DoD awards $220M+ for Afghan ammunition, raising questions on value and competition despite full and open process

Contract Overview

Contract Amount: $220,407,124 ($220.4M)

Contractor: Alliant Techsystems Operations LLC

Awarding Agency: Department of Defense

Start Date: 2009-09-25

End Date: 2013-06-30

Contract Duration: 1,374 days

Daily Burn Rate: $160.4K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: AWARD OF VARIOUS TYPES OF NON-STANDARD AMMUNITION FOR THE GOVERNMENT OF AFGHANISTAN UNDER FMS

Plain-Language Summary

Department of Defense obligated $220.4 million to ALLIANT TECHSYSTEMS OPERATIONS LLC for work described as: AWARD OF VARIOUS TYPES OF NON-STANDARD AMMUNITION FOR THE GOVERNMENT OF AFGHANISTAN UNDER FMS Key points: 1. The contract's significant value warrants scrutiny for cost-effectiveness and long-term strategic alignment. 2. While competed openly, the limited number of bidders may have impacted price discovery. 3. Performance risks associated with foreign military sales and ammunition procurement require careful monitoring. 4. The contract's duration and fixed-price nature suggest a predictable cost structure, but potential for cost overruns exists. 5. This award falls within the broader defense sector, specifically focusing on tactical munitions. 6. The absence of small business involvement suggests a focus on large prime contractors with specialized capabilities.

Value Assessment

Rating: fair

Benchmarking the value of this contract is challenging due to the specific nature of foreign military sales and the types of ammunition procured. The total award of over $220 million over nearly four years indicates a substantial investment. Without direct comparisons to similar FMS ammunition contracts or detailed cost breakdowns, assessing the precise value-for-money is difficult. The fixed-price contract type offers some cost certainty, but the overall price relative to the quantity and type of ammunition delivered needs further analysis to determine if it represents a fair market price.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, which is a positive indicator for achieving competitive pricing. However, only two bids were received. This limited number of bidders, despite the open competition, could suggest a specialized market or high barriers to entry for potential competitors. A low number of bids can sometimes lead to less aggressive pricing than a more robust competition with multiple offers.

Taxpayer Impact: While full and open competition was utilized, the low number of bidders means taxpayers may not have benefited from the most aggressive pricing possible. Further competition could have potentially driven down costs.

Public Impact

The primary beneficiaries are the government of Afghanistan, receiving essential ammunition supplies for its security forces. The services delivered include the provision of various types of non-standard ammunition, crucial for military operations. The geographic impact is focused on Afghanistan, supporting its defense capabilities. Workforce implications are likely within the defense manufacturing sector, supporting jobs at the prime contractor and its subcontractors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost overruns if market prices for raw materials or manufacturing increase significantly during the contract period.
Risks associated with the 'non-standard' nature of the ammunition, potentially leading to compatibility or logistical issues.
Geopolitical risks inherent in supplying military equipment to a foreign nation, including potential for diversion or misuse.
Limited competition (two bidders) may have resulted in a higher-than-optimal price for taxpayers.
Long contract duration (over 3 years) increases exposure to changing market conditions and potential obsolescence.

Positive Signals

Awarded under full and open competition, indicating an effort to maximize the bidder pool.
Firm Fixed Price contract type provides cost certainty for the government.
The contractor, Alliant Techsystems Operations LLC, is a known entity in defense manufacturing, suggesting established capabilities.
The contract addresses a critical need for ammunition, supporting the operational readiness of allied forces.

Sector Analysis

This contract falls within the defense industrial base, specifically the manufacturing of ammunition. The market for ammunition is characterized by high barriers to entry due to specialized manufacturing processes, stringent quality control, and significant capital investment. While 'standard' military ammunition is a large market, 'non-standard' ammunition for foreign partners can be a more niche segment. Spending in this area is often driven by foreign military sales (FMS) programs and direct commercial sales, supporting allied defense capabilities.

Small Business Impact

The contract data indicates that small business participation was not a primary focus, as the award was not set aside for small businesses and the prime contractor is a large entity. There is no explicit mention of subcontracting plans for small businesses. This suggests that the procurement likely required specialized manufacturing capabilities typically found in larger defense contractors, potentially limiting opportunities for small businesses in this specific award.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense, specifically the Department of the Army, which awarded the contract. As a foreign military sale, there would also be oversight from the Defense Security Cooperation Agency (DSCA). Accountability measures would include contract performance monitoring, quality assurance checks, and financial audits. Transparency is generally maintained through contract award databases, though detailed cost breakdowns might be sensitive.

Related Government Programs

Foreign Military Sales Program
Tactical Ammunition Procurement
Defense Security Assistance
Department of the Army Contracts
Ammunition Manufacturing

Risk Flags

Limited Competition
Foreign Military Sales Risks
Non-Standard Item Procurement
Potential for Cost Overruns

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $220.4 million to ALLIANT TECHSYSTEMS OPERATIONS LLC. AWARD OF VARIOUS TYPES OF NON-STANDARD AMMUNITION FOR THE GOVERNMENT OF AFGHANISTAN UNDER FMS

Who is the contractor on this award?

The obligated recipient is ALLIANT TECHSYSTEMS OPERATIONS LLC.

Which agency awarded this contract?

Awarding agency: Department of Defense (Department of the Army).

What is the total obligated amount?

The obligated amount is $220.4 million.

What is the period of performance?

Start: 2009-09-25. End: 2013-06-30.

What is the track record of Alliant Techsystems Operations LLC in fulfilling similar foreign military sales contracts, particularly for ammunition?

Alliant Techsystems Operations LLC (now part of Northrop Grumman) has a significant history in defense contracting, including the production of various types of ammunition. Their experience spans numerous domestic and international contracts. For foreign military sales (FMS), their track record would involve navigating complex international logistics, varying regulatory environments, and specific customer requirements. While specific details on past FMS ammunition contracts for Afghanistan might require deeper investigation, the company's overall capacity and experience in large-scale defense manufacturing suggest a capability to handle such procurements. However, the success of any FMS contract is also dependent on factors beyond the contractor, including the recipient nation's stability and absorptive capacity.

How does the per-unit cost of this ammunition compare to similar domestic procurements or market rates?

Determining the precise per-unit cost for this contract is difficult without access to the detailed award data, which often includes quantities and specific item descriptions. Furthermore, comparing 'non-standard' ammunition for a foreign government to domestic procurements or general market rates is inherently complex. Non-standard items may have different manufacturing costs, and FMS contracts often include additional costs related to program management, training, and support, which are not always present in purely domestic sales. The limited competition (two bidders) also suggests that the price might not be as low as it could be in a more competitive scenario. A thorough analysis would require access to the specific line-item details and a benchmark against comparable FMS sales or specialized ammunition manufacturers.

What are the primary risks associated with procuring 'non-standard' ammunition through FMS, and how were they mitigated?

Procuring 'non-standard' ammunition through FMS presents several risks. Firstly, 'non-standard' implies it may not align with U.S. military specifications or common international standards, potentially leading to interoperability issues, logistical challenges, or difficulties in maintenance and resupply. Secondly, FMS contracts involve the complexities of international relations, including political stability in the recipient country, potential for diversion of arms, and adherence to end-user agreements. Mitigation strategies typically include rigorous technical specifications, quality assurance protocols, end-use monitoring by the U.S. government, and clear contractual terms addressing liability and performance. The firm fixed-price nature of this contract aims to transfer some cost risk to the contractor, but risks related to usability and security remain.

Given the contract's duration and total value, what is the projected annual spending, and how does it compare to broader trends in defense ammunition spending?

The contract spans approximately 3.75 years (from September 2009 to June 2013) with a total award of $220,407,124.36. This projects an average annual spending of roughly $58.8 million. This figure represents a specific allocation within the broader U.S. defense budget for ammunition, particularly for FMS. Annual defense spending on ammunition can fluctuate significantly based on operational tempo, strategic priorities, and the volume of FMS agreements. While $58.8 million per year is substantial for a single contract, it needs to be viewed in the context of the total global defense ammunition market, which runs into billions of dollars annually, encompassing both domestic needs and international sales.

What does the limited number of bidders (two) for this 'full and open' competition suggest about the market for non-standard ammunition?

The fact that only two bids were received for a contract solicited under 'full and open' competition suggests a highly specialized or concentrated market for this specific type of 'non-standard' ammunition. Potential reasons include: high technical expertise required, significant manufacturing infrastructure investment, existing long-term relationships between suppliers and customers, or perhaps the specific 'non-standard' nature limits the pool of manufacturers capable of producing it. It could also indicate that the solicitation terms or anticipated profit margins were not attractive enough to draw a larger number of competitors. This limited competition raises concerns about whether the government secured the best possible price and value.

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

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: W52P1J09R0093

Offers Received: 2

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Northrop Grumman Innovation Systems LLC (UEI: 618705925)

Address: HWY 7 & 78 LAKE CITY ARMY AMUNITION PLANT, INDEPENDENCE, MO, 05

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Federally Funded Research and Development Corp, Manufacturer of Goods, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $220,407,124

Exercised Options: $220,407,124

Current Obligation: $220,407,124

Contract Characteristics

Cost or Pricing Data: NO

Timeline