Department of Defense awards $62.2M contract for explosives manufacturing to BAE Systems, with no competition

Contract Overview

Contract Amount: $62,189,544 ($62.2M)

Contractor: BAE Systems Ordnance Systems Inc.

Awarding Agency: Department of Defense

Start Date: 2019-09-09

End Date: 2023-06-30

Contract Duration: 1,390 days

Daily Burn Rate: $44.7K/day

Competition Type: NOT COMPETED

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: HSAAP - GOVERNMENT OWNED CONTRACTOR OPERATED U.S. GOVERNMENT FACILITY - CALENDAR YEAR 2021 REQUIREMENTS (IMX-101).

Place of Performance

Location: KINGSPORT, SULLIVAN County, TENNESSEE, 37660

State: Tennessee Government Spending

Plain-Language Summary

Department of Defense obligated $62.2 million to BAE SYSTEMS ORDNANCE SYSTEMS INC. for work described as: HSAAP - GOVERNMENT OWNED CONTRACTOR OPERATED U.S. GOVERNMENT FACILITY - CALENDAR YEAR 2021 REQUIREMENTS (IMX-101). Key points: 1. Contract awarded on a firm-fixed-price basis, indicating defined cost expectations. 2. The contract spans nearly four years, suggesting a long-term need for these services. 3. Performance is located in Tennessee, potentially impacting the local economy and workforce. 4. The absence of competition raises questions about potential cost efficiencies and market responsiveness. 5. This contract falls under the 'Explosives Manufacturing' category, a critical defense industrial base component. 6. The award was a delivery order against a previously established contract vehicle.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to the lack of competitive bids and specific service details. The raw dollar amount of $62.2 million over approximately 3.75 years suggests an average annual spend of around $16.6 million. Without comparable contract data for similar explosives manufacturing facilities operated by the government, it's difficult to definitively assess if this represents excellent value. The firm-fixed-price structure provides some cost certainty, but the lack of competition limits the ability to gauge market-driven pricing.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was not competed, indicating a sole-source award. The specific reasons for this determination are not provided in the data. Sole-source awards can occur for various reasons, including specialized capabilities, urgent needs, or when only one responsible source exists. The lack of competition means that the Department of the Army did not solicit bids from multiple vendors, which can limit price discovery and potentially lead to higher costs compared to a competitive process.

Taxpayer Impact: Taxpayers may not be receiving the best possible price due to the absence of competitive bidding. This could result in a higher overall expenditure for the required explosives manufacturing services.

Public Impact

The primary beneficiary is the Department of Defense, ensuring a supply of manufactured explosives. Services delivered include the operation of a government-owned facility for explosives production. The geographic impact is concentrated in Tennessee, where the facility is located. Workforce implications include the potential for skilled labor employment in the explosives manufacturing sector within Tennessee.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to inflated costs for taxpayers.
Sole-source awards can reduce transparency and accountability in government spending.
Absence of competitive pressure might disincentivize innovation and efficiency improvements by the contractor.

Positive Signals

Firm-fixed-price contract provides cost certainty for the government.
Contract duration of nearly four years suggests a stable and predictable operational period.
BAE Systems is a known entity in defense contracting, potentially bringing established expertise.

Sector Analysis

The explosives manufacturing sector is a critical component of the defense industrial base, essential for national security. This contract supports the government's need for specialized ordnance production. The market for such services is typically characterized by high barriers to entry due to stringent safety regulations, specialized equipment, and security requirements. Spending in this sector is often driven by defense budgets and geopolitical considerations. Comparable spending benchmarks are difficult to establish without more specific details on the types and quantities of explosives manufactured.

Small Business Impact

The data indicates that this contract was not set aside for small businesses, and there is no information suggesting subcontracting opportunities for small businesses. This means that the primary contract was awarded to a large business, and the direct impact on the small business ecosystem through this specific award is likely minimal. Further analysis would be needed to determine if BAE Systems has a subcontracting plan in place that benefits small businesses.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of the Army's contracting and program management offices. Accountability measures are inherent in the firm-fixed-price contract type, which obligates the contractor to deliver specific goods or services at an agreed-upon price. Transparency is limited by the sole-source nature of the award; however, contract awards are generally reported in federal procurement databases. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Ordnance Manufacturing
Defense Industrial Base Support
Government-Owned Contractor-Operated Facilities
Explosives Production
Department of the Army Procurement

Risk Flags

Sole-source award lacks competitive pricing.
Potential for cost overruns if contractor's estimates are inaccurate.
Limited transparency due to non-competitive nature.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $62.2 million to BAE SYSTEMS ORDNANCE SYSTEMS INC.. HSAAP - GOVERNMENT OWNED CONTRACTOR OPERATED U.S. GOVERNMENT FACILITY - CALENDAR YEAR 2021 REQUIREMENTS (IMX-101).

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 $62.2 million.

What is the period of performance?

Start: 2019-09-09. End: 2023-06-30.

What is the historical spending pattern for explosives manufacturing services by the Department of Defense, and how does this contract compare?

Analyzing historical spending for explosives manufacturing requires access to detailed procurement data beyond this single contract. Generally, the Department of Defense (DoD) spends billions annually on a wide array of munitions and explosives, supporting various operational and training needs. This $62.2 million contract represents a specific allocation for operating a Government-Owned Contractor-Operated (GOCO) facility. Without knowing the specific types and quantities of explosives produced under this contract, a direct comparison to broader historical spending is difficult. However, the duration and value suggest a significant, ongoing requirement. Historically, the DoD has relied on both government-owned and contractor-owned facilities for explosives production, with spending fluctuating based on global security postures, modernization programs, and inventory levels. This contract's value should be assessed against the specific mission requirements it fulfills within the larger DoD explosives procurement landscape.

What are the specific risks associated with a sole-source contract for critical defense manufacturing like explosives?

Sole-source contracts for critical defense manufacturing, such as explosives, present several risks. Foremost is the risk of inflated costs, as the absence of competition removes the downward price pressure that multiple bidders would typically exert. This can lead to taxpayers bearing a higher financial burden than necessary. Another significant risk is reduced innovation and efficiency; without competitive incentives, the sole contractor may have less motivation to invest in process improvements or develop more cost-effective manufacturing techniques. Furthermore, a sole-source award can create vendor lock-in, making it difficult and potentially more expensive to switch providers in the future if performance issues arise or market conditions change. There's also a potential risk to supply chain resilience if the sole provider faces disruptions. Finally, the lack of transparency inherent in sole-source decisions can sometimes mask underlying issues or lead to perceptions of favoritism, potentially impacting public trust.

How does the firm-fixed-price (FFP) contract type mitigate risks for the government in this explosives manufacturing scenario?

The Firm-Fixed-Price (FFP) contract type is generally considered advantageous for the government when the scope of work is well-defined and risks of cost overruns are manageable. In this explosives manufacturing contract, an FFP structure means that BAE Systems is obligated to deliver the specified explosives at the agreed-upon price, regardless of their actual costs incurred. This shifts the cost risk from the government to the contractor. For the government, this provides significant budget certainty, as the total expenditure is known upfront. It simplifies financial planning and reduces the likelihood of unexpected cost increases. However, the effectiveness of FFP in mitigating risk is dependent on the accuracy of the initial cost estimation and the contractor's ability to manage their expenses. If the contractor significantly underestimates costs, they may face financial strain, potentially impacting performance or leading to requests for contract modifications, which could negate some of the FFP benefits.

What is BAE Systems' track record with similar government contracts, particularly in explosives manufacturing?

BAE Systems is a major defense contractor with extensive experience in various defense sectors, including ordnance and explosives manufacturing. They operate several facilities globally that produce a wide range of munitions and related components for military customers. Their track record includes fulfilling large, complex contracts for governments, often involving advanced technologies and stringent quality requirements. Specific to explosives manufacturing, BAE Systems has been involved in producing artillery shells, missile components, and other energetic materials. While this particular contract is a sole-source award, BAE Systems has also secured competitive contracts in related areas. A comprehensive assessment of their track record would involve reviewing past performance evaluations, any contract disputes or terminations, and their history of meeting delivery schedules and quality standards on similar programs.

What are the potential implications for the local economy and workforce in Tennessee due to this contract?

This contract, valued at $62.2 million and spanning nearly four years, is likely to have a positive impact on the local economy and workforce in Tennessee, where the Government-Owned Contractor-Operated (GOCO) facility is located. The operation of an explosives manufacturing facility requires a skilled workforce, potentially creating or sustaining jobs in areas such as chemical engineering, manufacturing operations, quality assurance, safety management, and logistics. The presence of such a facility can also stimulate indirect economic activity through local procurement of goods and services, and increased demand for housing and amenities from employees. The duration of the contract suggests a stable employment base for the period. However, the specific number of jobs created or sustained and the exact economic multiplier effect would depend on the scale of operations and the extent of local sourcing.

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: FIRM FIXED PRICE (J)

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: $62,189,544

Exercised Options: $62,189,544

Current Obligation: $62,189,544

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