DoD awards $403M for 253,913 propellants, with limited competition and fixed-price incentive terms

Contract Overview

Contract Amount: $403,323,854 ($403.3M)

Contractor: General Dynamics Ordnance and Tactical Systems, Inc.

Awarding Agency: Department of Defense

Start Date: 2024-09-05

End Date: 2027-05-31

Contract Duration: 998 days

Daily Burn Rate: $404.1K/day

Competition Type: NOT COMPETED

Pricing Type: FIXED PRICE INCENTIVE

Sector: Defense

Official Description: UNDEFINITIZED DELIVERY ORDER FOR 253,913 UNITS OF 155MM M119A2 PROPELLING BAG CHARGES

Place of Performance

Location: MARION, WILLIAMSON County, ILLINOIS, 62959

State: Illinois Government Spending

Plain-Language Summary

Department of Defense obligated $403.3 million to GENERAL DYNAMICS ORDNANCE AND TACTICAL SYSTEMS, INC. for work described as: UNDEFINITIZED DELIVERY ORDER FOR 253,913 UNITS OF 155MM M119A2 PROPELLING BAG CHARGES Key points: 1. The contract utilizes a fixed-price incentive pricing structure, which aims to balance cost control with contractor performance. 2. The award was not competed, raising questions about potential price efficiencies and market engagement. 3. The duration of the contract extends over 998 days, indicating a long-term need for these critical components. 4. The specific product, 155mm M119A2 propelling bag charges, points to a sustained requirement within artillery systems. 5. The contractor, General Dynamics Ordnance and Tactical Systems, Inc., is a significant player in defense manufacturing. 6. The contract's value suggests a substantial investment in maintaining and supplying essential munitions.

Value Assessment

Rating: fair

The contract value of $403.3 million for 253,913 units of propelling charges represents a per-unit cost of approximately $1,590. Benchmarking this against similar ammunition components is challenging without more specific market data. However, the fixed-price incentive structure suggests an expectation of cost efficiencies, though the lack of competition limits direct price comparison to market alternatives. The overall value appears significant, reflecting the strategic importance and manufacturing complexity of these items.

Cost Per Unit: Approximately $1,590 per unit.

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning it was not open to competitive bidding. This approach is typically used when only one responsible source can provide the required supplies or services. The lack of competition means that the government did not benefit from the price discovery and potential cost savings that can arise from multiple bidders vying for the contract. This raises concerns about whether the government secured the best possible price.

Taxpayer Impact: Taxpayers may have paid a premium due to the absence of competitive pressure. Without competing offers, it is difficult to ascertain if the negotiated price reflects true market value or if efficiencies could have been achieved through a more open bidding process.

Public Impact

The Department of the Army is the primary beneficiary, ensuring the readiness of its artillery units. The contract delivers essential propelling charges for 155mm M119A2 howitzers, critical for indirect fire support. The geographic impact is national, supporting military readiness across various operational theaters. The contract supports jobs within the defense manufacturing sector, specifically at General Dynamics facilities.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to higher costs for taxpayers.
Sole-source awards can reduce transparency and accountability in pricing.
Reliance on a single supplier could create supply chain vulnerabilities.
Fixed-price incentive contracts require careful monitoring to ensure cost control.

Positive Signals

Ensures supply of critical munitions for military operations.
Contract awarded to an established defense contractor with relevant expertise.
Fixed-price incentive structure can incentivize performance and cost savings.
Long-term contract provides supply chain stability for essential components.

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 munitions is often characterized by high barriers to entry due to technical expertise, capital investment, and stringent quality control requirements. Spending in this sector is directly tied to military readiness and strategic defense planning. Comparable spending benchmarks would typically be found within other large-scale defense procurement contracts for similar ordnance.

Small Business Impact

The contract details indicate that small business participation was not a primary consideration, as the award was not competed and the prime contractor is a large entity. There is no explicit mention of small business set-asides or subcontracting plans within the provided data. This suggests that the direct impact on the small business ecosystem may be limited unless the prime contractor voluntarily engages small businesses in its supply chain.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Army's contracting and program management offices. Accountability measures are embedded within the fixed-price incentive contract terms, which link contractor profit to performance and cost targets. Transparency is somewhat limited due to 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 the Army Ammunition Procurement
Artillery Systems Procurement
Defense Industrial Base Support
Ordnance Manufacturing Contracts
Fixed-Price Incentive Contracts

Risk Flags

Sole-source award
Lack of competition
Potential for cost overruns
Supply chain dependency

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $403.3 million to GENERAL DYNAMICS ORDNANCE AND TACTICAL SYSTEMS, INC.. UNDEFINITIZED DELIVERY ORDER FOR 253,913 UNITS OF 155MM M119A2 PROPELLING BAG CHARGES

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 $403.3 million.

What is the period of performance?

Start: 2024-09-05. End: 2027-05-31.

What is the historical spending pattern for 155mm M119A2 propelling bag charges by the Department of Defense?

Analyzing historical spending for this specific item requires access to detailed procurement databases. However, the Department of Defense consistently procures large quantities of ammunition and related components to maintain operational readiness. The value of this current award ($403.3 million) suggests a significant and ongoing requirement. Past awards for similar propelling charges or related artillery ammunition would likely show substantial, multi-year investments, often in the hundreds of millions of dollars, reflecting the scale of military operations and the lifecycle of weapon systems. Fluctuations in spending could be influenced by geopolitical events, modernization programs, and inventory management strategies.

How does the per-unit cost of these propelling charges compare to similar items or historical prices?

The per-unit cost for these propelling charges is approximately $1,590. Direct comparison to similar items is difficult without specific market data for comparable munitions. Historically, ammunition costs can vary significantly based on material costs, manufacturing complexity, quantity ordered, and contract type. Given the sole-source nature of this award, it is challenging to benchmark against competitive market prices. However, the fixed-price incentive structure suggests an effort to control costs, implying that the negotiated price was deemed acceptable under the circumstances, though potentially higher than a fully competed award might yield.

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

The primary risk of a sole-source award for critical munitions is the potential for inflated pricing due to the lack of competitive pressure. Taxpayers may not receive the best value for their money. Additionally, reliance on a single supplier can create supply chain vulnerabilities; any disruption at the contractor's facility could significantly impact military readiness. It also reduces transparency in the procurement process and can limit opportunities for innovation from other potential suppliers. Ensuring robust oversight and negotiation is crucial to mitigate these risks.

What is the track record of General Dynamics Ordnance and Tactical Systems, Inc. in fulfilling similar defense contracts?

General Dynamics Ordnance and Tactical Systems, Inc. (GD-OTS) has a well-established track record as a major supplier of munitions and ordnance systems to the U.S. military and allied nations. They are known for producing a wide range of products, including artillery shells, mortar rounds, and related components. Their experience in manufacturing complex ordnance, adhering to strict quality standards, and managing large-scale defense contracts suggests a capability to fulfill this requirement. Past performance reviews and contract history would provide more granular detail on their reliability and quality.

What are the implications of the fixed-price incentive (FPI) contract type for cost control and performance?

A Fixed-Price Incentive (FPI) contract aims to share cost savings and cost overruns between the government and the contractor. It establishes a target cost, a target profit, and a price ceiling. If the final cost is below the target, both parties share the savings. If it exceeds the target, they share the overrun, up to the price ceiling. This structure incentivizes the contractor to control costs and perform efficiently to achieve a higher profit, while also providing the government with a cap on total expenditure. Effective administration and monitoring are key to realizing the benefits of an FPI contract.

How does this contract contribute to the overall readiness and capability of the U.S. Army's artillery forces?

This contract is crucial for maintaining the operational readiness of the U.S. Army's artillery forces. The 155mm M119A2 howitzer is a standard piece of equipment, and the propelling bag charges are essential consumables for its operation. By ensuring a steady supply of these charges, the Army can sustain training exercises and deploy effectively in combat situations. The quantity ordered (253,913 units) indicates a significant commitment to equipping and sustaining artillery units for extended periods, directly impacting their firepower and strategic reach.

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

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: $403,323,854

Exercised Options: $403,323,854

Current Obligation: $403,323,854

Subaward Activity

Number of Subawards: 7

Total Subaward Amount: $52,528,008

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