DoD awards $34.7M for Humvees to AM General LLC, a sole-source contract for Iraq

Contract Overview

Contract Amount: $34,741,166 ($34.7M)

Contractor: AM General LLC

Awarding Agency: Department of Defense

Start Date: 2019-08-29

End Date: 2022-02-22

Contract Duration: 908 days

Daily Burn Rate: $38.3K/day

Competition Type: NOT COMPETED

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: M1151A1B1 HMMWV (149 EA) AND M1152 HMMWV (45 EA) FOR IRAQ, FMS CASE 7N-B-ACW

Place of Performance

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

State: Indiana Government Spending

Plain-Language Summary

Department of Defense obligated $34.7 million to AM GENERAL LLC for work described as: M1151A1B1 HMMWV (149 EA) AND M1152 HMMWV (45 EA) FOR IRAQ, FMS CASE 7N-B-ACW Key points: 1. Contract awarded to a single supplier, raising questions about price competitiveness. 2. Focus on armored vehicles for foreign military sales indicates strategic defense partnerships. 3. Long performance period suggests a sustained need for these specific military assets. 4. Lack of competition may limit opportunities for innovation and cost savings. 5. Contract value falls within a typical range for specialized military vehicle procurement. 6. Geographic focus on Iraq highlights ongoing security assistance efforts.

Value Assessment

Rating: fair

The contract value of $34.7 million for 194 Humvees (M1151A1B1 and M1152 variants) appears within the expected range for specialized military vehicles, especially considering the foreign military sales context for Iraq. However, without competitive bidding, it's difficult to definitively assess value for money. Benchmarking against similar sole-source procurements or previous contracts for these specific models would be necessary for a more precise evaluation of pricing efficiency.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one vendor, AM General LLC, was solicited. This approach is typically used when a specific capability is required that only one source can provide, or in urgent situations. The lack of competition means that taxpayers did not benefit from the price discovery mechanisms inherent in a competitive bidding process, potentially leading to higher costs than if multiple vendors had vied for the contract.

Taxpayer Impact: Sole-source awards limit the government's ability to secure the best possible price, as there is no competitive pressure on the contractor to offer the lowest bid. This can result in taxpayer funds being used less efficiently.

Public Impact

The primary beneficiaries are the Iraqi security forces, who will receive critical armored vehicles to enhance their operational capabilities. The services delivered include the provision of specific military hardware (M1151A1B1 and M1152 Humvees) essential for troop transport and protection. The geographic impact is concentrated in Iraq, supporting U.S. foreign policy objectives and security assistance programs in the region. Workforce implications are primarily for AM General LLC, supporting manufacturing jobs and their supply chain.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition and potential cost savings for taxpayers.
Lack of open competition may reduce opportunities for exploring alternative or innovative vehicle solutions.
Foreign military sales can be complex and subject to geopolitical factors influencing delivery and sustainment.

Positive Signals

AM General LLC is an established manufacturer of HMMWVs, suggesting a track record of production for this specific vehicle type.
The contract specifies particular variants (M1151A1B1, M1152) indicating a tailored requirement met by the awarded contractor.
The contract supports U.S. foreign policy objectives by providing essential equipment to an allied nation.

Sector Analysis

This contract falls within the Defense Industrial Base sector, specifically the manufacturing of military armored vehicles. The market for such specialized vehicles is relatively concentrated, with a few key manufacturers dominating production. AM General LLC is a significant player in this niche. Spending on military vehicles is a substantial component of defense budgets globally, driven by ongoing security needs and modernization efforts. This procurement aligns with broader trends in defense spending focused on equipping allied forces.

Small Business Impact

This contract does not appear to have a small business set-aside component, nor is there information indicating significant subcontracting opportunities for small businesses. The procurement is a sole-source award to a large prime contractor, AM General LLC. This means the direct economic impact on the small business ecosystem from this specific award is likely minimal, unless AM General has a robust small business subcontracting program that is not detailed here.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Army and the Department of Defense's contracting and financial management offices. Given it's a Foreign Military Sales (FMS) case, additional oversight mechanisms from the Defense Security Cooperation Agency (DSCA) may be involved. Transparency is facilitated through contract databases like FPDS, but the sole-source nature limits public insight into the negotiation process. Inspector General (IG) jurisdiction would apply to any allegations of fraud, waste, or abuse.

Related Government Programs

Foreign Military Sales Program
Armored Vehicle Procurement
Tactical Wheeled Vehicles
Department of Defense Contracts
Military Vehicle Manufacturing

Risk Flags

Sole-source award
Lack of competition
Potential for non-competitive pricing

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $34.7 million to AM GENERAL LLC. M1151A1B1 HMMWV (149 EA) AND M1152 HMMWV (45 EA) FOR IRAQ, FMS CASE 7N-B-ACW

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 $34.7 million.

What is the period of performance?

Start: 2019-08-29. End: 2022-02-22.

What is AM General LLC's track record with HMMWV production and sole-source contracts?

AM General LLC has a long and established history as the original manufacturer of the High Mobility Multipurpose Wheeled Vehicle (HMMWV), often referred to as the Humvee. They have produced tens of thousands of these vehicles for the U.S. military and numerous foreign allies since the 1980s. Their expertise is specific to this platform, including various configurations and upgrades. Regarding sole-source contracts, AM General has historically received sole-source awards for specialized variants, upgrades, or sustainment parts where their unique knowledge and production capabilities are deemed essential. This is often due to the proprietary nature of certain designs or the need for interoperability with existing fleets. However, the frequency and justification for such sole-source awards are subject to review under federal procurement regulations to ensure fair and reasonable pricing and to explore competition where feasible.

How does the price per unit for these Humvees compare to similar procurements, especially considering it's a sole-source award?

Determining a precise per-unit cost benchmark is challenging without access to detailed pricing breakdowns and comparable contract data, especially given this is a sole-source award. The contract value of $34.7 million for 194 vehicles averages to approximately $179,000 per vehicle. This figure includes the vehicles themselves, potentially associated support, training, or specific configurations for the Iraqi market, and profit. Sole-source awards inherently lack the downward price pressure that competition provides. Therefore, this average price should be viewed with caution. To assess value, it would need to be compared against recent sole-source awards for similar HMMWV variants (M1151A1B1, M1152) to the same or different foreign customers, or against any available historical data for U.S. military domestic procurements of comparable configurations, adjusting for inflation and specific mission requirements.

What are the primary risks associated with this sole-source procurement of military vehicles?

The primary risk associated with this sole-source procurement is the potential for inflated pricing due to the lack of competitive bidding. Without competing offers, the government relies heavily on the contractor's proposed pricing being fair and reasonable, which can be harder to verify. Another risk is the potential for reduced innovation; a competitive environment often spurs contractors to find more cost-effective or technologically advanced solutions. Furthermore, sole-source awards can set a precedent, potentially leading to future sole-source justifications if not carefully managed. There's also a risk related to program execution and delivery timelines, although AM General's experience mitigates some of this. Finally, geopolitical risks associated with the destination country (Iraq) could impact delivery, sustainment, or the ultimate effectiveness of the equipment.

How effective is the Department of Defense in ensuring value for money on sole-source contracts like this one?

The Department of Defense (DoD) employs several mechanisms to ensure value for money on sole-source contracts, though effectiveness can vary. These include rigorous price analysis, cost realism assessments, and negotiation strategies. Contracting officers are required to obtain certified cost or pricing data from the contractor for certain sole-source procurements above specific thresholds, allowing for detailed scrutiny of the contractor's cost estimates. They also conduct market research to justify the sole-source determination and explore potential competition. However, the inherent limitation of sole-source awards is the absence of direct price competition. While oversight exists, the government's leverage in negotiating price is reduced compared to a competitive scenario. The effectiveness often depends on the contracting officer's skill, the data available, and the specific circumstances justifying the sole-source award.

What are the historical spending patterns for HMMWVs and similar armored vehicles by the Department of the Army?

The Department of the Army has historically been a major purchaser of HMMWVs and other armored vehicles. Spending on HMMWVs has been significant over several decades, particularly during periods of active conflict requiring large-scale deployment. Procurement has included various models, upgrades, and sustainment parts. Beyond HMMWVs, the Army also procures other armored vehicles like the Mine-Resistant Ambush Protected (MRAP) vehicles, Joint Light Tactical Vehicles (JLTVs), and various armored personnel carriers and tanks. Spending patterns fluctuate based on strategic needs, budget allocations, modernization programs (like the transition to JLTVs), and operational demands, including foreign military sales. While HMMWV procurement has decreased from peak wartime levels, specific variants and foreign sales continue to represent a notable portion of the Army's tactical vehicle spending.

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: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: KPS Capital Partners, LP

Address: 105 N NILES AVE, SOUTH BEND, IN, 46617

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

Financial Breakdown

Contract Ceiling: $34,741,166

Exercised Options: $34,741,166

Current Obligation: $34,741,166

Subaward Activity

Number of Subawards: 1

Total Subaward Amount: $2,037,468

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: W56HZV17D0071

IDV Type: IDC

Timeline