DoD awards $39.6M for 2.9M lbs of explosives to BAE Systems, raising concerns about competition

Contract Overview

Contract Amount: $39,596,263 ($39.6M)

Contractor: BAE Systems Ordnance Systems Inc.

Awarding Agency: Department of Defense

Start Date: 2010-06-14

End Date: 2013-02-28

Contract Duration: 990 days

Daily Burn Rate: $40.0K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: FUNDS PROVIDED FOR THE PRODUCTION AND SUPPLY OF 2,924,875 POUNDS OF COMP B GRADE A EXPLOSIVES.

Place of Performance

Location: KINGSPORT, SULLIVAN County, TENNESSEE, 37660

State: Tennessee Government Spending

Plain-Language Summary

Department of Defense obligated $39.6 million to BAE SYSTEMS ORDNANCE SYSTEMS INC. for work described as: FUNDS PROVIDED FOR THE PRODUCTION AND SUPPLY OF 2,924,875 POUNDS OF COMP B GRADE A EXPLOSIVES. Key points: 1. Significant award for a critical defense material. 2. Sole-source award to BAE Systems limits price discovery. 3. High unit cost compared to potential benchmarks. 4. Explosives manufacturing sector is specialized and consolidated.

Value Assessment

Rating: questionable

The per-unit cost of $13.50 for Comp B Grade A explosives appears high. Without competitive bidding, it's difficult to ascertain if this price reflects fair market value compared to similar contracts or industry benchmarks.

Cost Per Unit: $13.50

Competition Analysis

Competition Level: sole-source

This contract was not competed, indicating a sole-source award. This lack of competition likely prevented the government from achieving a lower price through market forces and robust price discovery.

Taxpayer Impact: The absence of competition may have resulted in taxpayers paying a premium for these explosives.

Public Impact

Ensures supply of essential explosives for military operations. Potential for higher costs due to lack of competition. Supports a key defense contractor in a specialized manufacturing area.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award
High unit cost
Lack of competition

Positive Signals

Critical material supply
Supports domestic manufacturing

Sector Analysis

The explosives manufacturing sector is highly specialized and often involves a limited number of qualified suppliers due to stringent safety and regulatory requirements. Spending benchmarks are difficult to establish without competitive data.

Small Business Impact

This contract was awarded to BAE Systems, a large business. There is no indication that small businesses were involved in this specific procurement, either as prime contractors or subcontractors.

Oversight & Accountability

The sole-source nature of this award warrants further review by oversight bodies to ensure the price paid was reasonable and that future procurements are competed where feasible.

Related Government Programs

Explosives Manufacturing
Department of Defense Contracting
Department of the Army Programs

Risk Flags

Sole-source award
High unit cost
Lack of competition
Potential for price gouging
Limited market visibility

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $39.6 million to BAE SYSTEMS ORDNANCE SYSTEMS INC.. FUNDS PROVIDED FOR THE PRODUCTION AND SUPPLY OF 2,924,875 POUNDS OF COMP B GRADE A 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 $39.6 million.

What is the period of performance?

Start: 2010-06-14. End: 2013-02-28.

What is the justification for awarding this contract sole-source?

The justification for a sole-source award typically involves unique capabilities, urgent needs, or a lack of other responsible sources. Without further documentation, it's unclear why this significant explosives contract was not competed, potentially leading to higher costs for the government.

How does the unit cost compare to historical or industry benchmarks for similar explosives?

The unit cost of $13.50 per pound is a key metric. A thorough analysis would involve comparing this price to previous government contracts for the same or similar explosives, as well as industry pricing data, to determine if it represents a fair and reasonable price.

What is the long-term strategy for ensuring competitive pricing in explosives procurement?

The Department of Defense should explore strategies to foster competition in the explosives manufacturing sector. This could include encouraging new entrants, investing in alternative production capabilities, or breaking down large requirements into smaller, more accessible contracts for a wider range of suppliers.

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

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: $39,596,263

Exercised Options: $39,596,263

Current Obligation: $39,596,263

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: W52P1J09D0003

IDV Type: IDC

Timeline