Department of the Army awarded $50M for construction machinery, including training, to Caterpillar Inc

Contract Overview

Contract Amount: $50,017,178 ($50.0M)

Contractor: Caterpillar Inc

Awarding Agency: Department of Defense

Start Date: 2008-12-30

End Date: 2014-12-18

Contract Duration: 2,179 days

Daily Burn Rate: $23.0K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Construction

Official Description: MOTORIZED GRADER WITH A-KITS AND NEW EQUIPMENT TRAINING

Place of Performance

Location: MOSSVILLE, PEORIA County, ILLINOIS, 61552

State: Illinois Government Spending

Plain-Language Summary

Department of Defense obligated $50.0 million to CATERPILLAR INC for work described as: MOTORIZED GRADER WITH A-KITS AND NEW EQUIPMENT TRAINING Key points: 1. The contract value of $50M for construction machinery and training appears to be within a reasonable range for specialized equipment and associated services. 2. Full and open competition was utilized, suggesting a robust bidding process that likely fostered competitive pricing. 3. The contract duration of approximately 6 years (2179 days) indicates a long-term need for these assets and services. 4. The fixed-price contract with economic price adjustment suggests a mechanism to account for potential cost fluctuations over the contract's life. 5. The award to Caterpillar Inc., a major manufacturer, points to the procurement of established and likely reliable equipment. 6. The absence of small business set-asides means direct impact on this segment is limited, but subcontracting opportunities may exist.

Value Assessment

Rating: good

The contract value of $50 million for motorized graders, kits, and training is substantial. Benchmarking against similar large-scale equipment procurements by the Department of Defense suggests this figure is within expected parameters for high-value, specialized machinery. The inclusion of training and accessory kits adds to the overall value proposition. Without specific per-unit cost data for the graders and kits, a precise value-for-money assessment is challenging, but the competitive award process provides some assurance of fair pricing.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that all responsible sources were permitted to submit bids. The presence of two bidders suggests a moderate level of competition for this specialized equipment. While two bidders are better than one, a higher number of bidders could potentially drive prices down further and offer a wider range of technical solutions.

Taxpayer Impact: The full and open competition process is beneficial for taxpayers as it aims to secure the best possible price and quality through a wide selection of potential suppliers, maximizing the use of public funds.

Public Impact

Military personnel in construction and engineering roles will benefit from access to modern, well-equipped motorized graders. The contract delivers essential construction machinery and training, enhancing the Army's operational readiness and infrastructure development capabilities. The equipment is likely to be deployed at various Army installations, potentially impacting construction and maintenance activities nationwide. The training component will upskill military personnel in operating and maintaining advanced construction equipment, contributing to workforce development within the Army.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for price increases due to economic price adjustment clause over the contract's long duration.
Limited direct small business participation if subcontracting opportunities are not actively pursued.
Dependence on a single primary contractor (Caterpillar Inc.) for equipment and potentially specialized support.

Positive Signals

Awarded through full and open competition, suggesting a competitive bidding environment.
Inclusion of training ensures effective utilization and maintenance of the acquired equipment.
Procurement of equipment from a reputable manufacturer known for heavy machinery.

Sector Analysis

The construction machinery manufacturing sector is characterized by large, established players and significant capital investment. This contract falls within the broader industrial manufacturing and defense procurement landscape. Spending on heavy construction equipment by government entities is common for infrastructure projects, base maintenance, and operational support. Comparable spending benchmarks would typically involve analyzing other large-scale procurements of similar heavy machinery by military branches or federal agencies.

Small Business Impact

This contract did not include specific small business set-asides. As such, direct opportunities for small businesses to be the prime contractor are absent. However, Caterpillar Inc. may engage small businesses for subcontracting opportunities related to parts, maintenance, or specialized services, depending on their established supply chain and subcontracting plans. The overall impact on the small business ecosystem is likely indirect unless significant subcontracting occurs.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of the Army's contracting and program management offices. Accountability measures are embedded in the contract terms, including delivery schedules, performance standards, and payment clauses. Transparency is facilitated through contract award announcements and reporting mechanisms. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse.

Related Government Programs

Military Construction
Base Operations Support
Heavy Equipment Procurement
Defense Logistics Agency
General Services Administration (GSA) Schedules

Risk Flags

Long contract duration may increase risk of technological obsolescence.
Economic price adjustment clause could lead to cost increases.
Limited number of bidders (2) may indicate potential for better pricing with more competition.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $50.0 million to CATERPILLAR INC. MOTORIZED GRADER WITH A-KITS AND NEW EQUIPMENT TRAINING

Who is the contractor on this award?

The obligated recipient is CATERPILLAR 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 $50.0 million.

What is the period of performance?

Start: 2008-12-30. End: 2014-12-18.

What is Caterpillar Inc.'s track record with the Department of Defense for similar equipment procurements?

Caterpillar Inc. has a long-standing relationship with the Department of Defense, frequently supplying heavy construction and engineering equipment. Historical data indicates numerous awards for various types of machinery, including graders, bulldozers, and excavators, across different military branches. These contracts often involve significant dollar values and extended performance periods, similar to the motorized grader award. While specific performance metrics for past contracts are not detailed here, Caterpillar's consistent presence as a prime contractor suggests a generally satisfactory performance history in meeting military requirements for durability, reliability, and operational effectiveness. However, a deeper dive into past contract close-out reports and any associated performance evaluations would be necessary for a comprehensive assessment.

How does the $50 million contract value compare to the average cost of motorized graders and associated kits?

The $50 million contract value encompasses not only motorized graders but also 'A-Kits' (likely specialized attachments or configurations) and new equipment training. This comprehensive package makes a direct per-unit cost comparison difficult without itemized pricing. However, high-end, military-grade motorized graders can range from $200,000 to over $500,000 each, depending on specifications and capabilities. If the contract included several hundred units, plus the cost of kits and extensive training, the $50 million figure appears plausible. For instance, 100 graders at $300,000 each would total $30 million, leaving $20 million for kits and training, which is feasible for a large-scale procurement and training program over several years.

What are the primary risks associated with a long-duration contract (2179 days) for heavy machinery?

Long-duration contracts for heavy machinery present several risks. Firstly, technological obsolescence is a concern; newer, more efficient models may become available during the contract period, potentially making the procured equipment less advanced. Secondly, maintenance and repair risks increase over time, especially if specialized parts become scarce or if the contractor's support infrastructure diminishes. Economic price adjustments, while intended to mitigate contractor risk, can lead to cost overruns for the government if inflation is higher than anticipated. Finally, contractor performance risk is amplified over longer periods; a contractor's financial stability or commitment could change, impacting delivery or support. The Department of the Army likely mitigates these risks through performance clauses, clear maintenance requirements, and potentially options for early termination or upgrade.

What is the expected program effectiveness and impact on Army's operational readiness?

The program's effectiveness is expected to be high, as it provides essential tools for construction and engineering tasks critical to military operations. Modern motorized graders enhance efficiency and precision in tasks such as site preparation, road construction, and maintenance of forward operating bases. The inclusion of 'A-Kits' suggests customization for specific mission requirements, further boosting effectiveness. The training component is crucial for ensuring that operators can maximize the equipment's capabilities and perform maintenance, thereby reducing downtime and reliance on external support. This directly contributes to the Army's operational readiness by ensuring that infrastructure can be built, maintained, and adapted to support deployed forces, regardless of location.

How has federal spending on construction machinery evolved, and where does this contract fit?

Federal spending on construction machinery is a consistent component of defense and infrastructure budgets. Spending fluctuates based on military deployment needs, base modernization efforts, and national infrastructure initiatives. Over the past decade, there has been a trend towards acquiring more technologically advanced and fuel-efficient equipment, often with integrated digital systems for monitoring and maintenance. This $50 million contract for motorized graders fits within the typical annual spending patterns for heavy equipment procurement by the Department of Defense. It represents a significant, but not unprecedented, investment aimed at maintaining and upgrading the Army's fleet of essential construction vehicles, ensuring they remain capable of supporting diverse operational environments.

Industry Classification

NAICS: Manufacturing › Agriculture, Construction, and Mining Machinery Manufacturing › Construction Machinery Manufacturing

Product/Service Code: CONSTRUCT/MINE/EXCAVATE/HIGHWY EQPT

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Offers Received: 2

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT (K)

Evaluated Preference: NONE

Contractor Details

Parent Company: Caterpillar Inc. (UEI: 005070479)

Address: 14009 OLD GALENA RD TC-A, MOSSVILLE, IL, 61552

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $50,017,178

Exercised Options: $50,017,178

Current Obligation: $50,017,178

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: W56HZV08D0037

IDV Type: IDC

Timeline