DoD awards $77.5M for explosives manufacturing, a sole-source contract with BAE Systems

Contract Overview

Contract Amount: $77,497,199 ($77.5M)

Contractor: BAE Systems Ordnance Systems Inc.

Awarding Agency: Department of Defense

Start Date: 2013-05-09

End Date: 2022-05-31

Contract Duration: 3,309 days

Daily Burn Rate: $23.4K/day

Competition Type: NOT COMPETED

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: PRODUCTION AND SUPPLY OF 111,210 POUNDS OF CXM-AF-5 EXPLOSIVES.

Place of Performance

Location: KINGSPORT, SULLIVAN County, TENNESSEE, 37660

State: Tennessee Government Spending

Plain-Language Summary

Department of Defense obligated $77.5 million to BAE SYSTEMS ORDNANCE SYSTEMS INC. for work described as: PRODUCTION AND SUPPLY OF 111,210 POUNDS OF CXM-AF-5 EXPLOSIVES. Key points: 1. Contract awarded for over 111,000 pounds of explosives. 2. Sole-source award indicates limited competition. 3. Long performance period spanning nearly a decade. 4. Firm-fixed-price contract type aims to control costs. 5. Contractor is a major defense industrial base participant. 6. Awarded as a delivery order under a larger contract. 7. Manufacturing located in Tennessee.

Value Assessment

Rating: fair

The contract value of $77.5 million for 111,210 pounds of explosives equates to approximately $697 per pound. Benchmarking this against publicly available data for similar explosive materials is challenging due to proprietary formulations and specific military requirements. However, the firm-fixed-price structure suggests an attempt to establish a predictable cost. Without competitive bids, it's difficult to definitively assess if this represents optimal value for money, but the long duration and specific nature of the product may justify the price.

Cost Per Unit: Approximately $697 per pound (based on total value and quantity).

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning it was not competed among multiple vendors. This typically occurs when a specific contractor possesses unique capabilities, proprietary technology, or is the only source capable of meeting the requirement. The lack of competition limits price discovery and may result in higher costs compared to a fully competed scenario. The Department of Defense likely justified this approach based on specific technical or strategic needs.

Taxpayer Impact: Sole-source awards mean taxpayers do not benefit from the cost savings that can arise from a competitive bidding process, potentially leading to a higher overall expenditure for this critical munition.

Public Impact

The primary beneficiaries are the Department of the Army and its operational units requiring specific explosive materials. The contract delivers essential explosives for military applications. The geographic impact is concentrated in Tennessee, where the manufacturing and supply chain operations are based. The contract supports jobs within BAE Systems' ordnance division and its associated supply chain.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing and potential cost savings for taxpayers.
Long contract duration (nearly 9 years) may obscure current market price fluctuations.
Lack of transparency in the justification for sole-source procurement.
Specific explosive formulation (CXM-AF-5) is not publicly detailed, hindering independent value assessment.

Positive Signals

Firm-fixed-price contract provides cost certainty for the government.
BAE Systems is a well-established defense contractor with extensive experience in ordnance.
Delivery order structure suggests integration into a broader acquisition strategy.
Long-term award may ensure a stable supply of critical munitions.

Sector Analysis

This contract falls within the Defense Industrial Base sector, specifically focusing on the manufacturing of explosives. The market for specialized military explosives is often characterized by high barriers to entry due to stringent safety regulations, proprietary technology, and specialized manufacturing capabilities. BAE Systems is a significant player in this niche. Comparable spending benchmarks are difficult to ascertain due to the specialized nature of the product and the sole-source award.

Small Business Impact

The data indicates that this contract was not set aside for small businesses, nor does it appear to involve significant subcontracting opportunities for small businesses based on the information provided. The primary contractor, BAE Systems, is a large corporation. This award does not directly contribute to the small business contracting goals of the Department of Defense.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense'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 sole-source nature and the classification of specific explosive details. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse.

Related Government Programs

Department of Defense Munitions Procurement
Explosives Manufacturing Contracts
BAE Systems Defense Contracts
Ordnance Supply Chain

Risk Flags

Sole-source award
Long contract duration
Lack of competitive bidding
Proprietary product details

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $77.5 million to BAE SYSTEMS ORDNANCE SYSTEMS INC.. PRODUCTION AND SUPPLY OF 111,210 POUNDS OF CXM-AF-5 EXPLOSIVES.

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 $77.5 million.

What is the period of performance?

Start: 2013-05-09. End: 2022-05-31.

What is the specific military application and formulation of CXM-AF-5 explosives?

The specific military application and precise formulation of CXM-AF-5 explosives are not publicly detailed in the provided data. This level of specificity is often classified or considered proprietary information by defense contractors to protect intellectual property and operational security. CXM-AF-5 likely refers to a particular type of explosive compound or mixture developed for specific military purposes, such as demolition, artillery shells, or other ordnance. The 'CXM' prefix might denote a specific series or type of chemical compound, while 'AF' could indicate a particular characteristic or application. Without access to classified documents or detailed technical specifications from BAE Systems, its exact composition and intended use remain undisclosed. This lack of transparency is common for specialized military-grade materials.

How does the per-pound cost of $697 compare to other military explosives?

The per-pound cost of approximately $697 for CXM-AF-5 explosives is difficult to benchmark directly against other military explosives without more specific comparative data. The price of explosives varies significantly based on their composition (e.g., TNT, C4, specialized propellants), intended use (e.g., demolition, propellant, warhead filler), required purity, manufacturing complexity, and volume. High-performance or specialized explosives designed for specific military applications, especially those requiring advanced formulations or stringent safety controls, can command significantly higher prices than bulk industrial explosives. Given that this is a sole-source award for a specific formulation (CXM-AF-5) manufactured by BAE Systems, the $697 per pound figure likely reflects specialized production costs, R&D investment, and the absence of competitive pressure, rather than a general market rate for all military explosives.

What is BAE Systems' track record with Department of Defense explosives contracts?

BAE Systems has a substantial and long-standing track record with the Department of Defense (DoD) for the production of ordnance and explosives. As a major defense contractor, the company is involved in various aspects of the defense industrial base, including the manufacturing of munitions, explosives, and related systems. Their experience spans decades, and they are known to produce a wide range of explosive materials and components for various military platforms and applications. The DoD frequently awards contracts to BAE Systems for these types of products, reflecting the company's established capabilities, manufacturing infrastructure, and perceived reliability in meeting stringent military specifications. This specific contract, while sole-source, is part of a broader pattern of BAE Systems supplying critical explosive materials to the U.S. military.

What are the risks associated with a sole-source award for critical munitions?

Sole-source awards for critical munitions, such as this contract for CXM-AF-5 explosives, carry several inherent risks. The primary risk is the potential for inflated pricing due to the absence of competitive bidding. Without competing offers, the government may pay more than necessary, impacting overall budget efficiency. Another risk is reduced innovation; a sole-source provider may have less incentive to invest in process improvements or cost-saving technologies if they are guaranteed the contract. Furthermore, reliance on a single supplier can create supply chain vulnerabilities. If the sole-source contractor experiences production issues, financial difficulties, or geopolitical disruptions, the supply of these critical munitions could be jeopardized, potentially impacting military readiness. Finally, the lack of transparency in sole-source justifications can raise concerns about fairness and potential favoritism.

How does the duration of this contract (2013-2022) affect its relevance for current spending analysis?

The contract's duration, spanning from May 2013 to May 2022, means that the awarded prices and terms reflect market conditions and cost structures from nearly a decade ago. Inflation, changes in raw material costs, advancements in manufacturing technology, and shifts in geopolitical demand can significantly alter the cost landscape for explosives manufacturing over such a long period. Therefore, using the $77.5 million total award or the approximate $697 per pound figure as a benchmark for current or future contracts would be misleading. A more relevant analysis for today's spending would require data from recently awarded, competitively bid contracts for similar explosive materials, taking into account current economic factors and technological capabilities. The historical nature of this award primarily serves to document past procurement rather than inform present-day value assessments.

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 Land & Armaments, L.P. (UEI: 876861790)

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: $77,497,199

Exercised Options: $77,497,199

Current Obligation: $77,497,199

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