DoD awards $94M for 490K lbs of CXM-7 explosives to BAE Systems, a sole-source contract

Contract Overview

Contract Amount: $94,142,213 ($94.1M)

Contractor: BAE Systems Ordnance Systems Inc.

Awarding Agency: Department of Defense

Start Date: 2013-09-12

End Date: 2021-05-31

Contract Duration: 2,818 days

Daily Burn Rate: $33.4K/day

Competition Type: NOT COMPETED

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: FUNDS PROVIDED FOR THE PRODUCTION OF 490,340 POUNDS OF CXM-7.

Place of Performance

Location: KINGSPORT, SULLIVAN County, TENNESSEE, 37660

State: Tennessee Government Spending

Plain-Language Summary

Department of Defense obligated $94.1 million to BAE SYSTEMS ORDNANCE SYSTEMS INC. for work described as: FUNDS PROVIDED FOR THE PRODUCTION OF 490,340 POUNDS OF CXM-7. Key points: 1. Significant investment in specialized explosives manufacturing. 2. BAE Systems is the sole provider, raising competition concerns. 3. Long contract duration (2013-2021) suggests potential for price creep. 4. The sector is critical for defense readiness but lacks transparency.

Value Assessment

Rating: questionable

The firm fixed price contract for $94.1M for 490,340 pounds of CXM-7 is difficult to assess without benchmarks. Given the sole-source nature, it's hard to determine if the price reflects fair market value or if it's inflated due to lack of competition.

Cost Per Unit: $192.03 per pound

Competition Analysis

Competition Level: sole-source

This contract was not competed, indicating a sole-source award to BAE Systems. This lack of competition limits price discovery and potentially leads to higher costs for the government.

Taxpayer Impact: Taxpayers may be overpaying due to the absence of competitive bidding, as the government did not explore alternative suppliers or negotiate based on multiple offers.

Public Impact

Ensures supply of a critical explosive material for military operations. Lack of competition raises concerns about long-term cost-effectiveness. Potential for reliance on a single supplier could create strategic vulnerabilities. Transparency in pricing and production costs is limited.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award
Lack of competition
Long contract duration
Limited transparency

Positive Signals

Ensures supply of critical material
Firm fixed price contract

Sector Analysis

The explosives manufacturing sector is highly specialized and often dominated by a few key players due to stringent safety and regulatory requirements. Spending benchmarks are difficult to establish due to the niche nature of specific munitions like CXM-7.

Small Business Impact

This contract was awarded to BAE Systems, a large defense contractor, and there is no indication of small business participation. The specialized nature of explosives manufacturing may present barriers for smaller firms.

Oversight & Accountability

The sole-source nature of this award warrants closer oversight to ensure the price remains fair and reasonable throughout the contract's life. Accountability for cost overruns or performance issues is crucial, especially without competitive pressure.

Related Government Programs

Explosives Manufacturing
Department of Defense Contracting
Department of the Army Programs

Risk Flags

Sole-source award limits competition and price negotiation.
Lack of transparency in pricing and cost justification.
Long contract duration increases risk of cost escalation.
Potential for vendor lock-in and strategic dependency.
No indication of small business participation.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $94.1 million to BAE SYSTEMS ORDNANCE SYSTEMS INC.. FUNDS PROVIDED FOR THE PRODUCTION OF 490,340 POUNDS OF CXM-7.

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 $94.1 million.

What is the period of performance?

Start: 2013-09-12. End: 2021-05-31.

What is 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 stems from unique capabilities, proprietary technology, or urgent needs where only one source can fulfill the requirement. For this contract, the Department of Defense should have thoroughly documented why competition was not feasible, exploring options like limited competition or seeking justifications for a full sole-source award to ensure taxpayer funds are used efficiently.

How does the per-unit cost of CXM-7 compare to similar explosive materials or previous contracts, and what factors influence this pricing?

Benchmarking the per-unit cost of $192.03 for CXM-7 is challenging without access to classified data or comparable munitions. Factors influencing pricing likely include raw material costs, specialized manufacturing processes, safety protocols, research and development investments, and the lack of competitive pressure. A detailed cost breakdown from BAE Systems would be necessary for a thorough price analysis.

What measures are in place to ensure the effectiveness and quality of CXM-7 produced under this long-term, sole-source contract?

Ensuring effectiveness and quality under a sole-source contract relies heavily on robust government quality assurance and inspection protocols. This includes rigorous testing of the final product, adherence to strict manufacturing standards, and performance monitoring throughout the contract. The Department of Defense must maintain strong oversight to verify that the CXM-7 meets all specified performance requirements and safety standards.

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: $94,142,213

Exercised Options: $94,142,213

Current Obligation: $94,142,213

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