Army awards $289.9M contract for bulk explosives to BAE Systems, raising competition concerns

Contract Overview

Contract Amount: $186,460,355 ($186.5M)

Contractor: BAE Systems Global Combat Systems Munitions Limited

Awarding Agency: Department of Defense

Start Date: 2003-06-05

End Date: 2010-06-30

Contract Duration: 2,582 days

Daily Burn Rate: $72.2K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: 200309!001145!2100!AA09 !U.S. ARMY INDUSTRIAL OPERATIONS !DAAA0903D0007 !A!N! !N!0003 !20030605!20040528!289954943!289954943!217304393!N!ROYAL ORDNANCE PLC !BUILDING 20A1 !BRISTOL !UK!BS34 !39560!163!47!KINGSPORT !SULLIVAN !TENNESSEE !+000026890887!N!N!000000000000!1376!BULK EXPLOSIVES !A6 !AMMUNITION !1000!NOT DISCERNABLE OR CLASSIFIED !325920!E! !5!A!S! ! ! !99990909!B! ! !A! !D!N!J!1!001!N!1G!A!Y!F! ! !N!C!N! ! ! !B!B!A!A!000!A!C!N! ! ! ! ! ! !0001! !

Place of Performance

Location: KINGSPORT, SULLIVAN County, TENNESSEE, 37660

State: Tennessee Government Spending

Plain-Language Summary

Department of Defense obligated $186.5 million to BAE SYSTEMS GLOBAL COMBAT SYSTEMS MUNITIONS LIMITED for work described as: 200309!001145!2100!AA09 !U.S. ARMY INDUSTRIAL OPERATIONS !DAAA0903D0007 !A!N! !N!0003 !20030605!20040528!289954943!289954943!217304393!N!ROYAL ORDNANCE PLC !BUILDING 20A1 !BRISTOL !UK!BS34 !39560!163!47!KINGSPORT !SULLI… Key points: 1. The contract value of $289.9 million for bulk explosives is significant. 2. Competition is limited, with a 'NOT COMPETED' status, raising questions about price discovery. 3. The sole-source nature of this award presents a potential risk for taxpayers. 4. The sector is Defense, specifically ammunition manufacturing, a critical area for national security.

Value Assessment

Rating: questionable

The contract value of $289.9 million for bulk explosives appears high, especially given the lack of competitive bidding. Benchmarking against similar explosives contracts is difficult without more data, but the absence of competition suggests potential overpricing.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

The contract was awarded on a sole-source basis ('NOT COMPETED'), indicating a lack of market research or a specific justification for not seeking other offers. This significantly limits price discovery and potentially leads to higher costs.

Taxpayer Impact: The lack of competition for a large contract like this means taxpayers may be paying more than necessary for essential defense materials.

Public Impact

Taxpayers may be overpaying for critical defense supplies due to a lack of competition. The U.S. Army relies on this contract for bulk explosives, essential for munitions. The award to a foreign entity (ROYAL ORDNANCE PLC, UK) for a defense-critical item warrants scrutiny regarding supply chain security.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award
Potential for overpricing
Foreign supplier for critical defense item
Limited transparency on pricing justification

Positive Signals

Contract supports critical defense needs
Long-term contract provides supply stability

Sector Analysis

This contract falls within the Defense sector, specifically the manufacturing of ammunition components. Spending in this area is critical for national security, but often involves complex supply chains and specialized production, which can impact competition and pricing.

Small Business Impact

There is no indication that small businesses were involved in this contract, either as prime contractors or subcontractors. The award was made to a large, established defense manufacturer.

Oversight & Accountability

The sole-source nature of this award suggests a potential gap in oversight regarding competitive sourcing for defense materials. Further review is needed to understand why competition was bypassed and if adequate price negotiations occurred.

Related Government Programs

Explosives Manufacturing
Department of Defense Contracting
Department of the Army Programs

Risk Flags

Sole-source award bypasses competition.
Potential for inflated pricing due to lack of competition.
Award to a foreign entity for critical defense material.
Limited transparency on pricing justification.
Lack of small business participation.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $186.5 million to BAE SYSTEMS GLOBAL COMBAT SYSTEMS MUNITIONS LIMITED. 200309!001145!2100!AA09 !U.S. ARMY INDUSTRIAL OPERATIONS !DAAA0903D0007 !A!N! !N!0003 !20030605!20040528!289954943!289954943!217304393!N!ROYAL ORDNANCE PLC !BUILDING 20A1 !BRISTOL !UK!BS34 !39560!163!47!KINGSPORT !SULLIVAN !TENNESSEE !+000026890887!N!N!000000000000!1376!BULK EXPLOSIVES !A6 !AMMUNITION !1000!NOT DISCERNABLE OR CLASSIFIED !325920!E! !5!A!S! ! ! !99990909!B

Who is the contractor on this award?

The obligated recipient is BAE SYSTEMS GLOBAL COMBAT SYSTEMS MUNITIONS LIMITED.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $186.5 million.

What is the period of performance?

Start: 2003-06-05. End: 2010-06-30.

What was the justification for awarding this contract on a sole-source basis, and what steps were taken to ensure fair and reasonable pricing?

The provided data indicates the contract was 'NOT COMPETED'. A thorough review would require access to the contract file to understand the specific justification (e.g., urgent need, unique capability, lack of sources). Without this, it's impossible to assess the fairness of pricing, though sole-source awards inherently carry a higher risk of inflated costs due to the absence of competitive pressure.

How does the unit cost of these bulk explosives compare to industry benchmarks or previous contracts, considering the sole-source nature?

Benchmarking is challenging without specific unit cost data and comparable market prices for bulk explosives. However, the 'NOT COMPETED' status suggests that the price may not have benefited from competitive negotiation. If the $289.9 million contract value is accurate and the quantity is substantial, the per-unit cost could be higher than if multiple bidders had competed.

What are the long-term implications for U.S. defense supply chain security and cost-effectiveness given this sole-source award to a foreign entity?

Awarding critical defense materials like explosives to a foreign entity on a sole-source basis raises concerns about supply chain resilience and potential over-reliance. While it may ensure immediate supply, it could stifle domestic industrial capacity and lead to higher long-term costs if competitive domestic alternatives are not developed or maintained.

Industry Classification

NAICS: Manufacturing › Other Chemical Product and Preparation Manufacturing › Explosives Manufacturing

Product/Service Code: AMMUNITION AND EXPLOSIVES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: BAE Systems PLC (UEI: 217304393)

Address: GLASCOED, USK

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

Contract Characteristics

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: DAAA0903D0007

IDV Type: IDC

Timeline