DoD's $34.8M contract for ammunition manufacturing awarded to BAE Systems, with no competition

Contract Overview

Contract Amount: $34,832,063 ($34.8M)

Contractor: BAE Systems Land & Armaments L.P.

Awarding Agency: Department of Defense

Start Date: 2011-07-15

End Date: 2015-06-30

Contract Duration: 1,446 days

Daily Burn Rate: $24.1K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: MK295 (HE-3P)

Place of Performance

Location: MINNEAPOLIS, ANOKA County, MINNESOTA, 55421, UNITED STATES OF AMERICA

State: Minnesota Government Spending

Plain-Language Summary

Department of Defense obligated $34.8 million to BAE SYSTEMS LAND & ARMAMENTS L.P. for work described as: MK295 (HE-3P) Key points: 1. The contract value of $34.8 million represents a significant investment in ammunition manufacturing. 2. The sole-source award to BAE Systems raises questions about potential price inflation and lack of market pressure. 3. The duration of the contract (over 4 years) suggests a long-term need for these specific ammunition components. 4. The absence of competition indicates a potential reliance on a single supplier, posing supply chain risks. 5. The contract falls under the 'Ammunition (except Small Arms) Manufacturing' NAICS code, a critical defense sector. 6. The firm-fixed-price contract type aims to transfer cost risk to the contractor, but this is less effective without competition.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to the lack of competitive bids. The $34.8 million award for ammunition manufacturing, while substantial, cannot be definitively assessed for value-for-money without comparison to other potential suppliers or historical pricing under competitive conditions. The firm-fixed-price structure is a positive indicator for cost control, but its effectiveness is diminished without a competitive bidding process to establish a market-driven price.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one bidder, BAE SYSTEMS LAND & ARMAMENTS L.P., was considered. The justification for a sole-source award typically involves unique capabilities, urgent needs, or lack of viable alternatives. Without a competitive process, it is difficult to ascertain if other qualified contractors could have provided the same goods or services at a better price or with superior terms.

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

Public Impact

The primary beneficiaries are the Department of Defense, specifically the Department of the Navy, ensuring a supply of critical ammunition. The contract supports the manufacturing of ammunition (except small arms), vital for military operations and readiness. The contract is associated with the state of Minnesota (MN), potentially impacting the local workforce and economy in that region. This contract directly supports the defense industrial base and the specialized manufacturing capabilities required for ordnance production.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to higher prices and reduced innovation.
Sole-source awards can create dependency on a single supplier, increasing supply chain vulnerability.
Limited transparency in pricing due to the absence of competitive bids.

Positive Signals

Firm-fixed-price contract type helps manage cost overruns if the contractor is efficient.
Award to an established defense contractor like BAE Systems suggests a level of proven capability.
Ensures a critical supply of ammunition for defense needs.

Sector Analysis

This contract falls within the defense manufacturing sector, specifically focusing on ammunition production. The market for defense-related manufacturing is characterized by high barriers to entry, stringent quality requirements, and significant government oversight. Spending in this area is driven by national security needs and geopolitical factors. Comparable spending benchmarks would typically involve analyzing other large-scale ammunition procurement contracts awarded by various defense agencies.

Small Business Impact

The data indicates that this contract was not set aside for small businesses (sb: false) and the contractor is not a small business (st: MN). Therefore, there are no direct subcontracting implications for small businesses stemming from a small business set-aside. The primary impact on the small business ecosystem would be indirect, potentially through BAE Systems' own supply chain, though this information is not detailed in the provided data.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense and the Department of the Navy. As a firm-fixed-price contract, the focus of oversight would be on delivery schedules, quality control, and compliance with contract terms. Transparency is limited due to the sole-source nature. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse.

Related Government Programs

Department of Defense Ammunition Procurement
Navy Weapons Systems Contracts
Defense Industrial Base Manufacturing
Ordnance Production Contracts

Risk Flags

Sole-source award
Lack of competition
Potential for overpricing
Supply chain risk

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $34.8 million to BAE SYSTEMS LAND & ARMAMENTS L.P.. MK295 (HE-3P)

Who is the contractor on this award?

The obligated recipient is BAE SYSTEMS LAND & ARMAMENTS L.P..

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $34.8 million.

What is the period of performance?

Start: 2011-07-15. End: 2015-06-30.

What is the track record of BAE SYSTEMS LAND & ARMAMENTS L.P. with the Department of Defense for similar ammunition contracts?

BAE SYSTEMS LAND & ARMAMENTS L.P. is a major defense contractor with a long history of supplying various defense systems and components to the U.S. military, including the Department of Defense and the Department of the Navy. They have been involved in numerous contracts for munitions, armored vehicles, and other defense matériel. While specific details on past ammunition contracts of identical scope and value are not provided here, their established presence in the defense sector suggests a significant level of experience and capability in fulfilling such requirements. Analyzing their past performance on similar contracts, including on-time delivery, quality adherence, and cost performance, would be crucial for a comprehensive assessment. However, without access to detailed contract performance databases or specific historical data for this contractor related to this particular type of ammunition, a precise evaluation remains limited.

How does the awarded amount of $34.8 million compare to similar ammunition manufacturing contracts awarded by the DoD in the past five years?

Comparing the $34.8 million award to similar ammunition manufacturing contracts requires access to a broader dataset of historical DoD procurements. However, based on general knowledge of defense spending, contracts of this magnitude for specialized ammunition components are not uncommon, especially when addressing specific military requirements or replenishing stocks. The key factor for comparison would be the type and quantity of ammunition being procured, as well as the specific manufacturing processes involved. Without knowing the exact specifications of the 'Ammunition (except Small Arms) Manufacturing' covered by this contract, a direct comparison is difficult. Contracts for large-caliber munitions, guided missile components, or specialized warheads could easily reach or exceed this value. Conversely, contracts for less complex or smaller-quantity ammunition might be significantly lower. The sole-source nature of this award further complicates direct value benchmarking against competitively bid contracts.

What are the primary risks associated with awarding a contract of this size on a sole-source basis?

The primary risks associated with awarding a contract of $34.8 million on a sole-source basis are multifaceted. Firstly, there is a significant risk of paying a non-competitive price, potentially exceeding what could have been achieved through a competitive bidding process. This lack of market pressure can lead to reduced value for taxpayer money. Secondly, sole-source awards can stifle innovation and competition within the defense industrial base, as potential competitors are excluded from the outset. This can lead to a long-term dependency on a single supplier, creating vulnerabilities in the supply chain. If the sole-source contractor experiences production issues, quality problems, or financial instability, the Department of Defense may face significant disruptions in supply. Furthermore, the absence of competition can reduce the incentive for the contractor to improve efficiency or reduce costs over the life of the contract.

What is the expected effectiveness of this contract in meeting the Department of the Navy's ammunition needs?

The expected effectiveness of this contract in meeting the Department of the Navy's ammunition needs hinges on several factors, primarily the contractor's ability to deliver the specified ammunition according to the contract's terms. Given that BAE SYSTEMS LAND & ARMAMENTS L.P. is an established defense contractor, there is a reasonable expectation of capability. The firm-fixed-price structure is designed to ensure cost certainty for the government, provided the contractor manages its own costs effectively. However, the sole-source nature introduces a risk that the 'need' might be met at a suboptimal price or that alternative, potentially more advanced or cost-effective solutions, were not explored due to the lack of competition. The contract's duration (over 4 years) suggests a sustained requirement, implying that its successful execution is critical for ongoing naval operations and readiness. Ultimately, effectiveness will be measured by timely delivery of high-quality ammunition that meets all technical specifications.

How has federal spending on 'Ammunition (except Small Arms) Manufacturing' evolved over the past decade, and where does this contract fit in?

Federal spending on 'Ammunition (except Small Arms) Manufacturing' has historically fluctuated based on global security environments, military operational tempo, and strategic priorities. Over the past decade, significant investments have been made to modernize munitions, replenish stocks depleted by conflicts, and develop next-generation ordnance. This $34.8 million contract, awarded in 2011 and ending in 2015, represents a specific procurement action within this broader spending category. While it might not be a colossal sum in the context of the entire defense budget, it signifies a dedicated allocation for a particular type of ammunition. To understand its place, one would need to analyze the total annual spending on this NAICS code over the last ten years. This contract's value would be compared against the average or total spending for those years to gauge its relative significance. Its sole-source nature also positions it differently from competitively awarded contracts, which often reflect broader market dynamics and pricing trends.

Industry Classification

NAICS: Manufacturing › Other Fabricated Metal Product Manufacturing › Ammunition (except Small Arms) Manufacturing

Product/Service Code: AMMUNITION AND EXPLOSIVES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0017410R0044

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: BAE Systems PLC (UEI: 217304393)

Address: 4800 E RIVER RD, MINNEAPOLIS, MN, 55421

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Foreign-Owned and U.S.-Incorporated Business, Manufacturer of Goods, Not Designated a Small Business, Special Designations

Financial Breakdown

Contract Ceiling: $35,593,292

Exercised Options: $34,832,063

Current Obligation: $34,832,063

Contract Characteristics

Cost or Pricing Data: YES

Timeline