Department of Defense awards $495.6M contract for ammunition manufacturing, highlighting long-term support needs

Contract Overview

Contract Amount: $495,583,992 ($495.6M)

Contractor: DSE, Inc.

Awarding Agency: Department of Defense

Start Date: 2005-04-29

End Date: 2013-11-22

Contract Duration: 3,129 days

Daily Burn Rate: $158.4K/day

Competition Type: FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES

Number of Offers Received: 6

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Defense

Place of Performance

Location: TAMPA, HILLSBOROUGH County, FLORIDA, 33611

State: Florida Government Spending

Plain-Language Summary

Department of Defense obligated $495.6 million to DSE, INC. for work described as: Key points: 1. Contract value indicates significant, long-term demand for specialized ammunition. 2. Fixed-price with economic price adjustment suggests potential for cost fluctuations over contract duration. 3. The contract's extended period of performance points to strategic importance and sustained operational requirements. 4. Competition was conducted after excluding sources, warranting scrutiny of the justification for limited bidding. 5. The award to DSE, INC. represents a substantial commitment to a single supplier for critical defense materiel. 6. Geographic concentration in Florida for contract performance may have localized economic impacts.

Value Assessment

Rating: fair

The total award amount of $495.6 million over approximately 8.5 years suggests a significant investment. Benchmarking this against similar long-term ammunition manufacturing contracts is challenging without more specific details on the types of ammunition and quantities. The 'economic price adjustment' clause introduces variability, making a direct value-for-money assessment difficult without tracking inflation and material cost changes. However, the duration and scale imply a negotiated price that was deemed acceptable at the time of award for ensuring supply chain stability.

Cost Per Unit: N/A

Competition Analysis

Competition Level: limited

The contract was awarded under 'FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES.' This indicates that while competition was intended, specific sources were excluded, suggesting a non-standard procurement approach. The number of bidders is not explicitly stated, but the 'exclusion of sources' implies a limited pool. This method can sometimes lead to higher prices if the justification for exclusion is not robust or if it significantly restricts market participation.

Taxpayer Impact: Taxpayers may face higher costs due to a potentially restricted competitive landscape. The exclusion of certain sources needs careful justification to ensure fair pricing and prevent undue cost increases.

Public Impact

The primary beneficiaries are the Department of the Army and potentially other branches of the Department of Defense requiring the specified ammunition. The contract ensures the continued supply of ammunition (except small arms), critical for military operations and readiness. Performance is concentrated in Florida, suggesting potential economic benefits and job creation within that state's defense industrial base. The workforce implications include employment opportunities for skilled labor in manufacturing and related support roles within the defense sector.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Limited competition due to exclusion of sources could impact price competitiveness.
Economic price adjustment clause introduces uncertainty in final cost to taxpayers.
Long contract duration increases exposure to potential cost overruns or changing market conditions.

Positive Signals

Ensures a stable and long-term supply of critical ammunition for national defense.
Award to an established entity (DSE, INC.) suggests a degree of reliability in production.
Contract duration allows for strategic planning and investment in manufacturing capabilities.

Sector Analysis

This contract falls within the defense manufacturing sector, specifically focusing on ammunition production. The market for defense-related manufacturing is characterized by long-term government contracts, specialized production requirements, and often, limited competition due to security and technical expertise needs. The total value of $495.6 million over nearly nine years positions this as a significant procurement within the ammunition sub-sector, reflecting sustained demand for military materiel. Comparable spending benchmarks would typically involve analyzing annual expenditures on similar ammunition types across different military branches.

Small Business Impact

The contract data indicates that small business participation was not a primary focus, as the 'ss' (small business set-aside) field is false and the 'sb' (small business) field is also false. This suggests the contract was not specifically set aside for small businesses, nor was the primary awardee a small business. Subcontracting opportunities for small businesses may exist but are not explicitly detailed in the provided data. The impact on the small business ecosystem would likely be indirect, potentially through the supply chain if DSE, INC. procures components from smaller firms.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Defense's contracting and financial management oversight bodies. Accountability measures are embedded in the contract terms, including performance standards and payment schedules. Transparency is facilitated through contract databases like FPDS-NG, where basic award information is publicly available. Inspector General jurisdiction would apply to any allegations of fraud, waste, or abuse related to the contract's execution.

Related Government Programs

Department of Defense Ammunition Procurement
Defense Industrial Base Manufacturing Contracts
Fixed-Price with Economic Price Adjustment Contracts
Long-Term Defense Supply Contracts
Ammunition Manufacturing Services

Risk Flags

Limited competition justification requires review.
Economic price adjustment clause introduces cost uncertainty.
Long-term contract duration increases risk exposure.
Potential for single-source dependency.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $495.6 million to DSE, INC.. See the official description on USAspending.

Who is the contractor on this award?

The obligated recipient is DSE, 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 $495.6 million.

What is the period of performance?

Start: 2005-04-29. End: 2013-11-22.

What specific types of ammunition are covered under this contract, and what is the projected quantity?

The provided data indicates the contract is for 'Ammunition (except Small Arms) Manufacturing' under the NAICS code 332993. However, it does not specify the exact types or quantities of ammunition. This level of detail is typically found in the contract's statement of work or delivery orders. Without this information, it's difficult to assess the specific military utility or the precise unit costs. The broad classification suggests a range of ordnance, potentially including artillery shells, mortar rounds, or other non-small caliber munitions, crucial for various combat support roles.

What was the justification for excluding certain sources in the competition process?

The contract was awarded under 'FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES.' This procurement method implies that a justification was required and approved to limit the pool of potential offerors. Common reasons for excluding sources include proprietary data rights, unique manufacturing capabilities, existing infrastructure investments by a specific contractor, or urgent requirements that necessitate leveraging existing supplier relationships. A thorough review of the contract file and associated documentation would be necessary to understand the specific rationale provided by the Department of the Army for this exclusion, which is critical for assessing whether the competition was appropriately managed and if it potentially inflated costs.

How does the 'economic price adjustment' (EPA) clause typically function in contracts of this nature, and what are its implications for cost certainty?

An Economic Price Adjustment (EPA) clause is designed to protect both the contractor and the government from unforeseen fluctuations in labor and material costs over the life of a contract. For ammunition manufacturing, this could include adjustments based on the price of metals, chemicals, and specialized labor. The clause typically specifies indices or formulas used to calculate adjustments, often tied to government economic indicators. While EPA provides flexibility and can help secure competitive bids by mitigating contractor risk, it introduces cost uncertainty for the government. The total final cost can exceed the initial estimated value, making precise budgeting challenging and requiring diligent oversight to ensure adjustments are fair and justified.

What is the historical spending pattern for ammunition manufacturing by the Department of the Army, and how does this contract compare?

Historical spending on ammunition manufacturing by the Department of the Army is substantial, reflecting the continuous need for munitions across various operational theaters and training exercises. While specific historical data for this exact contract's scope isn't provided, the Army consistently procures billions of dollars worth of ordnance annually. This $495.6 million award over approximately 8.5 years represents a significant, but likely not unprecedented, portion of the Army's overall ammunition budget. It suggests a strategic decision to secure a long-term supply from a specific provider, possibly for specialized or high-demand items, rather than relying solely on shorter-term, more frequent procurements.

What are the potential risks associated with a single contractor (DSE, INC.) holding such a large, long-term contract for critical defense materiel?

A significant risk associated with a large, long-term contract awarded to a single entity like DSE, INC. is the potential for over-reliance and reduced leverage for the government. If DSE, INC. faces production issues, financial instability, or decides to exit the market, the Department of the Army could face severe supply chain disruptions for critical ammunition. Furthermore, a lack of ongoing robust competition over the contract's duration could diminish incentives for cost efficiency and innovation. The 'exclusion of sources' further exacerbates this risk by potentially limiting the development of alternative suppliers or capabilities within the defense industrial base.

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: NEGOTIATED PROPOSAL/QUOTE

Offers Received: 6

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

Evaluated Preference: NONE

Contractor Details

Address: 5201 S WESTSHORE BLVD, TAMPA, FL, 90

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Small Business, Special Designations, U.S.-Owned Business

Contract Characteristics

Cost or Pricing Data: NO

Timeline