DoD awards $177.7M for large caliber metal parts, with potential for price adjustments

Contract Overview

Contract Amount: $177,697,480 ($177.7M)

Contractor: General Dynamics OTS (wilkes Barre), LLC

Awarding Agency: Department of Defense

Start Date: 2019-07-31

End Date: 2025-09-30

Contract Duration: 2,253 days

Daily Burn Rate: $78.9K/day

Competition Type: FULL AND OPEN COMPETITION

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Defense

Official Description: PURCHASE OF M795 AND 120MM LARGE CALIBER METAL PARTS

Place of Performance

Location: WILKES BARRE, LUZERNE County, PENNSYLVANIA, 18702

State: Pennsylvania Government Spending

Plain-Language Summary

Department of Defense obligated $177.7 million to GENERAL DYNAMICS OTS (WILKES BARRE), LLC for work described as: PURCHASE OF M795 AND 120MM LARGE CALIBER METAL PARTS Key points: 1. Contract awarded to General Dynamics OTS for ammunition components. 2. Fixed-price contract with economic price adjustment indicates potential for cost fluctuations. 3. Delivery order under a larger contract structure suggests ongoing program needs. 4. The contract duration spans over 6 years, indicating a long-term requirement. 5. Pennsylvania-based contractor selected, potentially impacting regional economic activity. 6. No small business set-aside, suggesting a focus on large-scale industrial capacity.

Value Assessment

Rating: fair

The total award value of $177.7 million for ammunition components over a 6-year period appears substantial. Benchmarking against similar large-caliber ammunition part procurements is difficult without more specific component details. However, the inclusion of economic price adjustment clauses suggests a strategy to mitigate contractor risk related to material cost volatility, which could lead to higher final costs for the government compared to a firm fixed-price contract. The contract type implies that the government is willing to absorb some cost increases to ensure supply chain stability.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that multiple vendors had the opportunity to bid. The specific number of bidders is not provided, but this competitive approach is generally expected to yield favorable pricing and terms for the government. The 'delivery order' designation suggests this is one of potentially many orders placed against an existing contract vehicle, which itself would have undergone a competitive process.

Taxpayer Impact: Full and open competition is the most advantageous for taxpayers as it maximizes the potential for competitive pricing and ensures that the government is not unduly constrained by a lack of vendor options.

Public Impact

The Department of the Army benefits from a secure supply of critical ammunition components. This contract supports the production of M795 and 120mm large caliber ammunition. The geographic impact is primarily centered around the contractor's facility in Wilkes-Barre, Pennsylvania. Workforce implications include employment at General Dynamics OTS and its supply chain partners.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Economic price adjustment clauses can lead to cost overruns if not carefully monitored.
Long contract duration increases exposure to market fluctuations and potential obsolescence.
Lack of small business participation may limit opportunities for smaller, specialized suppliers.

Positive Signals

Full and open competition promotes a competitive market and potentially better pricing.
Award to an established defense contractor like General Dynamics suggests reliability and experience.
Ensuring a steady supply of critical ammunition components is vital for national defense readiness.

Sector Analysis

This contract falls within the defense manufacturing sector, specifically focusing on ammunition components. The market for large caliber ammunition is dominated by a few major defense contractors. Spending in this area is driven by military readiness requirements and geopolitical factors. Comparable spending benchmarks would typically be found within the broader DoD budget for munitions procurement, which can run into billions of dollars annually.

Small Business Impact

The contract was not set aside for small businesses, nor does it indicate any specific subcontracting goals for small businesses. This suggests that the primary contractor, General Dynamics OTS, possesses the scale and capability to handle the entire scope of work. While this may limit direct opportunities for small businesses on this specific contract, it could indirectly benefit them if they are part of General Dynamics' broader supply chain for raw materials or specialized components.

Oversight & Accountability

Oversight for this contract would primarily reside with the Department of the Army contracting officers and program managers. The contract type, Fixed Price with Economic Price Adjustment, requires careful monitoring of cost indices to manage price adjustments effectively. Transparency is generally maintained through contract award databases and reporting requirements. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Department of Defense Ammunition Procurement
Large Caliber Ammunition Production
Defense Industrial Base Manufacturing
Army Munitions Programs

Risk Flags

Economic Price Adjustment Clause
Long Contract Duration
Single Primary Contractor
Potential Supply Chain Volatility

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $177.7 million to GENERAL DYNAMICS OTS (WILKES BARRE), LLC. PURCHASE OF M795 AND 120MM LARGE CALIBER METAL PARTS

Who is the contractor on this award?

The obligated recipient is GENERAL DYNAMICS OTS (WILKES BARRE), LLC.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $177.7 million.

What is the period of performance?

Start: 2019-07-31. End: 2025-09-30.

What is the historical spending pattern for M795 and 120mm large caliber metal parts by the Department of Defense?

Historical spending data for specific ammunition components like M795 and 120mm large caliber metal parts can be complex to isolate due to the way defense budgets are structured and reported. Typically, such procurements are aggregated under broader categories such as 'ammunition, missiles, and related electronic components' or specific weapon system line items. The Department of Defense (DoD) has consistently allocated significant portions of its budget to munitions to maintain readiness and support ongoing operations. For instance, in recent fiscal years, the Army's budget requests for procurement of ammunition and related components have often been in the billions of dollars. Analyzing specific contract awards over time, like the one to General Dynamics OTS, provides granular insight into spending trends for particular types of ordnance. Fluctuations in spending are often tied to global security environments, modernization efforts, and the depletion of stocks from training or operational use. The $177.7 million awarded here represents a substantial, but not unprecedented, investment in ensuring the availability of these critical warfighting materials.

How does the pricing of this contract compare to similar procurements for large caliber ammunition components?

Directly comparing the pricing of this $177.7 million contract for M795 and 120mm large caliber metal parts to similar procurements is challenging without access to detailed cost breakdowns and specific component specifications. The contract's 'Fixed Price with Economic Price Adjustment' (FPEPA) structure adds another layer of complexity, as the final price is subject to change based on economic indices, primarily related to labor and material costs. Generally, FPEPA contracts aim to balance cost certainty for the government with protection for the contractor against unforeseen market volatility. If this contract were a Firm Fixed Price (FFP), a direct comparison of the total award value against other FFP contracts for similar items would be more straightforward. However, the inclusion of economic price adjustments suggests that the initial negotiated price might be lower than an equivalent FFP contract, but the final expenditure could be higher. Benchmarking would require analyzing the specific indices used for adjustment and the historical trends of those indices during the contract period, as well as comparing the unit prices of comparable components procured under similar contract types by different branches of the military or allied nations.

What are the key risks associated with this contract, and how are they being mitigated?

Several key risks are associated with this $177.7 million contract for large caliber ammunition parts. Firstly, the 'Economic Price Adjustment' (EPA) clause introduces financial risk, as escalating material and labor costs could significantly increase the final contract price beyond initial projections. Mitigation for this risk lies in the careful selection and monitoring of the economic indices used for adjustments, ensuring they accurately reflect market conditions without unduly benefiting the contractor. Secondly, the long contract duration (ending September 2025) presents a risk of supply chain disruptions, potential obsolescence of materials or manufacturing processes, and shifts in geopolitical demand. Mitigation involves robust supply chain management by the contractor and potentially periodic reviews by the government. Thirdly, reliance on a single large contractor, General Dynamics OTS, for a critical component could pose a risk if their production capacity is unexpectedly impacted. The mitigation here is the initial 'full and open competition' which aimed to select a capable vendor, and the government's ongoing oversight of contractor performance and financial stability. Finally, the nature of defense procurement inherently carries risks related to evolving threat landscapes and changing military requirements, which could necessitate modifications or adjustments to the contract.

What is the contractor's track record with the Department of Defense, particularly in ammunition manufacturing?

General Dynamics Ordnance and Tactical Systems (OTS), the contractor for this $177.7 million award, has a well-established and extensive track record within the Department of Defense (DoD), particularly in the realm of ordnance and ammunition manufacturing. As a subsidiary of General Dynamics, a major defense contractor, OTS is known for producing a wide array of munitions, including large caliber projectiles, mortar systems, and related components. They have historically secured numerous contracts with the Army, Navy, and Air Force for various ammunition types and manufacturing services. Their experience often encompasses the entire lifecycle, from research and development to full-scale production and sustainment. Specific to large caliber ammunition, General Dynamics OTS has been a key supplier for various programs, including artillery shells and tank rounds. Their ability to consistently win competitive bids for significant contracts like this one suggests a strong performance history, adherence to quality standards, and the capacity to meet the demanding production schedules required by the military. While specific performance metrics for individual contracts are often proprietary, their sustained presence and significant contract awards indicate a generally positive and reliable relationship with the DoD.

What are the implications of this contract for the broader defense industrial base and supply chain resilience?

This $177.7 million contract for M795 and 120mm large caliber metal parts has several implications for the defense industrial base and supply chain resilience. Firstly, it signifies continued demand for traditional large caliber munitions, reinforcing the importance of established manufacturing capabilities within the sector. Awarding the contract to General Dynamics OTS, a major player, supports the operational capacity and workforce of a key defense industrial entity. Secondly, the 'full and open competition' aspect, while beneficial for initial pricing, also highlights the concentrated nature of this specialized manufacturing segment, where only a few large firms possess the necessary scale and expertise. This concentration can be a vulnerability; if a primary supplier faces disruptions (e.g., natural disasters, labor issues, geopolitical events), the impact on supply chain resilience could be significant. The 'Economic Price Adjustment' clause implicitly acknowledges the volatility within the supply chain for raw materials and labor, suggesting that ensuring consistent supply at predictable costs remains a challenge. For supply chain resilience, the DoD likely relies on multiple sources for critical components where possible, and robust inventory management. This contract, by consolidating a significant portion of the requirement with one entity, underscores the need for continuous monitoring of that entity's supply chain and contingency planning.

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

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

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

Evaluated Preference: NONE

Contractor Details

Parent Company: Wico Limited

Address: 1500 HIGHWAY 315 BLVD, WILKES BARRE, PA, 18702

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

Financial Breakdown

Contract Ceiling: $177,697,480

Exercised Options: $177,697,480

Current Obligation: $177,697,480

Subaward Activity

Number of Subawards: 11

Total Subaward Amount: $10,640,066

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: W15QKN19D0084

IDV Type: IDC

Timeline