DoD's $101M Explosives Manufacturing Contract Awarded to BAE Systems Faces Scrutiny

Contract Overview

Contract Amount: $101,388,445 ($101.4M)

Contractor: BAE Systems Ordnance Systems Inc.

Awarding Agency: Department of Defense

Start Date: 2019-09-23

End Date: 2024-05-31

Contract Duration: 1,712 days

Daily Burn Rate: $59.2K/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 2023 REQUIREMENTS (CXM-AF-5).

Place of Performance

Location: KINGSPORT, SULLIVAN County, TENNESSEE, 37660

State: Tennessee Government Spending

Plain-Language Summary

Department of Defense obligated $101.4 million to BAE SYSTEMS ORDNANCE SYSTEMS INC. for work described as: HSAAP - GOVERNMENT OWNED CONTRACTOR OPERATED U.S. GOVERNMENT FACILITY - CALENDAR YEAR 2023 REQUIREMENTS (CXM-AF-5). Key points: 1. The contract for calendar year 2023 requirements for a Government Owned Contractor Operated facility is a significant expenditure. 2. BAE Systems Ordnance Systems Inc. is the sole awardee, raising questions about competition. 3. The fixed-price incentive contract type suggests efforts to control costs, but the lack of competition is a risk. 4. The sector is Explosives Manufacturing, a critical defense industry.

Value Assessment

Rating: questionable

The contract value of $101M for calendar year 2023 requirements is substantial. Without competitive bidding, it's difficult to assess if this price is optimal compared to similar government-operated facilities or private sector alternatives.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was not competed, indicating a sole-source award. This limits price discovery and potentially leads to higher costs for taxpayers as there is no market pressure to offer the best price.

Taxpayer Impact: The lack of competition on this $101M contract may result in taxpayers paying more than necessary for essential explosives manufacturing services.

Public Impact

Ensures continued production of critical explosives for national defense. Potential for higher costs due to lack of competitive bidding. Reliance on a single contractor for essential defense manufacturing capabilities. Impacts the defense industrial base and supply chain security.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award
Lack of competition
Potential for cost overruns

Positive Signals

Ensures critical defense capability
Fixed-price incentive contract type

Sector Analysis

The Explosives Manufacturing sector is vital for national defense, often involving specialized facilities and high-security requirements. Government Owned Contractor Operated (GOCO) facilities are common in this sector to leverage private sector expertise while maintaining government control. Spending benchmarks are difficult to establish due to the specialized nature and security protocols involved.

Small Business Impact

There is no indication that small businesses were involved in this contract, either as prime contractors or subcontractors. The nature of explosives manufacturing and the scale of this contract likely favor large, specialized defense contractors.

Oversight & Accountability

The sole-source nature of this award warrants close oversight to ensure fair pricing and performance. The Department of Defense should have robust internal controls and justification for not pursuing a competitive process.

Related Government Programs

Explosives Manufacturing
Department of Defense Contracting
Department of the Army Programs

Risk Flags

Lack of competition
Potential for inflated pricing
Limited oversight on sole-source justification
Dependency on a single contractor
Risk of supply chain disruption

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $101.4 million to BAE SYSTEMS ORDNANCE SYSTEMS INC.. HSAAP - GOVERNMENT OWNED CONTRACTOR OPERATED U.S. GOVERNMENT FACILITY - CALENDAR YEAR 2023 REQUIREMENTS (CXM-AF-5).

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 $101.4 million.

What is the period of performance?

Start: 2019-09-23. End: 2024-05-31.

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

The justification for a sole-source award typically involves unique capabilities, urgent needs, or a lack of available sources. For this specific contract, the government would need to demonstrate that BAE Systems is the only entity capable of fulfilling the requirements for explosives manufacturing at this specific facility, or that competition was not feasible or practical within the given timeframe and scope.

How is the 'incentive' component of the fixed-price incentive contract structured to ensure cost control?

A fixed-price incentive contract establishes target costs, target profits, and price ceilings. The contractor and the government share any cost savings or overruns beyond the target cost, up to the ceiling. The incentive structure aims to motivate the contractor to control costs by sharing in the savings, while the ceiling protects the government from excessive price increases.

What are the long-term implications of relying on a sole-source contractor for critical explosives manufacturing?

Long-term reliance on a sole-source contractor can lead to reduced innovation, potential complacency, and a lack of market discipline, potentially driving up costs over time. It also creates a single point of failure in the supply chain. Diversifying sources or fostering competition, where feasible, can enhance resilience and cost-effectiveness.

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: BAE Systems PLC

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: $101,388,445

Exercised Options: $101,388,445

Current Obligation: $101,388,445

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