Army awards $290M for bulk explosives, with BAE Systems as sole contractor

Contract Overview

Contract Amount: $72,517,698 ($72.5M)

Contractor: BAE Systems Global Combat Systems Munitions Limited

Awarding Agency: Department of Defense

Start Date: 2003-06-13

End Date: 2009-05-31

Contract Duration: 2,179 days

Daily Burn Rate: $33.3K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: 200309!001191!2100!AA09 !U.S. ARMY INDUSTRIAL OPERATIONS !DAAA0903D0007 !A!N! !N!0004 !20030613!20030828!289954943!289954943!217304393!N!ROYAL ORDNANCE PLC !BUILDING 20A1 !BRISTOL !UK!BS34 !39560!163!47!KINGSPORT !SULLIVAN !TENNESSEE !+000000076110!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!N!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 $72.5 million to BAE SYSTEMS GLOBAL COMBAT SYSTEMS MUNITIONS LIMITED for work described as: 200309!001191!2100!AA09 !U.S. ARMY INDUSTRIAL OPERATIONS !DAAA0903D0007 !A!N! !N!0004 !20030613!20030828!289954943!289954943!217304393!N!ROYAL ORDNANCE PLC !BUILDING 20A1 !BRISTOL !UK!BS34 !39560!163!47!KINGSPORT !SULLI… Key points: 1. Contract awarded to a single, established supplier suggests limited market exploration. 2. Long contract duration may indicate a need for sustained supply chain stability. 3. Fixed-price contract type shifts risk to the contractor, potentially impacting final cost. 4. The specific nature of explosives manufacturing implies a highly specialized and regulated industry. 5. Geographic location of the contractor in the UK may present logistical considerations. 6. Lack of competition raises questions about potential cost efficiencies and value for money.

Value Assessment

Rating: fair

The contract value of approximately $290 million over its duration is substantial for bulk explosives. Without comparable contract data for similar large-scale explosives manufacturing, a precise value-for-money assessment is challenging. The firm fixed-price structure suggests that the contractor bears the risk of cost overruns, which can be a positive indicator for the government if the price is competitive. However, the absence of competition makes it difficult to benchmark pricing against market alternatives or other potential suppliers.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was not competed, indicating a sole-source award. The data does not provide details on why a competitive process was not undertaken, such as a lack of available sources or a national security imperative. The absence of multiple bidders means there was no opportunity for price discovery through a bidding process, which could lead to higher costs for the government compared to a competed contract.

Taxpayer Impact: Sole-source awards limit the government's ability to leverage competition to secure the best possible pricing, potentially resulting in less favorable terms for taxpayers.

Public Impact

The U.S. Army is the primary beneficiary, securing a supply of bulk explosives. This contract supports the production and availability of essential munitions. The contract's impact is primarily national, ensuring defense readiness. Workforce implications are likely concentrated within the contractor's facilities in the UK.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition and potential taxpayer savings.
Long contract duration (over 6 years) may not reflect current market efficiencies.
Contractor is based in the UK, potentially adding complexity to oversight and logistics.
Lack of transparency regarding the justification for a sole-source award.

Positive Signals

Firm Fixed Price contract type shifts cost risk to the contractor.
BAE Systems is a major defense contractor with established expertise in munitions.
Contract ensures a critical supply of explosives for defense needs.

Sector Analysis

The defense sector, specifically munitions manufacturing, is characterized by high barriers to entry due to specialized technology, stringent safety regulations, and significant capital investment. This contract falls within the broader category of defense industrial base support, ensuring the availability of critical components. Comparable spending benchmarks are difficult to establish without more specific data on the type and quantity of explosives, but large-scale government contracts for such materials are typically substantial due to the inherent risks and specialized nature of production.

Small Business Impact

This contract does not appear to involve small business set-asides, as it was awarded to a large, established defense contractor. There is no information provided regarding subcontracting plans or their impact on small businesses. Given the specialized nature of explosives manufacturing and the sole-source award, it is unlikely that small businesses would be significantly involved as prime contractors or major subcontractors.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Army's contracting and program management offices. As a sole-source award, the justification and terms would be subject to review by relevant procurement authorities. Transparency is limited due to the lack of a competitive bidding process. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse, but specific oversight mechanisms for performance and cost control are not detailed in the provided data.

Related Government Programs

Ammunition Procurement
Explosives Manufacturing
Defense Industrial Base
Munitions Production
Department of the Army Contracts

Risk Flags

Sole Source Award
Lack of Competition
Long Contract Duration
Foreign Contractor Location
Limited Transparency on Justification

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $72.5 million to BAE SYSTEMS GLOBAL COMBAT SYSTEMS MUNITIONS LIMITED. 200309!001191!2100!AA09 !U.S. ARMY INDUSTRIAL OPERATIONS !DAAA0903D0007 !A!N! !N!0004 !20030613!20030828!289954943!289954943!217304393!N!ROYAL ORDNANCE PLC !BUILDING 20A1 !BRISTOL !UK!BS34 !39560!163!47!KINGSPORT !SULLIVAN !TENNESSEE !+000000076110!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 $72.5 million.

What is the period of performance?

Start: 2003-06-13. End: 2009-05-31.

What is the specific type and quantity of bulk explosives being procured under this contract?

The provided data indicates the National Stock Number (NSN) as '325920' and the product description as 'BULK EXPLOSIVES'. However, the exact type, grade, and precise quantities are not detailed in the extract. This level of specificity is crucial for understanding the scope of the contract and for conducting meaningful cost and performance analysis. Without this information, it is difficult to benchmark the unit price or assess the overall value proposition beyond the total contract value.

What was the justification for awarding this contract on a sole-source basis?

The data explicitly states the contract type as 'NOT COMPETED', indicating a sole-source award. However, the specific justification for this determination is not provided. Typical reasons for sole-source awards include national security requirements, lack of available competitive sources, or urgent and compelling needs. Without this justification, it is impossible to assess whether the sole-source decision was appropriate and if it potentially deprived the government of better pricing through competition. Further investigation into the contract file or agency justifications would be necessary.

How does the per-unit cost of these bulk explosives compare to market rates or similar government contracts?

A direct per-unit cost comparison is not feasible with the provided data. The total contract value is approximately $290 million over a period of roughly 6 years. However, the specific quantities of explosives are not detailed. To perform a unit cost analysis, we would need to know the total quantity procured (e.g., in tons, pounds, or specific explosive units) and compare that to the total value. Furthermore, benchmarking against market rates or other government contracts would require access to similar procurement data, which is not available in this extract. The sole-source nature of the award also complicates price benchmarking.

What is BAE Systems Global Combat Systems Munitions Limited's track record with the U.S. Army for similar explosive contracts?

The provided data identifies BAE Systems Global Combat Systems Munitions Limited as the contractor. While this indicates they are a significant player in the defense industry, their specific track record with the U.S. Army for bulk explosives is not detailed here. A comprehensive assessment would require reviewing their past performance on similar contracts, including delivery timeliness, quality of products, and adherence to contract terms. Given their established presence, it is likely they have prior experience, but the extent and success of that experience are not evident from this single contract record.

What are the potential risks associated with a sole-source contract for critical defense materials like explosives?

Sole-source contracts for critical defense materials like explosives carry several risks. Primarily, the lack of competition can lead to inflated prices and reduced value for taxpayer money, as the government cannot leverage bidding to drive down costs. It also reduces the incentive for the sole contractor to innovate or improve efficiency, as they face no direct competitive pressure. Furthermore, over-reliance on a single supplier can create supply chain vulnerabilities; if the contractor experiences production issues, delivery delays, or ceases operations, the government's supply could be critically disrupted. Finally, it can limit opportunities for other capable suppliers to enter the market and gain experience.

How does the contract duration of over six years impact the government's flexibility and potential for cost savings?

A contract duration of over six years (from June 2003 to May 2009) for bulk explosives provides the contractor with a stable demand, which can be beneficial for long-term production planning and potentially lead to economies of scale. However, it also reduces the government's flexibility to adapt to changing requirements, technological advancements, or market price fluctuations. Over such a long period, market prices for raw materials or manufacturing processes could decrease, but the government might be locked into the initially negotiated price, missing out on potential savings. It also extends the period during which the risks associated with a sole-source award are present.

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, Foreign Owned, Limited Liability Corporation, Manufacturer of Goods, Not Designated a Small Business, Special Designations

Contract Characteristics

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: DAAA0903D0007

IDV Type: IDC

Timeline