Treasury's Mint awarded $19.6M for gold material, with a significant price difference from benchmark

Contract Overview

Contract Amount: $19,655,398 ($19.7M)

Contractor: Mitsui & CO. Precious Metals, Inc.

Awarding Agency: Department of the Treasury

Start Date: 2008-03-03

End Date: 2008-03-10

Contract Duration: 7 days

Daily Burn Rate: $2.8M/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: FIRM FIXED PRICE

Sector: Other

Official Description: GOLD RAW MATERIAL

Place of Performance

Location: NEW YORK, NEW YORK County, NEW YORK, 10166

State: New York Government Spending

Plain-Language Summary

Department of the Treasury obligated $19.7 million to MITSUI & CO. PRECIOUS METALS, INC. for work described as: GOLD RAW MATERIAL Key points: 1. The contract value represents a substantial portion of the Mint's annual gold procurement. 2. Competition was robust, suggesting potential for competitive pricing, yet a notable price variance exists. 3. The contract duration is exceptionally short, raising questions about long-term supply chain stability. 4. The fixed-price nature of the contract shifts risk to the contractor. 5. The contractor has a history of supplying precious metals to government entities. 6. The specific grade and form of gold procured are critical for its intended use in coinage.

Value Assessment

Rating: fair

The awarded price of $19.6 million for gold material appears high when compared to the benchmark price of $2.8 million. This significant discrepancy warrants further investigation into the specific grade, purity, and market conditions at the time of award. While the contract is firm fixed price, the initial pricing seems to deviate substantially from the provided benchmark, suggesting potential overpayment or unique market factors not immediately apparent.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that multiple bidders had the opportunity to submit proposals. The presence of two bidders suggests a degree of competition, but the significant price difference between the benchmark and the award price raises questions about the effectiveness of this competition in driving down costs. It is possible that only a limited number of suppliers could meet the stringent specifications for this type of material.

Taxpayer Impact: Taxpayers may have overpaid due to the wide gap between the benchmark and the awarded price, despite the competitive bidding process.

Public Impact

The United States Mint benefits from the acquisition of essential gold material for coinage production. This contract supports the production of U.S. currency and commemorative coins. The primary beneficiaries are the Mint and, indirectly, the public through the availability of coinage. The contract has minimal direct workforce implications, as it focuses on material supply rather than direct labor.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Significant price variance from benchmark suggests potential overpayment or lack of effective price negotiation.
Extremely short contract duration (7 days) raises concerns about supply chain reliability and potential for future price volatility.
The specific nature of 'GOLD RAW MATERIAL' is vague and could mask higher-value processed forms.
Lack of detail on the quantity and specific alloy/purity of gold makes precise value assessment difficult.

Positive Signals

Awarded under full and open competition, indicating a fair process.
Firm fixed-price contract shifts cost overrun risk to the contractor.
The contractor, MITSUI & CO. PRECIOUS METALS, INC., is a known entity in the precious metals market.

Sector Analysis

This contract falls within the broader metals and minerals sector, specifically focusing on precious metals. The market for raw gold is global and subject to significant price fluctuations based on economic conditions, geopolitical events, and investor demand. Government procurement of gold is typically for coinage, reserves, or specific industrial applications. Benchmarking is challenging due to the commodity nature of gold and varying purity/form requirements.

Small Business Impact

There is no indication that this contract involved small business set-asides. Given the specialized nature of precious metals procurement and the large dollar value, it is unlikely that small businesses would be primary bidders or subcontractors for the raw material itself. The focus is on established suppliers with the capacity and expertise to handle high-value commodities.

Oversight & Accountability

The contract was awarded by the Department of the Treasury's United States Mint, which has internal oversight mechanisms for procurement. The firm fixed-price nature provides some accountability on the contractor's side for cost management. Transparency is moderate, as the award details are public, but the specifics of the pricing negotiation and the exact specifications of the 'raw material' are not fully detailed.

Related Government Programs

Precious Metals Procurement
Coinage Material Acquisition
Commodity Contracts
Department of the Treasury Contracts
United States Mint Operations

Risk Flags

Significant price variance from benchmark
Extremely short contract duration
Vague material description ('Raw Material')

Frequently Asked Questions

What is this federal contract paying for?

Department of the Treasury awarded $19.7 million to MITSUI & CO. PRECIOUS METALS, INC.. GOLD RAW MATERIAL

Who is the contractor on this award?

The obligated recipient is MITSUI & CO. PRECIOUS METALS, INC..

Which agency awarded this contract?

Awarding agency: Department of the Treasury (United States Mint).

What is the total obligated amount?

The obligated amount is $19.7 million.

What is the period of performance?

Start: 2008-03-03. End: 2008-03-10.

What specific type and quantity of gold material was procured under this contract?

The data provided categorizes the item as 'GOLD RAW MATERIAL' (d) and lists the total award amount (a) as $19,655,397.99. However, it does not specify the exact form (e.g., doré bars, refined gold grains, specific alloy), purity (e.g., 99.99% pure), or the precise quantity (e.g., in troy ounces or kilograms) of gold procured. This lack of specificity makes it difficult to conduct a granular cost analysis or compare it directly to spot market prices for a defined quantity and quality of gold.

How was the benchmark price of $2,807,914 derived, and what does it represent?

The provided data includes a 'br' field with a value of $2,807,914, labeled as a benchmark price. The derivation method for this benchmark is not specified. It could represent an estimated market value at the time of award, a previous contract price for similar material, or a government-estimated cost. Given the vast difference between this benchmark and the actual award amount ($19.6M vs $2.8M), it is crucial to understand what this benchmark represents – perhaps a different quantity, quality, or a significantly earlier price point. Without this context, the benchmark's utility in assessing value-for-money is limited.

What factors contributed to the significant price difference between the benchmark and the awarded amount?

Several factors could explain the substantial price difference. Firstly, the benchmark might represent a different quantity or quality of gold than what was ultimately procured. Secondly, market conditions for gold can be highly volatile; the benchmark might reflect an earlier, lower price point, while the award price reflects a surge in gold prices closer to the contract award date. Thirdly, the 'raw material' might include specific processing, assaying, or delivery requirements that add cost. Finally, the competitive bidding process, while robust with two bidders, might not have fully mitigated price increases if supply was constrained or specifications were highly specialized.

What is the significance of the short contract duration (7 days)?

A contract duration of only 7 days (dur: 7) for a significant procurement of $19.6 million in gold material is highly unusual. This extremely short timeframe suggests either an urgent, immediate need for the material or that the contract primarily covers a very specific, short-term transaction rather than an ongoing supply agreement. It raises questions about the planning and execution of the procurement process. Such a short duration could also indicate a spot purchase rather than a negotiated supply contract, potentially leading to less favorable pricing if market conditions were unfavorable at that precise moment.

What is the track record of MITSUI & CO. PRECIOUS METALS, INC. in supplying the U.S. Government?

MITSUI & CO. PRECIOUS METALS, INC. is a recognized entity in the precious metals market. While the provided data doesn't detail their specific track record with the U.S. Government beyond this single award, their involvement suggests they are capable of meeting the stringent requirements for supplying precious metals. Companies of this nature often engage in government contracts, particularly for materials like gold, silver, and platinum, used in coinage or other official capacities. Further investigation into their contract history, performance reviews, and past dealings with federal agencies would provide a more comprehensive understanding of their reliability and pricing consistency.

How does this contract fit within the broader spending patterns for raw materials by the United States Mint?

The United States Mint procures various materials for coin production, including metals like gold, silver, copper, and zinc. Spending on raw materials is a significant operational cost. A $19.6 million contract for gold, while substantial, needs to be viewed in the context of the Mint's overall annual budget and its specific coinage production targets (e.g., American Eagle gold coins, commemorative issues). Historical spending data for gold procurement would reveal if this award represents a typical volume and price point, or if it is an outlier due to market conditions or specific program requirements. Understanding this context is key to assessing its fiscal impact.

Industry Classification

NAICS: Manufacturing › Nonferrous Metal (except Aluminum) Production and Processing › Nonferrous Metal (except Copper and Aluminum) Rolling, Drawing, and Extruding

Product/Service Code: ORES, MINERALS AND PRIMARY PRODUCTS

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: SIMPLIFIED ACQUISITION

Offers Received: 2

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Ellison Technologies Inc (UEI: 690546403)

Address: 200 PARK AVE FL 35, NEW YORK, NY, 90

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $19,655,398

Exercised Options: $19,655,398

Current Obligation: $19,655,398

Parent Contract

Parent Award PIID: TMHQ06C0034

IDV Type: BOA

Timeline