts

Risk Flags

Sole-source award
Lack of competitive bidding
Potential for unbenchmarked pricing

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $74.3 million to GENERAL DYNAMICS LAND SYSTEMS INC.. PROVIDE 45 SETS OF SEPV3 UNIQUE COMPONENTS FOR M1A2 SEPV3 PRODUCTION BUILD.

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 $74.3 million.

What is the period of performance?

Start: 2016-09-29. End: 2018-11-30.

What is the historical spending pattern for M1A2 SEPv3 components or similar Abrams tank upgrades?

Analyzing historical spending for M1A2 SEPv3 components or related Abrams tank upgrades is crucial for context. While this specific contract is for $74.3 million, understanding previous awards for similar upgrades, production runs, or component procurements can reveal trends in pricing, volume, and contractor performance. For instance, if previous sole-source awards for comparable components were significantly lower or higher, it would raise questions about the current pricing. Conversely, if this award aligns with historical spending for similar scope and complexity, it might suggest a fair market price given the circumstances. Without access to detailed historical contract data for this specific program or comparable systems, a precise benchmark is challenging, but trends in defense spending for major platform upgrades often show increasing costs due to technological advancements and inflation.

What specific components are included in this $74.3 million award for M1A2 SEPv3 production build?

The contract data indicates the award is for 'PROVIDE 45 SETS OF SEPV3 UNIQUE COMPONENTS FOR M1A2 SEPV3 PRODUCTION BUILD.' While the exact list of 45 unique components is not publicly detailed in the provided data, these are understood to be critical elements required for the production of the latest variant of the M1 Abrams main battle tank, the SEPv3 (System Enhancement Package version 3). These components likely encompass advanced electronics, improved armor packages, power generation systems, and other technological upgrades that differentiate the SEPv3 from earlier versions. The specificity of '45 sets' suggests a defined quantity of complete upgrade packages or major sub-assemblies needed for new production builds rather than a general supply agreement.

What is the justification for awarding this contract on a sole-source basis to General Dynamics Land Systems Inc.?

The provided data states the contract type as 'NOT COMPETED,' implying a sole-source award. The specific justification for this sole-source determination is not detailed in the summary data. Typically, sole-source procurements require a formal justification and approval (J&A) process, often citing reasons such as unique capabilities of a single contractor, urgent and compelling needs where competition is not feasible, or when only one responsible source exists. Given General Dynamics Land Systems Inc.'s role as the prime contractor and manufacturer for the Abrams tank, the justification likely centers on their proprietary knowledge, existing production lines, and the specialized nature of the SEPv3 components, making it difficult or impractical for another entity to supply them within the required timeframe and specifications.

How does the firm-fixed-price (FFP) contract type mitigate risks for the government in this sole-source award?

A firm-fixed-price (FFP) contract type is generally advantageous for the government, especially in sole-source situations, as it shifts the majority of the cost risk to the contractor. Under an FFP agreement, the contractor is obligated to complete the work for a predetermined price, regardless of their actual costs. This provides the government with cost certainty and predictability, preventing unexpected cost increases that could occur with cost-reimbursement contracts. While the initial price is negotiated, the FFP structure incentivizes the contractor to manage their own costs efficiently to maximize profit. In this sole-source context, the FFP structure is a key mechanism for the government to lock in a price and avoid potential overruns that might arise from a lack of competitive bidding.

What are the potential implications of this contract on the overall modernization timeline for the M1A2 SEPv3 Abrams tanks?

This contract, valued at $74.3 million for 45 sets of unique SEPv3 components, is directly tied to the production build of the M1A2 SEPv3 Abrams tanks. The timely delivery of these components is critical for meeting the Army's modernization objectives. If the contract is executed successfully and on schedule, it will contribute positively to the overall modernization timeline, ensuring that the Army receives updated tanks equipped with the latest enhancements. Conversely, any delays in component production or delivery could potentially impact the fielding schedule for these upgraded tanks, affecting the Army's operational readiness and strategic deployment capabilities. The contract's duration of 792 days (approximately 2.2 years) suggests a significant lead time for these specialized components.

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: W56HZV16R0027

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: General Dynamics Corp

Address: 38500 MOUND RD, STERLING HEIGHTS, MI, 48310

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: $74,327,865

Exercised Options: $74,327,865

Current Obligation: $74,327,865

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline