DoD awards $28.5M for PAP 7993 Propellant to BAE Systems, raising questions on value and competition

Contract Overview

Contract Amount: $28,497,778 ($28.5M)

Contractor: BAE Systems Ordnance Systems Inc

Awarding Agency: Department of Defense

Start Date: 2011-05-19

End Date: 2017-10-19

Contract Duration: 2,345 days

Daily Burn Rate: $12.2K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: PRODUCTION OF PAP 7993 PROPELLANT

Place of Performance

Location: RADFORD, RADFORD CITY County, VIRGINIA, 24141

State: Virginia Government Spending

Plain-Language Summary

Department of Defense obligated $28.5 million to BAE SYSTEMS ORDNANCE SYSTEMS INC for work described as: PRODUCTION OF PAP 7993 PROPELLANT Key points: 1. Significant contract value for specialized propellant production. 2. BAE Systems is a major defense contractor, indicating potential market concentration. 3. Risk of price escalation due to long contract duration and firm-fixed-price structure. 4. Sector is critical for defense readiness, but specific product details are limited.

Value Assessment

Rating: fair

The contract value of $28.5 million over approximately 6.5 years suggests a substantial but not exceptionally high annual spend. Benchmarking against similar specialized propellant contracts is difficult without more granular data on quantity and specifications.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, which is positive for price discovery. However, the specific details of the bidding process and the number of competitors are not provided, making it hard to assess the effectiveness of the competition.

Taxpayer Impact: While competition was utilized, the long duration and firm-fixed-price nature could lead to suboptimal pricing if market conditions change significantly.

Public Impact

Ensures supply of critical propellant for military applications. Supports a major defense contractor and its workforce. Potential for long-term reliance on a single supplier for this specific propellant. Limited public information on the exact use and quantity of the propellant.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Long contract duration may not reflect current market prices.
Limited transparency on competition details.
Firm-fixed-price could be disadvantageous if input costs rise.

Positive Signals

Awarded under full and open competition.
Production of essential defense material.

Sector Analysis

This contract falls within the Ammunition (except Small Arms) Manufacturing sector, a critical component of the defense industrial base. Spending in this area is directly tied to military readiness and procurement cycles, often involving specialized and high-cost materials.

Small Business Impact

The contract was awarded to BAE Systems, a large prime contractor. There is no indication that small businesses were significantly involved as subcontractors in this specific award, which is common for large-scale defense manufacturing contracts.

Oversight & Accountability

The Department of the Army awarded this contract, implying oversight from a major federal agency. However, the limited data provided does not offer insights into specific oversight mechanisms, performance monitoring, or accountability measures employed during the contract's lifecycle.

Related Government Programs

Ammunition (except Small Arms) Manufacturing
Department of Defense Contracting
Department of the Army Programs

Risk Flags

Potential for price escalation due to long duration.
Limited transparency on competitive bidding details.
Risk of contractor lock-in for specialized material.
Lack of small business participation noted.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $28.5 million to BAE SYSTEMS ORDNANCE SYSTEMS INC. PRODUCTION OF PAP 7993 PROPELLANT

Who is the contractor on this award?

The obligated recipient is BAE SYSTEMS ORDNANCE SYSTEMS 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 $28.5 million.

What is the period of performance?

Start: 2011-05-19. End: 2017-10-19.

What was the competitive landscape like for this specific propellant, and did multiple bids truly drive down costs?

While the award states 'full and open competition,' the actual number of bidders and the price spread between them are crucial for assessing value. Without this data, it's impossible to confirm if the competition was robust enough to secure the best possible price for taxpayers. The long duration might also have deterred some potential bidders.

What are the risks associated with a firm-fixed-price contract for a specialized, potentially volatile commodity like propellant over a 6.5-year period?

A firm-fixed-price contract locks in the price regardless of future cost fluctuations. For a specialized item like propellant, raw material costs, manufacturing complexities, and energy prices can change significantly over 6.5 years. This exposes the government to potential overpayment if costs decrease and could incentivize the contractor to cut corners if costs rise unexpectedly.

How does the production of PAP 7993 propellant align with current and future defense needs, and is this a strategic long-term investment?

The effectiveness hinges on the strategic importance and projected demand for PAP 7993 propellant. If it's a legacy system component with declining relevance, the investment might be questionable. Conversely, if it's integral to current or next-generation munitions, securing a long-term supply through a competitive process is vital for national security.

Industry Classification

NAICS: Manufacturing › Other Fabricated Metal Product Manufacturing › Ammunition (except Small Arms) Manufacturing

Product/Service Code: AMMUNITION AND EXPLOSIVES

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Offers Received: 2

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: STATE RT 114, RADFORD, VA, 24141

Business Categories: Category Business, Corporate Entity Not Tax Exempt, DoT Certified Disadvantaged Business Enterprise, Manufacturer of Goods, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $28,497,778

Exercised Options: $28,497,778

Current Obligation: $28,497,778

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: W52P1J11D0013

IDV Type: IDC

Timeline