DoD awards $19.6M for Ukraine artillery charge production, with delivery through 2030

Contract Overview

Contract Amount: $19,618,996 ($19.6M)

Contractor: American Ordnance LLC

Awarding Agency: Department of Defense

Start Date: 2023-09-26

End Date: 2030-06-30

Contract Duration: 2,469 days

Daily Burn Rate: $7.9K/day

Competition Type: FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES

Number of Offers Received: 2

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: THIS ORDER IS ISSUED AS A MULTI-YEAR TO MANUFACTURE, PRODUCE, AND DELIVER MODULAR ARTILLERY CHARGE SYSTEM (MACS) LOAD, ASSEMBLE, AND PACK (LAP) FOR THE M232A2 PROPELLING CHARGES IN SUPPORT OF UKRAINE.

Place of Performance

Location: MIDDLETOWN, DES MOINES County, IOWA, 52638

State: Iowa Government Spending

Plain-Language Summary

Department of Defense obligated $19.6 million to AMERICAN ORDNANCE LLC for work described as: THIS ORDER IS ISSUED AS A MULTI-YEAR TO MANUFACTURE, PRODUCE, AND DELIVER MODULAR ARTILLERY CHARGE SYSTEM (MACS) LOAD, ASSEMBLE, AND PACK (LAP) FOR THE M232A2 PROPELLING CHARGES IN SUPPORT OF UKRAINE. Key points: 1. Contract focuses on critical ammunition components for international support. 2. Long-term delivery schedule suggests sustained demand and production planning. 3. Sole-source award raises questions about competition and potential cost efficiencies. 4. Fixed-price contract structure shifts some risk to the contractor. 5. Production is concentrated in Iowa, impacting regional manufacturing capacity. 6. This award is part of broader U.S. military aid initiatives.

Value Assessment

Rating: fair

The contract's value of $19.6 million for ammunition production is difficult to benchmark without specific details on the quantity and type of charges. The firm fixed-price structure provides cost certainty for the government, but the absence of competitive bidding limits the ability to assess optimal pricing. Further analysis would require comparing unit costs to similar historical contracts or market rates for comparable munitions.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded under 'full and open competition after exclusion of sources,' which is a limited competition scenario. While the specific reasons for excluding other sources are not detailed, this approach typically arises when only one responsible source can provide the required supplies or services. The limited competition may result in less aggressive pricing compared to a fully open bid process.

Taxpayer Impact: The limited competition means taxpayers may not benefit from the most cost-effective pricing achievable through broader market engagement. This could lead to higher overall expenditures for the required munitions.

Public Impact

The primary beneficiaries are Ukrainian forces requiring M232A2 propelling charges for artillery operations. The contract ensures the supply of critical ammunition components, supporting military readiness. Geographic impact is concentrated in Iowa, where American Ordnance LLC will conduct manufacturing. Workforce implications include job retention and potential expansion at the contractor's facility.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Limited competition may lead to higher prices than a fully open bid.
Lack of detailed cost breakdowns hinders value-for-money assessment.
Long-term contract duration could be subject to changing geopolitical needs or technological advancements.

Positive Signals

Firm fixed-price contract provides cost predictability for the government.
Award to a known domestic manufacturer ensures supply chain reliability.
Contract supports critical U.S. foreign policy objectives related to Ukraine.

Sector Analysis

This contract falls within the ammunition manufacturing sector, a specialized segment of the defense industrial base. The market for such specialized munitions is often characterized by limited players due to high barriers to entry, including technical expertise, specialized facilities, and stringent regulatory requirements. Spending in this area is directly tied to national security needs and international commitments, making it sensitive to geopolitical events.

Small Business Impact

The contract data indicates that small business participation is not a primary focus, as the prime contractor is American Ordnance LLC, and the 'small business set-aside' field is false. There is no explicit mention of subcontracting goals for small businesses within the provided data. This suggests that the primary contract is not designed to directly benefit the small business ecosystem, although the prime contractor may engage small businesses in its supply chain.

Oversight & Accountability

Oversight for this contract will likely be managed by the Department of the Army, with potential involvement from the Defense Contract Management Agency (DCMA) for performance monitoring. The firm fixed-price nature of the contract simplifies some aspects of financial oversight by setting a clear ceiling. Transparency is facilitated through contract award databases, but detailed operational performance metrics may not be publicly disclosed.

Related Government Programs

Foreign Military Financing
Ukraine Security Assistance Initiative
Department of Defense Ammunition Procurement
Propelling Charge Manufacturing

Risk Flags

Limited competition
Lack of detailed cost transparency
Potential for price inflation due to sole-sourcing

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $19.6 million to AMERICAN ORDNANCE LLC. THIS ORDER IS ISSUED AS A MULTI-YEAR TO MANUFACTURE, PRODUCE, AND DELIVER MODULAR ARTILLERY CHARGE SYSTEM (MACS) LOAD, ASSEMBLE, AND PACK (LAP) FOR THE M232A2 PROPELLING CHARGES IN SUPPORT OF UKRAINE.

Who is the contractor on this award?

The obligated recipient is AMERICAN ORDNANCE 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 $19.6 million.

What is the period of performance?

Start: 2023-09-26. End: 2030-06-30.

What is the historical spending pattern for similar ammunition components by the Department of Defense?

Analyzing historical spending for similar ammunition components requires access to detailed procurement databases. However, generally, the Department of Defense procures vast quantities of munitions annually, with spending fluctuating based on operational tempo, strategic priorities, and international commitments. Contracts for specialized items like M232A2 propelling charges are often awarded to a limited number of qualified manufacturers. Historical data would likely show multi-year contracts for such items, with prices influenced by raw material costs, production volumes, and the competitive landscape at the time of award. Without specific historical data for this exact item, it's challenging to provide precise figures, but it's reasonable to assume that similar multi-year procurements for critical ordnance components can range from tens to hundreds of millions of dollars over their lifecycle, depending on quantity and duration.

How does the unit cost of these M232A2 charges compare to market rates or similar contracts?

The provided data does not include the quantity of M232A2 propelling charges to be delivered, making a direct unit cost calculation impossible. Therefore, a precise comparison to market rates or similar contracts cannot be made. To assess the unit cost, one would need to divide the total contract value ($19.6 million) by the total number of units. Benchmarking would then involve comparing this calculated unit cost against publicly available data for similar ammunition components, considering factors like manufacturer, quantity, contract type (firm fixed-price vs. cost-plus), and delivery timeline. The 'sole-source' nature of this award also complicates direct price comparisons, as it bypasses the typical price discovery mechanisms of open competition.

What are the specific risks associated with a sole-source award for critical defense components?

Sole-source awards for critical defense components carry several risks. Primarily, the lack of competition can lead to inflated prices, as the government does not benefit from the cost-saving pressures inherent in a competitive bidding process. This can result in a lower value for taxpayer money. Additionally, sole-sourcing can stifle innovation and discourage potential new entrants into the market, as established contractors may have less incentive to improve efficiency or develop new technologies. There's also a risk of over-reliance on a single supplier, which can create vulnerabilities in the supply chain. If the sole-source contractor experiences production issues, quality control problems, or financial instability, the government may face significant delays or disruptions in obtaining essential materiel, potentially impacting national security or foreign policy objectives.

What is the track record of American Ordnance LLC in fulfilling similar defense contracts?

American Ordnance LLC has a significant track record in manufacturing ammunition and ordnance components for the U.S. military. As a key producer of various munitions, including artillery charges, the company has experience with large-scale production and meeting stringent military specifications. Their history likely includes fulfilling numerous contracts with the Department of Defense, demonstrating capabilities in load, assemble, and pack (LAP) operations. While specific performance details for past contracts are not publicly detailed in this summary, their continued selection for such critical production suggests a history of meeting contractual requirements. Further due diligence would involve reviewing past performance evaluations and any reported issues or successes on previous government contracts.

How does this contract align with broader U.S. foreign policy objectives regarding support for Ukraine?

This contract directly aligns with the U.S. foreign policy objective of supporting Ukraine's defense capabilities against external aggression. By funding the production of M232A2 propelling charges, the U.S. is ensuring a critical supply of ammunition for Ukrainian artillery systems. This support is a key component of the broader security assistance package aimed at bolstering Ukraine's military effectiveness and sovereignty. The multi-year nature of the contract suggests a sustained commitment to providing this support, acknowledging the ongoing nature of the conflict and the need for a reliable supply chain for essential warfighting materiel. The award underscores the U.S. role in enabling Ukraine's self-defense efforts.

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: SUBJECT TO MULTIPLE AWARD FAIR OPPORTUNITY

Solicitation ID: W15QKN19R0013

Offers Received: 2

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 17575 HIGHWAY 79, MIDDLETOWN, IA, 52638

Business Categories: Category Business, Limited Liability Corporation, Manufacturer of Goods, Not Designated a Small Business, Partnership or Limited Liability Partnership, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $59,921,649

Exercised Options: $19,618,996

Current Obligation: $19,618,996

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: W15QKN19D0109

IDV Type: IDC

Timeline