DoD's $737M MRAP contract awarded to ND Defense LLC, with 10 bidders, highlights significant defense spending

Contract Overview

Contract Amount: $736,671,138 ($736.7M)

Contractor: ND Defense LLC

Awarding Agency: Department of Defense

Start Date: 2007-05-31

End Date: 2009-03-31

Contract Duration: 670 days

Daily Burn Rate: $1.1M/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 10

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: 1200 CATEGORY I MRAP

Place of Performance

Location: WARRENVILLE, DUPAGE County, ILLINOIS, 60555

State: Illinois Government Spending

Plain-Language Summary

Department of Defense obligated $736.7 million to ND DEFENSE LLC for work described as: 1200 CATEGORY I MRAP Key points: 1. The contract's value of $737 million represents a substantial investment in military armored vehicles. 2. Competition dynamics involved 10 bidders, suggesting a moderately competitive market for this type of equipment. 3. Risk indicators are moderate, given the fixed-price nature which shifts some cost risk to the contractor. 4. Performance context is tied to the urgent need for mine-resistant vehicles during the contract period. 5. Sector positioning places this contract within the critical defense manufacturing industry, specifically armored vehicles.

Value Assessment

Rating: good

The contract's total value of $737 million for 1200 MRAP vehicles indicates a per-unit cost of approximately $614,000. Benchmarking this against similar large-scale military vehicle procurements suggests this pricing is within a reasonable range, considering the specialized nature and urgent operational requirements often associated with MRAP vehicles. The firm fixed-price contract structure also implies that the government secured a predictable cost, though the ultimate value depends on the contractor's efficiency.

Cost Per Unit: Approximately $614,000 per unit.

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, with 10 distinct bidders participating. The presence of multiple bidders indicates a healthy level of interest and capability within the market for MRAP vehicles. This competitive environment likely contributed to achieving a fair market price for the government, as contractors vied to win the award by offering competitive terms and pricing.

Taxpayer Impact: The full and open competition ensured that taxpayer funds were used efficiently by fostering a competitive bidding process, which typically leads to better pricing and value for the government.

Public Impact

The primary beneficiaries are the U.S. military personnel who received enhanced protection through the MRAP vehicles. The services delivered include the manufacturing and delivery of 1200 mine-resistant ambush-protected vehicles. The geographic impact is primarily within operational theaters where these vehicles were deployed, enhancing soldier safety. Workforce implications include job creation and sustainment within the defense manufacturing sector, particularly at ND Defense LLC and its supply chain.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost overruns if the fixed-price contract does not adequately account for unforeseen production challenges.
Dependence on a single contractor (ND Defense LLC) for a critical defense asset could pose supply chain risks.
Ensuring timely delivery and quality control for a large quantity of specialized vehicles requires robust oversight.

Positive Signals

Awarded under full and open competition, indicating a robust market and potential for competitive pricing.
Firm fixed-price contract shifts cost risk to the contractor, providing budget certainty for the government.
The large number of bidders suggests a healthy industrial base capable of producing these critical assets.

Sector Analysis

The defense manufacturing sector, particularly the segment focused on armored vehicles, is characterized by high technological requirements, stringent quality standards, and significant government investment. The market size for such specialized equipment is substantial, driven by global security needs. This contract for MRAP vehicles fits within the broader category of tactical wheeled vehicles, a critical component of modern military logistics and force protection. Comparable spending benchmarks in this area often involve multi-billion dollar programs for vehicle fleets.

Small Business Impact

This contract does not appear to have specific small business set-aside provisions, as it was awarded under full and open competition. However, the prime contractor, ND Defense LLC, may engage small businesses for subcontracting opportunities to fulfill the manufacturing requirements. The extent of small business participation would depend on ND Defense LLC's subcontracting plan and the availability of qualified small business suppliers within the defense industrial base.

Oversight & Accountability

Oversight for this contract would typically be managed by the Department of the Navy's contracting and program management offices. Accountability measures are embedded in the firm fixed-price contract terms, requiring delivery of specified quantities and quality. Transparency is generally maintained through contract award databases and reporting requirements, though specific production details may be sensitive. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Mine-Resistant Ambush Protected (MRAP) Vehicle Program
Tactical Wheeled Vehicle Procurement
Department of Defense Vehicle Manufacturing Contracts
Naval Sea Systems Command (NAVSEA) Contracts

Risk Flags

Potential for cost overruns if contractor faces unforeseen production issues.
Ensuring consistent quality across 1200 units requires diligent oversight.
Dependence on contractor's supply chain stability.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $736.7 million to ND DEFENSE LLC. 1200 CATEGORY I MRAP

Who is the contractor on this award?

The obligated recipient is ND DEFENSE LLC.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $736.7 million.

What is the period of performance?

Start: 2007-05-31. End: 2009-03-31.

What is the track record of ND Defense LLC in delivering large-scale military vehicle contracts?

Information regarding ND Defense LLC's specific track record for large-scale military vehicle contracts prior to or subsequent to this award is not detailed in the provided data. However, the award of a $737 million contract for 1200 MRAP vehicles suggests a demonstrated capability to handle significant production volumes and meet stringent military specifications. Further investigation into the company's history, past performance on similar contracts, and any reported issues or successes would be necessary for a comprehensive assessment of their track record. The context of the MRAP program itself, which was initiated to address urgent needs in conflict zones, implies that contractors were selected based on their ability to rapidly produce and deliver these specialized vehicles.

How does the per-unit cost of $614,000 for these MRAP vehicles compare to other similar procurements?

The per-unit cost of approximately $614,000 for the MRAP vehicles under this contract appears to be within the expected range for such specialized military equipment, especially considering the urgency and operational context of the MRAP program. Early MRAP variants, procured under emergency conditions, sometimes had higher per-unit costs due to rapid development and fielding. As the program matured and production scaled, costs could decrease. Comparing this figure to other large-scale armored vehicle procurements, such as tanks or other protected mobility vehicles, would provide a more robust benchmark. However, given the unique design requirements for blast protection, the $614,000 figure is not inherently indicative of poor value, but rather reflects the complexity and safety features of the MRAP.

What are the primary risks associated with a firm fixed-price contract for military vehicle manufacturing?

The primary risk associated with a firm fixed-price (FFP) contract for military vehicle manufacturing, like this MRAP award, is that the contractor bears the brunt of any cost overruns. If ND Defense LLC underestimated production costs, experienced supply chain disruptions leading to higher material prices, or encountered unforeseen manufacturing challenges, their profit margin would shrink, potentially leading to financial strain. Conversely, the government benefits from cost certainty. However, there's a risk that to maintain profitability under an FFP, a contractor might cut corners on quality or use less expensive materials if oversight is insufficient, though stringent military specifications aim to prevent this. The government's risk is primarily related to potential delays or quality issues if the contractor struggles financially.

How effective was the competition level (10 bidders) in driving down costs for this MRAP contract?

A competition level of 10 bidders for this MRAP contract suggests a reasonably robust market, which is generally effective in driving down costs. With multiple capable companies vying for the award, each bidder is incentivized to offer competitive pricing and favorable terms to secure the contract. This scenario typically leads to a price closer to the market equilibrium and prevents a single supplier from dictating terms. While it's difficult to quantify the exact cost savings without a baseline 'no-bid' scenario, the presence of strong competition is a key factor in ensuring the government receives good value for taxpayer money. The firm fixed-price nature further solidifies the cost certainty achieved through this competitive process.

What are the historical spending patterns for MRAP vehicles and similar armored vehicles by the Department of Defense?

Historical spending on MRAP vehicles by the Department of Defense has been substantial, particularly during the height of the conflicts in Iraq and Afghanistan, where the need for blast-protected vehicles was paramount. Billions of dollars were invested in the procurement and sustainment of various MRAP variants. Spending on similar armored vehicles, such as tanks (e.g., Abrams) and other tactical vehicles, also represents a significant portion of the defense budget, often running into tens of billions over the lifecycle of these platforms. The $737 million awarded here is a notable single contract but fits within the broader pattern of continuous investment in ground vehicle modernization and force protection by the DoD.

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: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Offers Received: 10

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Navistar International Corporation (UEI: 161984646)

Address: 4201 WINFIELD RD, WARRENVILLE, IL, 60555

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $736,671,138

Exercised Options: $736,671,138

Current Obligation: $736,671,138

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: M6785407D5032

IDV Type: IDC

Timeline