DoD's $163.7M Propellant Production Contract Awarded Sole-Source to Canadian Commercial Corporation

Contract Overview

Contract Amount: $163,650,780 ($163.7M)

Contractor: Canadian Commercial Corporation

Awarding Agency: Department of Defense

Start Date: 2008-05-07

End Date: 2014-01-17

Contract Duration: 2,081 days

Daily Burn Rate: $78.6K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: M31A2 PROPELLANT PRODUCTION

Plain-Language Summary

Department of Defense obligated $163.7 million to CANADIAN COMMERCIAL CORPORATION for work described as: M31A2 PROPELLANT PRODUCTION Key points: 1. Contract awarded without competition, raising questions about potential cost savings and market fairness. 2. Sole-source award to a foreign entity for a critical defense material warrants scrutiny of national security implications. 3. Long contract duration of 2081 days suggests a sustained need, but also limits flexibility for future procurement strategies. 4. The contract's value of $163.7M represents a significant investment in a specialized manufacturing capability. 5. Lack of competition may have led to higher prices than if multiple bidders had vied for the contract. 6. Performance metrics and quality assurance details are crucial for assessing the value delivered under this sole-source agreement.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to its sole-source nature and the specialized product. Without competitive bids, it's difficult to ascertain if the $163.7 million represents a fair market price for propellant production. The absence of comparable contracts for similar quantities and specifications from other suppliers makes a direct price comparison impossible. Further analysis would require understanding the production costs and profit margins inherent in this specific defense supply chain.

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 among multiple potential suppliers. This approach is typically used when only one source is capable of meeting the requirement, or in cases of urgent need. The lack of competition means that the government did not benefit from the price discovery mechanisms that typically occur in a competitive bidding process, potentially leading to higher costs.

Taxpayer Impact: Taxpayers may have paid a premium for this propellant due to the absence of competitive pressure. The government's negotiating position is weakened when there are no alternative suppliers to consider.

Public Impact

The Department of Defense benefits from a secured supply of essential propellant for its operations. This contract ensures the availability of a critical component for military readiness and national security. The geographic impact is primarily within the defense supply chain, with potential downstream effects on military bases and operations. Workforce implications are likely concentrated within the specialized manufacturing sector involved in propellant production.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits opportunities for other domestic or international suppliers.
Lack of competition raises concerns about price reasonableness and potential for cost overruns.
Dependence on a single supplier for a critical defense material could pose supply chain risks.
The long contract duration may not reflect current market conditions or technological advancements.

Positive Signals

Ensures a consistent and reliable supply of a critical defense material.
The award to Canadian Commercial Corporation suggests a pre-existing relationship or established trust.
The contract specifies a Firm Fixed Price, providing cost certainty for the government.

Sector Analysis

The explosives manufacturing sector is a highly specialized niche within the broader industrial landscape, critical for defense applications. This contract falls under the North American Industry Classification System (NAICS) code 325920 (Explosives Manufacturing). The market for such specialized propellants is typically limited, with a small number of qualified producers globally. Government contracts often represent a significant portion of the demand for these materials, influencing market dynamics and production capacities.

Small Business Impact

This contract does not appear to have a small business set-aside component, nor is there information indicating significant subcontracting opportunities for small businesses. The nature of specialized propellant manufacturing often involves large-scale industrial processes and established prime contractors, potentially limiting the direct participation of small businesses in the primary execution of this contract. Further investigation into subcontracting plans would be needed to fully assess the impact on the small business ecosystem.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Defense's contracting and program management offices. Accountability measures would be defined by the contract terms, including performance standards and payment schedules. Transparency is often limited for sole-source defense contracts, but reporting requirements may exist. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Defense Ammunition Production
Military Explosives Procurement
Chemical Manufacturing Contracts
North American Defense Industrial Base

Risk Flags

Sole-source award
Foreign supplier
Critical defense material
Long contract duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $163.7 million to CANADIAN COMMERCIAL CORPORATION. M31A2 PROPELLANT PRODUCTION

Who is the contractor on this award?

The obligated recipient is CANADIAN COMMERCIAL CORPORATION.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $163.7 million.

What is the period of performance?

Start: 2008-05-07. End: 2014-01-17.

What is the track record of Canadian Commercial Corporation in supplying defense materials to the U.S. Department of Defense?

Canadian Commercial Corporation (CCC) is a Crown corporation that supports the development of international trade between Canada and other countries. While CCC facilitates trade, its direct track record as a prime contractor for U.S. Department of Defense (DoD) specific propellant production may be limited. Typically, CCC acts as a facilitator, ensuring Canadian companies meet U.S. government procurement requirements. Information on CCC's specific performance history for this particular propellant contract would need to be reviewed within the DoD's contract performance databases. However, as a government entity, it is expected to adhere to stringent quality and delivery standards. The fact that this was a sole-source award suggests a specific capability or relationship that the DoD deemed necessary to leverage through CCC.

How does the $163.7 million contract value compare to historical spending on similar propellant production by the DoD?

Comparing the $163.7 million contract value to historical spending on similar propellant production requires access to detailed historical procurement data for specific types of propellants. Without knowing the exact type and quantity of propellant, a direct comparison is difficult. However, given the specialized nature of defense propellants, such contracts can range from tens to hundreds of millions of dollars over their lifecycle. The duration of this contract (2081 days, approximately 5.7 years) suggests a substantial, ongoing requirement. If this contract represents a significant portion of the DoD's annual propellant needs for a particular system, its value would be considered substantial. Historical data would reveal if this award is in line with previous sole-source or competed contracts for comparable materials, considering inflation and potential changes in production scale or technology.

What are the primary risks associated with a sole-source award for a critical defense material like propellant?

The primary risks associated with a sole-source award for a critical defense material like propellant include potential overpricing due to lack of competition, reduced incentive for the contractor to innovate or improve efficiency, and increased supply chain vulnerability. Without competitive pressure, the government may pay more than necessary. The sole supplier might have less motivation to invest in cost-saving technologies or process improvements. Furthermore, reliance on a single source creates a significant risk if that supplier experiences production issues, faces geopolitical challenges, or ceases operations, potentially disrupting critical military capabilities. National security could be compromised if the supply chain is not robust and diversified.

How effective is the Firm Fixed Price (FFP) contract type in managing costs for specialized manufacturing like propellant production?

The Firm Fixed Price (FFP) contract type is generally considered effective for managing costs in specialized manufacturing like propellant production, especially when the scope of work and requirements are well-defined. Under an FFP contract, the contractor assumes most of the cost risk, agreeing to a set price regardless of their actual costs. This provides the government with cost certainty and predictability, making budgeting easier. For the contractor, it incentivizes efficiency and cost control to maximize profit. However, if the initial cost estimates are inaccurate or unforeseen issues arise that significantly impact the contractor's costs, the FFP structure can lead to disputes or reduced contractor performance if they attempt to cut corners. In a sole-source scenario, the effectiveness hinges heavily on the accuracy of the initial price negotiation.

What are the potential implications of awarding this contract to a foreign entity (Canadian Commercial Corporation) for U.S. national security?

Awarding a contract for a critical defense material like propellant to a foreign entity, even a close ally like Canada through its Commercial Corporation, carries potential national security implications. While Canada is a trusted partner, reliance on foreign sources for essential military components can introduce geopolitical risks, potential supply chain disruptions due to differing regulations or political relations, and concerns about intellectual property protection. It also raises questions about the availability of domestic industrial capacity for such critical materials. However, using a foreign entity might also be driven by unique capabilities, cost efficiencies, or strategic alliances. The DoD would have conducted a thorough risk assessment to mitigate these concerns, likely involving stringent security protocols and contingency planning.

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: Government of Canada (UEI: 241015486)

Address: 50 O'CONNOR ST SUITE 1100, OTTAWA

Business Categories: Category Business, Foreign Government, Foreign Owned, Not Designated a Small Business, Special Designations

Financial Breakdown

Contract Ceiling: $184,816,334

Exercised Options: $163,650,780

Current Obligation: $163,650,780

Contract Characteristics

Cost or Pricing Data: NO

Timeline