DoD awards BAE Systems $164.7M for explosive production, highlighting critical national defense manufacturing needs

Contract Overview

Contract Amount: $164,740,559 ($164.7M)

Contractor: BAE Systems Ordnance Systems Inc.

Awarding Agency: Department of Defense

Start Date: 2024-07-12

End Date: 2026-12-31

Contract Duration: 902 days

Daily Burn Rate: $182.6K/day

Competition Type: FULL AND OPEN COMPETITION

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Defense

Official Description: THIS DELIVERY ORDER IS FOR THE U.S. GOVERNMENT EXPLOSIVE PRODUCTION REQUIREMENTS TO BE EXECUTED DURING ORDERING PERIOD 01.

Place of Performance

Location: KINGSPORT, SULLIVAN County, TENNESSEE, 37660

State: Tennessee Government Spending

Plain-Language Summary

Department of Defense obligated $164.7 million to BAE SYSTEMS ORDNANCE SYSTEMS INC. for work described as: THIS DELIVERY ORDER IS FOR THE U.S. GOVERNMENT EXPLOSIVE PRODUCTION REQUIREMENTS TO BE EXECUTED DURING ORDERING PERIOD 01. Key points: 1. Contract addresses essential U.S. Government explosive production, indicating a strategic national security requirement. 2. Full and open competition suggests a robust market for these specialized manufacturing services. 3. Fixed Price with Economic Price Adjustment (FPEPA) contract type aims to balance cost stability with market fluctuations. 4. Long-term ordering period (902 days) indicates sustained demand for these critical munitions components. 5. Performance location in Tennessee points to a concentration of defense manufacturing capabilities in the region. 6. The award signifies continued investment in domestic industrial base for munitions.

Value Assessment

Rating: good

The contract value of $164.7 million over approximately 2.5 years for explosive production requirements appears reasonable given the specialized nature of the goods and the strategic importance. Benchmarking against similar large-scale munitions production contracts is challenging due to the specific nature of 'explosive production requirements.' However, the fixed-price with economic price adjustment structure suggests an effort to control costs while accounting for potential material and labor cost increases inherent in long-term manufacturing.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that multiple capable vendors were likely solicited. This approach generally fosters a competitive environment, encouraging bidders to offer their best pricing and terms. The specific number of bidders is not provided, but the designation implies a market where more than one entity could fulfill the requirement, leading to potential price discovery and value for the government.

Taxpayer Impact: Full and open competition is beneficial for taxpayers as it typically drives down prices through market forces and ensures the government accesses the most cost-effective solutions available for critical defense needs.

Public Impact

The U.S. Government, specifically the Department of the Army, benefits from a secured supply of essential explosives. This contract ensures the continued production of critical components for national defense and military readiness. The geographic impact is concentrated in Tennessee, supporting the regional defense industrial base and associated workforce. Workforce implications include job creation and retention within the specialized field of explosives manufacturing in Tennessee.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for price increases due to economic price adjustment clause if market conditions fluctuate significantly.
Reliance on a single contractor for a critical national security requirement necessitates robust oversight.
Geographic concentration of production could pose logistical risks in case of regional disruptions.

Positive Signals

Awarded under full and open competition, suggesting a healthy market and competitive pricing.
Long-term ordering period provides supply chain stability for essential munitions.
Fixed Price with Economic Price Adjustment (FPEPA) aims to manage cost volatility over the contract duration.

Sector Analysis

The defense manufacturing sector, particularly explosives and munitions production, is a critical component of national security. This contract falls within the broader industrial base supporting military readiness. The market for such specialized explosives is typically characterized by a limited number of highly qualified contractors due to stringent safety, security, and technical requirements. Spending in this area is driven by defense budgets and strategic priorities, with significant government investment aimed at maintaining domestic production capabilities.

Small Business Impact

The provided data indicates this contract was not set aside for small businesses (ss: false, sb: false). As a large-scale production requirement for explosives, it is likely that prime contracting opportunities are limited to larger defense manufacturers with the necessary infrastructure and security clearances. However, BAE Systems Ordnance Systems Inc. may engage small businesses as subcontractors for specialized components, raw materials, or support services, contributing indirectly to the small business ecosystem within the defense supply chain.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of the Army's contracting command and program management offices. Accountability measures are embedded in the contract's performance requirements and delivery schedules. Transparency is facilitated through contract award databases like SAM.gov. Inspector General (IG) jurisdiction would apply if any fraud, waste, or abuse is suspected or reported.

Related Government Programs

Department of Defense Ammunition Production
Ordnance Manufacturing Contracts
Military Munitions Production
Explosives Manufacturing Services
National Defense Industrial Base Support

Risk Flags

Potential for cost escalation due to economic price adjustment.
Long-term reliance on a single supplier for critical materials.
Geographic concentration risk for production facility.
Need for continuous monitoring of safety and environmental compliance.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $164.7 million to BAE SYSTEMS ORDNANCE SYSTEMS INC.. THIS DELIVERY ORDER IS FOR THE U.S. GOVERNMENT EXPLOSIVE PRODUCTION REQUIREMENTS TO BE EXECUTED DURING ORDERING PERIOD 01.

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 $164.7 million.

What is the period of performance?

Start: 2024-07-12. End: 2026-12-31.

What is the historical spending trend for explosive production requirements by the Department of Defense?

Analyzing historical spending trends for 'explosive production requirements' specifically is challenging without more granular data. However, overall Department of Defense spending on munitions and ordnance has historically been substantial, fluctuating based on geopolitical events, modernization programs, and operational tempo. For instance, during periods of active conflict or heightened global tensions, spending on ammunition and related production often increases. The sustained nature of this $164.7 million award over approximately 2.5 years suggests a consistent, long-term requirement that aligns with strategic defense planning rather than a short-term surge. Examining broader categories like 'Ordnance, Ammunition, and Related Components' within the DoD budget would provide context, revealing billions of dollars allocated annually to ensure readiness and maintain the industrial base.

How does the pricing structure (Fixed Price with Economic Price Adjustment) compare to other similar defense manufacturing contracts?

The Fixed Price with Economic Price Adjustment (FPEPA) structure is common for long-term defense manufacturing contracts where the cost of raw materials and labor can be volatile. Compared to a firm Fixed Price (FP) contract, FPEPA offers the government some cost certainty upfront while protecting the contractor from significant market shifts that could otherwise lead to contract renegotiations or defaults. Conversely, it provides less cost certainty than a Cost-Plus contract. For specialized manufacturing like explosives, where precursor material costs (e.g., metals, chemicals) can fluctuate, FPEPA is often seen as a balanced approach. Many large-scale defense production contracts, especially for systems with multi-year production runs, utilize variations of FP or FPEPA to manage risk for both parties.

What are the key performance indicators (KPIs) typically associated with explosive production contracts?

Key performance indicators (KPIs) for explosive production contracts generally focus on quality, timeliness, safety, and cost control. Quality is paramount, measured by adherence to strict specifications, defect rates (e.g., parts per million), and performance testing of the final product. Timeliness is assessed through on-time delivery rates against the contract schedule and production milestones. Safety is a critical KPI, monitored through incident rates (lost time injuries, accidents), compliance with environmental regulations, and adherence to stringent safety protocols during manufacturing and handling. Cost control is evaluated by performance against budget, efficiency metrics in production, and management of economic price adjustment factors. Meeting all these KPIs is crucial for maintaining contractor performance ratings and ensuring the reliable supply of essential defense materiel.

What is the track record of BAE Systems Ordnance Systems Inc. in fulfilling similar government contracts?

BAE Systems Ordnance Systems Inc. has a significant track record in fulfilling U.S. Government contracts related to ordnance and explosives manufacturing. They are a key player in the defense industrial base, often involved in producing large quantities of munitions and related components. Their history includes managing large-scale production facilities, such as the Holston Army Ammunition Plant, under government contracts. Past performance evaluations, available through sources like the Federal Awardee Performance and Integrity Information System (FAPIIS), would provide detailed insights into their on-time delivery, quality adherence, and overall performance on previous contracts. Generally, companies of this scale and specialization are expected to have extensive experience, though specific contract performance can vary.

What are the potential risks associated with the long duration (902 days) of this delivery order?

The long duration of 902 days (approximately 2.5 years) for this delivery order presents several potential risks. Firstly, there's the risk of economic volatility; the Economic Price Adjustment (EPA) clause is designed to mitigate this, but significant unforeseen inflation or material cost spikes could still impact the overall value or contractor profitability. Secondly, technological obsolescence or changes in military requirements could occur over this period, potentially making the specific explosives produced less relevant or requiring modifications. Thirdly, supply chain disruptions, whether due to geopolitical events, natural disasters, or supplier issues, pose a risk to sustained production. Finally, contractor performance degradation over time, or shifts in strategic priorities within the Department of Defense, could affect the program's continuity or necessitate adjustments.

Industry Classification

NAICS: Manufacturing › Other Chemical Product and Preparation Manufacturing › Explosives Manufacturing

Product/Service Code: AMMUNITION AND EXPLOSIVES

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT (K)

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, Not Designated a Small Business, Special Designations

Financial Breakdown

Contract Ceiling: $164,740,559

Exercised Options: $164,740,559

Current Obligation: $164,740,559

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: W519TC24D0001

IDV Type: IDC

Timeline