BAE Systems awarded $57.5M for explosives manufacturing at government-owned facility, a sole-source contract

Contract Overview

Contract Amount: $57,458,446 ($57.5M)

Contractor: BAE Systems Ordnance Systems Inc.

Awarding Agency: Department of Defense

Start Date: 2019-09-09

End Date: 2023-09-30

Contract Duration: 1,482 days

Daily Burn Rate: $38.8K/day

Competition Type: NOT COMPETED

Pricing Type: FIXED PRICE INCENTIVE

Sector: Defense

Official Description: HSAAP - GOVERNMENT OWNED CONTRACTOR OPERATED U.S. GOVERNMENT FACILITY - CALENDAR YEAR 2020 REQUIREMENTS (COMP B, IMX-101, AND IMX-104).

Place of Performance

Location: KINGSPORT, SULLIVAN County, TENNESSEE, 37660

State: Tennessee Government Spending

Plain-Language Summary

Department of Defense obligated $57.5 million to BAE SYSTEMS ORDNANCE SYSTEMS INC. for work described as: HSAAP - GOVERNMENT OWNED CONTRACTOR OPERATED U.S. GOVERNMENT FACILITY - CALENDAR YEAR 2020 REQUIREMENTS (COMP B, IMX-101, AND IMX-104). Key points: 1. Contract awarded to BAE Systems for operating a government-owned facility for explosives manufacturing. 2. The contract is a fixed-price incentive type, suggesting shared risk between government and contractor. 3. Duration of the contract is over 4 years, indicating a long-term need for these services. 4. The contract was not competed, raising questions about potential cost efficiencies and market alternatives. 5. The facility is located in Tennessee, potentially impacting local workforce and economic activity. 6. The specific product codes indicate a focus on explosives manufacturing, a critical defense capability.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging without comparable sole-source awards for similar government-owned, contractor-operated facilities. The fixed-price incentive structure aims to control costs, but the lack of competition prevents direct price comparison against market alternatives. Further analysis would require understanding the specific services and overhead associated with operating a government-owned explosives manufacturing facility.

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, often due to unique capabilities, existing infrastructure, or national security considerations. The lack of competition limits the government's ability to leverage market forces to achieve the best possible price.

Taxpayer Impact: Sole-source awards mean taxpayers may not benefit from competitive pricing, potentially leading to higher costs than if multiple vendors had vied for the contract.

Public Impact

The primary beneficiary is the Department of Defense, specifically the Department of the Army, which relies on the contractor for critical explosives manufacturing capabilities. The services delivered include the operation of a government-owned facility for the production of explosives. The geographic impact is concentrated in Tennessee, where the facility is located, potentially supporting local employment and the regional economy. Workforce implications include the potential for skilled labor employment in specialized manufacturing roles within Tennessee.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to higher costs for taxpayers.
Sole-source nature limits transparency in pricing and service delivery.
Reliance on a single contractor for critical defense manufacturing poses a potential supply chain risk.

Positive Signals

Contract ensures continued operation of a critical government-owned facility.
Fixed-price incentive contract structure aims to align contractor and government interests in cost control.
Long-term contract duration provides stability for essential defense production.

Sector Analysis

The explosives manufacturing sector is a specialized niche within the broader defense industrial base. Companies operating in this area require significant expertise, stringent safety protocols, and often specialized facilities. Government-owned, contractor-operated (GOCO) facilities are common in defense manufacturing to maintain control over critical assets while leveraging private sector operational efficiency. Comparable spending benchmarks are difficult to establish due to the unique nature of GOCO facilities and the specific defense requirements.

Small Business Impact

This contract does not appear to involve small business set-asides, as indicated by the 'sb' field being false. There is no explicit information regarding subcontracting plans for small businesses. The focus on specialized explosives manufacturing suggests that prime contracting opportunities for small businesses in this specific area may be limited, though they could potentially participate as subcontractors if opportunities arise.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Army's contracting and program management offices. Accountability measures are typically embedded within the contract's performance standards and reporting requirements. Transparency may be limited due to the sole-source nature of the award. Inspector General jurisdiction would apply to investigations of fraud, waste, or abuse related to the contract.

Related Government Programs

Department of Defense Ammunition Production
Ordnance Manufacturing Contracts
Government-Owned Contractor-Operated Facilities
Defense Industrial Base Support

Risk Flags

Sole-source award limits competitive pricing.
Lack of transparency in cost and performance metrics.
Potential supply chain concentration risk.
Reliance on contractor for critical defense manufacturing.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $57.5 million to BAE SYSTEMS ORDNANCE SYSTEMS INC.. HSAAP - GOVERNMENT OWNED CONTRACTOR OPERATED U.S. GOVERNMENT FACILITY - CALENDAR YEAR 2020 REQUIREMENTS (COMP B, IMX-101, AND IMX-104).

Who is the contractor on this award?

The obligated recipient is BAE SYSTEMS ORDNANCE 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 $57.5 million.

What is the period of performance?

Start: 2019-09-09. End: 2023-09-30.

What is the historical spending pattern for this specific contract or similar services provided by BAE Systems to the Department of Defense?

Historical spending data for this specific contract is limited to the current award amount of $57,458,446.01, covering the period from September 9, 2019, to September 30, 2023. Without access to prior contract history for this exact facility or service under BAE Systems, a comprehensive historical spending pattern cannot be established. However, BAE Systems is a major defense contractor with a significant history of providing ordnance and other defense-related services. Analyzing their broader contract portfolio with the DoD could reveal trends in spending for similar capabilities, but direct comparisons require specific contract details. The duration of this contract (approximately 4 years) suggests a sustained need for these explosives manufacturing services.

How does the pricing structure (Fixed Price Incentive) compare to other contract types for similar defense manufacturing services?

Fixed Price Incentive (FPI) contracts, like this one, are designed to share cost risks and rewards between the government and the contractor. The target cost is established, and if the final cost is below the target, both parties share in the savings. If the final cost exceeds the target but remains below the ceiling price, the contractor absorbs a portion of the overrun. This contrasts with Firm Fixed Price (FFP) contracts, where the contractor bears all cost risk, and Cost Plus Incentive Fee (CPIF) contracts, which have a higher degree of cost sharing. For defense manufacturing, FPI can be effective when precise cost estimation is difficult but there's a need to incentivize cost control. However, it can be more complex to administer than FFP. The choice of contract type depends on the level of uncertainty in performance requirements and cost estimation.

What are the key performance indicators (KPIs) used to assess BAE Systems' performance under this contract?

Specific Key Performance Indicators (KPIs) for this contract are not publicly detailed in the provided data. However, for a contract involving explosives manufacturing at a government-owned facility, typical KPIs would likely include metrics related to production output (quantity and quality), adherence to safety standards, on-time delivery of manufactured explosives, cost control against the target cost, facility maintenance and operational readiness, and compliance with environmental regulations. The 'Fixed Price Incentive' nature of the contract suggests that cost performance against targets would be a significant KPI, influencing the final price paid. Performance would also be evaluated against technical specifications and delivery schedules.

What is the potential impact of this contract on the broader defense industrial base, particularly in the explosives manufacturing sector?

This contract supports the operational readiness and capacity of the U.S. defense industrial base by ensuring the continued manufacturing of essential explosives. By awarding this contract to BAE Systems for operating a government-owned facility, the Department of Defense maintains a critical capability that might otherwise be outsourced or developed independently. This sustains specialized expertise and infrastructure within the sector. The sole-source nature, however, limits opportunities for other potential manufacturers to contribute or compete, potentially concentrating this capability within one entity. It underscores the government's reliance on established, large defense contractors for specialized and sensitive manufacturing processes.

Are there any known risks associated with BAE Systems' track record in managing similar government-owned, contractor-operated facilities?

Assessing BAE Systems' track record specifically with Government-Owned Contractor-Operated (GOCO) facilities for explosives manufacturing requires a detailed review of past performance evaluations and any reported issues. BAE Systems is a large, established defense contractor with extensive experience across various defense programs. While specific public information on risks related to their management of similar GOCO explosives facilities is not readily available in this dataset, any contractor of this size may encounter performance challenges or contract disputes over time. A thorough risk assessment would involve examining past performance reports, any corrective actions taken, and the contractor's overall safety and quality record in sensitive manufacturing environments.

Industry Classification

NAICS: Manufacturing › Other Chemical Product and Preparation Manufacturing › Explosives Manufacturing

Product/Service Code: AMMUNITION AND EXPLOSIVES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Pricing Type: FIXED PRICE INCENTIVE (L)

Evaluated Preference: NONE

Contractor Details

Parent Company: Compagnie DE Developpement DE L'eau S.A.

Address: 4509 W STONE DR, KINGSPORT, TN, 37660

Business Categories: Category Business, Corporate Entity Not Tax Exempt, DoT Certified Disadvantaged Business Enterprise, Foreign Owned, Foreign-Owned and U.S.-Incorporated Business, Manufacturer of Goods, Not Designated a Small Business, Special Designations

Financial Breakdown

Contract Ceiling: $57,458,446

Exercised Options: $57,458,446

Current Obligation: $57,458,446

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: W52P1J19D0074

IDV Type: IDC

Timeline