DoD's $207M contract for metal parts awarded to General Dynamics, with a fixed price and economic adjustment

Contract Overview

Contract Amount: $207,111,243 ($207.1M)

Contractor: General Dynamics Ordnance and Tactical Systems Inc

Awarding Agency: Department of Defense

Start Date: 2008-06-06

End Date: 2014-07-30

Contract Duration: 2,245 days

Daily Burn Rate: $92.3K/day

Competition Type: FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES

Number of Offers Received: 1

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Defense

Official Description: BASE YEAR - M795 METAL PARTS

Place of Performance

Location: SCRANTON, LACKAWANNA County, PENNSYLVANIA, 18505

State: Pennsylvania Government Spending

Plain-Language Summary

Department of Defense obligated $207.1 million to GENERAL DYNAMICS ORDNANCE AND TACTICAL SYSTEMS INC for work described as: BASE YEAR - M795 METAL PARTS Key points: 1. Value for money assessed through fixed-price structure with economic price adjustment, aiming to balance cost control with market fluctuations. 2. Competition dynamics indicate a full and open competition after exclusion of sources, suggesting a deliberate selection process. 3. Risk indicators include potential for price increases due to economic adjustments, requiring careful monitoring of market conditions. 4. Performance context is tied to the supply of metal parts for defense applications, critical for operational readiness. 5. Sector positioning places this contract within the defense industrial base, specifically supporting ammunition manufacturing.

Value Assessment

Rating: good

The contract's fixed-price with economic price adjustment (FP-EPA) structure is a common approach for long-term defense procurements where material costs can fluctuate. While the base year value is substantial, the FP-EPA mechanism aims to provide a degree of cost certainty for the government while allowing the contractor to adapt to unforeseen economic changes. Benchmarking against similar long-term defense supply contracts for specialized metal components would be necessary for a more precise value assessment, but the structure itself suggests a reasonable attempt to manage risk and cost.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under 'Full and Open Competition After Exclusion of Sources.' This specific designation implies that while the competition was initially intended to be broad, certain sources were excluded, possibly due to specific technical requirements, security clearances, or prior performance issues. The number of bidders is not explicitly stated, but the 'full and open' aspect suggests an effort to solicit from a wide range of qualified vendors before the exclusion.

Taxpayer Impact: The 'full and open' competition, even with exclusions, generally benefits taxpayers by fostering a competitive environment that can lead to better pricing and innovation. However, the exclusion of sources warrants scrutiny to ensure it was justified and did not unduly limit competition.

Public Impact

Benefits the Department of Defense by ensuring a supply of critical metal parts for ammunition manufacturing. Supports the defense industrial base and the operational readiness of military forces. The contract's geographic impact is centered in Pennsylvania, where General Dynamics Ordnance and Tactical Systems Inc. is located. Implies a stable demand for specialized manufacturing capabilities and skilled labor within the defense sector.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost overruns due to economic price adjustment clauses if market conditions escalate rapidly.
Dependence on a single contractor for a critical component could pose supply chain risks.
The 'exclusion of sources' in an otherwise 'full and open' competition needs clear justification to ensure fairness and optimal pricing.

Positive Signals

Fixed-price structure provides a baseline cost control mechanism.
Economic price adjustment can mitigate risks associated with volatile raw material markets.
Award to a known defense contractor suggests established production capabilities and quality control.

Sector Analysis

This contract falls within the broader defense manufacturing sector, specifically focusing on ammunition components. The North American Industry Classification System (NAICS) code 332993, 'Ammunition (except Small Arms) Manufacturing,' indicates a specialized niche. The defense sector is characterized by long-term contracts, stringent quality requirements, and significant government oversight. Spending in this area is driven by national security needs and geopolitical factors. Comparable spending benchmarks would involve analyzing other contracts for similar defense-related manufactured goods, considering factors like volume, complexity, and duration.

Small Business Impact

The contract data indicates that small business participation (ss: false, sb: false) was not a primary set-aside consideration for this specific award. This suggests the procurement likely focused on large-scale manufacturing capabilities. There is no explicit information on subcontracting plans for small businesses. The absence of small business set-asides means that opportunities for small businesses to directly participate in this contract are limited, though they might be involved indirectly through the supply chain of the prime contractor.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Army and the Department of Defense. Mechanisms likely include contract performance reviews, quality assurance inspections, and financial audits. The fixed-price with economic price adjustment (FP-EPA) structure necessitates monitoring of economic indicators to validate any price adjustments. Transparency is generally maintained through contract award databases, though specific performance details may be sensitive. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Department of Defense Ammunition Procurement
Defense Industrial Base Manufacturing Contracts
General Dynamics Ordnance and Tactical Systems Contracts
Fixed-Price with Economic Price Adjustment Contracts
Metal Parts Manufacturing for Defense

Risk Flags

Potential for cost escalation due to economic price adjustment.
Justification for exclusion of sources in competition needs verification.
Long-term reliance on a single supplier for critical components.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $207.1 million to GENERAL DYNAMICS ORDNANCE AND TACTICAL SYSTEMS INC. BASE YEAR - M795 METAL PARTS

Who is the contractor on this award?

The obligated recipient is GENERAL DYNAMICS ORDNANCE AND TACTICAL 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 $207.1 million.

What is the period of performance?

Start: 2008-06-06. End: 2014-07-30.

What is the historical spending pattern for this specific contract or similar metal parts for ammunition manufacturing by the Department of the Army?

Historical spending data for this specific contract (identified by its unique award ID, if available) would reveal the total value obligated over its lifespan, including any modifications or exercised options. For similar metal parts for ammunition manufacturing, analysis of past contracts under NAICS code 332993 awarded by the Department of the Army would be crucial. This would involve examining contract durations, award values, and the number of competitors. Trends might show increasing or decreasing demand, shifts in pricing due to market conditions or technological advancements, and the prevalence of specific contract types (e.g., fixed-price vs. cost-plus). Understanding these patterns helps contextualize the current $207 million award, assessing whether it represents a typical investment or a significant deviation.

How does the pricing structure (Fixed Price with Economic Price Adjustment) compare to other large defense manufacturing contracts for similar components?

The Fixed Price with Economic Price Adjustment (FP-EPA) structure is common for long-term defense contracts where the cost of raw materials or labor can be volatile. Compared to pure Fixed Price (FP) contracts, FP-EPA offers the government some protection against uncontrolled price spikes while allowing the contractor to adjust prices based on pre-defined economic indices (e.g., Producer Price Index for specific materials). This contrasts with Cost Plus contracts, which offer less price certainty for the government but ensure the contractor covers all allowable costs. For similar metal parts, FP-EPA is often preferred over FP when supply chain stability or commodity prices are a significant concern, as is often the case in defense manufacturing. The 'good' rating for value reflects that this structure is a recognized method for balancing risk and cost in such environments.

What specific 'sources' were excluded in this 'Full and Open Competition After Exclusion of Sources,' and what was the justification?

The designation 'Full and Open Competition After Exclusion of Sources' indicates that the solicitation was initially intended for all responsible sources, but specific entities were later excluded from consideration. The exact 'sources' excluded and the precise justification are typically detailed in the contract's Justification and Approval (J&A) document, which is often publicly available through contract databases or agency portals, though sometimes redacted for proprietary reasons. Common reasons for exclusion include failure to meet specific technical requirements, lack of necessary security clearances, inability to meet delivery schedules, or past performance issues. Understanding these exclusions is vital for assessing whether the competition was truly maximized and if the exclusions were fair and legally sound, directly impacting the potential for optimal pricing and innovation for taxpayers.

What is the track record of General Dynamics Ordnance and Tactical Systems Inc. in fulfilling similar defense manufacturing contracts, particularly regarding performance and cost control?

General Dynamics Ordnance and Tactical Systems Inc. (GD-OTS) is a significant defense contractor with a substantial history of producing ordnance and related components. Their track record in fulfilling similar defense manufacturing contracts is generally characterized by large-scale production capabilities and adherence to stringent military specifications. Performance metrics, such as on-time delivery rates and quality compliance, are typically monitored by the contracting agency. Cost control performance can be assessed by examining contract modifications, claims, and any disputes that arose during previous contracts. While specific details require access to detailed contract performance reports, GD-OTS's continued awards in this sector suggest a generally satisfactory performance history, though like any large contractor, they may have faced challenges on specific programs.

What are the potential risks associated with the economic price adjustment clause in this contract, and how are they mitigated?

The primary risk associated with the Economic Price Adjustment (EPA) clause is the potential for significant price increases if the cost of labor, raw materials, or other specified economic factors rise unexpectedly or rapidly. This could lead to the contract exceeding initial budget expectations. Mitigation strategies employed by the government typically include: 1) Clearly defining the economic indices used for adjustment (e.g., specific Bureau of Labor Statistics data) to ensure objectivity. 2) Setting caps or limits on the percentage of price increase allowed per adjustment period or over the contract's life. 3) Requiring the contractor to provide detailed cost breakdowns and justification for any requested adjustments. 4) Conducting thorough audits of the contractor's cost data supporting the EPA claims. 5) Maintaining flexibility in the contract to renegotiate terms if market conditions become excessively volatile.

Industry Classification

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

Product/Service Code: AMMUNITION AND EXPLOSIVES

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: W15QKN08R0339

Offers Received: 1

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT (K)

Evaluated Preference: NONE

Contractor Details

Parent Company: General Dynamics Corp

Address: 156 CEDAR AVE, SCRANTON, PA, 18505

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Manufacturer of Goods, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $207,111,243

Exercised Options: $207,111,243

Current Obligation: $207,111,243

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline