DoD's $271.7M Heavy Equipment Program awarded to Caterpillar Inc. shows strong performance

Contract Overview

Contract Amount: $27,170,222 ($27.2M)

Contractor: Caterpillar Inc

Awarding Agency: Department of Defense

Start Date: 2017-12-20

End Date: 2018-10-26

Contract Duration: 310 days

Daily Burn Rate: $87.6K/day

Competition Type: FULL AND OPEN COMPETITION

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Construction

Official Description: 8505036036!HEAVY EQUIPMENT PROGRAM IST -

Place of Performance

Location: MOSSVILLE, PEORIA County, ILLINOIS, 61552

State: Illinois Government Spending

Plain-Language Summary

Department of Defense obligated $27.2 million to CATERPILLAR INC for work described as: 8505036036!HEAVY EQUIPMENT PROGRAM IST - Key points: 1. Contract value of $271.7 million indicates significant investment in heavy machinery. 2. Awarded to a single, established manufacturer, suggesting a focus on reliability and existing supply chains. 3. Fixed Price with Economic Price Adjustment contract type introduces some cost fluctuation risk. 4. Performance period of approximately 10 months suggests a focused, short-term need for equipment. 5. The contract falls under Construction Machinery Manufacturing, a critical sector for defense logistics. 6. Awarded under full and open competition, implying a robust bidding process.

Value Assessment

Rating: good

The contract value of $271.7 million for heavy equipment appears substantial. Benchmarking against similar large-scale procurements for construction machinery is difficult without more specific details on the equipment type and quantity. However, Caterpillar is a well-established leader in this market, suggesting that the pricing is likely competitive within the industry for high-quality, specialized equipment. The fixed-price with economic price adjustment structure allows for some flexibility in managing costs related to material and labor fluctuations, which is common in long-lead manufacturing.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that multiple bidders were likely considered. The specific number of bidders is not provided, but this procurement method generally fosters price discovery and encourages competitive pricing. Awarding to Caterpillar Inc. suggests they offered the best value proposition among the competing firms, whether through price, technical capabilities, or other evaluation factors.

Taxpayer Impact: Full and open competition is beneficial for taxpayers as it typically leads to more competitive pricing and a wider selection of qualified vendors, maximizing the use of public funds.

Public Impact

The Department of Defense benefits from the acquisition of essential heavy equipment for its operations. This contract supports the maintenance and readiness of military infrastructure and logistical capabilities. The geographic impact is likely national, supporting defense installations and operations across various locations. Workforce implications include support for manufacturing jobs within Caterpillar Inc. and its supply chain.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Economic price adjustment clause introduces potential for cost overruns if market prices increase significantly.
Reliance on a single primary contractor, Caterpillar Inc., could pose supply chain risks if disruptions occur.
Lack of specific performance metrics makes it difficult to fully assess operational efficiency and value.

Positive Signals

Awarded through full and open competition, suggesting a competitive bidding process.
Caterpillar Inc. is a reputable manufacturer with a strong track record in heavy equipment.
The contract value indicates a significant commitment to acquiring necessary operational assets.

Sector Analysis

The Construction Machinery Manufacturing sector is vital for infrastructure development and maintenance, including military applications. This contract, valued at over $271 million, represents a significant procurement within this industry. The market is dominated by a few large global players, including Caterpillar, which often leads to contracts being awarded to these established firms. Spending in this sector for government purposes is often driven by infrastructure projects, disaster relief, and military logistics, making it a consistent area of federal expenditure.

Small Business Impact

The provided data does not indicate any specific small business set-aside provisions for this contract. Given the nature of heavy equipment manufacturing and the award to a large corporation like Caterpillar Inc., it is unlikely that small businesses were the primary focus of the prime contract. However, Caterpillar likely utilizes a network of small business suppliers and subcontractors for components and services, contributing to the broader small business ecosystem.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Defense's contracting and financial management systems. The Defense Contract Management Agency (DCMA) would likely be involved in monitoring performance and compliance. Transparency is generally maintained through contract databases like FPDS, which record award details. Inspector General offices within the DoD would have jurisdiction to investigate any allegations of fraud, waste, or abuse related to this procurement.

Related Government Programs

Heavy Construction Equipment
Military Engineering Vehicles
Defense Logistics Support Equipment
Construction Machinery Procurement

Risk Flags

Potential for cost overruns due to Economic Price Adjustment clause.
Supply chain disruption risk associated with reliance on a single large manufacturer.
Lack of detailed performance metrics in available data.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $27.2 million to CATERPILLAR INC. 8505036036!HEAVY EQUIPMENT PROGRAM IST -

Who is the contractor on this award?

The obligated recipient is CATERPILLAR INC.

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Logistics Agency).

What is the total obligated amount?

The obligated amount is $27.2 million.

What is the period of performance?

Start: 2017-12-20. End: 2018-10-26.

What specific types of heavy equipment were procured under this contract, and what were their intended uses?

The provided data identifies the North American Industry Classification System (NAICS) code as 333120, which corresponds to Construction Machinery Manufacturing. This suggests the equipment procured falls under categories such as excavators, bulldozers, loaders, and other heavy machinery essential for construction, earthmoving, and infrastructure projects. While specific item details are not available in the abbreviated data, such equipment is critical for military base construction, repair, logistical support operations, and potentially disaster response efforts. The 'HEAVY EQUIPMENT PROGRAM IST' designation further supports this interpretation, indicating a program focused on the acquisition or sustainment of these vital assets for operational readiness.

How does the $271.7 million contract value compare to historical spending on similar heavy equipment programs by the Department of Defense?

Comparing the $271.7 million contract value requires access to historical spending data for similar heavy equipment programs within the Department of Defense. Without specific historical benchmarks for comparable procurements (e.g., by equipment type, quantity, or duration), it's challenging to definitively state whether this represents an increase or decrease. However, large-scale procurements of heavy machinery are typical for military operations and infrastructure maintenance. The value suggests a significant investment, potentially for a major program initiation, expansion, or a substantial replenishment of aging fleets. Further analysis would involve querying contract databases for similar NAICS codes and contract types over several fiscal years to establish a trend.

What are the key performance indicators (KPIs) or metrics used to evaluate the success of this contract?

The provided data does not explicitly list the Key Performance Indicators (KPIs) or metrics used to evaluate the success of this specific contract. Typically, for heavy equipment procurements, KPIs would focus on factors such as on-time delivery of equipment, adherence to specifications (quality and functionality), warranty performance, reliability in operational environments, and potentially total cost of ownership over a defined period. For a fixed-price with economic price adjustment contract, tracking the final cost against initial projections, considering the price adjustments, would also be a key metric. The effectiveness of the equipment in supporting its intended military or logistical missions would be the ultimate measure of success.

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

Caterpillar Inc. has a long-standing and extensive track record of supplying heavy equipment to the U.S. military, including the Department of Defense (DoD). They are a primary contractor for a wide range of construction, engineering, and tactical support vehicles. Their history with the DoD includes numerous contracts for excavators, bulldozers, wheel loaders, and specialized equipment tailored for military applications. Caterpillar is known for its robust manufacturing capabilities, global support network, and ability to meet stringent military specifications. This established relationship and proven performance likely contributed to them being awarded this significant contract, suggesting a high degree of confidence from the DoD in their ability to deliver.

What are the potential risks associated with the 'Economic Price Adjustment' clause in this contract?

The 'Economic Price Adjustment' (EPA) clause in this contract introduces a degree of financial risk for the government. This clause allows for adjustments to the contract price based on fluctuations in specified economic factors, such as labor costs, material prices, or other indices. The primary risk is that these adjustments could lead to the final contract cost exceeding the initially anticipated fixed price, especially if market conditions experience significant inflation or supply chain disruptions affecting raw material costs. While EPA clauses are intended to protect contractors from unforeseen cost increases and ensure fair pricing, they require careful monitoring by the contracting agency to ensure that adjustments are justified and do not result in excessive payments to the contractor.

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

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

Financial Breakdown

Contract Ceiling: $27,170,222

Exercised Options: $27,170,222

Current Obligation: $27,170,222

Subaward Activity

Number of Subawards: 2

Total Subaward Amount: $678,991

Contract Characteristics

Commercial Item: COMMERCIAL ITEM

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SPE8EC17D0012

IDV Type: IDC

Timeline