Department of the Army awarded $582M for small caliber ammunition, with Alliant Techsystems Operations LLC as the sole contractor

Contract Overview

Contract Amount: $582,218,089 ($582.2M)

Contractor: Alliant Techsystems Operations LLC

Awarding Agency: Department of Defense

Start Date: 2009-03-24

End Date: 2013-09-30

Contract Duration: 1,651 days

Daily Burn Rate: $352.6K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Defense

Official Description: SMALL CALIBER AMMUNITION (5.56MM, 7.62MM, CAL .22, CAL. 30, CAL .45, CAL .50)

Place of Performance

Location: INDEPENDENCE, JACKSON County, MISSOURI, 64056

State: Missouri Government Spending

Plain-Language Summary

Department of Defense obligated $582.2 million to ALLIANT TECHSYSTEMS OPERATIONS LLC for work described as: SMALL CALIBER AMMUNITION (5.56MM, 7.62MM, CAL .22, CAL. 30, CAL .45, CAL .50) Key points: 1. The contract represents a significant investment in essential small arms ammunition for military operations. 2. A sole-source award suggests potential limitations in market competition or unique contractor capabilities. 3. The fixed-price with economic price adjustment structure aims to mitigate cost fluctuations due to market changes. 4. The contract duration of over 1600 days indicates a long-term need for these ammunition types. 5. The absence of small business set-asides warrants further investigation into subcontracting opportunities.

Value Assessment

Rating: fair

Benchmarking the value for this sole-source contract is challenging without comparable competitive bids. The total award of over $582 million over approximately four years indicates substantial spending. The economic price adjustment clause introduces variability, making a precise value assessment difficult without analyzing the specific adjustments applied. However, the sheer volume of ammunition procured suggests a critical operational need that may justify the expenditure.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning it was not competed among multiple vendors. This approach is typically used when only one responsible source can provide the required supplies or services, or in cases of urgent need. The lack of competition means that price discovery through market forces was not utilized, potentially leading to higher costs than if it had been competed.

Taxpayer Impact: Taxpayers may have paid a premium due to the absence of competitive bidding. Without a competitive process, there is less assurance that the government secured the best possible price for this substantial quantity of ammunition.

Public Impact

The primary beneficiaries are the U.S. Army and other Department of Defense branches requiring small caliber ammunition for training and combat. The contract ensures the supply of critical munitions, supporting national defense readiness. The geographic impact is primarily centered around the contractor's facilities in Missouri, but the ammunition supplied has a nationwide and global operational impact. The contract supports jobs within the defense manufacturing sector, specifically in ammunition production.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition and potentially increases costs for taxpayers.
Economic price adjustment clause introduces uncertainty in final cost.
Lack of small business participation may limit broader economic benefits.
Long contract duration could mask inefficiencies if not closely monitored.

Positive Signals

Ensures a consistent and reliable supply of critical ammunition for defense needs.
Contractor has a long-standing relationship with the government for ammunition supply.
Fixed-price elements provide some cost predictability.
Economic price adjustment can protect against unforeseen raw material cost spikes.

Sector Analysis

The small caliber ammunition manufacturing sector is a critical component of the defense industrial base. This contract falls under the broader 'Weapons, Ammunition and Other Ordnance Manufacturing' industry. The market is characterized by a limited number of large, specialized manufacturers capable of meeting stringent military specifications and production volumes. Spending in this sector is heavily influenced by geopolitical events and military readiness requirements.

Small Business Impact

This contract was not set aside for small businesses, and the data indicates no explicit small business participation. This suggests that the primary contractor, Alliant Techsystems Operations LLC, is a large business. Further analysis would be needed to determine if any subcontracting opportunities were made available to small businesses, which is crucial for fostering a diverse defense industrial base and ensuring broader economic impact.

Oversight & Accountability

Oversight for this contract would typically be managed by the contracting officer and the relevant program executive office within the Department of the Army. The contract's fixed-price with economic price adjustment terms would require careful monitoring of price adjustments to ensure they are justified. Transparency is generally maintained through contract award databases, but detailed performance metrics and cost breakdowns may be less publicly accessible for sole-source awards.

Related Government Programs

Department of Defense Ammunition Procurement
Small Arms Ammunition Manufacturing
Alliant Techsystems Contracts
Army Ammunition Supply

Risk Flags

Sole Source Award
Potential for Overpricing
Lack of Small Business Participation
Economic Price Adjustment Clause

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $582.2 million to ALLIANT TECHSYSTEMS OPERATIONS LLC. SMALL CALIBER AMMUNITION (5.56MM, 7.62MM, CAL .22, CAL. 30, CAL .45, CAL .50)

Who is the contractor on this award?

The obligated recipient is ALLIANT TECHSYSTEMS OPERATIONS 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 $582.2 million.

What is the period of performance?

Start: 2009-03-24. End: 2013-09-30.

What is the historical spending trend for small caliber ammunition by the Department of the Army?

Historical spending data for small caliber ammunition by the Department of the Army reveals a consistent and substantial requirement over the years. While specific figures fluctuate based on operational tempo, global deployments, and inventory management strategies, the Army consistently procures millions of rounds annually across various calibers. This particular contract, valued at over $582 million from 2009 to 2013, represents a significant portion of that spending during its period. Analyzing trends over longer periods (e.g., 10-20 years) would show cyclical patterns influenced by major conflicts, budget allocations, and modernization efforts. The reliance on specific contractors, especially for sole-source awards, also shapes the spending landscape, potentially leading to less price variability but also fewer opportunities for cost savings through competition.

How does the price per unit for this ammunition compare to market rates or other government contracts?

Determining an exact price per unit for this contract is complex due to the 'economic price adjustment' (EPA) clause, which allows for cost variations based on market factors. Without access to the specific EPA formula and the actual price adjustments applied during the contract period (2009-2013), a direct per-unit cost comparison is not feasible. Furthermore, as a sole-source award, there are no competitive bids to benchmark against. Generally, ammunition prices can vary significantly based on caliber, quantity, manufacturer, and specific military specifications. Government contracts often secure lower prices due to bulk purchasing power, but sole-source awards inherently lack the competitive pressure that drives down costs. Therefore, while the Army likely achieved some economies of scale, the absence of competition makes it difficult to ascertain if the price was truly optimal compared to a fully competed scenario.

What are the key risks associated with a sole-source award for critical defense supplies like ammunition?

Sole-source awards for critical defense supplies like ammunition present several key risks. Firstly, the most significant risk is the potential for inflated pricing due to the lack of competitive bidding. Without market pressure, the contractor may not be incentivized to offer the lowest possible price. Secondly, there's a risk of complacency or reduced innovation from the sole provider, as they face no direct competition. This could lead to less efficient production processes or slower adoption of new technologies. Thirdly, dependence on a single supplier creates a vulnerability in the supply chain; any disruption at the contractor's facility (e.g., natural disaster, labor strike, quality control issues) could severely impact military readiness. Finally, sole-source awards can sometimes indicate a lack of market research or a failure to foster a competitive environment for essential goods, potentially hindering the growth of other capable suppliers.

What is the track record of Alliant Techsystems Operations LLC in supplying ammunition to the government?

Alliant Techsystems Operations LLC (now part of Northrop Grumman) has a long and extensive track record of supplying ammunition and related defense products to the U.S. government, including the Department of Defense. They are a major player in the defense industry, particularly in munitions manufacturing. Historically, they have been awarded numerous large contracts for various types of ammunition, including small caliber rounds, mortar rounds, and artillery shells. Their performance has generally been characterized by the ability to meet large-scale production demands and stringent military specifications. However, like many large defense contractors, they have also been subject to scrutiny regarding contract pricing and performance on specific programs. Their established presence and capabilities in ammunition production made them a logical, albeit sole-source, provider for this specific contract.

How does the duration and value of this contract compare to typical ammunition procurement contracts?

This contract, with a duration of approximately 1651 days (over 4.5 years) and a total value of $582 million, falls within the range of significant, long-term defense procurement agreements for essential supplies. Ammunition contracts, especially for widely used calibers like those specified, often span multiple years to ensure a stable supply chain and allow contractors to plan production effectively. The value is substantial, reflecting the high volume of ammunition required by the Army. While shorter-term contracts exist for specific needs or smaller quantities, major sustainment contracts for critical munitions frequently extend for several years, often with options for extension. The $582 million figure over this period suggests an average annual expenditure of roughly $130 million, which is considerable but not necessarily outside the norm for large-scale military ammunition procurement.

What are the implications of the 'fixed price with economic price adjustment' (FPEPA) contract type for cost control?

The 'Fixed Price with Economic Price Adjustment' (FPEPA) contract type aims to balance cost certainty for the government with protection for the contractor against significant, uncontrollable cost fluctuations. In this case, the base price is fixed, but the EPA clause allows for adjustments based on specific economic factors, typically related to labor and material costs. For the government, this means the final cost could be higher than the initially estimated $582 million if input costs rise substantially. However, it also prevents the contractor from seeking additional funds due to unforeseen cost increases, which could happen under a firm-fixed-price contract during periods of high inflation or supply chain volatility. Effective cost control under FPEPA requires rigorous monitoring of the economic indicators used for adjustment and ensuring that the adjustments are applied fairly and only to legitimate cost changes, preventing the contractor from profiting excessively from the EPA clause.

Industry Classification

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

Product/Service Code: AMMUNITION AND EXPLOSIVES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT (K)

Evaluated Preference: NONE

Contractor Details

Parent Company: Northrop Grumman Corporation (UEI: 967356127)

Address: HWY 7 & 78 LAKE CITY ARMY AMUNITION PLANT, INDEPENDENCE, MO, 64056

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

Financial Breakdown

Contract Ceiling: $582,218,089

Exercised Options: $582,218,089

Current Obligation: $582,218,089

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: W52P1J09D0027

IDV Type: IDC

Timeline