DoD's $24.2M contract for ammunition manufacturing shows fair value despite limited competition

Contract Overview

Contract Amount: $24,210,857 ($24.2M)

Contractor: Nato Support and Procurement Agency

Awarding Agency: Department of Defense

Start Date: 2011-02-01

End Date: 2018-07-02

Contract Duration: 2,708 days

Daily Burn Rate: $8.9K/day

Competition Type: FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: M772/M776 FUZES FOR PICATINNY ARESENAL, NJ

Plain-Language Summary

Department of Defense obligated $24.2 million to NATO SUPPORT AND PROCUREMENT AGENCY for work described as: M772/M776 FUZES FOR PICATINNY ARESENAL, NJ Key points: 1. Contract awarded through full and open competition after exclusion of sources, indicating a deliberate selection process. 2. The contract's duration and value suggest a significant, long-term need for these specific ammunition components. 3. Performance period of 2708 days (over 7 years) points to sustained demand and potential for contractor stability. 4. The firm-fixed-price structure generally favors the government by shifting cost overrun risks to the contractor. 5. While competition was not broad, the 'after exclusion of sources' clause implies a rationale for limiting bidders. 6. The contract falls under the Ammunition (except Small Arms) Manufacturing sector, a critical defense industrial base component.

Value Assessment

Rating: good

Benchmarking the value of this contract is challenging without specific per-unit cost data or comparable contracts for M772/M776 FUZES. However, the firm-fixed-price (FFP) award type is generally favorable for the government, as it caps the contractor's potential profit and transfers cost overrun risks. The duration of the contract (over 7 years) suggests that the negotiated price was deemed acceptable for a long-term supply agreement, implying a reasonable assessment of value at the time of award.

Cost Per Unit: N/A

Competition Analysis

Competition Level: limited

The contract was awarded using 'Full and Open Competition After Exclusion of Sources.' This indicates that while the competition was intended to be open, specific sources were excluded for reasons not detailed in the provided data. This approach can sometimes limit the number of bidders and potentially impact price discovery compared to unrestricted full and open competition. The number of bidders is not specified, but the designation suggests a curated selection process rather than a broad market solicitation.

Taxpayer Impact: While the competition was not fully unrestricted, the 'after exclusion of sources' clause implies a justification for the limited pool. Taxpayers benefit from a structured procurement process, even if it narrows the field, provided the selected contractor offers competitive terms within that narrowed scope.

Public Impact

The primary beneficiaries are the Department of the Army and potentially allied forces through the NATO Support and Procurement Agency, receiving critical ammunition components. The contract ensures the supply of M772/M776 FUZES, essential for specific artillery systems. The manufacturing likely occurs at or near Picatinny Arsenal, NJ, potentially supporting the local industrial base and workforce. This contract contributes to the readiness and operational capability of military forces reliant on this type of ammunition.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Limited competition ('after exclusion of sources') may have reduced potential cost savings for taxpayers.
Lack of specific per-unit cost data makes detailed value-for-money assessment difficult.
The long contract duration could lead to price increases if market conditions change significantly and are not adequately addressed in the contract.

Positive Signals

Firm-fixed-price contract structure shifts cost risk to the contractor.
Award through a structured competition process, even if limited, suggests due diligence.
Long-term contract provides supply chain stability for critical defense components.

Sector Analysis

This contract falls within the Ammunition (except Small Arms) Manufacturing sector, a specialized segment of the defense industrial base. The market for such components is often characterized by high barriers to entry due to stringent quality requirements, specialized manufacturing capabilities, and long qualification processes. Spending in this sector is driven by military readiness needs and geopolitical factors. Comparable spending benchmarks would typically involve other contracts for artillery fuzes or similar ordnance components, often awarded by defense agencies.

Small Business Impact

The data indicates that small business participation (ss: false, sb: false) was not a primary set-aside consideration for this contract. This suggests the contract was likely awarded to a large business or a specialized manufacturer capable of meeting the stringent requirements. There is no explicit information on subcontracting plans for small businesses, which could represent a missed opportunity to engage the small business industrial base in supporting this critical defense need.

Oversight & Accountability

Oversight for this Department of Defense contract would typically fall under the purview of the relevant Army contracting command and potentially the Department of Defense Inspector General. Accountability measures are inherent in the firm-fixed-price contract type, which obligates the contractor to deliver specified goods at an agreed-upon price. Transparency is generally maintained through contract databases like FPDS, although detailed justifications for source exclusions may not always be publicly accessible.

Related Government Programs

Artillery Ammunition Procurement
Ordnance Manufacturing Contracts
Defense Industrial Base Support
NATO Procurement Contracts
Picatinny Arsenal Contracts

Risk Flags

Limited Competition
Long Contract Duration
Lack of Detailed Cost Breakdown

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $24.2 million to NATO SUPPORT AND PROCUREMENT AGENCY. M772/M776 FUZES FOR PICATINNY ARESENAL, NJ

Who is the contractor on this award?

The obligated recipient is NATO SUPPORT AND PROCUREMENT AGENCY.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $24.2 million.

What is the period of performance?

Start: 2011-02-01. End: 2018-07-02.

What is the specific rationale behind the 'exclusion of sources' in this full and open competition?

The provided data does not specify the exact reasons for excluding certain sources in this 'Full and Open Competition After Exclusion of Sources' award. Typically, such exclusions are based on factors like national security concerns, proprietary technology, specific security clearances required, or the need for a contractor with unique, pre-qualified capabilities essential for the specialized nature of the M772/M776 FUZES. Without further documentation or agency explanation, the precise justification remains unclear, but it implies a deliberate narrowing of the competitive field based on specific criteria deemed necessary by the NATO Support and Procurement Agency for this particular procurement.

How does the firm-fixed-price (FFP) structure benefit the government in this context?

The Firm-Fixed-Price (FFP) contract structure is highly beneficial for the government in this ammunition manufacturing contract. It establishes a final price that is not subject to any adjustment based on the contractor's cost experience in performing the work. This means the contractor bears the full risk of cost overruns. For the government, this provides budget certainty and predictability, as the total cost is known upfront. It incentivizes the contractor to manage its costs efficiently and effectively to maximize profit, as any savings achieved below the fixed price directly benefit the contractor's bottom line. This structure is particularly suitable for procurements where the scope of work is well-defined, as it is with the manufacturing of specific ammunition components like fuzes.

What are the potential risks associated with a contract duration of over 7 years?

A contract duration of over 7 years (2708 days) presents several potential risks. Firstly, market conditions for raw materials, labor, and manufacturing processes can fluctuate significantly over such a long period, potentially leading to unforeseen cost increases for the contractor that might not be fully mitigated by the FFP structure if not carefully negotiated. Secondly, technological advancements could render the specified fuzes obsolete or less effective, although this is less likely for established ordnance. Thirdly, contractor performance or financial stability could degrade over time, impacting delivery schedules or quality. Finally, the government might be locked into a potentially suboptimal price if market rates decrease substantially during the contract term, although contract clauses can sometimes address economic price adjustments.

Can we compare the value of this contract to similar ammunition fuze procurements?

Directly comparing the value of this $24.2 million contract for M772/M776 FUZES to similar procurements is difficult without access to detailed contract data, including specific quantities, unit prices, and the exact type of fuzes involved in other contracts. Ammunition components vary significantly in complexity, materials, and production scale, influencing their cost. Furthermore, the 'Full and Open Competition After Exclusion of Sources' aspect suggests this procurement might have unique circumstances. A comprehensive benchmark would require analyzing contracts for comparable artillery fuzes awarded by the DoD or other NATO agencies over a similar timeframe, considering factors like competition levels and contract types.

What is the significance of this contract for the defense industrial base in New Jersey?

This contract, awarded for manufacturing at or near Picatinny Arsenal, NJ, holds significant importance for the regional defense industrial base. Picatinny Arsenal is a major hub for munitions research, development, and production. Contracts like this sustain specialized manufacturing capabilities, support skilled labor jobs in engineering, production, and quality assurance, and contribute to the economic vitality of the area. It reinforces the ecosystem of suppliers and support services necessary for maintaining domestic production capacity for critical ordnance, ensuring supply chain resilience and reducing reliance on foreign sources for essential defense materiel.

Industry Classification

NAICS: Manufacturing › Other Fabricated Metal Product Manufacturing › Ammunition (except Small Arms) Manufacturing

Product/Service Code: AMMUNITION AND EXPLOSIVES

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES

Solicitation Procedures: SEALED BID

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: RUE DE LA GARE 11, KOERICH

Business Categories: Category Business, Community Developed Corporation Owned Firm, Community Development Corporation, International Organization, Minority Owned Business, Nonprofit Organization, Other Minority Owned Business, Not Designated a Small Business, Special Designations

Financial Breakdown

Contract Ceiling: $24,210,857

Exercised Options: $24,210,857

Current Obligation: $24,210,857

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline