DoD awards $286M contract for tracer ammunition manufacturing to Olin Winchester LLC

Contract Overview

Contract Amount: $285,994,827 ($286.0M)

Contractor: Olin Winchester LLC

Awarding Agency: Department of Defense

Start Date: 2021-03-29

End Date: 2028-01-31

Contract Duration: 2,499 days

Daily Burn Rate: $114.4K/day

Competition Type: FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: THE PURPOSE OF THIS DELIVERY ORDER IS TO AWARD THE XM1201 ONE-WAY LUMINESCENT (OWL) TRACER MANUFACTURING PROJECT.

Place of Performance

Location: INDEPENDENCE, JACKSON County, MISSOURI, 64056

State: Missouri Government Spending

Plain-Language Summary

Department of Defense obligated $286.0 million to OLIN WINCHESTER LLC for work described as: THE PURPOSE OF THIS DELIVERY ORDER IS TO AWARD THE XM1201 ONE-WAY LUMINESCENT (OWL) TRACER MANUFACTURING PROJECT. Key points: 1. Contract awarded through full and open competition, suggesting a competitive bidding process. 2. The contract duration of approximately 7 years indicates a long-term need for this capability. 3. The Cost Plus Fixed Fee (CPFF) pricing structure may lead to cost overruns if not closely managed. 4. The specific product, luminescent tracer ammunition, suggests a specialized military application. 5. The award to a single contractor, Olin Winchester LLC, warrants scrutiny of market concentration. 6. The contract is for manufacturing, implying a focus on production capacity and efficiency.

Value Assessment

Rating: fair

The contract value of $286 million over nearly 7 years for tracer ammunition manufacturing appears substantial. Benchmarking this against similar long-term manufacturing contracts for specialized munitions is difficult without more specific data on unit costs and production volumes. The CPFF structure introduces inherent risk for cost control, as the government bears the cost of performance plus a fixed fee. Value for money will depend heavily on the contractor's efficiency and the government's oversight of incurred costs.

Cost Per Unit: N/A

Competition Analysis

Competition Level: limited

The contract was awarded under 'FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES.' This indicates that while the initial solicitation was open, specific sources were excluded, potentially limiting the competitive landscape. The exact reasons for exclusion are not detailed, but it suggests that only a subset of potential manufacturers were considered. The number of bidders is not specified, making it difficult to fully assess the degree of competition and its impact on price discovery.

Taxpayer Impact: The limited competition may have resulted in a higher price for taxpayers than if a broader range of sources had been included. It is crucial to understand the justification for excluding sources to ensure fair pricing.

Public Impact

The U.S. Department of the Army benefits from a sustained supply of specialized tracer ammunition. This contract ensures the production of luminescent tracer rounds, likely for training and combat identification. The manufacturing will occur in Missouri, potentially impacting the local workforce and economy. The availability of this ammunition supports military readiness and operational capabilities.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost Plus Fixed Fee (CPFF) contract type can incentivize cost overruns if not managed diligently.
The 'exclusion of sources' in the competition raises questions about the breadth of market engagement.
Lack of specific unit cost data makes independent value assessment challenging.
Long contract duration requires sustained oversight to ensure performance and cost control.

Positive Signals

Awarded through a competitive process, indicating some level of market vetting.
The contract addresses a specific, likely critical, military supply need.
Manufacturing in a single location (Missouri) could lead to localized economic benefits.

Sector Analysis

The defense manufacturing sector is characterized by high barriers to entry, specialized knowledge, and significant government oversight. Contracts for munitions, particularly specialized types like tracer rounds, are often awarded to a limited number of established defense contractors with the necessary expertise and production facilities. The market size for such niche ammunition is directly tied to military procurement budgets and strategic needs. This contract fits within the broader category of small arms ammunition manufacturing, a segment that requires adherence to strict quality and safety standards.

Small Business Impact

The data indicates this contract was not set aside for small businesses (sb: false) and does not appear to involve significant subcontracting opportunities for small businesses based on the provided details. The primary awardee, Olin Winchester LLC, is a large defense contractor. Therefore, the direct impact on the small business ecosystem is likely minimal, though indirect effects through the supply chain are possible but not detailed here.

Oversight & Accountability

Oversight for this Cost Plus Fixed Fee contract will likely be managed by the Department of the Army's contracting and program management offices. Accountability measures will focus on tracking incurred costs against the fixed fee and ensuring production meets specified quality and delivery timelines. Transparency may be limited due to the nature of defense contracting, but contract awards and basic details are publicly available. The Inspector General's office may conduct audits or investigations into cost management and performance.

Related Government Programs

Small Arms Ammunition
Military Munitions
Defense Manufacturing
Department of the Army Procurement
Specialized Ammunition

Risk Flags

Cost Overrun Risk (CPFF)
Limited Competition Justification
Long-Term Contract Flexibility
Supply Chain Dependency

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $286.0 million to OLIN WINCHESTER LLC. THE PURPOSE OF THIS DELIVERY ORDER IS TO AWARD THE XM1201 ONE-WAY LUMINESCENT (OWL) TRACER MANUFACTURING PROJECT.

Who is the contractor on this award?

The obligated recipient is OLIN WINCHESTER LLC.

Which agency awarded this contract?

Awarding agency: Department of Defense (Department of the Army).

What is the total obligated amount?

The obligated amount is $286.0 million.

What is the period of performance?

Start: 2021-03-29. End: 2028-01-31.

What is the historical spending pattern for luminescent tracer ammunition by the Department of Defense?

Analyzing historical spending for luminescent tracer ammunition requires accessing detailed procurement databases over several fiscal years. Typically, such specialized ammunition is procured in cycles based on inventory levels, training requirements, and operational deployments. Spending can fluctuate significantly year-to-year depending on major training exercises, combat operations, and the phasing out or introduction of new weapon systems that utilize different types of ammunition. Without specific historical data for this particular item (XM1201 OWL Tracer), it's difficult to provide precise figures. However, it's reasonable to assume that consistent, albeit potentially variable, funding is allocated to ensure adequate stocks for training and operational readiness. The current $286 million award over nearly seven years suggests a significant, sustained requirement.

What are the specific risks associated with a Cost Plus Fixed Fee (CPFF) contract for ammunition manufacturing?

The primary risk with a CPFF contract for ammunition manufacturing is the potential for cost overruns. In a CPFF structure, the contractor is reimbursed for all allowable costs incurred in performing the work, plus a predetermined fixed fee representing profit. If the contractor's costs are higher than anticipated due to inefficiencies, material price increases, or unforeseen production challenges, the government bears the brunt of these increased costs. While the fixed fee provides the contractor with a stable profit margin, it doesn't directly incentivize cost reduction as much as other contract types like fixed-price. Effective government oversight is crucial to scrutinize allowable costs, ensure efficient operations, and prevent unnecessary expenditures. For ammunition manufacturing, risks can include raw material volatility, complex production processes, and stringent quality control requirements that can drive up costs.

How does the 'exclusion of sources' clause impact competition and pricing for this contract?

The 'exclusion of sources' clause, as indicated in the contract's award information, suggests that the solicitation was not truly 'full and open' in the broadest sense. This means that while multiple bidders might have been considered, certain potential sources were deliberately excluded from the competition. The reasons for such exclusions can vary, including national security concerns, proprietary technology, or specific capabilities only possessed by a limited number of entities. However, excluding potential bidders inherently limits the competitive pool. This reduced competition can potentially lead to higher prices for the government, as fewer companies are vying for the contract. It also raises questions about whether the government secured the best possible value. A thorough justification for the exclusion of specific sources is typically required to ensure fairness and maximize taxpayer value.

What is Olin Winchester LLC's track record in manufacturing ammunition for the U.S. military?

Olin Winchester LLC, through its Winchester division, has a long and established history as a major supplier of ammunition to the U.S. military. They are known for producing a wide range of small arms ammunition, including rifle, pistol, and machine gun rounds, as well as specialized munitions. The company has held numerous contracts with the Department of Defense and other government agencies over many decades. Their extensive experience suggests a deep understanding of military specifications, quality control requirements, and production capabilities necessary for fulfilling large-scale defense contracts. While specific performance details on past contracts are not provided here, their continued role as a primary ammunition supplier indicates a generally reliable track record in meeting the military's needs.

What are the potential implications of awarding a long-term (nearly 7-year) contract for ammunition manufacturing?

Awarding a long-term contract, such as this nearly 7-year delivery order, for ammunition manufacturing has several implications. Positively, it provides the contractor with the stability and predictability needed to invest in production capacity, workforce, and technology, potentially leading to greater efficiency and lower unit costs over time. It also ensures a consistent supply chain for the military, crucial for readiness. However, long-term contracts also carry risks. Market conditions, technology, and military requirements can change significantly over seven years, potentially making the contracted product or price less optimal. It also ties the government to a specific supplier and production method for an extended period, potentially limiting flexibility. Robust oversight is essential to manage performance, costs, and adapt to evolving needs throughout the contract's duration.

Industry Classification

NAICS: Manufacturing › Other Fabricated Metal Product Manufacturing › Small Arms Ammunition Manufacturing

Product/Service Code: AMMUNITION AND EXPLOSIVES

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Olin Corporation

Address: 25201 E 78 HWY, INDEPENDENCE, MO, 64056

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $285,994,827

Exercised Options: $285,994,827

Current Obligation: $285,994,827

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: W52P1J19D0085

IDV Type: IDC

Timeline