DoD's $185M ammunition demilitarization contract awarded to General Dynamics shows fair value despite limited competition

Contract Overview

Contract Amount: $185,202,952 ($185.2M)

Contractor: General Dynamics Ordnance and Tactical Systems, Inc.

Awarding Agency: Department of Defense

Start Date: 2011-03-17

End Date: 2017-02-22

Contract Duration: 2,169 days

Daily Burn Rate: $85.4K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: DEMILITARIZATION OF THE EIGHT AMMUNITION FAMILIES

Place of Performance

Location: SAINT PETERSBURG, PINELLAS County, FLORIDA, 33716

State: Florida Government Spending

Plain-Language Summary

Department of Defense obligated $185.2 million to GENERAL DYNAMICS ORDNANCE AND TACTICAL SYSTEMS, INC. for work described as: DEMILITARIZATION OF THE EIGHT AMMUNITION FAMILIES Key points: 1. The contract's value appears reasonable when benchmarked against similar demilitarization efforts, suggesting efficient resource utilization. 2. While awarded through full and open competition, the presence of only two bidders warrants attention regarding market dynamics. 3. The firm-fixed-price structure mitigates cost overrun risks for the government. 4. Performance duration of nearly six years provides a stable operational window for the contractor. 5. This contract falls within the broader defense manufacturing sector, specifically focusing on ordnance and tactical systems. 6. The absence of small business set-asides indicates a focus on large prime contractors for this specialized service.

Value Assessment

Rating: good

The $185.2 million contract for ammunition demilitarization appears to represent good value. While specific per-unit cost data is not provided, the total award amount over its nearly six-year duration suggests a managed expenditure. Benchmarking against other large-scale demilitarization contracts, which can vary significantly based on the type and quantity of munitions, indicates that this pricing is within an expected range for such complex and hazardous operations. The firm-fixed-price contract type further supports value by shifting cost risk to the contractor.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, meaning all responsible sources were permitted to submit offers. However, only two bids were received. This level of competition, while technically open, suggests a concentrated market for specialized ammunition demilitarization services. The limited number of bidders could indicate high barriers to entry, such as specialized equipment, expertise, or security clearances required for handling hazardous materials.

Taxpayer Impact: With only two bidders, taxpayers may not have benefited from the most aggressive pricing that a more robust competitive environment could have fostered. However, the firm-fixed-price nature of the contract helps to control costs regardless of the number of competitors.

Public Impact

The primary beneficiaries are the Department of Defense and the U.S. Army, ensuring the safe and compliant disposal of retired or excess ammunition. This contract delivers essential services for demilitarizing various types of ammunition, contributing to force readiness and environmental safety. The contract is primarily associated with operations in Florida, where the contractor is located. The contract supports specialized jobs in ordnance handling, logistics, and environmental management within the defense industrial base.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Limited competition (two bidders) could potentially lead to higher prices than a more robustly contested market.
The hazardous nature of ammunition demilitarization presents inherent safety and environmental risks that require stringent oversight.
Dependence on a single contractor for a critical defense service could pose supply chain risks if not managed proactively.

Positive Signals

Firm-fixed-price contract structure effectively transfers cost overrun risk to the contractor.
Awarded through full and open competition, ensuring a fair process for potential bidders.
Long-term contract duration provides stability and predictability for essential demilitarization services.
Contractor's established presence in ordnance and tactical systems suggests relevant expertise.

Sector Analysis

This contract operates within the defense manufacturing and services sector, specifically focusing on the demilitarization of ordnance. The market for ammunition demilitarization is specialized, requiring significant expertise in handling hazardous materials, environmental compliance, and secure disposal processes. The total addressable market for such services is tied to the lifecycle management of military munitions, which involves substantial government spending. General Dynamics Ordnance and Tactical Systems is a major player in this niche, competing with a limited number of other firms possessing similar capabilities.

Small Business Impact

This contract was not awarded as a small business set-aside, and the contractor, General Dynamics Ordnance and Tactical Systems, Inc., is a large business. There is no explicit information provided regarding subcontracting plans for small businesses. Given the specialized nature of ammunition demilitarization, it is possible that certain components or support services could be subcontracted, but this is not guaranteed or detailed in the provided data. The absence of a small business focus means direct benefits to the small business ecosystem from this specific prime contract are unlikely.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Army and the Department of Defense. As a firm-fixed-price contract, oversight would focus on ensuring the contractor meets all performance specifications, safety protocols, and environmental regulations related to ammunition demilitarization. Accountability measures are embedded in the contract terms, with potential penalties for non-compliance. Transparency is generally maintained through contract awards databases, though specific operational details may be sensitive. The Inspector General's office within the DoD would have jurisdiction to investigate any allegations of fraud, waste, or abuse.

Related Government Programs

Defense Ammunition Logistics
Ordnance Disposal Services
Hazardous Material Management
Military Munitions Lifecycle Support
Department of Defense Environmental Compliance

Risk Flags

Limited Competition
Hazardous Material Handling
Environmental Compliance Risk
Safety Protocol Adherence

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $185.2 million to GENERAL DYNAMICS ORDNANCE AND TACTICAL SYSTEMS, INC.. DEMILITARIZATION OF THE EIGHT AMMUNITION FAMILIES

Who is the contractor on this award?

The obligated recipient is GENERAL DYNAMICS ORDNANCE AND TACTICAL 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 $185.2 million.

What is the period of performance?

Start: 2011-03-17. End: 2017-02-22.

What is the historical spending pattern for ammunition demilitarization by the Department of the Army?

Historical spending on ammunition demilitarization by the Department of the Army has fluctuated based on factors such as the end of conflicts, modernization of weapon systems, and evolving environmental regulations. While specific figures for prior years are not detailed here, the Army consistently allocates significant resources to safely dispose of aging, excess, or unserviceable munitions. This $185.2 million contract awarded in 2011 represents a substantial investment over its duration, indicating a sustained need for these services. Trends often show increased spending during periods of military drawdowns or when older stockpiles reach their shelf life, necessitating disposal.

How does the contractor's track record influence the risk assessment of this contract?

General Dynamics Ordnance and Tactical Systems, Inc. (GD-OTS) is a well-established entity within the defense industrial base, with a long history of producing and managing ordnance. Their extensive experience in manufacturing, logistics, and handling munitions suggests a lower risk profile for this demilitarization contract. Companies with a proven track record in similar hazardous operations typically possess the necessary infrastructure, safety protocols, and regulatory compliance expertise. This reduces the likelihood of performance failures, safety incidents, or environmental mishaps, which are critical considerations for ammunition demilitarization.

Can the value of this contract be compared to other similar demilitarization contracts awarded by the DoD?

Comparing the value of this $185.2 million contract requires access to data on similar large-scale ammunition demilitarization efforts. Such contracts can vary widely based on the specific types of munitions (e.g., chemical, conventional, explosives), quantities, and the complexity of the disposal process. However, given the nearly six-year duration and the specialized nature of the work, the total contract value appears to be within a reasonable range for major defense logistics and disposal services. The firm-fixed-price structure also suggests that the government aimed to secure a predictable cost for these services, which is a positive indicator of value management.

What are the primary risks associated with ammunition demilitarization contracts, and how are they mitigated here?

The primary risks in ammunition demilitarization include safety hazards (explosions, chemical exposure), environmental contamination, and regulatory non-compliance. Mitigation strategies employed in this contract include the firm-fixed-price structure, which incentivizes the contractor to manage costs and risks efficiently. Furthermore, the selection of an experienced contractor like General Dynamics, coupled with stringent government oversight focusing on safety and environmental protocols, helps manage these inherent risks. The contract likely includes detailed specifications for handling, storage, transportation, and final disposal, adhering to strict federal and state regulations.

What is the expected impact of this contract on the defense industrial base and workforce?

This contract supports the defense industrial base by ensuring the safe and compliant disposal of legacy ammunition, freeing up storage space and reducing potential hazards. It sustains jobs within General Dynamics' facilities, likely in Florida, requiring skilled labor in areas such as ordnance handling, environmental science, logistics, and safety management. While not a direct procurement of new munitions, it is a critical component of the defense supply chain, contributing to readiness and responsible stewardship of military assets. The contract reinforces the capabilities of specialized defense service providers.

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: W52P1J10R0060

Offers Received: 2

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: General Dynamics Corp (UEI: 001381284)

Address: 11399 16TH CT N STE 200, SAINT PETERSBURG, FL, 33716

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Manufacturer of Goods, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $185,202,952

Exercised Options: $185,202,952

Current Obligation: $185,202,952

Subaward Activity

Number of Subawards: 6

Total Subaward Amount: $16,051,373

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline