Department of Defense awards $267.7M for M62A1 tracers, with a fixed-price economic adjustment contract

Contract Overview

Contract Amount: $267,660,057 ($267.7M)

Contractor: Olin Winchester LLC

Awarding Agency: Department of Defense

Start Date: 2022-03-31

End Date: 2024-09-30

Contract Duration: 914 days

Daily Burn Rate: $292.8K/day

Competition Type: FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Defense

Official Description: THE PURPOSE OF THIS DELIVERY ORDER IS TO AWARD THE M62A1 TRACERS FY22 PRODUCTION ORDER.

Place of Performance

Location: INDEPENDENCE, JACKSON County, MISSOURI, 64056

State: Missouri Government Spending

Plain-Language Summary

Department of Defense obligated $267.7 million to OLIN WINCHESTER LLC for work described as: THE PURPOSE OF THIS DELIVERY ORDER IS TO AWARD THE M62A1 TRACERS FY22 PRODUCTION ORDER. Key points: 1. Contract awarded to Olin Winchester LLC for FY22 production of M62A1 tracers. 2. The contract type is Fixed Price with Economic Price Adjustment, allowing for cost fluctuations. 3. Delivery order duration is 914 days, spanning from March 31, 2022, to September 30, 2024. 4. The contract was awarded under Full and Open Competition after Exclusion of Sources. 5. This award represents a significant investment in small arms ammunition manufacturing. 6. The base award amount is $267,660,056.94. 7. The contract is managed by the Department of the Army. 8. The North American Industry Classification System (NAICS) code is 332992.

Value Assessment

Rating: good

The contract value of $267.7 million for M62A1 tracers appears to be within a reasonable range for large-scale ammunition production, considering the fixed-price with economic adjustment structure. Benchmarking against similar large-volume munitions contracts would provide a more precise value-for-money assessment. The economic price adjustment clause introduces a degree of risk regarding potential cost overruns, but it also allows for fair compensation to the contractor in volatile market conditions for raw materials.

Cost Per Unit: N/A

Competition Analysis

Competition Level: limited

The contract was awarded under 'Full and Open Competition after Exclusion of Sources.' This specific designation suggests that while the competition was intended to be open, certain sources may have been excluded for specific reasons, potentially related to technical capabilities, security clearances, or prior performance. The exact number of bidders and the rationale for excluding other sources are not detailed, which limits a full assessment of the competitive landscape. This type of competition might lead to less aggressive pricing compared to a truly unrestricted full and open competition.

Taxpayer Impact: The limited competition may mean that taxpayers did not benefit from the most aggressive pricing achievable through a broader bidding process. However, it could also indicate that only highly qualified and specialized manufacturers were considered, potentially ensuring quality and reliability.

Public Impact

This contract directly supports the U.S. Army's operational readiness by ensuring a supply of critical ammunition. The primary beneficiaries are military personnel who rely on M62A1 tracers for training and combat. The geographic impact is primarily within the United States, with Olin Winchester LLC's facilities likely in Missouri. The contract supports jobs within the defense manufacturing sector, specifically in small arms ammunition production.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Economic price adjustment clause could lead to increased costs if raw material prices surge.
Limited competition may have resulted in a higher price than a fully open bid.
Long contract duration (914 days) increases exposure to market volatility and potential performance issues.

Positive Signals

Award to a known manufacturer (Olin Winchester LLC) suggests a degree of confidence in their production capabilities.
Fixed-price component provides some cost certainty for a portion of the contract value.
Contract is for a specific, essential military item (M62A1 tracers), indicating a clear need.

Sector Analysis

The defense sector, particularly ammunition manufacturing, is a specialized and critical component of national security. This contract falls under the broader category of defense industrial base, which relies on a limited number of highly capable firms. The market for such specialized munitions is often characterized by long lead times, significant capital investment, and stringent quality control requirements. Comparable spending benchmarks would likely involve other large-volume, fixed-price contracts for military ordnance.

Small Business Impact

The data indicates that small business participation (sb) is marked as false, and there is no mention of small business set-asides. This suggests that the primary contract was not specifically targeted towards small businesses. Subcontracting opportunities for small businesses may exist within Olin Winchester LLC's supply chain, but this is not explicitly detailed in the provided information. The overall impact on the small business ecosystem for this specific contract appears minimal, as it was awarded to a large prime contractor.

Oversight & Accountability

Oversight for this contract is primarily managed by the Department of the Army. Accountability measures are embedded within the contract terms, including delivery schedules and quality specifications. Transparency is facilitated through contract award databases like FPDS. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse related to the contract.

Related Government Programs

Department of Defense Ammunition Procurement
Small Arms Ammunition Manufacturing
Army Combat Ammunition Systems
Fixed Price with Economic Price Adjustment Contracts

Risk Flags

Potential for cost escalation due to economic price adjustment.
Limited competition may result in suboptimal pricing.
Long contract duration increases exposure to market volatility.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $267.7 million to OLIN WINCHESTER LLC. THE PURPOSE OF THIS DELIVERY ORDER IS TO AWARD THE M62A1 TRACERS FY22 PRODUCTION ORDER.

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 $267.7 million.

What is the period of performance?

Start: 2022-03-31. End: 2024-09-30.

What is the historical spending pattern for M62A1 tracers by the Department of Defense?

Analyzing historical spending for M62A1 tracers requires access to detailed procurement data over multiple fiscal years. Typically, the Department of Defense procures ammunition in large quantities to maintain readiness. Spending patterns can fluctuate based on operational tempo, inventory levels, modernization programs, and budget allocations. For instance, periods of heightened conflict or strategic shifts in military doctrine might lead to increased procurement. Conversely, stable geopolitical environments or budget constraints could result in lower or steady spending. Without specific historical data for this particular tracer round, it's difficult to provide precise figures, but it's reasonable to assume consistent, significant annual investments to sustain the necessary stockpile for training and operational use.

How does the price per unit for these M62A1 tracers compare to similar ammunition contracts?

A precise per-unit cost comparison for the M62A1 tracers is not directly available from the provided data, as the total award amount is for a large quantity over a significant period. To benchmark the value, one would need to divide the total contract value ($267.7 million) by the total number of units procured. However, the number of units is not specified. Furthermore, the 'Fixed Price with Economic Price Adjustment' (FPEPA) clause complicates direct comparisons, as the final cost can vary. Generally, large-volume ammunition procurement aims for cost efficiencies. If the per-unit cost, once calculated, significantly exceeds benchmarks for comparable military-grade ammunition (considering factors like caliber, type, and manufacturer), it could indicate a potential value concern. The limited competition aspect also plays a role, as fewer bidders might lead to less competitive pricing.

What are the key risks associated with a Fixed Price with Economic Price Adjustment (FPEPA) contract for ammunition?

The primary risk with an FPEPA contract for ammunition is cost escalation due to the economic price adjustment clause. This clause allows the contractor to adjust the price based on fluctuations in specified economic factors, most commonly the cost of raw materials (like metals, propellants) and labor. If the market prices for these inputs increase significantly during the contract period, the total cost to the government can exceed initial projections, potentially leading to budget overruns. While this clause protects the contractor from unforeseen cost increases and ensures a fair profit, it shifts some of the financial risk to the government. Effective oversight and clear definitions of the economic factors are crucial to mitigate this risk.

What is Olin Winchester LLC's track record in fulfilling large defense ammunition contracts?

Olin Winchester LLC is a well-established and significant player in the defense ammunition manufacturing industry, with a long history of producing various types of ammunition for the U.S. military and other government agencies. They are known for their capabilities in producing small arms ammunition, including rifle and pistol cartridges, as well as specialized rounds. Their track record generally includes successful fulfillment of large-scale contracts, often involving complex production requirements and stringent quality standards. However, like any large contractor, specific contract performance can vary, and a detailed review of their past performance on similar large-volume, multi-year contracts would be necessary for a comprehensive assessment of their reliability and efficiency in meeting delivery schedules and quality specifications.

How does the 'Full and Open Competition after Exclusion of Sources' procurement method impact cost and availability?

The 'Full and Open Competition after Exclusion of Sources' method is a specific type of competitive procurement. It implies that the solicitation was initially intended for full and open competition, but certain potential sources were excluded based on specific criteria (e.g., inability to meet security requirements, lack of specialized technology, or prior performance issues). While it is still a competitive process, the exclusion of sources inherently limits the pool of potential bidders. This reduction in competition can potentially lead to higher prices compared to a scenario where all qualified sources were allowed to bid. It may also affect the availability of goods or services if the remaining bidders have limited production capacity. The rationale for exclusion must be justified to ensure fairness and prevent undue restriction of competition.

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: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT (K)

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: $267,660,057

Exercised Options: $267,660,057

Current Obligation: $267,660,057

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