DoD awards $365M contract for HMMWV production to AM General LLC, with delivery through 2023

Contract Overview

Contract Amount: $364,981,572 ($365.0M)

Contractor: AM General LLC

Awarding Agency: Department of Defense

Start Date: 2020-07-15

End Date: 2023-12-31

Contract Duration: 1,264 days

Daily Burn Rate: $288.8K/day

Competition Type: NOT COMPETED

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: PROCURE HMMWV FOR JORDAN AND ARMY

Place of Performance

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

State: Indiana Government Spending

Plain-Language Summary

Department of Defense obligated $365.0 million to AM GENERAL LLC for work described as: PROCURE HMMWV FOR JORDAN AND ARMY Key points: 1. Contract awarded to a single supplier, raising questions about price competitiveness. 2. Sole-source nature limits opportunities for market-based price discovery. 3. Long-term delivery schedule suggests sustained demand for HMMWV vehicles. 4. Contract performance period spans over three years, indicating a significant commitment. 5. Focus on armored vehicle manufacturing places this contract within a specialized defense sector. 6. No small business set-aside indicates the primary contractor is likely a large entity.

Value Assessment

Rating: fair

The contract value of $365 million for HMMWV production is substantial. Without specific unit cost data or comparisons to similar sole-source procurements, it is difficult to definitively assess value for money. However, sole-source contracts often carry a premium due to the lack of competitive pressure. Benchmarking against historical AM General contracts for similar vehicles or against industry standards for armored vehicle manufacturing would be necessary for a more precise evaluation.

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 unique capability or proprietary technology is required, or in cases of urgent need where competition is not feasible. The lack of competition means that taxpayers did not benefit from the potential cost savings that could arise from multiple bidders vying for the contract.

Taxpayer Impact: Sole-source awards can lead to higher prices for taxpayers as there is no competitive pressure to drive down costs. This limits the government's ability to secure the best possible price.

Public Impact

The primary beneficiaries are the U.S. Army and potentially allied forces (Jordan) receiving essential light tactical vehicles. The contract ensures the continued production and delivery of High Mobility Multipurpose Wheeled Vehicles (HMMWVs). Geographic impact is primarily on AM General's manufacturing facilities in Indiana. Workforce implications include sustained employment for AM General's production and support staff.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing and potential cost savings for taxpayers.
Lack of transparency in the procurement process due to single-bidder solicitation.
Potential for cost overruns if not rigorously managed due to lack of competition.
Long contract duration could lead to price escalation if not adequately controlled.

Positive Signals

Ensures continued supply of a critical military asset (HMMWV).
Award to established manufacturer AM General suggests reliability and existing production capabilities.
Firm Fixed Price contract type provides cost certainty for the government, assuming no change orders.
Delivery to allied forces (Jordan) supports foreign military sales and diplomatic objectives.

Sector Analysis

The defense sector, specifically military vehicle manufacturing, is characterized by high barriers to entry, specialized technology, and significant government investment. AM General LLC is a long-standing prime contractor in this space, known for its HMMWV platform. This contract fits within the broader category of tactical wheeled vehicle procurement, a critical component of military logistics and operations. Comparable spending benchmarks would involve other large-scale vehicle production contracts within the Department of Defense.

Small Business Impact

The data indicates that this contract was not set aside for small businesses (ss: false, sb: false). AM General LLC is a large defense contractor, and the nature of HMMWV production typically involves substantial manufacturing capabilities. There is no explicit information regarding subcontracting plans for small businesses within this specific award notice, but large prime contractors are often required to meet small business subcontracting goals on larger defense contracts.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Army and the Department of Defense's contracting and program management offices. Accountability measures would include performance monitoring against delivery schedules and quality standards. Transparency is limited due to the sole-source nature of the award. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse.

Related Government Programs

Tactical Wheeled Vehicles
Light Tactical Vehicles
Armored Vehicle Manufacturing
Foreign Military Sales
Department of the Army Procurements

Risk Flags

Sole Source Procurement
Lack of Competition
Potential for Higher Costs
Long-Term Delivery Schedule

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $365.0 million to AM GENERAL LLC. PROCURE HMMWV FOR JORDAN AND ARMY

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 $365.0 million.

What is the period of performance?

Start: 2020-07-15. End: 2023-12-31.

What is AM General LLC's track record with HMMWV production and other military vehicle contracts?

AM General LLC has a long and established history as the primary manufacturer of the HMMWV (High Mobility Multipurpose Wheeled Vehicle) for the U.S. military, dating back to the 1980s. They have produced tens of thousands of these vehicles, fulfilling numerous contracts over several decades. Beyond the HMMWV, AM General has also been involved in the production or upgrade of other military vehicles, including the Humvee's successor, the JLTV (Joint Light Tactical Vehicle), though Oshkosh Defense won the primary contract for that program. Their track record demonstrates significant experience and capability in large-scale military vehicle manufacturing, including meeting stringent military specifications and production schedules. However, like many long-term sole-source providers, scrutiny often focuses on cost-effectiveness over extended periods.

How does the $365 million contract value compare to previous HMMWV procurements by the Army?

Comparing the $365 million contract value directly to previous HMMWV procurements requires access to historical contract data, including the number of vehicles procured and the specific contract types (e.g., fixed-price, cost-plus). However, given that this contract covers production and delivery over a period extending to late 2023, it represents a significant, ongoing investment in the HMMWV fleet. The Army has historically awarded multi-year contracts for HMMWV production, often in the hundreds of millions of dollars, to AM General. The specific value is influenced by factors such as the variant of HMMWV being produced, the quantity ordered, and any associated upgrades or support services. Without granular data on unit costs and quantities for this specific award versus prior ones, a precise year-over-year comparison is challenging, but the scale aligns with previous large-volume production efforts.

What are the primary risks associated with a sole-source award for military vehicle production?

The primary risks associated with a sole-source award for military vehicle production, such as this HMMWV contract, revolve around cost and innovation. Without competition, there is reduced pressure on the contractor (AM General LLC) to offer the lowest possible price, potentially leading to higher costs for the government and taxpayers. The government may also lack leverage to negotiate favorable terms or drive down unit prices over time. Furthermore, a sole-source approach can stifle innovation, as the incumbent contractor may face less incentive to invest in new technologies or process improvements if their market position is guaranteed. Dependence on a single supplier also creates supply chain risks; any disruption at the sole source can halt production, impacting military readiness.

What is the strategic importance of the HMMWV platform for the U.S. Army and its allies like Jordan?

The HMMWV (High Mobility Multipurpose Wheeled Vehicle) platform remains strategically important for the U.S. Army and its allies due to its versatility, mobility, and relatively lower cost compared to heavier armored vehicles. It serves as a light tactical vehicle capable of performing a wide range of missions, including troop transport, cargo hauling, reconnaissance, and as a platform for various weapon systems. Its ability to navigate diverse terrains makes it crucial for operational flexibility. For allies like Jordan, acquiring HMMWVs through foreign military sales enhances their own defense capabilities, interoperability with U.S. forces, and border security. Continued procurement ensures the availability of these essential assets for both current operations and future contingency planning.

How does the 'Firm Fixed Price' contract type (PT) mitigate cost risks for the government in this sole-source scenario?

The 'Firm Fixed Price' (FFP) contract type is designed to provide the government with cost certainty, even in a sole-source scenario. Under an FFP contract, the price is set and not subject to adjustment based on the contractor's actual costs. This means AM General LLC assumes the risk of cost overruns. If their production costs exceed the agreed-upon price, the contractor absorbs the loss. Conversely, if they manage costs efficiently and their actual expenses are lower than anticipated, they retain the profit margin. While this structure shifts cost risk to the contractor, it does not inherently guarantee the lowest possible price, as that is a function of the initial negotiation in a sole-source context. However, it does prevent unexpected cost increases during the contract performance period, which is a significant benefit for government budgeting.

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: $364,981,572

Exercised Options: $364,981,572

Current Obligation: $364,981,572

Subaward Activity

Number of Subawards: 345

Total Subaward Amount: $158,174,803

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: W56HZV17D0071

IDV Type: IDC

Timeline