DoD Awards $118.7M for Explosives Production in 2024 to BAE Systems

Contract Overview

Contract Amount: $118,681,985 ($118.7M)

Contractor: BAE Systems Ordnance Systems Inc.

Awarding Agency: Department of Defense

Start Date: 2022-12-09

End Date: 2025-09-30

Contract Duration: 1,026 days

Daily Burn Rate: $115.7K/day

Competition Type: NOT COMPETED

Pricing Type: FIXED PRICE INCENTIVE

Sector: Defense

Official Description: THIS DELIVERY ORDER IS FOR THE U.S. GOVERNMENT EXPLOSIVE PRODUCTION REQUIREMENTS TO OCCUR DURING CALENDAR YEAR 2024.

Place of Performance

Location: KINGSPORT, SULLIVAN County, TENNESSEE, 37660

State: Tennessee Government Spending

Plain-Language Summary

Department of Defense obligated $118.7 million to BAE SYSTEMS ORDNANCE SYSTEMS INC. for work described as: THIS DELIVERY ORDER IS FOR THE U.S. GOVERNMENT EXPLOSIVE PRODUCTION REQUIREMENTS TO OCCUR DURING CALENDAR YEAR 2024. Key points: 1. Significant contract for essential national defense materials. 2. Sole-source award raises questions about competition and pricing. 3. Potential for cost overruns given fixed-price incentive structure. 4. Tennessee-based production impacts regional economy.

Value Assessment

Rating: questionable

The contract value of $118.7M for explosives production is substantial. Benchmarking against similar contracts is difficult due to the specialized nature of the product and the sole-source award.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was not competed, indicating a sole-source award. This limits price discovery and may lead to higher costs for taxpayers compared to a competitive process.

Taxpayer Impact: The lack of competition for this critical defense need could result in taxpayers paying a premium for explosives.

Public Impact

Ensures U.S. military readiness by securing explosive supplies. Supports BAE Systems' operations and employment in Tennessee. Potential for price increases if incentive targets are not met efficiently.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition
Sole-source award
Fixed-price incentive risk

Positive Signals

Critical national defense requirement
Long-term production capability

Sector Analysis

This contract falls under the defense manufacturing sector, specifically explosives. Spending in this area is critical for national security, but often involves specialized suppliers and can be subject to less competitive bidding.

Small Business Impact

There is no indication that small businesses are involved in this contract, either as prime contractors or subcontractors. Further analysis would be needed to determine potential subcontracting opportunities.

Oversight & Accountability

The sole-source nature of this award warrants close oversight to ensure fair pricing and efficient execution. The Department of Defense should monitor performance closely against the incentive structure.

Related Government Programs

Explosives Manufacturing
Department of Defense Contracting
Department of the Army Programs

Risk Flags

Lack of competition
Sole-source award
Potential for cost overruns
Limited transparency on pricing justification

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $118.7 million to BAE SYSTEMS ORDNANCE SYSTEMS INC.. THIS DELIVERY ORDER IS FOR THE U.S. GOVERNMENT EXPLOSIVE PRODUCTION REQUIREMENTS TO OCCUR DURING CALENDAR YEAR 2024.

Who is the contractor on this award?

The obligated recipient is BAE SYSTEMS ORDNANCE 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 $118.7 million.

What is the period of performance?

Start: 2022-12-09. End: 2025-09-30.

What is the justification for awarding this contract sole-source, and what steps were taken to ensure fair and reasonable pricing?

The justification for a sole-source award typically involves unique capabilities, urgent needs, or lack of viable alternatives. Without a competitive process, the government must rely on robust cost analysis and negotiation to ensure fair pricing. The contracting officer should have documented the rationale thoroughly and performed detailed price analysis, potentially using historical data or independent cost estimates.

What are the specific risks associated with the fixed-price incentive (FPI) contract type for this explosives production requirement?

An FPI contract shares cost risks and benefits between the government and contractor. For explosives production, risks include potential cost overruns if production is inefficient or unforeseen issues arise, leading to higher prices for the government. Conversely, if the contractor manages costs effectively, both parties can benefit. However, the government bears the risk of paying more than anticipated if targets are missed.

How does this contract contribute to the overall effectiveness and readiness of the U.S. military's explosive capabilities?

This contract is crucial for ensuring the U.S. military has a consistent and sufficient supply of explosives for training, operations, and strategic reserves throughout 2024. By securing production with BAE Systems, the Department of the Army aims to maintain readiness and avoid potential shortages that could impact military effectiveness. The long-term nature of the delivery order suggests a focus on sustained capability.

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: FIXED PRICE INCENTIVE (L)

Evaluated Preference: NONE

Contractor Details

Parent Company: Compagnie DE Developpement DE L'eau S.A.

Address: 4509 W STONE DR, KINGSPORT, TN, 37660

Business Categories: Category Business, Corporate Entity Not Tax Exempt, DoT Certified Disadvantaged Business Enterprise, Foreign Owned, Foreign-Owned and U.S.-Incorporated Business, Manufacturer of Goods, Not Designated a Small Business, Special Designations

Financial Breakdown

Contract Ceiling: $118,681,985

Exercised Options: $118,681,985

Current Obligation: $118,681,985

Actual Outlays: $1,949,184

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: W52P1J19D0074

IDV Type: IDC

Timeline