DoD's $75.8M Explosives Manufacturing Contract with BAE Systems Faces Scrutiny for Lack of Competition

Contract Overview

Contract Amount: $75,837,658 ($75.8M)

Contractor: BAE Systems Ordnance Systems Inc.

Awarding Agency: Department of Defense

Start Date: 2019-09-26

End Date: 2023-10-31

Contract Duration: 1,496 days

Daily Burn Rate: $50.7K/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 2022 REQUIREMENTS (CXM-7, CXM-11, AND RDX TYPE II CLASS I).

Place of Performance

Location: KINGSPORT, SULLIVAN County, TENNESSEE, 37660

State: Tennessee Government Spending

Plain-Language Summary

Department of Defense obligated $75.8 million to BAE SYSTEMS ORDNANCE SYSTEMS INC. for work described as: HSAAP - GOVERNMENT OWNED CONTRACTOR OPERATED U.S. GOVERNMENT FACILITY - CALENDAR YEAR 2022 REQUIREMENTS (CXM-7, CXM-11, AND RDX TYPE II CLASS I). Key points: 1. The contract awarded to BAE Systems for explosives manufacturing represents a significant expenditure. 2. Limited competition raises concerns about potential overpricing and reduced innovation. 3. The fixed-price incentive structure aims to control costs but effectiveness is tied to oversight. 4. The sector is critical for national defense, making reliable supply chains paramount.

Value Assessment

Rating: questionable

The contract's total value is substantial. Without competitive bidding, it's difficult to assess if the pricing is optimal compared to market rates for similar explosives manufacturing services.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

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

Taxpayer Impact: The lack of competition means taxpayers may be paying a premium for these essential explosives, as the government did not explore potentially lower-cost alternatives.

Public Impact

Ensures supply of critical explosives for military operations. Potential for higher costs due to lack of competitive bidding. Reliance on a single contractor for essential defense materials. Impacts the defense industrial base and associated workforce.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition
Sole-source award
Potential for inflated pricing

Positive Signals

Ensures critical supply chain for defense
Fixed-price incentive contract type

Sector Analysis

This contract falls within the Explosives Manufacturing sector, crucial for national defense. Spending benchmarks in this specialized area are hard to establish due to limited public data and high barriers to entry.

Small Business Impact

The data indicates this contract was not awarded to small businesses, as BAE Systems is a large defense contractor. There is no indication of subcontracting opportunities for small businesses within this specific award.

Oversight & Accountability

The 'not competed' status necessitates robust oversight to ensure the contractor is meeting performance requirements and that pricing remains reasonable, despite the absence of competitive pressure. Accountability for cost and quality is key.

Related Government Programs

Explosives Manufacturing
Department of Defense Contracting
Department of the Army Programs

Risk Flags

Sole-source award lacks competitive pricing pressure.
Potential for cost overruns without market comparison.
Dependency on a single supplier for critical defense materials.
Limited transparency into the justification for non-competition.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $75.8 million to BAE SYSTEMS ORDNANCE SYSTEMS INC.. HSAAP - GOVERNMENT OWNED CONTRACTOR OPERATED U.S. GOVERNMENT FACILITY - CALENDAR YEAR 2022 REQUIREMENTS (CXM-7, CXM-11, AND RDX TYPE II CLASS I).

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 $75.8 million.

What is the period of performance?

Start: 2019-09-26. End: 2023-10-31.

What is the justification for awarding this contract on a sole-source basis, and what steps are being taken to ensure fair pricing?

The justification for a sole-source award typically involves unique capabilities or urgent needs. Without this information, it's presumed the government has determined BAE Systems is the only viable source. Robust oversight, including detailed cost analysis and performance monitoring, is crucial to mitigate risks associated with non-competitive awards and ensure fair pricing.

What are the risks associated with relying on a single contractor for critical explosives manufacturing, especially given the lack of competition?

The primary risks include supply chain disruption if the sole contractor faces issues, potential for price escalation over time without competitive pressure, and reduced incentive for innovation. This reliance also limits the government's ability to leverage market competition for better terms or explore alternative technologies. Contingency planning and strong contract management are vital.

How effectively is the fixed-price incentive contract structure being utilized to manage costs and ensure quality for this sole-source award?

The effectiveness of a fixed-price incentive contract hinges on clearly defined performance targets and cost ceilings, along with rigorous monitoring. For a sole-source award, the government must meticulously track performance against these metrics and ensure the incentive structure truly drives efficiency and quality without being exploited due to the lack of competition. Regular audits are essential.

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: $75,837,658

Exercised Options: $75,837,658

Current Obligation: $75,837,658

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