DoD awards $56.8M for explosives manufacturing, with BAE Systems as sole provider

Contract Overview

Contract Amount: $56,789,329 ($56.8M)

Contractor: BAE Systems Ordnance Systems Inc.

Awarding Agency: Department of Defense

Start Date: 2013-07-09

End Date: 2019-04-30

Contract Duration: 2,121 days

Daily Burn Rate: $26.8K/day

Competition Type: NOT COMPETED

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: FUNDING PROVIDED FOR 798,108 POUNDS OF IMX-104 EXPLOSIVES.

Place of Performance

Location: KINGSPORT, SULLIVAN County, TENNESSEE, 37660

State: Tennessee Government Spending

Plain-Language Summary

Department of Defense obligated $56.8 million to BAE SYSTEMS ORDNANCE SYSTEMS INC. for work described as: FUNDING PROVIDED FOR 798,108 POUNDS OF IMX-104 EXPLOSIVES. Key points: 1. Significant investment in critical munitions production capacity. 2. Sole-source award raises questions about price competition and value. 3. Long contract duration suggests sustained demand for these explosives. 4. Focus on a single contractor may limit market innovation. 5. Geographic concentration of production in Tennessee. 6. Firm-fixed-price contract shifts some risk to the government.

Value Assessment

Rating: fair

The contract value of $56.8 million for 798,108 pounds of IMX-104 explosives represents a unit cost of approximately $71.14 per pound. Without comparable contract data for this specific explosive type or detailed cost breakdowns, it is difficult to definitively benchmark value. However, the sole-source nature of the award suggests potential for higher pricing than a competitive scenario.

Cost Per Unit: Approximately $71.14 per pound (based on total value and quantity).

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one vendor, BAE Systems Ordnance Systems Inc., was solicited. This approach is typically used when a unique capability or proprietary technology is required, or in cases of urgent need where competition is not feasible. The lack of competition means that the government did not benefit from potential price reductions or innovative solutions that multiple bidders might have offered.

Taxpayer Impact: Taxpayers may have paid a premium due to the absence of competitive bidding, potentially leading to less efficient use of funds for this critical defense material.

Public Impact

Ensures the availability of a specific type of explosive for Department of Defense operations. Supports manufacturing jobs and industrial capacity within Tennessee. Contributes to the readiness and operational capabilities of the U.S. military. Provides a critical component for various ordnance systems.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price discovery and potential cost savings.
Long-term commitment without competition may reduce incentive for contractor efficiency.
Dependence on a single supplier creates supply chain risk.

Positive Signals

Ensures consistent supply of a critical munition.
BAE Systems is an established defense contractor with relevant expertise.
Firm-fixed-price contract provides cost certainty for the government.

Sector Analysis

The defense sector relies heavily on specialized manufacturers for munitions and explosives. This contract falls within the explosives manufacturing sub-sector, which is critical for national security. The market for such specialized materials is often concentrated among a few key players due to high barriers to entry, including specialized knowledge, safety regulations, and capital investment. Spending in this area is directly tied to military readiness requirements and geopolitical factors.

Small Business Impact

This contract was awarded directly to BAE Systems Ordnance Systems Inc. and does not appear to include specific small business set-aside provisions. As a sole-source award to a large prime contractor, there is a potential for limited subcontracting opportunities for small businesses unless explicitly mandated or pursued by the prime. Further analysis would be needed to determine if BAE Systems has a robust subcontracting plan that includes small businesses.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Army and the Department of Defense's contracting and auditing functions. The firm-fixed-price nature of the contract provides a degree of cost control, but the sole-source award necessitates careful monitoring of performance and delivery to ensure value for money. Inspector General investigations could be initiated if performance issues or allegations of impropriety arise.

Related Government Programs

Department of Defense Munitions Procurement
Explosives and Chemical Manufacturing
BAE Systems Defense Contracts
Army Ordnance Programs

Risk Flags

Sole-source award
Potential for non-competitive pricing
Supply chain concentration risk

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $56.8 million to BAE SYSTEMS ORDNANCE SYSTEMS INC.. FUNDING PROVIDED FOR 798,108 POUNDS OF IMX-104 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 $56.8 million.

What is the period of performance?

Start: 2013-07-09. End: 2019-04-30.

What is the specific application and strategic importance of IMX-104 explosives?

IMX-104 is a type of insensitive high explosive (IHE) developed to enhance safety during handling, storage, and transportation while maintaining high energetic performance. Its strategic importance lies in reducing the risk of accidental detonation, thereby improving the safety of military personnel and the security of munitions stockpiles. This is crucial for maintaining operational readiness and minimizing collateral damage. The Department of Defense prioritizes the use of IHEs in its munitions to meet stringent safety standards and operational requirements, making contracts for their production vital for national security.

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

Sole-source awards for critical defense materials like explosives carry several risks. Firstly, the absence of competition can lead to higher prices than might be achieved through a competitive bidding process, potentially resulting in less value for taxpayer money. Secondly, it creates a dependency on a single supplier, which can pose supply chain risks if the contractor experiences production issues, financial instability, or geopolitical disruptions. Thirdly, it may stifle innovation, as the sole contractor may have less incentive to invest in process improvements or develop alternative solutions compared to a competitive environment. Finally, it limits the government's ability to leverage the broader industrial base for these essential materials.

How does the firm-fixed-price (FFP) contract type impact cost control and risk allocation?

A firm-fixed-price (FFP) contract is generally favored by the government for its cost certainty. Under an FFP agreement, the contractor agrees to a set price for the goods or services, regardless of their actual costs. This shifts the risk of cost overruns from the government to the contractor. For the government, this means the total cost is known upfront, simplifying budgeting and financial planning. However, for the contractor, it necessitates careful cost management and estimation. In a sole-source FFP contract, while the price is fixed, the government still bears the risk that the fixed price might be higher than it would have been in a competitive scenario.

What is BAE Systems Ordnance Systems Inc.'s track record in producing explosives for the DoD?

BAE Systems Ordnance Systems Inc. is a significant defense contractor with a long history of producing munitions and explosives for the U.S. military. They operate the Holston Army Ammunition Plant in Tennessee, a key facility for manufacturing energetic materials. Their track record includes producing various types of explosives and propellants, and they have been a consistent supplier to the Department of Defense. While specific performance metrics for this particular contract are not detailed here, their established presence and operational capabilities suggest a capacity to fulfill large-scale orders for defense materials.

Are there alternative suppliers or domestic capabilities for IMX-104 explosives?

The availability of alternative domestic suppliers for IMX-104 explosives is likely limited, given the specialized nature of insensitive high explosives and the significant investment required for production facilities that meet stringent safety and environmental regulations. BAE Systems, through its operation of the Holston Army Ammunition Plant, represents a critical node in the U.S. industrial base for such materials. While other defense contractors may produce different types of explosives, the specific formulation and production requirements for IMX-104 may restrict the number of viable alternatives. The sole-source award suggests that, at the time of procurement, BAE Systems was the only or most suitable option.

What is the historical spending trend for explosives manufacturing by the Department of the Army?

Historical spending by the Department of the Army on explosives manufacturing has fluctuated based on global security environments, military operational tempo, and strategic modernization efforts. Significant investments are typically made during periods of heightened conflict or when transitioning to new munition technologies. The Army relies on a mix of government-owned, contractor-operated facilities (like Holston) and private sector capabilities. Analyzing past spending patterns reveals a consistent need for explosives production, often concentrated among a few key industry partners due to the specialized and sensitive nature of the work. Trends may show shifts towards safer, more environmentally friendly formulations and advanced energetic materials.

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: $56,789,329

Exercised Options: $56,789,329

Current Obligation: $56,789,329

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