Army awards $2.3B for ammunition facilities, with BAE Systems as primary contractor

Contract Overview

Contract Amount: $2,317,804,253 ($2.3B)

Contractor: BAE Systems Ordnance Systems Inc.

Awarding Agency: Department of Defense

Start Date: 1999-10-19

End Date: 2027-03-31

Contract Duration: 10,025 days

Daily Burn Rate: $231.2K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: 199812!2100!0747!AA09 !U.S. ARMY INDUSTRIAL OPERATIONS !DAAA0998E0006 !A!*!P00001 !19980929!19991231!289954943!770087872!217304393!N!40381!ROYAL ORDNANCE PLC !EUXTON LA !CHORLEY !UK!PR7 6!03000!013!51!ARLINGTON !ARLINGTON !VIRGINIA !0001!+000000759000!N!N!000000000000!Y151!AMMUNITION FACILITIES !A6 !AMMUNITION !1000!NOT DISCERNABLE OR CLASSIFIED !3483!3!*!*!C!B!A!*!A !N!J!1!001!B!* !A!Y!A!* !* !N!C!*!A!A!A!A!A!*!* !*!N!A!C!N!*!*!*!*!*!

Place of Performance

Location: KINGSPORT, SULLIVAN County, TENNESSEE, 37660

State: Tennessee Government Spending

Plain-Language Summary

Department of Defense obligated $2.32 billion to BAE SYSTEMS ORDNANCE SYSTEMS INC. for work described as: 199812!2100!0747!AA09 !U.S. ARMY INDUSTRIAL OPERATIONS !DAAA0998E0006 !A!*!P00001 !19980929!19991231!289954943!770087872!217304393!N!40381!ROYAL ORDNANCE PLC !EUXTON LA !CHORLEY !UK!PR7 6!03000!013!51!ARLINGTON !ARLING… Key points: 1. Contract value of $2.3B over its lifecycle suggests significant investment in defense infrastructure. 2. The definitive contract type indicates a long-term relationship for ongoing services. 3. A firm-fixed-price structure aims to control costs for the government. 4. The contract spans over 25 years, highlighting the enduring need for ammunition facility support. 5. The primary contractor, BAE Systems Ordnance Systems Inc., has a substantial role in this award. 6. The award falls under Facilities Support Services, a critical component of defense operations.

Value Assessment

Rating: good

The total award amount of $2.3 billion for ammunition facilities over a 25-year period appears substantial. Benchmarking this against similar long-term defense infrastructure contracts is challenging due to the specialized nature of ammunition facilities. However, the firm-fixed-price structure suggests an effort to achieve cost certainty. The contract's duration implies a consistent need for these services, and the award value reflects the scale of operations managed by the contractor.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that multiple bidders were likely considered. The presence of a definitive contract with a long duration suggests a competitive process that evaluated long-term capabilities and pricing. While the specific number of bidders is not detailed, full and open competition generally fosters a more robust price discovery process and encourages contractors to offer competitive terms.

Taxpayer Impact: Full and open competition is beneficial for taxpayers as it typically leads to more competitive pricing and a wider range of potential solutions, maximizing the value for the government's investment.

Public Impact

The U.S. Army benefits from secure and efficient ammunition storage and handling capabilities. This contract ensures the continued operation and maintenance of critical defense infrastructure. The services provided support national defense readiness and military operational effectiveness. The contract's duration implies a stable operational environment for the contractor and its workforce. Geographic impact is likely concentrated around Army installations requiring ammunition facilities, primarily in Tennessee based on the contractor's location.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Long-term nature of the contract could lead to contractor complacency if not actively managed.
Dependence on a single primary contractor for critical infrastructure raises concerns about sole-source reliance if competition diminishes in future renewals.
The sheer scale of the award necessitates robust oversight to ensure performance and prevent cost overruns.

Positive Signals

Awarded through full and open competition, suggesting a competitive process that likely yielded favorable terms.
Firm-fixed-price contract type provides cost certainty for the government.
The contractor, BAE Systems, is a major defense industry player with established expertise in ordnance systems.

Sector Analysis

This contract falls within the Defense sector, specifically supporting facilities management for ammunition. The defense industry is characterized by large, long-term contracts for specialized equipment and services. Spending in this area is driven by national security requirements and the need to maintain readiness. Comparable spending benchmarks would typically involve other large-scale infrastructure and logistics contracts within the Department of Defense, often running into billions of dollars over extended periods.

Small Business Impact

The data indicates this contract was not set aside for small businesses (ss: false, sb: false). As a large-scale definitive contract awarded to a major defense contractor, it is unlikely to involve significant direct subcontracting opportunities for small businesses unless specified within the contract's detailed terms. The primary focus appears to be on the capabilities of the prime contractor, BAE Systems.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Army's contracting and program management offices. As a definitive contract with a long duration, it likely includes performance metrics, reporting requirements, and regular reviews. The Inspector General's office for the Department of Defense would have jurisdiction to investigate any allegations of fraud, waste, or abuse related to this contract.

Related Government Programs

Defense Infrastructure Modernization Programs
Ordnance and Ammunition Procurement
Base Operations Support Contracts
Logistics and Supply Chain Management (Defense)
Facilities Engineering and Maintenance (Defense)

Risk Flags

Long contract duration may lead to performance degradation or technological obsolescence.
Firm-fixed-price contracts can be challenging to manage over extended periods due to economic fluctuations.
Reliance on a single contractor for critical infrastructure requires robust oversight.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $2.32 billion to BAE SYSTEMS ORDNANCE SYSTEMS INC.. 199812!2100!0747!AA09 !U.S. ARMY INDUSTRIAL OPERATIONS !DAAA0998E0006 !A!*!P00001 !19980929!19991231!289954943!770087872!217304393!N!40381!ROYAL ORDNANCE PLC !EUXTON LA !CHORLEY !UK!PR7 6!03000!013!51!ARLINGTON !ARLINGTON !VIRGINIA !0001!+000000759000!N!N!000000000000!Y151!AMMUNITION FACILITIES !A6 !AMMUNITION !1000!NOT DISCERNABLE OR CLASSIFIED !3483!3!*!*!C!B!A!*!A !N!J!1!0

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 $2.32 billion.

What is the period of performance?

Start: 1999-10-19. End: 2027-03-31.

What is the historical spending pattern for ammunition facilities under the U.S. Army?

Analyzing historical spending for ammunition facilities requires examining past contracts awarded by the Department of the Army for similar services. This specific contract, awarded in 1998 with an end date of 2027, represents a significant, long-term investment. To understand historical patterns, one would need to look at previous contracts for ammunition storage, maintenance, and handling facilities, potentially identifying trends in contract duration, value, and the types of services procured. For instance, prior to this definitive contract, the Army might have utilized shorter-term contracts or a different procurement approach. Understanding the evolution of these contracts can reveal shifts in defense strategy, technological advancements in ammunition handling, and changes in contracting policies aimed at achieving better value or performance.

How does the per-unit cost of managing ammunition facilities compare to industry benchmarks?

Determining a precise per-unit cost for managing ammunition facilities is complex due to the varied nature of services and the specialized infrastructure involved. This contract, valued at approximately $2.3 billion over its lifecycle, covers a broad range of support. To establish a per-unit benchmark, one would need to define a consistent unit of measure, such as cost per square foot of storage, cost per ton of munitions managed, or cost per maintenance action. Comparing this to industry benchmarks would require access to proprietary data from other defense contractors or private sector logistics providers specializing in hazardous materials. Given the specialized security and regulatory requirements for ammunition facilities, direct comparisons might be difficult, and costs could be higher than general warehousing due to these factors.

What is BAE Systems Ordnance Systems Inc.'s track record with similar large-scale defense infrastructure contracts?

BAE Systems Ordnance Systems Inc. is a significant entity within the defense sector, and its track record with large-scale infrastructure contracts is generally extensive. As a subsidiary of BAE Systems, a global defense prime contractor, it possesses substantial experience in managing complex projects, including those involving ordnance and munitions. This specific contract, valued at $2.3 billion over its extended duration, indicates a high level of trust and proven capability. Historical performance data, including past performance evaluations from previous government contracts, would provide a more granular assessment. However, the award of such a substantial and long-term definitive contract suggests a positive assessment of their capabilities in areas such as facility management, safety compliance, and operational efficiency related to ammunition.

What are the key performance indicators (KPIs) used to measure the effectiveness of this ammunition facilities contract?

While the specific Key Performance Indicators (KPIs) for this contract are not publicly detailed in the provided data, typical KPIs for ammunition facilities management would likely include metrics related to safety compliance (e.g., incident rates, adherence to safety protocols), operational efficiency (e.g., turnaround times for storage and retrieval, inventory accuracy), facility maintenance (e.g., response times for repairs, preventative maintenance completion rates), security (e.g., breach incidents, access control effectiveness), and environmental compliance. The firm-fixed-price nature of the contract suggests that the government is focused on achieving specific outcomes, and performance against these KPIs would be crucial for ensuring the contractor meets its obligations and delivers value for the taxpayer.

What is the potential risk associated with the long duration (over 25 years) of this contract?

The long duration of this contract, spanning over 25 years, presents several potential risks. Firstly, there's the risk of technological obsolescence; ammunition handling and storage technologies may evolve significantly over such a period, potentially making current systems or processes outdated. Secondly, economic risks, such as inflation or unforeseen changes in market conditions, could impact the contractor's ability to maintain profitability under a fixed-price agreement, potentially leading to requests for modification or disputes. Thirdly, there's the risk of contractor performance degradation over time; maintaining consistent high performance over decades requires sustained management focus and quality control. Finally, the government faces the risk of being locked into a contract that may not remain the most cost-effective or efficient solution throughout its entire term, especially if market competition or alternative solutions emerge.

Industry Classification

NAICS: Administrative and Support and Waste Management and Remediation Services › Facilities Support Services › Facilities Support Services

Product/Service Code: CONSTRUCT OF STRUCTURES/FACILITIES › CONSTRUCTION OF BUILDINGS

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Offers Received: 2

Pricing Type: FIRM FIXED PRICE (J)

Contractor Details

Parent Company: Compagnie DE Developpement DE L'eau S.A.

Address: 4509 W STONE DR, KINGSPORT, TN, 37660

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $1,388,396,957

Exercised Options: $1,388,396,957

Current Obligation: $2,317,804,253

Actual Outlays: $72,599,244

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline