DoD's $156M contract for small arms ammunition manufacturing awarded to Armtec Defense Products Co. raises value concerns

Contract Overview

Contract Amount: $156,079,060 ($156.1M)

Contractor: Armtec Defense Products CO.

Awarding Agency: Department of Defense

Start Date: 2003-03-20

End Date: 2008-06-23

Contract Duration: 1,922 days

Daily Burn Rate: $81.2K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: 200306!000515!2100!AE30 !TACOM - PICATINNY !DAAE3003C1099 !A!N! !N! !20030320!20080328!611068453!611068453!043190826!N!ARMTEC DEFENSE PRODUCTS CO !85901 AVENUE 53 !COACHELLA !CA!92236!14260!065!06!COACHELLA !RIVERSIDE !CALIFORNIA!+000032951468!N!N!000000000000!AD15!RDTE/AMMUNITION-ENG/MANUF DEVELOP !A6 !AMMUNITION !1000!NOT DISCERNABLE OR CLASSIFIED !332992!E! !3! ! ! ! ! !99990909!B! ! !A! !D!N!J!1!001!N!1G!A!Y!Z! ! !N!C!N! ! ! !Z!A!A!A!000!A!C!N! ! ! ! ! ! !0001! !

Place of Performance

Location: COACHELLA, RIVERSIDE County, CALIFORNIA, 92236

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $156.1 million to ARMTEC DEFENSE PRODUCTS CO. for work described as: 200306!000515!2100!AE30 !TACOM - PICATINNY !DAAE3003C1099 !A!N! !N! !20030320!20080328!611068453!611068453!043190826!N!ARMTEC DEFENSE PRODUCTS CO !85901 AVENUE 53 !COACHELLA !CA!92236!14260!065!06!COACHELLA !RIVER… Key points: 1. The contract's value proposition is questionable given the lack of competition and potential for overpricing. 2. Sole-source awards can limit price discovery and may not reflect market-driven efficiencies. 3. The extended duration of the contract (over 5 years) warrants scrutiny for ongoing cost-effectiveness. 4. Performance context is limited due to the 'not competed' status, making direct comparisons difficult. 5. The contract falls within the Defense sector, specifically supporting ammunition engineering and manufacturing. 6. No small business set-aside was utilized, indicating a potential missed opportunity for smaller defense contractors.

Value Assessment

Rating: questionable

The total contract value of $156 million over approximately five years for small arms ammunition manufacturing is substantial. However, without a competitive bidding process, it is difficult to benchmark the value for money. The lack of competition suggests that the pricing may not have been subjected to market pressures, potentially leading to a higher cost than if multiple vendors had vied for the contract. Further analysis would require comparing the unit costs to similar ammunition procurements or industry benchmarks, which are not readily available in the provided data.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning it was not competed. This indicates that only one vendor, Armtec Defense Products Co., was considered for this procurement. The lack of competition limits the government's ability to explore alternative solutions or negotiate the best possible price through a bidding process. It suggests that either there were unique capabilities required that only Armtec possessed, or the procurement strategy did not prioritize open competition.

Taxpayer Impact: Sole-source awards can result in higher costs for taxpayers as there is no competitive pressure to drive down prices. This can lead to less efficient use of public funds compared to contracts awarded through full and open competition.

Public Impact

The primary beneficiaries are the U.S. Army units requiring small arms ammunition for training and operational readiness. The contract delivers essential ammunition, supporting the logistical needs of the armed forces. The geographic impact is primarily centered around Armtec Defense Products Co.'s facilities in California, with potential downstream effects on regional employment. Workforce implications include the direct employment at Armtec and its supply chain, contributing to the defense manufacturing sector.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to inflated prices and reduced value for taxpayer dollars.
Sole-source awards can stifle innovation by not encouraging new entrants or alternative solutions.
The extended contract duration without competitive re-evaluation poses a risk of complacency and potential cost overruns.
Limited transparency into the justification for sole-source award makes it difficult to assess fairness and necessity.

Positive Signals

Ensures a consistent supply of critical ammunition to the Department of the Army.
Supports a domestic defense manufacturer, contributing to the industrial base.
The contract specifies a Firm Fixed Price, which provides cost certainty for the government.

Sector Analysis

This contract falls within the broader Defense Industrial Base sector, specifically focusing on the manufacturing of ammunition. The North American Industry Classification System (NAICS) code 332992, 'Small Arms Ammunition Manufacturing,' represents a niche but critical segment of the defense market. Spending in this area is driven by military readiness requirements and modernization efforts. Comparable spending benchmarks would typically involve analyzing historical procurement data for similar ammunition types across different branches of the military or comparing unit costs with international allies, though such data is not provided here.

Small Business Impact

This contract was not set aside for small businesses, nor does it indicate any subcontracting requirements for small businesses. The award to Armtec Defense Products Co., a presumably larger entity, suggests that the procurement was not designed to specifically foster small business participation. This could mean missed opportunities for small businesses within the ammunition manufacturing supply chain to contribute to this significant defense contract and potentially limit their growth within the federal contracting ecosystem.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contracting and program management offices. Specific oversight mechanisms would include contract performance reviews, financial audits, and potentially Inspector General investigations if any irregularities were suspected. Transparency is limited due to the sole-source nature of the award, making it harder for the public to scrutinize the decision-making process and ensure accountability. The contract's duration and value necessitate robust oversight to ensure continued adherence to terms and conditions.

Related Government Programs

Department of Defense Ammunition Procurement
Army Small Arms Systems
Defense Manufacturing Industrial Base
Ordnance and Ammunition Manufacturing

Risk Flags

Sole-source award lacks competitive justification.
Potential for uncompetitive pricing due to lack of competition.
Extended contract duration without re-competition.
Limited transparency regarding procurement rationale.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $156.1 million to ARMTEC DEFENSE PRODUCTS CO.. 200306!000515!2100!AE30 !TACOM - PICATINNY !DAAE3003C1099 !A!N! !N! !20030320!20080328!611068453!611068453!043190826!N!ARMTEC DEFENSE PRODUCTS CO !85901 AVENUE 53 !COACHELLA !CA!92236!14260!065!06!COACHELLA !RIVERSIDE !CALIFORNIA!+000032951468!N!N!000000000000!AD15!RDTE/AMMUNITION-ENG/MANUF DEVELOP !A6 !AMMUNITION !1000!NOT DISCERNABLE OR CLASSIFIED !332992!E! !3! ! ! ! ! !99990909!B

Who is the contractor on this award?

The obligated recipient is ARMTEC DEFENSE PRODUCTS CO..

Which agency awarded this contract?

Awarding agency: Department of Defense (Department of the Army).

What is the total obligated amount?

The obligated amount is $156.1 million.

What is the period of performance?

Start: 2003-03-20. End: 2008-06-23.

What is the specific justification for awarding this contract on a sole-source basis?

The provided data indicates the contract was 'NOT COMPETED,' which is synonymous with a sole-source award. The specific justification for this determination is not detailed in the extract. Typically, sole-source awards are justified when only one responsible source is available or capable of meeting the government's needs, or in cases of urgent and compelling need where competition is not feasible. Without further documentation from the awarding agency (Department of the Army, TACOM), the precise rationale remains unknown. This lack of transparency is a common concern with sole-source procurements, as it limits the public's ability to assess whether competition was genuinely impossible or if it was simply not pursued.

How does the unit cost of this ammunition compare to market rates or similar government contracts?

The provided data does not include specific unit costs for the ammunition procured under this contract, nor does it detail the exact type of ammunition. The total contract value is $156,068,453, and the contract duration is approximately 1922 days (about 5.26 years). To calculate an average annual spend, we divide the total value by the duration in years: $156,068,453 / 5.26 years ≈ $29.67 million per year. However, this does not yield a unit cost. Without knowing the quantity of ammunition purchased, a direct comparison to market rates or other government contracts is impossible. The 'NOT COMPETED' status further complicates benchmarking, as competitive bids often reveal market pricing.

What are the potential risks associated with a sole-source contract of this magnitude and duration?

A sole-source contract of this magnitude ($156 million) and duration (over 5 years) carries several risks. Firstly, the lack of competition can lead to inflated pricing, as the contractor faces no pressure to offer the most cost-effective solution. Secondly, it can reduce the incentive for the contractor to innovate or improve efficiency over the contract's life. Thirdly, there's a risk of vendor lock-in, where the government becomes dependent on a single supplier, potentially limiting future options or leverage. Finally, without competitive oversight, there's an increased possibility of complacency or less rigorous performance management, potentially impacting the quality or timeliness of delivery.

What is Armtec Defense Products Co.'s track record with government contracts, particularly with the Department of Defense?

Armtec Defense Products Co. has a history of receiving contracts from the Department of Defense. The provided data shows this specific contract (DAAE30-03-C-1099) was awarded to them. While this extract doesn't detail their entire contract history, their involvement in a $156 million ammunition manufacturing contract suggests significant experience and capability in serving military needs. A comprehensive assessment would require reviewing their broader contract portfolio, including past performance evaluations, any disputes or terminations, and their success in delivering on previous DoD requirements across various programs.

How does this spending compare to historical trends in ammunition procurement by the Department of the Army?

This contract represents a significant investment in small arms ammunition manufacturing, totaling $156 million over approximately five years. To compare this to historical trends, one would need data on the Army's ammunition procurement spending in previous fiscal years and across different types of ammunition. Factors such as changes in operational tempo, modernization programs, and inventory management strategies influence these trends. Without historical spending figures for similar contracts or overall ammunition budgets, it's challenging to definitively state whether this contract represents an increase, decrease, or stable level of spending relative to past patterns. However, a $156 million award is substantial enough to warrant attention within the context of the Army's overall budget.

Industry Classification

NAICS: Manufacturing › Other Fabricated Metal Product Manufacturing › Small Arms Ammunition Manufacturing

Product/Service Code: RESEARCH AND DEVELOPMENT › DEFENSE (OTHER) R&D

Competition & Pricing

Extent Competed: NOT COMPETED

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Contractor Details

Parent Company: Esterline Technologies Corporation (UEI: 043190826)

Address: 85901 AVENUE 53, COACHELLA, CA, 25

Business Categories: Category Business, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $135,028,614

Exercised Options: $125,028,614

Current Obligation: $156,079,060

Contract Characteristics

Multi-Year Contract: Yes

Cost or Pricing Data: YES

Timeline