DoD awards BAE Systems $68.2M for 1.26M lbs of C-4 explosives, raising questions on competition

Contract Overview

Contract Amount: $68,233,378 ($68.2M)

Contractor: BAE Systems Ordnance Systems Inc.

Awarding Agency: Department of Defense

Start Date: 2013-03-28

End Date: 2020-10-31

Contract Duration: 2,774 days

Daily Burn Rate: $24.6K/day

Competition Type: NOT COMPETED

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: FUNDS PROVIDED FOR THE PRODUCTION AND SUPPLY OF 1,262,778 POUNDS OF COMP C-4 CLASS 3 (TAGGED).

Place of Performance

Location: KINGSPORT, SULLIVAN County, TENNESSEE, 37660

State: Tennessee Government Spending

Plain-Language Summary

Department of Defense obligated $68.2 million to BAE SYSTEMS ORDNANCE SYSTEMS INC. for work described as: FUNDS PROVIDED FOR THE PRODUCTION AND SUPPLY OF 1,262,778 POUNDS OF COMP C-4 CLASS 3 (TAGGED). Key points: 1. Significant award for essential military explosives. 2. Sole-source nature of the contract warrants scrutiny. 3. Long performance period (2013-2020) may impact price competitiveness. 4. Explosives manufacturing sector is highly specialized.

Value Assessment

Rating: fair

The award of $68.2M for 1.26M lbs of C-4 equates to approximately $54 per pound. Benchmarking against similar military explosives contracts is difficult due to proprietary data and specialized nature, but this price appears within a reasonable range for such a critical and controlled substance.

Cost Per Unit: $54/lb

Competition Analysis

Competition Level: sole-source

This contract was not competed, indicating a sole-source award. Without competition, there is a reduced incentive for the contractor to offer the lowest possible price, and the government may not have explored all available market options or achieved the best possible price discovery.

Taxpayer Impact: The lack of competition may result in taxpayers paying a premium for these explosives, as the government did not leverage market forces to secure the most cost-effective deal.

Public Impact

Ensures supply of critical ordnance for military operations. Potential for higher costs due to sole-source award. Long-term contract may reflect strategic supply chain needs. Supports domestic manufacturing capabilities for defense materials.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award
Lack of price competition
Long contract duration

Positive Signals

Ensures critical supply
Supports domestic manufacturing

Sector Analysis

This contract falls within the Explosives Manufacturing sector, a niche area critical for national defense. Spending in this sector is often characterized by high barriers to entry, stringent safety regulations, and specialized production capabilities, leading to fewer potential suppliers.

Small Business Impact

The data indicates this contract was awarded to BAE Systems Ordnance Systems Inc., a large defense contractor. There is no indication that small businesses were involved as prime contractors or significant subcontractors in this specific award.

Oversight & Accountability

The sole-source nature of this award suggests that oversight may have focused on ensuring contract compliance and delivery rather than competitive pricing. Further review of the justification for the sole-source award and any price negotiation strategies employed would be beneficial.

Related Government Programs

Explosives Manufacturing
Department of Defense Contracting
Department of the Army Programs

Risk Flags

Sole-source award limits price competition.
Potential for overpayment due to lack of competition.
Long contract duration may not reflect current market prices.
Limited transparency on cost justification.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $68.2 million to BAE SYSTEMS ORDNANCE SYSTEMS INC.. FUNDS PROVIDED FOR THE PRODUCTION AND SUPPLY OF 1,262,778 POUNDS OF COMP C-4 CLASS 3 (TAGGED).

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 $68.2 million.

What is the period of performance?

Start: 2013-03-28. End: 2020-10-31.

What was the justification for awarding this contract on a sole-source basis, and were alternative competitive strategies considered?

The justification for a sole-source award typically involves unique capabilities, urgent needs, or lack of viable alternatives. Without access to the specific contract file, it's impossible to determine the exact reasoning. However, the government should have thoroughly explored if any other qualified manufacturers could produce C-4 to the required specifications, especially given the long performance period.

How does the per-unit cost of $54 compare to historical pricing or industry benchmarks for similar military-grade explosives?

Establishing a precise benchmark is challenging due to the specialized nature of military explosives and potential proprietary data. However, $54 per pound for C-4, a controlled explosive, appears to be within a plausible range, considering production costs, safety protocols, and quality assurance. Further analysis would require access to classified or internal government cost data for comparison.

What measures were in place to ensure the quality and timely delivery of 1.26 million pounds of C-4 over a seven-year period?

As a Firm Fixed Price contract, the onus is on BAE Systems to deliver the specified quantity and quality within the agreed timeframe. The Department of Defense likely had quality assurance representatives and contract officers monitoring performance, conducting inspections, and ensuring compliance with technical specifications and delivery schedules throughout the contract's duration.

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

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: BAE Systems PLC (UEI: 217304393)

Address: 4509 W STONE DR, KINGSPORT, TN, 37660

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: $84,472,703

Exercised Options: $68,233,378

Current Obligation: $68,233,378

Contract Characteristics

Multi-Year Contract: Yes

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: W52P1J12D0037

IDV Type: IDC

Timeline