Army awards $740.4M for 174 Abrams tank upgrades to SEPv3 configuration

Contract Overview

Contract Amount: $696,102,141 ($696.1M)

Contractor: General Dynamics Land Systems Inc.

Awarding Agency: Department of Defense

Start Date: 2018-12-14

End Date: 2022-04-22

Contract Duration: 1,225 days

Daily Burn Rate: $568.2K/day

Competition Type: NOT COMPETED

Pricing Type: FIXED PRICE INCENTIVE

Sector: Defense

Official Description: AWARD DELIVERY ORDER W56HZV-19-F-0116 (0005) AGAINST THE ABRAMS REQUIREMENTS CONTRACT (ARC) TO PROCURE 174 ABRAMS VEHICLE UPGRADES TO THE LATEST M1A2 SYSTEM ENHANCEMENT PACKAGE VERSION 3 (SEPV3) CONFIGURATION, ALONG WITH THE SUPPORTING INTEGRATED PRODUCT SUPPORT (IPS), REPAIR OF DEFECTIVE GOVERNMENT MATERIAL (DGM), AND THE REPLACEMENT OF WASHED-OUT ANNISTON ARMY DEPOT (ANAD) RECLAIMED COMPONENTS. THE DELIVERY ORDER CONSISTS OF THREE CONTRACT TYPES: FIXED PRICE INCENTIVE-FIRM (FPIF), FIRM FIXED PRICE (FFP), AND COST PLUS FIXED FEE (CPFF). THE TOTAL CEILING COST OF DELIVERY ORDER W56HZV-19-F-0116 (0005) FOR THE VEHICLES, SUPPORTING ITEMS, AND REPAIR IS ESTIMATED AT $740.4M. THIS DELIVERY ORDER IS IN SUPPORT OF PRODUCT MANAGER MAIN BATTLE TANK SYSTEMS (PD MBTS) AND WILL BE FUNDED WITH FISCAL YEAR (FY) 18-19 PAA AND EDI FUNDS.

Place of Performance

Location: STERLING HEIGHTS, MACOMB County, MICHIGAN, 48310

State: Michigan Government Spending

Plain-Language Summary

Department of Defense obligated $696.1 million to GENERAL DYNAMICS LAND SYSTEMS INC. for work described as: AWARD DELIVERY ORDER W56HZV-19-F-0116 (0005) AGAINST THE ABRAMS REQUIREMENTS CONTRACT (ARC) TO PROCURE 174 ABRAMS VEHICLE UPGRADES TO THE LATEST M1A2 SYSTEM ENHANCEMENT PACKAGE VERSION 3 (SEPV3) CONFIGURATION, ALONG WITH THE SUPPORTING INTEGRATED PRODUCT SUPPORT (IPS), REPAIR OF … Key points: 1. Significant investment in modernizing the Abrams main battle tank fleet. 2. Contract includes vehicle upgrades, integrated product support, and component repair. 3. Utilizes a mix of contract types (FPIF, FFP, CPFF) to manage risk and cost. 4. General Dynamics Land Systems Inc. is the sole awardee, raising questions about competition. 5. Delivery order supports Product Manager Main Battle Tank Systems (Pd MBTS). 6. Funding is allocated from the Fiscal Year 2019 budget.

Value Assessment

Rating: fair

The total ceiling cost of $740.4 million for 174 Abrams vehicle upgrades represents a substantial investment. Benchmarking this against previous Abrams upgrade contracts or similar large-scale military vehicle modernization programs would be necessary for a precise value-for-money assessment. The mix of contract types suggests an attempt to balance cost control with flexibility for evolving requirements, but the lack of competition limits the ability to assess if the pricing is truly competitive.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This delivery order was not competed, indicating a sole-source award to General Dynamics Land Systems Inc. This approach is often used when a specific contractor possesses unique capabilities or when the requirement is a follow-on to existing work. However, the absence of a competitive bidding process means that the government did not explore potential cost savings or innovative solutions that might have been offered by other vendors.

Taxpayer Impact: The lack of competition means taxpayers may not be receiving the best possible price for these critical upgrades, as there was no market pressure to drive down costs.

Public Impact

The U.S. Army benefits from enhanced combat capabilities through upgraded Abrams tanks. Services include the modernization of 174 M1A2 Abrams tanks to the SEPv3 configuration. Geographic impact is primarily within the U.S. Army's operational footprint. Workforce implications include skilled labor for manufacturing, integration, and support at General Dynamics facilities.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price discovery and potential cost savings for taxpayers.
Reliance on a single contractor for critical upgrades could pose supply chain risks.
Complexity of contract types (FPIF, FFP, CPFF) requires robust oversight to ensure cost control.

Positive Signals

Modernization to the latest SEPv3 configuration ensures Abrams tanks remain technologically relevant.
Integrated Product Support (IPS) indicates a focus on long-term sustainment and readiness.
Repair of defective government material and replacement of reclaimed components demonstrates a commitment to maintaining fleet integrity.

Sector Analysis

This contract falls within the Defense Industrial Base sector, specifically focusing on armored vehicle manufacturing and modernization. The market for such specialized military hardware is typically dominated by a few large defense contractors. The spending aligns with broader defense modernization trends aimed at maintaining technological superiority for ground forces. Comparable spending benchmarks would involve analyzing other major vehicle upgrade programs within the DoD.

Small Business Impact

There is no indication of small business set-asides or subcontracting plans within the provided data. 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. actively engages them for subcontracting opportunities.

Oversight & Accountability

Oversight will be managed by the Department of the Army, likely through program management offices and contracting officers. The use of multiple contract types necessitates careful monitoring of cost, schedule, and performance. Transparency may be limited due to the sole-source nature, but contract modifications and performance reports would be subject to standard DoD oversight procedures.

Related Government Programs

Abrams Tank Program
Army Combat Systems
Ground Vehicle Modernization
Defense Procurement

Risk Flags

Sole-source award
Lack of competition
Potential for cost overruns due to contract types
Long-term sustainment dependency

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $696.1 million to GENERAL DYNAMICS LAND SYSTEMS INC.. AWARD DELIVERY ORDER W56HZV-19-F-0116 (0005) AGAINST THE ABRAMS REQUIREMENTS CONTRACT (ARC) TO PROCURE 174 ABRAMS VEHICLE UPGRADES TO THE LATEST M1A2 SYSTEM ENHANCEMENT PACKAGE VERSION 3 (SEPV3) CONFIGURATION, ALONG WITH THE SUPPORTING INTEGRATED PRODUCT SUPPORT (IPS), REPAIR OF DEFECTIVE GOVERNMENT MATERIAL (DGM), AND THE REPLACEMENT OF WASHED-OUT ANNISTON ARMY DEPOT (ANAD) RECLAIMED COMPONENTS. THE DELIVERY ORDER CONSISTS OF THREE CONTRACT TYPES: FIXED PRICE INCENTIVE-FIRM (FPIF), FIRM FIXED

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 $696.1 million.

What is the period of performance?

Start: 2018-12-14. End: 2022-04-22.

What is the historical spending trend for Abrams tank upgrades?

Historical spending on Abrams tank upgrades has been substantial, reflecting the continuous need to maintain the relevance and effectiveness of this key platform. The Army has consistently invested in various upgrade packages over the decades, such as the SEPv1, SEPv2, and now SEPv3, to incorporate new technologies in areas like survivability, lethality, and network connectivity. Specific dollar amounts vary significantly by fiscal year and the scope of the upgrades being procured. For instance, previous large-scale upgrade contracts have also run into hundreds of millions of dollars. Analyzing past contract awards for similar upgrade levels (e.g., SEPv2 to SEPv3 transitions) would provide a clearer picture of cost trends and the evolution of pricing for these complex modernizations.

How does the cost per unit for this SEPv3 upgrade compare to previous versions?

Determining the precise cost per unit for this specific SEPv3 upgrade requires dividing the total contract value by the number of units. The total ceiling cost is $740.4 million for 174 upgrades, yielding a per-unit cost of approximately $4.25 million. Comparing this directly to previous versions like SEPv2 is challenging without specific contract data for those upgrades. However, it is generally expected that newer, more technologically advanced versions like SEPv3 would incur higher per-unit costs due to the integration of more sophisticated electronics, improved armor, and enhanced power systems. Factors such as inflation, evolving threat assessments, and the specific scope of work in each upgrade package also influence year-over-year cost comparisons.

What are the primary risks associated with this sole-source contract?

The primary risk associated with this sole-source contract is the potential for inflated pricing due to the lack of competitive pressure. Without competing bids, General Dynamics Land Systems Inc. may not have had the same incentive to offer the most cost-effective solution. Another risk is contractor dependency; the Army becomes reliant on a single source for these critical upgrades, potentially limiting flexibility and leverage in future negotiations. Furthermore, sole-source awards can sometimes mask inefficiencies or lead to less innovation compared to a competitive environment where multiple companies vie to offer the best value. Robust oversight and negotiation are crucial to mitigate these risks.

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

General Dynamics Land Systems Inc. (GDLS) has a long and established track record as the prime contractor for the Abrams Main Battle Tank, including the development and production of various upgrade packages. They have been instrumental in evolving the Abrams from its initial configurations through multiple System Enhancement Packages (SEP). GDLS has consistently delivered these complex systems to the U.S. Army and allied nations. Their experience encompasses integrating advanced technologies, managing large-scale production, and providing sustainment support. While specific performance metrics for every contract are not publicly detailed, GDLS's continued role as the primary provider of Abrams tanks and upgrades suggests a generally positive performance history in meeting the Army's requirements.

What are the implications of using multiple contract types (FPIF, FFP, CPFF) on this delivery order?

The use of multiple contract types—Fixed Price Incentive-Firm (FPIF), Firm Fixed Price (FFP), and Cost Plus Fixed Fee (CPFF)—on this delivery order indicates a strategy to manage different aspects of the work with varying levels of risk and flexibility. FFP is typically used for well-defined requirements where cost certainty is paramount. FPIF allows for shared cost savings or overruns between the government and contractor, incentivizing cost control while accommodating some uncertainty. CPFF is often used for research, development, or complex integration efforts where costs are difficult to estimate precisely, providing the contractor with cost reimbursement plus a fixed fee. This mix suggests the Army is attempting to balance cost predictability for some elements with the need for flexibility and contractor incentive for others, requiring careful administration to ensure each type is applied appropriately and effectively.

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

Pricing Type: FIXED PRICE INCENTIVE (L)

Evaluated Preference: NONE

Contractor Details

Parent Company: Wico Limited

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: $696,102,141

Exercised Options: $696,102,141

Current Obligation: $696,102,141

Subaward Activity

Number of Subawards: 754

Total Subaward Amount: $301,965,197

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: W56HZV18D0012

IDV Type: IDC

Timeline