DoD's $91.6M ammunition contract to General Dynamics raises questions on competition and value

Contract Overview

Contract Amount: $91,577,327 ($91.6M)

Contractor: General Dynamics Ordnance and Tactical Systems, Inc.

Awarding Agency: Department of Defense

Start Date: 2009-04-16

End Date: 2018-06-30

Contract Duration: 3,362 days

Daily Burn Rate: $27.2K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: M1130 HE-PFF BB CARTRIDGE PRODUCTION

Place of Performance

Location: SAINT PETERSBURG, PINELLAS County, FLORIDA, 33716

State: Florida Government Spending

Plain-Language Summary

Department of Defense obligated $91.6 million to GENERAL DYNAMICS ORDNANCE AND TACTICAL SYSTEMS, INC. for work described as: M1130 HE-PFF BB CARTRIDGE PRODUCTION Key points: 1. Contract awarded without competition, limiting price discovery and potentially increasing costs. 2. Long contract duration (over 9 years) may not reflect current market needs or pricing. 3. Fixed-price contract type offers some cost certainty but may not capture efficiencies. 4. Sole-source award suggests potential reliance on a single supplier for critical defense needs. 5. Lack of small business participation noted, with no set-aside or subcontracting requirements. 6. Geographic concentration in Florida for production could pose supply chain risks.

Value Assessment

Rating: questionable

The contract's value is difficult to benchmark due to its sole-source nature and long duration. Without competitive bids, it's hard to ascertain if the $91.6 million represents a fair market price for M1130 HE-PFF BB CARTRIDGE PRODUCTION. The fixed-price structure provides some cost predictability, but the absence of competition means potential savings from market dynamics were likely forgone. The contract's extended period also raises concerns about whether the pricing remained optimal throughout its lifecycle.

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. The Department of the Army likely justified this approach due to specific requirements or a lack of alternative sources. The absence of multiple bidders means there was no opportunity for price negotiation or comparison against market alternatives, which can lead to higher costs for the government.

Taxpayer Impact: Sole-source awards mean taxpayers do not benefit from the cost savings typically achieved through competitive bidding processes. This can result in higher overall expenditure for essential defense materiel.

Public Impact

The primary beneficiaries are the Department of Defense, ensuring a supply of ammunition. Services delivered include the production of M1130 HE-PFF BB CARTRIDGE. Geographic impact is concentrated in Florida, where the contractor is located. Workforce implications include jobs supported at General Dynamics' Florida facility.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to inflated prices.
Long contract duration could result in outdated technology or pricing.
Sole-source award raises concerns about contractor dependency.
No small business participation limits opportunities for smaller firms.
Geographic concentration in Florida could be a supply chain vulnerability.

Positive Signals

Fixed-price contract provides cost certainty for the government.
Contract ensures a consistent supply of critical ammunition.
General Dynamics is an established defense contractor with relevant expertise.

Sector Analysis

This contract falls within the Ammunition (except Small Arms) Manufacturing sector, a critical component of the defense industrial base. The market for specialized ammunition is often characterized by high barriers to entry, proprietary technology, and a limited number of qualified suppliers. Spending in this sector is directly tied to military readiness and operational requirements. Comparable spending benchmarks are difficult to establish for sole-source, long-duration contracts.

Small Business Impact

This contract did not include any small business set-aside provisions, nor is there any indication of subcontracting requirements for small businesses. The award to a large, established prime contractor suggests that small businesses were not actively sought or included in this specific procurement. This limits opportunities for small businesses to participate in the defense supply chain for this particular item and potentially concentrates the economic benefits with larger corporations.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of the Army's contracting and program management offices. Accountability measures are inherent in the fixed-price contract type, which shifts some risk to the contractor. Transparency is limited due to the sole-source nature of the award. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Department of the Army Ammunition Procurement
Defense Industrial Base Ammunition Manufacturing
Ordnance and Tactical Systems Contracts
Fixed-Price Defense Contracts
Sole-Source Defense Procurements

Risk Flags

Sole-source award
Lack of competition
Long contract duration
No small business participation
Geographic concentration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $91.6 million to GENERAL DYNAMICS ORDNANCE AND TACTICAL SYSTEMS, INC.. M1130 HE-PFF BB CARTRIDGE PRODUCTION

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 $91.6 million.

What is the period of performance?

Start: 2009-04-16. End: 2018-06-30.

What is the track record of General Dynamics Ordnance and Tactical Systems, Inc. with similar sole-source ammunition contracts?

General Dynamics Ordnance and Tactical Systems, Inc. (GD-OTS) has a significant history of producing ordnance and ammunition for the U.S. military and allied nations. As a major defense contractor, they frequently engage in large-scale production contracts. While specific data on their sole-source ammunition contracts is not publicly detailed in this context, their extensive experience suggests a capacity to fulfill complex production requirements. However, the absence of competition on such contracts, regardless of the contractor's reputation, inherently limits the government's ability to ensure the most cost-effective pricing and explore alternative technological solutions. Analysis of past performance on competed contracts could provide a better benchmark for value, but for sole-source awards, the focus shifts to the justification for the lack of competition and the reasonableness of the negotiated price.

How does the $91.6 million total contract value compare to market rates for similar ammunition, considering it was sole-sourced?

Direct comparison to market rates for similar ammunition is challenging because this contract was awarded on a sole-source basis for over nine years. Competitive bidding typically drives prices down by fostering a marketplace where multiple suppliers vie for the contract. In a sole-source scenario, the government negotiates directly with one supplier, and the price is influenced by factors such as the contractor's cost structure, profit margins, and the perceived necessity of the item. Without competitive bids or publicly available cost breakdowns, it is difficult to definitively state whether $91.6 million represents a fair market value. Benchmarking would ideally involve comparing unit costs to similar items procured competitively, but such data is not readily available for this specific sole-source award.

What are the primary risks associated with a sole-source, long-duration contract for ammunition production?

The primary risks associated with this sole-source, long-duration contract include potential cost inefficiencies, technological obsolescence, and supply chain vulnerability. Since the contract was not competed, there's a risk that the government may be paying a premium compared to what could have been achieved through competition. The extended duration (over 9 years) increases the likelihood that the technology or specifications may become outdated, or that market conditions could change significantly, making the negotiated price less favorable over time. Furthermore, relying on a single supplier for critical ammunition creates a dependency that could be problematic if the contractor faces production issues, financial instability, or geopolitical disruptions affecting their operations. This concentration of risk is a significant concern for ensuring sustained military readiness.

How effective is the fixed-price contract type in ensuring value for money in this specific ammunition procurement?

The fixed-price contract type (Firm Fixed Price) aims to ensure value for money by shifting the risk of cost overruns to the contractor. This means the government agrees to pay a set price, regardless of the contractor's actual costs. For the government, this provides budget certainty and incentivizes the contractor to manage costs efficiently to maximize their profit margin. However, the effectiveness of value for money in this specific case is significantly undermined by the sole-source nature of the award. While the fixed price offers predictability, the absence of competition means the initial price negotiated might not have been the lowest possible. Therefore, while the contract structure itself has mechanisms for cost control, the overall value realized is questionable due to the lack of competitive pressure during the award phase.

What are the historical spending patterns for M1130 HE-PFF BB CARTRIDGE or similar ammunition by the Department of the Army?

Detailed historical spending patterns specifically for the 'M1130 HE-PFF BB CARTRIDGE' are not readily available in the public domain, especially considering this contract spans from 2009 to 2018 and was sole-sourced. Generally, the Department of the Army procures ammunition through various contract types, including competitive bids for standard items and sole-source awards for specialized or uniquely manufactured munitions. Spending levels fluctuate based on operational tempo, strategic priorities, and inventory management goals. Large-scale ammunition procurements often involve multi-year contracts to ensure supply chain stability and achieve economies of scale. Without access to specific contract histories or budget allocations for this particular cartridge type, it's difficult to establish a precise historical spending trend. However, the $91.6 million awarded over nearly a decade indicates a significant, albeit potentially concentrated, investment in this specific munition.

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: W15QKN08R0331

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: General Dynamics Corp

Address: 11399 16TH CT N STE 200, SAINT PETERSBURG, FL, 33716

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

Financial Breakdown

Contract Ceiling: $91,577,327

Exercised Options: $91,577,327

Current Obligation: $91,577,327

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline