Caterpillar Inc. awarded $42M contract for construction machinery by the U.S. Army, highlighting strong performance in manufacturing

Contract Overview

Contract Amount: $42,032,661 ($42.0M)

Contractor: Caterpillar Inc

Awarding Agency: Department of Defense

Start Date: 2010-12-15

End Date: 2015-09-25

Contract Duration: 1,745 days

Daily Burn Rate: $24.1K/day

Competition Type: FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Construction

Official Description: SCRAPER (U.S. ARMY)

Place of Performance

Location: MOSSVILLE, PEORIA County, ILLINOIS, 61552

State: Illinois Government Spending

Plain-Language Summary

Department of Defense obligated $42.0 million to CATERPILLAR INC for work described as: SCRAPER (U.S. ARMY) Key points: 1. The contract value of $42 million represents a significant investment in essential construction machinery. 2. Caterpillar Inc.'s award suggests a strong track record and competitive positioning in the defense sector. 3. The 'FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES' indicates a deliberate procurement strategy. 4. The fixed-price contract type offers cost certainty for the government. 5. The duration of 1745 days suggests a long-term need for these specialized machines. 6. The contract was awarded by the Department of the Navy, indicating its use within naval operations or support.

Value Assessment

Rating: good

The contract value of $42 million for construction machinery appears reasonable given the duration and the supplier's established reputation. Benchmarking against similar large-scale procurements for heavy equipment suggests this price point is within expected ranges. The firm fixed-price nature of the contract further supports value by locking in costs.

Cost Per Unit: N/A

Competition Analysis

Competition Level: limited

The contract was awarded under 'FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES.' This specific designation implies that while the competition was intended to be broad, certain sources were excluded, potentially due to specific technical requirements, existing relationships, or strategic considerations. The exact number of bidders is not specified, but the exclusion of sources suggests a potentially narrower field than a truly open competition.

Taxpayer Impact: This limited competition structure means taxpayers may not have benefited from the absolute lowest price achievable through unrestricted bidding. However, if the exclusions were justified by specialized needs, the resulting equipment may offer superior performance or compatibility, potentially leading to better long-term value.

Public Impact

The U.S. Army benefits from the acquisition of critical construction machinery essential for various operational and logistical support functions. This contract ensures the availability of specialized equipment for infrastructure development, maintenance, and deployment activities. The machinery procured will likely support military bases and operational theaters, contributing to national defense readiness. The contract supports jobs within Caterpillar Inc. and its supply chain, particularly in the manufacturing sector.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for higher costs due to limited competition.
Dependence on a single manufacturer for critical equipment could pose supply chain risks.
Ensuring long-term maintenance and parts availability for specialized machinery.

Positive Signals

Award to a reputable manufacturer with a proven track record.
Firm fixed-price contract provides cost predictability.
Long contract duration suggests sustained operational need and potential for economies of scale.
Awarded by the Department of the Navy, indicating strategic alignment with defense needs.

Sector Analysis

The construction machinery manufacturing sector is a vital component of the industrial base, supplying essential equipment for infrastructure projects, defense operations, and commercial development. This contract falls under NAICS code 333120 (Construction Machinery Manufacturing). The market is characterized by large, established players like Caterpillar, Inc., who often compete for significant government contracts due to their production capacity and specialized offerings. Government spending in this area is crucial for maintaining operational readiness and supporting large-scale projects.

Small Business Impact

This contract does not appear to have a specific small business set-aside. Given the nature of heavy construction machinery manufacturing and the scale of the award, it is unlikely that small businesses would be primary contractors. However, Caterpillar Inc. may engage small businesses as subcontractors for components or services, contributing to the broader small business ecosystem.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of the Navy's contracting and financial management departments. The firm fixed-price nature provides a degree of financial oversight by limiting cost overruns. Transparency is generally maintained through contract award databases like FPDS. Inspector General involvement would be triggered by allegations of fraud, waste, or abuse.

Related Government Programs

Defense Logistics Agency (DLA) Equipment Procurement
Army Corps of Engineers Construction Contracts
Naval Facilities Engineering Command (NAVFAC) Contracts
General Services Administration (GSA) Schedule Contracts for Heavy Equipment

Risk Flags

Limited competition may impact price competitiveness.
Long-term contract duration increases risk of obsolescence or changing needs.
Dependence on a single supplier for critical equipment.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $42.0 million to CATERPILLAR INC. SCRAPER (U.S. ARMY)

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 Navy).

What is the total obligated amount?

The obligated amount is $42.0 million.

What is the period of performance?

Start: 2010-12-15. End: 2015-09-25.

What is Caterpillar Inc.'s historical performance and track record with U.S. military contracts?

Caterpillar Inc. has a long-standing relationship with the U.S. military, frequently supplying heavy equipment and machinery for various defense applications. Their track record generally indicates reliability and adherence to contract specifications. Historical data from sources like the Federal Procurement Data System (FPDS) shows numerous awards to Caterpillar across different military branches for construction, engineering, and logistical support equipment. While specific performance metrics for individual contracts are not always publicly detailed, their continued success in winning large-scale government bids suggests a consistent ability to meet military requirements and quality standards. Any concerns would typically be flagged through contract performance reports or debriefs, which are not detailed here.

How does the $42 million contract value compare to similar procurements for construction machinery by the Department of Defense?

The $42 million contract value for construction machinery awarded to Caterpillar Inc. by the U.S. Army (via the Department of the Navy) is substantial but falls within the typical range for large-scale government procurements of heavy equipment. Similar contracts for bulldozers, excavators, loaders, and other construction vehicles often range from tens to hundreds of millions of dollars, depending on the quantity, specifications, and duration. For instance, contracts for fleet-wide replacements or major base construction projects can easily exceed this amount. The firm fixed-price nature of this contract suggests a defined scope and budget, making it a benchmark for cost predictability in such acquisitions. Without specific details on the exact types and quantities of machinery, a precise comparison is difficult, but the value is consistent with significant defense equipment needs.

What are the primary risks associated with this specific contract, considering its limited competition and duration?

The primary risks associated with this contract stem from its 'limited competition' designation and its substantial duration of 1745 days (approximately 4.8 years). Limited competition, even if justified, can reduce price pressure, potentially leading to higher costs for taxpayers than if a broader range of suppliers had been involved. There's also a risk of vendor lock-in, where the government becomes heavily reliant on Caterpillar for specific parts, maintenance, and future upgrades, potentially at premium prices. The long duration increases the risk of unforeseen technological obsolescence or changes in military requirements that the contracted machinery may not adequately address. Furthermore, any performance issues or supply chain disruptions from Caterpillar could significantly impact military operations that depend on this equipment.

How effective is the 'FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES' strategy in ensuring value for taxpayer money?

The effectiveness of 'FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES' in ensuring value for taxpayer money is nuanced. This strategy aims to balance the benefits of competition with specific, often technical, requirements that may limit the pool of eligible bidders. If the exclusions are well-justified (e.g., unique technical capabilities, interoperability needs, security requirements), it can lead to the acquisition of highly suitable equipment that performs exceptionally well, potentially offering better long-term value despite a potentially higher initial price. However, if the exclusions are less critical or overly broad, it can stifle competition, leading to inflated prices and reduced value. The key determinant of value is whether the excluded sources could have met the requirements adequately at a lower cost or with comparable performance.

What are the implications of this contract for the broader construction machinery market and Caterpillar's market share?

This $42 million contract significantly bolsters Caterpillar Inc.'s market share within the government sector for construction machinery. It reinforces their position as a key supplier to the U.S. military, potentially influencing future procurement decisions. For the broader construction machinery market, such large government awards signal demand and can drive innovation and production capacity among major manufacturers. It also highlights the importance of maintaining robust manufacturing capabilities that can meet stringent defense requirements. While this specific contract is limited, it contributes to Caterpillar's overall revenue and market presence, potentially impacting competitive dynamics for other large-scale projects, both governmental and commercial.

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 AFTER EXCLUSION OF SOURCES

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: M6785410R5117

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

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, Manufacturer of Goods, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $42,032,661

Exercised Options: $42,032,661

Current Obligation: $42,032,661

Contract Characteristics

Multi-Year Contract: Yes

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: M6785410D5117

IDV Type: IDC

Timeline