DoD awards $216M for M119A2 howitzer propelling charges, with limited competition

Contract Overview

Contract Amount: $215,977,827 ($216.0M)

Contractor: General Dynamics Ordnance and Tactical Systems, Inc.

Awarding Agency: Department of Defense

Start Date: 2023-09-07

End Date: 2025-09-30

Contract Duration: 754 days

Daily Burn Rate: $286.4K/day

Competition Type: NOT COMPETED

Pricing Type: FIXED PRICE INCENTIVE

Sector: Defense

Official Description: UKRAINE: UCA DELIVERY ORDER FOR M119A2 PROPELLING BAG CHARGES AND FIRST ARTICLE TESTING.

Place of Performance

Location: MARION, WILLIAMSON County, ILLINOIS, 62959

State: Illinois Government Spending

Plain-Language Summary

Department of Defense obligated $216.0 million to GENERAL DYNAMICS ORDNANCE AND TACTICAL SYSTEMS, INC. for work described as: UKRAINE: UCA DELIVERY ORDER FOR M119A2 PROPELLING BAG CHARGES AND FIRST ARTICLE TESTING. Key points: 1. This contract represents a significant investment in essential artillery components for the U.S. Army. 2. The fixed-price incentive contract structure aims to balance cost control with performance incentives. 3. Limited competition raises questions about potential price overruns and the availability of alternative suppliers. 4. The duration of the contract suggests a sustained need for these specific ammunition components. 5. The award to a single, established defense contractor indicates a reliance on existing supply chains. 6. The contract's focus on first article testing highlights a commitment to quality assurance before full-scale production.

Value Assessment

Rating: fair

The contract value of $215.9 million for propelling charges and testing is substantial. Benchmarking this specific item is challenging without more granular data on similar contracts for M119A2 components. However, the 'NOT COMPETED' status suggests that a thorough price comparison against market alternatives was likely not performed, potentially impacting overall value for money. The fixed-price incentive (FPI) structure, while offering some cost control, can lead to higher initial prices compared to fixed-price-firm (FPF) contracts if the contractor anticipates significant cost overruns.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one vendor was solicited. This approach is typically used when only one responsible source is available or when there is a compelling justification for not seeking competition. The lack of competition limits the government's ability to leverage market forces to drive down prices and ensure the most cost-effective solution. It also raises concerns about whether the government received the best possible pricing and terms.

Taxpayer Impact: Taxpayers may be paying a premium due to the absence of competitive bidding. Without multiple offers, there is less pressure on the contractor to offer the lowest possible price, potentially leading to higher overall expenditure for this critical defense need.

Public Impact

The U.S. Army benefits directly through the supply of critical ammunition components for its M119A2 howitzers. This contract ensures the continued operational readiness of artillery units equipped with the M119A2 system. The primary service delivered is the manufacturing and testing of propelling bag charges, essential for artillery function. The contract is likely to impact the workforce at the contractor's facility in Illinois, supporting skilled manufacturing jobs. The geographic impact is primarily within the United States, specifically at the contractor's manufacturing site.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price discovery and potentially increases costs for taxpayers.
Lack of competition may reduce incentives for innovation or efficiency improvements by the contractor.
Reliance on a single supplier could create supply chain vulnerabilities if the contractor faces production issues.
The fixed-price incentive structure, while aiming for control, can sometimes lead to higher base prices than other contract types.

Positive Signals

Award ensures critical ammunition supply for a key Army weapon system, supporting national defense.
The fixed-price incentive contract type includes performance targets, potentially driving efficiency and quality.
First article testing indicates a focus on ensuring the quality and reliability of the delivered product.
The contract duration suggests a stable, long-term need, allowing for predictable production planning.

Sector Analysis

This contract falls within the Ammunition (except Small Arms) Manufacturing sector, a critical component of the broader Defense Industrial Base. The market for specialized artillery components like propelling charges is often concentrated among a few key defense contractors due to high barriers to entry, including specialized knowledge, manufacturing capabilities, and security clearances. Spending in this sector is directly tied to military readiness requirements and geopolitical demands. Comparable spending benchmarks are difficult to ascertain without specific contract details, but significant investments are typical for maintaining artillery systems.

Small Business Impact

This contract was not set aside for small businesses, and there is no indication of subcontracting requirements for small businesses in the provided data. The award to a large, established defense contractor suggests that the primary focus was on securing the necessary manufacturing capabilities and meeting the specific technical requirements of the ammunition. This may limit opportunities for small businesses to participate in this specific procurement, although they might be suppliers further down the chain.

Oversight & Accountability

Oversight for this contract will primarily reside with the Department of the Army contracting and program management offices. The fixed-price incentive structure includes provisions for monitoring performance against established targets and managing costs. Transparency is facilitated through contract award databases like FPDS. Inspector General (IG) jurisdiction would apply if any fraud, waste, or abuse is suspected or alleged. The contract's duration and value warrant diligent oversight to ensure compliance and value.

Related Government Programs

M119A2 Howitzer Systems
Artillery Ammunition Procurement
Defense Industrial Base Manufacturing
Ammunition Propelling Charges
Department of the Army Contracts
Fixed-Price Incentive Contracts

Risk Flags

Sole-source award
Potential for cost overruns
Limited price competition
Supply chain dependency

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $216.0 million to GENERAL DYNAMICS ORDNANCE AND TACTICAL SYSTEMS, INC.. UKRAINE: UCA DELIVERY ORDER FOR M119A2 PROPELLING BAG CHARGES AND FIRST ARTICLE TESTING.

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 $216.0 million.

What is the period of performance?

Start: 2023-09-07. End: 2025-09-30.

What is the track record of General Dynamics Ordnance and Tactical Systems, Inc. in supplying similar ammunition components?

General Dynamics Ordnance and Tactical Systems, Inc. (GD-OTS) has a significant history of supplying ammunition and ordnance to the U.S. military and allied nations. They are known for producing a wide range of munitions, including artillery shells, mortar rounds, and related components. Their experience likely includes the manufacturing of propelling charges for various howitzer systems. Given their established role in the defense sector, it is probable they have supplied components for the M119A2 or similar systems previously. However, specific details on their performance for this exact type of charge, including on-time delivery rates, quality metrics, and past pricing structures for similar contracts, would require a deeper dive into historical contract data and performance reviews, which are not fully detailed in the provided summary.

How does the pricing of this contract compare to historical spending on M119A2 propelling charges?

Direct comparison of the current contract's pricing to historical spending on M119A2 propelling charges is challenging without access to detailed historical contract data, including specific quantities, unit costs, and inflation adjustments over time. The current award of $215,977,827.33 is for a delivery order with a duration extending to September 2025. Historical data would need to account for the specific type and quantity of charges procured in previous years, as well as the contract type (e.g., fixed-price, cost-plus). Given that this is a sole-source award, it is difficult to ascertain if the price reflects competitive market rates. A thorough analysis would involve trend analysis of unit costs, adjusted for inflation and quantity variations, across multiple previous contracts for the same or similar components.

What are the primary risks associated with a sole-source award for critical ammunition components?

The primary risks associated with a sole-source award for critical ammunition components like M119A2 propelling charges include elevated costs, potential for reduced quality or innovation, and supply chain vulnerability. Without competition, the government loses the leverage to negotiate the lowest possible price, potentially leading to overspending. The lack of competing suppliers can also reduce the incentive for the sole contractor to invest in process improvements or technological advancements, potentially impacting long-term efficiency and product evolution. Furthermore, reliance on a single source creates a significant vulnerability; any disruption in the contractor's production capabilities, whether due to technical issues, labor disputes, or geopolitical events, could severely impact the supply chain and the operational readiness of the armed forces.

How effective is the fixed-price incentive (FPI) contract type in managing costs for ammunition production?

The Fixed-Price Incentive (FPI) contract type aims to balance cost control with performance by establishing target costs, target profits, and price ceilings. The contractor is incentivized to keep costs below the target, sharing in the savings with the government up to a certain point. However, if costs exceed the target, both the contractor and the government share the overrun up to the negotiated price ceiling. While FPI can encourage efficiency and cost consciousness compared to cost-plus contracts, it can also lead to higher initial target costs than a firm-fixed-price contract because the contractor anticipates potential overruns and includes contingencies. For ammunition production, where material costs and production complexities can fluctuate, FPI offers a structured approach to cost management, but its effectiveness hinges on realistic target setting and diligent government oversight to prevent excessive cost growth.

What is the expected impact of this contract on the overall spending for ammunition manufacturing by the Department of the Army?

This contract for $215.9 million represents a significant, but likely specific, portion of the Department of the Army's overall ammunition manufacturing spending. The Army procures a vast array of ammunition types for its diverse weapon systems. This award specifically addresses the propelling charges for the M119A2 howitzer, a particular niche within the broader ammunition portfolio. While substantial in its own right, it should be viewed in the context of the Army's total annual budget for ordnance and ammunition, which can run into billions of dollars. The impact on overall spending depends on whether this represents a new requirement, a replenishment of existing stocks, or a long-term sustainment contract. Its sole-source nature might also influence future pricing strategies for similar components if not re-competed.

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: W15QKN23R0062

Pricing Type: FIXED PRICE INCENTIVE (L)

Evaluated Preference: NONE

Contractor Details

Parent Company: Wico Limited

Address: 100 CARILLON PKWY, SAINT PETERSBURG, FL, 33716

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

Financial Breakdown

Contract Ceiling: $215,977,827

Exercised Options: $215,977,827

Current Obligation: $215,977,827

Subaward Activity

Number of Subawards: 33

Total Subaward Amount: $240,561,007

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: W15QKN23D0054

IDV Type: IDC

Timeline