DoD's $28.3M BAE Systems contract for NACO propellant production shows fair value with 2 bidders

Contract Overview

Contract Amount: $28,281,320 ($28.3M)

Contractor: BAE Systems Ordnance Systems Inc

Awarding Agency: Department of Defense

Start Date: 2012-04-23

End Date: 2019-02-18

Contract Duration: 2,492 days

Daily Burn Rate: $11.3K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: PRODUCTION OF BS NACO PROPELLANT

Place of Performance

Location: RADFORD, RADFORD CITY County, VIRGINIA, 24141

State: Virginia Government Spending

Plain-Language Summary

Department of Defense obligated $28.3 million to BAE SYSTEMS ORDNANCE SYSTEMS INC for work described as: PRODUCTION OF BS NACO PROPELLANT Key points: 1. The contract demonstrates a competitive procurement process, indicating potential for good value. 2. BAE Systems' performance history and the fixed-price nature of the contract suggest managed cost risks. 3. The contract's duration and delivery order structure imply a need for sustained production capacity. 4. This procurement aligns with broader defense sector needs for specialized ordnance components. 5. The absence of small business set-asides warrants further examination of subcontracting opportunities.

Value Assessment

Rating: good

The total award of $28.3 million over approximately 7 years for NACO propellant production appears reasonable given the specialized nature of the product and the defense industry context. While direct comparisons are difficult without more granular data on propellant types and quantities, the contract was competed, suggesting a degree of price discovery. The firm fixed-price structure provides cost certainty for the government, mitigating risk of cost overruns.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that multiple capable vendors were solicited. With two bidders identified, the competition level was moderate. This suggests that while the market may not be saturated, there were at least two entities capable of meeting the stringent requirements for producing NACO propellant, which likely contributed to achieving a fair market price.

Taxpayer Impact: The full and open competition with multiple bidders helps ensure that taxpayer dollars are used efficiently by fostering a competitive environment that drives down costs.

Public Impact

The Department of Defense benefits from a reliable supply of critical NACO propellant for its ordnance systems. This contract supports the production of ammunition components essential for national defense readiness. The contract's impact is primarily within the defense industrial base, supporting specialized manufacturing capabilities. Workforce implications include employment in specialized manufacturing roles within BAE Systems and its supply chain.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of specific small business set-aside could limit opportunities for smaller firms in the supply chain.
The long duration of the contract might create vendor lock-in if alternatives are not actively explored.

Positive Signals

Firm fixed-price contract structure provides cost predictability.
Full and open competition suggests a healthy market for this specialized product.
BAE Systems is a known entity in defense manufacturing, implying a degree of reliability.

Sector Analysis

The defense sector, particularly the ammunition manufacturing sub-sector, relies on specialized producers for critical components like propellants. The market for such materials is often concentrated due to high barriers to entry, including technical expertise, safety regulations, and capital investment. This contract fits within the broader landscape of defense industrial base sustainment, ensuring the availability of essential materials for military operations. Comparable spending benchmarks are difficult to ascertain without specific market intelligence on propellant production costs.

Small Business Impact

This contract did not include a small business set-aside, nor is there an indication of significant subcontracting to small businesses based on the provided data. This suggests that the primary award went to a large defense contractor. Further analysis would be needed to determine if small businesses are involved in the supply chain for raw materials or components, or if there are opportunities for them to participate in future procurements.

Oversight & Accountability

The contract is subject to standard Department of Defense oversight mechanisms for defense procurements. Accountability is managed through the firm fixed-price terms and delivery schedules. Transparency is generally maintained through contract award databases, though specific performance metrics are not publicly detailed. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Ordnance Manufacturing
Ammunition Production
Defense Industrial Base Sustainment
Propellant Manufacturing
BAE Systems Contracts

Risk Flags

Long-term contract duration
Potential supply chain dependencies
Safety and handling of hazardous materials

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $28.3 million to BAE SYSTEMS ORDNANCE SYSTEMS INC. PRODUCTION OF BS NACO 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 $28.3 million.

What is the period of performance?

Start: 2012-04-23. End: 2019-02-18.

What is BAE Systems' track record with similar defense manufacturing contracts?

BAE Systems is a major global defense contractor with extensive experience in producing a wide range of defense systems, including ordnance and munitions. They have a long history of fulfilling complex government contracts, often involving specialized manufacturing processes and materials. While specific performance details for every contract are not always public, their sustained presence and significant role in the defense industrial base suggest a generally reliable track record. However, like any large contractor, they may have faced performance challenges or disputes on specific projects, which would typically be managed through contractual mechanisms and oversight. A deeper dive into their contract history with the Department of Defense, particularly for similar propellant or explosive materials, would provide more specific insights into their performance trends and any recurring issues.

How does the per-unit cost of this NACO propellant compare to market rates or similar government contracts?

Determining a precise per-unit cost benchmark for this NACO propellant contract is challenging with the provided data. The total award amount of $28.3 million is for a delivery order contract spanning several years, and the exact quantity of propellant produced is not specified. Furthermore, the 'NACO' designation may refer to a specific type of propellant with unique formulation and production costs. Without knowing the total quantity delivered or the specific technical characteristics of the propellant, a direct per-unit cost comparison is not feasible. Generally, specialized propellants for defense applications can have high per-unit costs due to stringent safety, quality, and performance requirements, as well as the specialized manufacturing infrastructure needed. The fact that the contract was competed suggests the pricing achieved was considered fair relative to the market capabilities at the time of award.

What are the primary risks associated with this contract, and how are they being managed?

The primary risks associated with this contract include potential supply chain disruptions for raw materials, manufacturing quality control issues, and the inherent safety risks associated with handling and producing explosive materials. Additionally, there's a risk of cost escalation if the firm fixed-price contract doesn't adequately account for unforeseen material price increases, though this is mitigated by the contract type. The government manages these risks through the competitive bidding process, which selects capable vendors, and the firm fixed-price structure, which shifts cost overrun risk to the contractor. BAE Systems, as the contractor, is responsible for implementing robust quality control and safety protocols, and managing its own supply chain. The contract's duration and delivery order mechanism allow for phased production, potentially enabling adjustments if issues arise.

How effective is this contract in ensuring the long-term availability of critical defense materials?

This contract appears effective in ensuring the near-to-medium term availability of NACO propellant, a critical defense material, by securing production capacity with BAE Systems through February 2019. The firm fixed-price nature and the competitive award process suggest a commitment to obtaining this material at a reasonable cost. However, the long-term effectiveness depends on factors beyond this specific contract, such as the sustainment of the broader defense industrial base, ongoing investment in manufacturing capabilities, and the development of next-generation propellants. While this contract addresses immediate needs, strategic planning for future propellant requirements and ensuring a robust, diversified supplier base would be crucial for long-term availability.

What has been the historical spending trend for NACO propellant or similar ammunition components by the Department of Defense?

Analyzing the historical spending trend for NACO propellant or similar ammunition components requires access to comprehensive historical contract databases. The provided data point represents a single contract award from 2012 to 2019. To understand trends, one would need to examine spending patterns over multiple years, identify all relevant contracts (including those awarded to different contractors or under different competition types), and account for fluctuations in demand driven by geopolitical events, operational tempo, and modernization programs. Generally, spending on ammunition components can be cyclical, influenced by military readiness requirements and budget allocations. Significant global events or conflicts often lead to increased demand and, consequently, higher spending. Without a broader dataset, it's difficult to establish a definitive historical trend for this specific category.

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: $28,281,320

Exercised Options: $28,281,320

Current Obligation: $28,281,320

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: W52P1J11D0013

IDV Type: IDC

Timeline