DoD awards $43.7M for M31-type propellant, raising questions on competition and value

Contract Overview

Contract Amount: $43,654,080 ($43.7M)

Contractor: Canadian Commercial Corporation

Awarding Agency: Department of Defense

Start Date: 2019-12-17

End Date: 2023-09-30

Contract Duration: 1,383 days

Daily Burn Rate: $31.6K/day

Competition Type: NOT COMPETED

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: THE PURPOSE OF THIS SECOND DELIVERY ORDER W15QKN-20-F-0082 UNDER MACS CONTRACT W15QKN-19-D-0072 FOR A PRODUCTION QUANTITY OF 2,1900,000 (LBS) OF THE M31-TYPE PROPELLANT FOR THE 155MM M232 SERIES PROPELLING CHARGE

Plain-Language Summary

Department of Defense obligated $43.7 million to CANADIAN COMMERCIAL CORPORATION for work described as: THE PURPOSE OF THIS SECOND DELIVERY ORDER W15QKN-20-F-0082 UNDER MACS CONTRACT W15QKN-19-D-0072 FOR A PRODUCTION QUANTITY OF 2,1900,000 (LBS) OF THE M31-TYPE PROPELLANT FOR THE 155MM M232 SERIES PROPELLING CHARGE Key points: 1. Contract awarded via delivery order under an existing MACS contract. 2. Significant quantity of propellant to be produced. 3. Sole-source award raises concerns about price discovery and potential overpayment. 4. Long performance period suggests potential for cost overruns or scope creep. 5. Lack of competition limits opportunities for innovative solutions or cost savings. 6. Propellant manufacturing is a specialized sector with limited suppliers.

Value Assessment

Rating: questionable

The contract value of $43.7 million for 2.19 million pounds of M31-type propellant warrants scrutiny. Without competitive bidding, it is difficult to benchmark the pricing against market rates or similar contracts. The firm fixed-price structure offers some cost certainty, but the absence of competition means the government may not be achieving the best possible value. Further analysis of historical pricing for this specific propellant or comparable propellants would be necessary to definitively assess value for money.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded as a sole-source delivery order under an existing MACS contract, meaning it was not competed at the delivery order level. The Canadian Commercial Corporation is the awardee. The lack of competition at this stage limits the government's ability to solicit bids from multiple suppliers, potentially hindering price discovery and the achievement of the most favorable terms. It suggests that either only one source was deemed capable or available, or that the contracting strategy did not prioritize open competition for this specific requirement.

Taxpayer Impact: Taxpayers may be paying a premium due to the absence of competitive pressure. Without multiple bids, there is less incentive for the contractor to offer the lowest possible price, potentially leading to higher overall expenditure for the Department of Defense.

Public Impact

The Department of the Army benefits from the supply of M31-type propellant, crucial for 155mm artillery systems. This contract ensures the production of a critical munition component for military readiness. The geographic impact is primarily on the contractor's facilities, with the end-use being military operations. Workforce implications are within the specialized explosives manufacturing sector.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition.
Long contract duration increases risk of cost escalation.
Lack of transparency in the procurement process.
Potential for contractor to leverage limited competition for higher margins.

Positive Signals

Firm fixed-price contract provides cost certainty.
Awarded under an existing MACS contract, potentially streamlining the process.
Ensures supply of a critical defense material.

Sector Analysis

The explosives manufacturing sector is a niche but critical part of the defense industrial base. Companies in this sector require specialized facilities, stringent safety protocols, and significant R&D investment. The market is often characterized by a limited number of qualified suppliers due to high barriers to entry. This contract for M31-type propellant fits within this specialized segment, supplying a key component for artillery munitions. Comparable spending benchmarks are difficult to establish without more specific market data on propellant production costs.

Small Business Impact

This contract does not appear to have a small business set-aside. Given the specialized nature of propellant manufacturing, it is unlikely that small businesses would be primary awardees for such a large-scale requirement. Subcontracting opportunities for small businesses may exist in areas such as raw material supply or logistics, but this is not explicitly detailed in the provided data. The overall impact on the small business ecosystem for this specific contract is likely minimal.

Oversight & Accountability

Oversight for this contract would fall under the Department of Defense's existing procurement regulations and contract management processes. Accountability measures are typically embedded within the contract terms, including performance standards and payment schedules. Transparency is limited by the sole-source nature of the award. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse.

Related Government Programs

Department of Defense Munitions Procurement
Artillery Ammunition Production
Propellant Manufacturing Contracts
MACS Contract Vehicles

Risk Flags

Sole-source award
Lack of competitive bidding
Potential for non-competitive pricing
Long performance period

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $43.7 million to CANADIAN COMMERCIAL CORPORATION. THE PURPOSE OF THIS SECOND DELIVERY ORDER W15QKN-20-F-0082 UNDER MACS CONTRACT W15QKN-19-D-0072 FOR A PRODUCTION QUANTITY OF 2,1900,000 (LBS) OF THE M31-TYPE PROPELLANT FOR THE 155MM M232 SERIES PROPELLING CHARGE

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 $43.7 million.

What is the period of performance?

Start: 2019-12-17. End: 2023-09-30.

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

The Canadian Commercial Corporation (CCC) acts as a government-to-government contracting agency for Canada. While specific details on their track record with the U.S. DoD for this particular propellant are not provided, CCC has a history of facilitating defense procurement for Canada from U.S. suppliers and vice versa. Their role is often to manage complex international contracts, ensuring compliance with both nations' regulations. For this specific contract, the U.S. Army is the end-user, and the award is made to CCC, which then likely contracts with a Canadian manufacturer. Assessing the manufacturer's specific track record would require further investigation beyond the provided contract data.

How does the unit cost of this propellant compare to similar propellants or historical DoD purchases?

The provided data does not include a specific per-unit cost, only the total contract value ($43,654,080) for a quantity of 2,190,000 pounds. This yields a rough unit cost of approximately $19.93 per pound. Without access to competitive bids for this specific M31-type propellant or comparable propellants (e.g., M110A1, M231), or historical pricing data from the DoD for similar bulk propellant purchases, it is impossible to benchmark this value effectively. The sole-source nature of this award further complicates direct value-for-money comparisons, as competitive market forces were not applied.

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

The primary risks associated with a sole-source award for critical defense materials include a lack of price competition, potentially leading to inflated costs for taxpayers. It can also reduce the incentive for the contractor to innovate or improve efficiency, as there is no competitive pressure to do so. Furthermore, reliance on a single source can create supply chain vulnerabilities; if the sole provider experiences production issues, delays, or ceases operations, the military's supply of essential materials could be jeopardized. This also limits the government's ability to explore alternative materials or technologies that might offer better performance or lower costs.

How effective is the firm fixed-price contract type in managing costs for long-duration defense procurements?

A Firm Fixed-Price (FFP) contract type is generally considered effective for managing costs in procurements where the scope of work is well-defined and risks can be reasonably estimated. For long-duration procurements like this one (ending Sept 30, 2023, with a start date of Dec 17, 2019, totaling 1383 days), FFP provides cost certainty to the government, as the contractor assumes most of the risk for cost overruns. However, if unforeseen circumstances significantly impact the contractor's costs (e.g., raw material price spikes, regulatory changes), the contractor may seek adjustments or face financial strain, potentially impacting delivery schedules. The effectiveness also hinges on the initial price negotiation; if the baseline price was set too high due to lack of competition, FFP still locks in that higher cost.

What are the historical spending patterns for M31-type propellant or similar propellants by the Department of Defense?

Historical spending data for M31-type propellant specifically is not readily available in the public domain without dedicated research into DoD procurement databases like FPDS-NG or SAM.gov archives. However, the Department of Defense consistently procures large quantities of various propellants to support its munitions programs. Spending patterns are influenced by geopolitical factors, operational tempo, inventory management strategies, and the development of new munitions. Contracts for propellants are often awarded under large, multi-year indefinite-delivery/indefinite-quantity (IDIQ) contracts or specific delivery orders, sometimes to a limited number of specialized manufacturers. The total annual spending on propellants can run into hundreds of millions or even billions of dollars, depending on global demand and strategic stockpiling efforts.

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

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Government of Canada

Address: 350 ALBERT ST SUITE 700, OTTAWA

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

Financial Breakdown

Contract Ceiling: $43,654,080

Exercised Options: $43,654,080

Current Obligation: $43,654,080

Subaward Activity

Number of Subawards: 2

Total Subaward Amount: $43,274,400

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NOT OBTAINED - WAIVED

Parent Contract

Parent Award PIID: W15QKN19D0072

IDV Type: IDC

Timeline