DoD awards $270.5M for small caliber ammunition, with Olin Winchester LLC securing the contract

Contract Overview

Contract Amount: $270,549,309 ($270.5M)

Contractor: Olin Winchester LLC

Awarding Agency: Department of Defense

Start Date: 2011-07-28

End Date: 2018-12-01

Contract Duration: 2,683 days

Daily Burn Rate: $100.8K/day

Competition Type: FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES

Number of Offers Received: 2

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Defense

Official Description: AWARD SMALL CALIBER AMMUNITION PRODUCTION, SPECIFICALLY, 5.56MM, 7.62MM, AND CAL .50.

Place of Performance

Location: EAST ALTON, MADISON County, ILLINOIS, 62024

State: Illinois Government Spending

Plain-Language Summary

Department of Defense obligated $270.5 million to OLIN WINCHESTER LLC for work described as: AWARD SMALL CALIBER AMMUNITION PRODUCTION, SPECIFICALLY, 5.56MM, 7.62MM, AND CAL .50. Key points: 1. Contract awarded through full and open competition, indicating a robust bidding process. 2. The contract covers essential small caliber ammunition types, crucial for military operations. 3. Fixed Price with Economic Price Adjustment (FP/EPA) terms suggest potential for cost fluctuations. 4. The duration of the contract (2683 days) indicates a long-term supply need. 5. Awarded by the Department of the Army, highlighting a significant defense procurement. 6. No small business set-aside was utilized, suggesting the scale or nature of the requirement.

Value Assessment

Rating: good

The total award amount of $270.5 million over approximately 7.3 years represents a substantial investment in ammunition production. Benchmarking this against historical ammunition contracts is challenging without specific unit cost data. However, the fixed-price with economic price adjustment structure aims to balance cost certainty for the government with protection for the contractor against material cost volatility. The number of bids received (2) is on the lower side for a full and open competition, which could warrant further investigation into pricing competitiveness.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under 'Full and Open Competition After Exclusion of Sources,' which implies that while the competition was open, specific sources may have been excluded for defined reasons. With two bids received, the level of competition appears moderate. A higher number of bidders typically leads to more competitive pricing for the government. The limited number of bidders could suggest a specialized market or high barriers to entry for potential competitors.

Taxpayer Impact: The moderate competition level means taxpayers may not have benefited from the most aggressive pricing possible. However, the full and open nature ensures a fair process and allows for potential savings compared to sole-source awards.

Public Impact

The primary beneficiaries are the U.S. Army and other Department of Defense branches requiring small caliber ammunition for training and operational readiness. The contract ensures the continuous supply of 5.56mm, 7.62mm, and .50 caliber ammunition. The geographic impact is primarily national, supporting U.S. military logistics and readiness. Workforce implications include sustained employment at Olin Winchester LLC's manufacturing facilities and associated supply chains.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Limited competition (2 bidders) may have resulted in higher prices than a more robustly competed contract.
The 'Exclusion of Sources' clause in the competition type warrants understanding the specific reasons for exclusion to ensure fairness and prevent anti-competitive practices.
Economic price adjustment clauses can lead to cost increases if raw material prices rise significantly.

Positive Signals

Awarded through full and open competition, ensuring a fair and transparent process.
Secures a critical supply of essential ammunition types for national defense.
Long-term contract duration provides supply chain stability for the Department of Defense.

Sector Analysis

This contract falls within the defense manufacturing sector, specifically small arms ammunition. The market for ammunition is characterized by high barriers to entry due to specialized manufacturing processes, stringent quality control, and significant capital investment. Olin Winchester LLC is a major player in this niche. Comparable spending benchmarks would involve analyzing other large-scale ammunition procurement contracts from the DoD or allied nations, which often run into hundreds of millions of dollars over several years.

Small Business Impact

This contract was not set aside for small businesses, nor does it appear to have specific subcontracting requirements for small businesses explicitly detailed in the provided data. The nature of large-scale ammunition manufacturing often favors established, larger industrial players. The absence of small business participation could limit opportunities for smaller firms within this specific procurement, though they might be involved in the broader defense supply chain.

Oversight & Accountability

Oversight for this definitive contract would typically fall under the Department of the Army's contracting command and potentially the Department of Defense's Inspector General. Accountability measures are embedded in the contract's performance requirements and payment terms. Transparency is facilitated through contract award databases like FPDS. The fixed-price nature with economic price adjustment requires careful monitoring of cost drivers to ensure fair pricing.

Related Government Programs

Small Arms Ammunition Production
Department of Defense Ammunition Procurement
Military Logistics and Readiness
Defense Industrial Base Manufacturing

Risk Flags

Moderate Competition
Economic Price Adjustment Clause
Long Contract Duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $270.5 million to OLIN WINCHESTER LLC. AWARD SMALL CALIBER AMMUNITION PRODUCTION, SPECIFICALLY, 5.56MM, 7.62MM, AND CAL .50.

Who is the contractor on this award?

The obligated recipient is OLIN WINCHESTER 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 $270.5 million.

What is the period of performance?

Start: 2011-07-28. End: 2018-12-01.

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

Historical spending on small caliber ammunition by the Department of the Army has been substantial and consistent, reflecting the ongoing need for training and operational readiness. Over the past decade, the Army has awarded numerous contracts for various calibers, often in the hundreds of millions of dollars cumulatively. These awards are driven by factors such as troop levels, deployment cycles, and modernization programs. For instance, prior to this $270.5 million award to Olin Winchester LLC, there have been significant procurements for 5.56mm, 7.62mm, and .50 caliber rounds. Analyzing historical data reveals a trend of long-term contracts with major defense contractors, often utilizing fixed-price structures with adjustments for economic factors, to ensure a stable supply chain. Fluctuations in spending can be linked to geopolitical events, changes in defense budgets, and the phasing out or introduction of new weapon systems that utilize different ammunition types.

How does the pricing of this contract compare to similar ammunition awards?

Directly comparing the pricing of this $270.5 million contract to similar ammunition awards is challenging without access to specific unit costs and the exact period of performance for comparable contracts. However, the contract type, Fixed Price with Economic Price Adjustment (FP/EPA), is common for long-term defense procurements where raw material costs can fluctuate significantly. This structure aims to provide a baseline price while allowing for adjustments based on indices for metals, components, and labor. The fact that only two bids were received in a 'Full and Open Competition After Exclusion of Sources' might suggest that the pricing, while competitive under the circumstances, may not reflect the lowest possible cost achievable in a market with more active bidders. Further analysis would require benchmarking the per-round cost against historical data for the specific calibers (5.56mm, 7.62mm, .50 cal) awarded under similar contract terms and competition levels.

What are the key risks associated with this ammunition supply contract?

Several key risks are associated with this ammunition supply contract. Firstly, the reliance on a single primary contractor, Olin Winchester LLC, for a significant portion of the supply creates a single point of failure risk. Disruptions at their manufacturing facilities due to unforeseen events (e.g., natural disasters, labor disputes, supply chain interruptions for raw materials) could impact delivery schedules. Secondly, the economic price adjustment (EPA) clause introduces cost escalation risk; if the prices of brass, lead, propellants, or other components increase substantially, the total contract value could exceed initial projections. Thirdly, the moderate competition level (two bidders) might indicate potential market concentration, which could limit future competitive pricing. Finally, ensuring consistent quality control across millions of rounds produced over several years is an ongoing risk that requires diligent government oversight.

What is the track record of Olin Winchester LLC as a government contractor?

Olin Winchester LLC has a long and established track record as a major supplier of ammunition to the U.S. government, particularly the Department of Defense. They are a primary manufacturer of small caliber ammunition, including the calibers specified in this contract (5.56mm, 7.62mm, and .50 caliber). Historically, they have been awarded numerous large-scale contracts for ammunition production, reflecting their capacity and capability to meet stringent military specifications. While specific performance metrics for every contract are not publicly detailed, their continued success in winning significant defense contracts suggests a generally positive performance history regarding quality, delivery, and adherence to requirements. However, like any large contractor, there may be instances of past performance issues or contract disputes, which would typically be documented in government performance evaluations and could be reviewed during source selection processes.

How does the contract duration impact the overall value and risk?

The contract duration of approximately 7.3 years (2683 days) significantly impacts both the overall value and risk profile. From a value perspective, the long duration allows for economies of scale in production and potentially lower per-unit costs due to sustained manufacturing runs. It also provides the Department of the Army with supply chain stability and predictability for a critical munition. However, this extended period also increases risk. The longer the contract, the greater the exposure to economic fluctuations (addressed partly by the EPA clause), potential changes in military requirements or technology that could render the ammunition obsolete, and the risk of contractor performance degradation over time. Furthermore, a long-term commitment might reduce the government's flexibility to adapt to new market entrants or technological advancements that could offer better value if the contract were shorter or re-competed more frequently.

Industry Classification

NAICS: Manufacturing › Other Fabricated Metal Product Manufacturing › Small Arms Ammunition Manufacturing

Product/Service Code: AMMUNITION AND EXPLOSIVES

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: W52P1J10R0203

Offers Received: 2

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

Evaluated Preference: NONE

Contractor Details

Address: 600 POWDER MILL RD, EAST ALTON, IL, 62024

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

Financial Breakdown

Contract Ceiling: $299,921,783

Exercised Options: $270,549,309

Current Obligation: $270,549,309

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline