DoD awards $235M contract for ammunition manufacturing, raising questions about competition and value

Contract Overview

Contract Amount: $235,075,366 ($235.1M)

Contractor: General Dynamics Ordnance and Tactical Systems, Inc.

Awarding Agency: Department of Defense

Start Date: 2012-03-29

End Date: 2022-11-07

Contract Duration: 3,875 days

Daily Burn Rate: $60.7K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: 120 MM M865 REFURB AND M1002 CARTRIDGES

Place of Performance

Location: SAINT PETERSBURG, PINELLAS County, FLORIDA, 33716

State: Florida Government Spending

Plain-Language Summary

Department of Defense obligated $235.1 million to GENERAL DYNAMICS ORDNANCE AND TACTICAL SYSTEMS, INC. for work described as: 120 MM M865 REFURB AND M1002 CARTRIDGES Key points: 1. Contract awarded on a sole-source basis, limiting price discovery and potentially increasing costs. 2. Significant contract duration of over 10 years suggests long-term reliance on a single supplier. 3. Lack of competition raises concerns about the government's ability to secure the best possible pricing. 4. The contract's value of $235 million warrants a thorough review of cost-effectiveness. 5. Performance context is limited due to the sole-source nature, making benchmarking difficult. 6. Sector positioning within Ammunition Manufacturing (NAICS 332993) is dominated by a few key players.

Value Assessment

Rating: questionable

Benchmarking the value of this $235 million contract is challenging due to its sole-source nature and long duration. Without competitive bids, it's difficult to assess if the pricing reflects fair market value. The fixed-price structure offers some cost certainty, but the absence of competition means the Department of Defense may not be benefiting from potential cost savings that could arise from a more open bidding process. Further analysis would be needed to compare unit costs against historical government purchases or industry benchmarks for similar ammunition types.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning it was not competed among multiple vendors. This approach is typically used when only one vendor can provide the required goods or services, or in cases of urgent need. The lack of competition means that the Department of Defense did not benefit from the price discovery mechanisms inherent in a competitive bidding process, potentially leading to higher costs for taxpayers.

Taxpayer Impact: The absence of competition means taxpayers may be paying a premium for these ammunition components, as there was no market pressure to drive down prices. This could represent a missed opportunity for cost savings.

Public Impact

The Department of Defense is the primary beneficiary, receiving essential ammunition components for its operations. The contract supports the manufacturing of M865 REFURB and M1002 cartridges, critical for military training and readiness. The geographic impact is concentrated in Florida, where the contractor is located. Workforce implications include job retention and potential expansion at the contractor's facilities in Florida.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure, potentially inflating costs.
Long contract duration (over 10 years) reduces flexibility and opportunities for future cost optimization.
Lack of transparency in the sole-source justification process.
Potential for vendor lock-in, making it difficult to switch suppliers in the future.
Limited public data on performance metrics and quality control for this specific contract.

Positive Signals

Contract ensures a steady supply of critical ammunition components for the Department of Defense.
Firm fixed-price contract provides cost predictability for the government.
Contractor, General Dynamics Ordnance and Tactical Systems, is an established entity in defense manufacturing.
Contract supports domestic manufacturing capabilities within the United States.

Sector Analysis

The ammunition manufacturing sector is a critical component of the defense industrial base, characterized by high barriers to entry due to specialized knowledge, capital investment, and stringent quality control requirements. Major players like General Dynamics often hold significant portions of government contracts. Spending in this sector is directly tied to military readiness and modernization efforts. Comparable spending benchmarks are difficult to establish precisely due to the proprietary nature of defense contracts and the specific nature of the ammunition types procured.

Small Business Impact

This contract was not set aside for small businesses, and there is no indication of significant subcontracting opportunities for small businesses within the provided data. The sole-source nature of the award further limits the potential for small business participation, as the primary contract is directly awarded to a large defense contractor. This suggests that the direct economic impact on the small business ecosystem for this specific contract may be minimal.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contracting and procurement regulations. Accountability measures are typically embedded within the contract terms, including delivery schedules and quality specifications. Transparency is limited due to the sole-source award, with less public information available compared to competed contracts. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse.

Related Government Programs

Department of Defense Ammunition Procurement
Ordnance Manufacturing Contracts
Military Readiness Support
Defense Industrial Base Contracts

Risk Flags

Sole-source award raises concerns about fair pricing and competition.
Long contract duration may indicate a lack of market alternatives or strategic sourcing decisions.
Limited transparency regarding the justification for sole-source procurement.
Potential for cost overruns due to absence of competitive pressure.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $235.1 million to GENERAL DYNAMICS ORDNANCE AND TACTICAL SYSTEMS, INC.. 120 MM M865 REFURB AND M1002 CARTRIDGES

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 $235.1 million.

What is the period of performance?

Start: 2012-03-29. End: 2022-11-07.

What is the justification for awarding this contract on a sole-source basis?

The provided data indicates the contract was awarded as 'NOT COMPETED,' signifying a sole-source procurement. The specific justification for this determination is not detailed in the summary data. Typically, sole-source awards are made when only one responsible source is available, or in cases of urgent and compelling need, or when national security interests preclude full and open competition. Without further documentation from the Department of Defense, the precise rationale remains unclear. This lack of competition raises concerns about potential cost inefficiencies and limits the government's ability to leverage market forces for better pricing.

How does the unit cost of these ammunition components compare to similar contracts or market rates?

Direct comparison of unit costs is not feasible with the provided data. The contract value is $235,075,366.10 for an unspecified quantity of M865 REFURB and M1002 cartridges over a duration of 3875 days (approximately 10.6 years). Without knowing the total number of units procured, calculating a precise unit cost is impossible. Furthermore, the sole-source nature of the award makes external benchmarking difficult, as there is no competitive data to reference. To assess value, a detailed cost analysis by the Department of Defense, comparing internal cost estimates and historical pricing for similar items, would be necessary.

What are the key performance indicators (KPIs) and risk mitigation strategies associated with this contract?

The provided summary data does not explicitly detail the Key Performance Indicators (KPIs) or specific risk mitigation strategies for this contract. However, as a firm fixed-price contract, the primary performance expectation is the delivery of the specified ammunition components (M865 REFURB and M1002 cartridges) according to the agreed-upon schedule and quality standards. Risks inherent in such a long-term, sole-source contract could include potential supply chain disruptions, obsolescence of technology, or contractor performance issues. The Department of Defense would typically have internal processes for monitoring contractor performance and addressing risks, but these are not detailed here.

What is the historical spending pattern for this type of ammunition by the Department of Defense?

The provided data focuses on a single, large contract awarded in 2012 and ending in 2022. It does not offer a comprehensive view of historical spending patterns for M865 REFURB and M1002 cartridges. However, the duration and significant value of this contract suggest a consistent and substantial requirement for these ammunition types within the Department of the Army. To understand broader historical spending, one would need to analyze procurement data over a longer period, looking at multiple contracts, different fiscal years, and potentially other branches of the military that might procure similar items.

What is the track record of General Dynamics Ordnance and Tactical Systems, Inc. in fulfilling similar defense contracts?

General Dynamics Ordnance and Tactical Systems, Inc. (GD-OTS) is a well-established entity within the defense industry, known for producing a wide range of ordnance and munitions. As a subsidiary of General Dynamics, it benefits from the parent company's extensive experience and resources. While specific performance details for this particular $235 million contract are not elaborated upon in the summary, GD-OTS generally has a significant track record in supplying ammunition and related products to the U.S. military and allied nations. Their experience suggests a capability to meet complex manufacturing and delivery requirements, although the success of any individual contract depends on numerous factors including specific program management and oversight.

Industry Classification

NAICS: Manufacturing › Other Fabricated Metal Product Manufacturing › Ammunition (except Small Arms) Manufacturing

Product/Service Code: AMMUNITION AND EXPLOSIVES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: W52P1J10R0220

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: General Dynamics Corp

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: $235,075,366

Exercised Options: $235,075,366

Current Obligation: $235,075,366

Actual Outlays: $3,200,000

Subaward Activity

Number of Subawards: 26

Total Subaward Amount: $41,133,103

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline