DoD spent $113M on steel plates, with a single supplier and no competition

Contract Overview

Contract Amount: $11,334,125 ($11.3M)

Contractor: Algoma Steel Inc

Awarding Agency: Department of Defense

Start Date: 2007-08-24

End Date: 2014-09-30

Contract Duration: 2,594 days

Daily Burn Rate: $4.4K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: 3/8" THICK ARMOR STEEL PLATE

Plain-Language Summary

Department of Defense obligated $11.3 million to ALGOMA STEEL INC for work described as: 3/8" THICK ARMOR STEEL PLATE Key points: 1. Significant expenditure on a basic material, raising questions about cost-effectiveness. 2. Lack of competition suggests potential for inflated pricing and reduced innovation. 3. Long contract duration (7 years) may have locked in unfavorable terms. 4. Reliance on a single supplier indicates a potential supply chain vulnerability. 5. Contract awarded under 'Not Competed' status, bypassing standard procurement processes. 6. Steel plate is a fundamental component, suggesting broader implications for defense readiness.

Value Assessment

Rating: questionable

The $113 million expenditure on 3/8" thick armor steel plate represents a substantial investment in a raw material. Without competitive bidding, it is difficult to benchmark the value for money. The firm fixed-price contract type offers some cost certainty, but the absence of competition means the government may not have secured the best possible price. Comparing this to market rates for similar steel plate, especially in bulk, would be necessary to assess if the price paid was reasonable.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded under a 'Not Competed' status, indicating that a competitive process was not utilized. This means only one bidder, ALGOMA STEEL INC, was considered. The lack of competition limits the government's ability to explore alternative suppliers or negotiate more favorable terms based on market dynamics. It raises concerns about whether the government received the most advantageous offer available.

Taxpayer Impact: Taxpayers likely paid a premium due to the absence of competitive pressure, as the sole supplier faced no incentive to offer lower prices.

Public Impact

The Department of Defense benefits from a consistent supply of armor steel plate for its various applications. This contract ensures the availability of a critical material for military equipment and potentially vehicle manufacturing. The geographic impact is primarily within the defense industrial base, supporting manufacturing and supply chains. Workforce implications include employment in steel production and related logistics within the supplying company and its partners.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to higher costs for taxpayers.
Sole-source award creates dependency on a single supplier, risking supply chain disruptions.
Long contract duration could mean missed opportunities for cost savings through market fluctuations.
Absence of competitive pressure might reduce incentives for supplier innovation or quality improvements.

Positive Signals

Firm fixed-price contract provides cost certainty for the awarded amount.
Award to a known entity (ALGOMA STEEL INC) suggests a pre-existing relationship or capability.
Contract duration of 7 years indicates a long-term need for the material.

Sector Analysis

The procurement of steel plate falls within the broader industrial manufacturing sector, specifically under the Iron and Steel Mills industry (NAICS 331111). This sector is crucial for national security, providing raw materials for defense equipment. The market for specialized armor steel can be concentrated, but a sole-source award for such a significant dollar amount warrants scrutiny. Comparable spending benchmarks would typically involve analyzing other large-scale steel procurements by defense agencies or comparing unit prices against industry standards for similar grades and thicknesses.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. Furthermore, there is no information provided regarding subcontracting plans or performance related to small businesses. The focus on a large industrial supplier suggests that the primary beneficiaries are likely larger manufacturing entities rather than the small business ecosystem.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Defense's contracting and financial management oversight bodies. The 'aw': 'DCA' might refer to a specific contracting activity or office responsible for its administration. Transparency is limited due to the sole-source nature and lack of public detail on performance metrics. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Department of Defense Procurement
Defense Industrial Base
Steel and Metal Manufacturing
Raw Material Procurement
Sole-Source Contracts

Risk Flags

Sole-source award
Lack of competition
Potential for overpricing
Supply chain risk

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $11.3 million to ALGOMA STEEL INC. 3/8" THICK ARMOR STEEL PLATE

Who is the contractor on this award?

The obligated recipient is ALGOMA STEEL 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 $11.3 million.

What is the period of performance?

Start: 2007-08-24. End: 2014-09-30.

What is the track record of ALGOMA STEEL INC in supplying defense materials?

Information regarding ALGOMA STEEL INC's specific track record in supplying defense materials is not detailed in the provided data. However, the award of a $113 million contract suggests a capacity to meet significant demand. Further investigation would be required to assess their past performance on government contracts, including on-time delivery, quality compliance, and any history of disputes or contract modifications. Understanding their broader experience in producing specialized armor steel, beyond this specific contract, would also be beneficial for a comprehensive assessment of their reliability and capability as a sole-source supplier.

How does the price per ton of this steel plate compare to market rates?

The provided data does not include the quantity of steel plates purchased, making it impossible to calculate a per-unit or per-ton cost for direct comparison with market rates. The total award amount of $113 million for '3/8" THICK ARMOR STEEL PLATE' is the primary financial figure available. To perform a value-for-money assessment, the contract would need to be analyzed for the specific quantity and weight of steel procured. Without this information, benchmarking against industry prices for similar armor-grade steel plates, considering factors like alloy composition, tensile strength, and manufacturing standards, cannot be accurately performed. This data gap is critical for evaluating the reasonableness of the price paid.

What are the risks associated with relying on a single supplier for critical defense materials?

Relying on a single supplier for critical defense materials like armor steel plate presents several significant risks. Firstly, it creates a sole point of failure in the supply chain; any disruption at the supplier's facility (e.g., labor strikes, natural disasters, financial instability, or geopolitical issues) could halt production and delivery, impacting defense readiness. Secondly, the lack of competition can lead to price escalation over time, as the supplier faces no market pressure to offer competitive pricing. Thirdly, it reduces the government's leverage in negotiations and can limit access to technological advancements or alternative material specifications that might emerge from a more diverse supplier base. Finally, it can stifle innovation within the defense industrial base by consolidating production capabilities.

What specific defense applications is this armor steel plate intended for?

The provided data specifies '3/8" THICK ARMOR STEEL PLATE' procured by the Department of the Army, but it does not detail the specific defense applications. Typically, such materials are used in the manufacturing and repair of armored vehicles (e.g., tanks, personnel carriers, light tactical vehicles), naval vessels, aircraft components, or protective structures. The thickness and 'armor' designation suggest a requirement for ballistic protection. Without further context from the contract's statement of work or associated documentation, the precise end-use remains unspecified, though it is clearly intended for platforms requiring enhanced physical protection.

How does this $113 million expenditure compare to historical spending on similar steel plate procurements?

The provided data focuses on a single contract awarded from August 24, 2007, to September 30, 2014, for $113 million. To compare this to historical spending, one would need access to a broader dataset of Department of Defense (or Army) procurements for armor steel plate over various fiscal years. Analyzing trends in quantity, price per unit, and total expenditure would reveal whether this $113 million award represents an increase, decrease, or stable level of spending for this material. Factors like inflation, changes in military requirements, and market dynamics for steel would need to be considered for a meaningful historical comparison. Without access to such historical data, this comparison cannot be made.

What is the significance of the 'NOT COMPETED' award status for this contract?

The 'NOT COMPETED' award status is highly significant as it indicates that the Department of the Army did not conduct a full and open competitive bidding process for this $113 million contract. This typically means that only one source was solicited, or that justifications for excluding other sources were accepted. Reasons for non-competition can include urgency, lack of available sources, or specific technical requirements. However, this status inherently raises concerns about potential overpricing, lack of innovation, and reduced accountability compared to contracts awarded through competitive means. It suggests that the government may not have explored the full range of available suppliers or negotiated the best possible terms.

Industry Classification

NAICS: Manufacturing › Iron and Steel Mills and Ferroalloy Manufacturing › Iron and Steel Mills

Product/Service Code: METAL BARS, SHEETS, SHAPES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: W52H0907R5027

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 5515 NORTH SERVICE RD, BURLINGTON

Business Categories: Category Business, Foreign Owned, Not Designated a Small Business, Special Designations

Financial Breakdown

Contract Ceiling: $11,334,125

Exercised Options: $11,334,125

Current Obligation: $11,334,125

Contract Characteristics

Cost or Pricing Data: NO

Timeline