DoD's $36.2M medium caliber cartridge contract awarded to General Dynamics shows fair value despite limited competition

Contract Overview

Contract Amount: $36,203,863 ($36.2M)

Contractor: General Dynamics Ordnance & Tactical Systems, Inc.

Awarding Agency: Department of Defense

Start Date: 2013-03-27

End Date: 2015-08-31

Contract Duration: 887 days

Daily Burn Rate: $40.8K/day

Competition Type: FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES

Number of Offers Received: 2

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: M788 AND M789 MEDIUM CALIBER CARTRIDGES

Place of Performance

Location: MARION, WILLIAMSON County, ILLINOIS, 62959

State: Illinois Government Spending

Plain-Language Summary

Department of Defense obligated $36.2 million to GENERAL DYNAMICS ORDNANCE & TACTICAL SYSTEMS, INC. for work described as: M788 AND M789 MEDIUM CALIBER CARTRIDGES Key points: 1. Contract value of $36.2M for medium caliber cartridges represents a significant investment in ammunition procurement. 2. The award to General Dynamics, a major defense contractor, indicates a reliance on established industry players. 3. Limited competition after exclusion of sources may have implications for price optimization. 4. The firm-fixed-price contract type suggests a clear understanding of costs and risks between the government and contractor. 5. The contract duration of 887 days allowed for sustained supply chain support. 6. The contract's performance period falls within a period of active military engagement, highlighting its operational importance.

Value Assessment

Rating: good

The contract's value of $36.2 million for medium caliber cartridges appears reasonable when benchmarked against similar defense procurements. While specific per-unit cost data is not provided, the firm-fixed-price structure suggests that the government secured predictable costs. The award to a sole, established supplier like General Dynamics, however, warrants a closer look at whether alternative sourcing could have yielded better pricing. Without direct comparison data, it's difficult to definitively state it's excellent value, but it doesn't raise immediate red flags.

Cost Per Unit: N/A

Competition Analysis

Competition Level: limited

This contract was awarded under 'Full and Open Competition After Exclusion of Sources,' indicating that while the initial solicitation was broad, specific sources were later excluded, leading to a limited competition scenario. The number of bidders is not explicitly stated but the designation implies more than one potential offeror was considered, though not all were allowed to bid. This level of competition can sometimes lead to higher prices than full and open competition, as the pool of potential suppliers is restricted.

Taxpayer Impact: Taxpayers may have paid a premium due to the restricted competition. While the government likely sought specific capabilities or existing relationships, the reduced number of bidders limits the downward pressure on prices that a wider competition could generate.

Public Impact

This contract directly supports the U.S. Army's operational readiness by providing essential medium caliber ammunition. The ammunition procured is critical for various combat platforms and training exercises. The contract ensures a consistent supply of munitions, bolstering military effectiveness. The primary beneficiaries are military personnel who rely on this ammunition for mission success. The contract's impact is national, supporting defense objectives across different theaters of operation.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Limited competition could result in less favorable pricing for the government.
Reliance on a single primary contractor may create supply chain vulnerabilities if not managed proactively.
The exclusion of certain sources, if not fully justified, could represent a missed opportunity for innovation or cost savings.

Positive Signals

Award to a reputable and experienced contractor like General Dynamics ensures quality and reliability.
Firm-fixed-price contract provides cost certainty for the government.
The contract duration allowed for planned production and delivery schedules.

Sector Analysis

The defense sector, particularly ammunition manufacturing, is characterized by high barriers to entry, stringent quality control, and significant capital investment. This contract falls within the broader 'Ammunition (except Small Arms) Manufacturing' industry, which is a critical component of the defense industrial base. Spending in this area is often driven by geopolitical factors and military readiness requirements. Comparable spending benchmarks are difficult to ascertain without detailed market analysis, but this contract represents a substantial procurement within its specific niche.

Small Business Impact

The contract indicates that small business participation was not a primary set-aside consideration, as the award was made to a large prime contractor, General Dynamics. There is no explicit mention of subcontracting goals for small businesses within the provided data. This suggests that the primary focus was on the prime contractor's capabilities. Further investigation would be needed to determine if any subcontracting opportunities were made available to small businesses within the supply chain for these cartridges.

Oversight & Accountability

Oversight for this Department of the Army contract would typically fall under the purview of the Army Contracting Command and potentially the Department of Defense's Inspector General. Accountability measures are embedded in the firm-fixed-price contract terms, which hold the contractor responsible for delivering specified goods at an agreed-upon price. Transparency is facilitated through contract databases like FPDS, though detailed performance metrics and internal oversight reports are generally not publicly disclosed.

Related Government Programs

Department of Defense Ammunition Procurement
Army Medium Caliber Ammunition Programs
Defense Industrial Base Ammunition Manufacturing
General Dynamics Ordnance & Tactical Systems Contracts

Risk Flags

Limited competition may lead to higher costs.
Contractor performance history not detailed.
Specific technical requirements driving source exclusion require justification.
Potential for supply chain disruption exists with any single-source reliance.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $36.2 million to GENERAL DYNAMICS ORDNANCE & TACTICAL SYSTEMS, INC.. M788 AND M789 MEDIUM CALIBER CARTRIDGES

Who is the contractor on this award?

The obligated recipient is GENERAL DYNAMICS ORDNANCE & TACTICAL 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 $36.2 million.

What is the period of performance?

Start: 2013-03-27. End: 2015-08-31.

What is the historical spending trend for medium caliber cartridges by the Department of the Army?

Analyzing historical spending on medium caliber cartridges by the Department of the Army reveals a consistent demand driven by training requirements and operational needs. Over the past decade, spending has fluctuated based on global security postures and specific military campaigns. While this $36.2 million contract represents a significant single award, it is part of a larger, ongoing procurement strategy. Trends indicate a steady, albeit variable, investment in maintaining adequate stockpiles and ensuring the availability of modern ammunition types. Factors such as technological advancements in munitions and the phasing out of older weapon systems also influence spending patterns, often leading to procurements for newer generations of cartridges.

How does the per-unit cost of these medium caliber cartridges compare to similar contracts awarded by other military branches?

Direct comparison of per-unit costs for these medium caliber cartridges is challenging without access to detailed pricing breakdowns for this specific contract and comparable awards. However, general market intelligence suggests that ammunition prices can vary significantly based on quantity, specific caliber, material costs, and the competitive landscape at the time of award. Contracts awarded under full and open competition typically yield lower per-unit costs than those with limited competition. Given this contract's 'limited competition after exclusion of sources' status, it is plausible that the per-unit cost might be higher than what could be achieved in a more open bidding environment. Benchmarking against similar contracts from the Navy or Air Force, if available, would provide a more robust comparison, but such data is often proprietary or aggregated.

What are the key performance indicators (KPIs) used to evaluate General Dynamics' performance on this contract?

Key performance indicators for ammunition contracts typically revolve around delivery timeliness, quality control, and adherence to specifications. For this contract, KPIs would likely include meeting delivery schedules for the specified quantities of medium caliber cartridges, ensuring that the ammunition meets all technical and ballistic performance requirements (e.g., accuracy, reliability, shelf-life), and maintaining stringent quality assurance processes throughout manufacturing. Compliance with safety regulations during production and transportation is also paramount. The firm-fixed-price nature of the contract incentivizes the contractor to meet these KPIs to avoid penalties and ensure profitability, while the government would monitor these metrics to ensure mission readiness and value for money.

What is the risk profile associated with relying on General Dynamics for this critical ammunition supply?

The risk profile associated with relying on General Dynamics, a major defense contractor, for critical ammunition supply is generally considered moderate to low, given their established track record and significant capabilities. However, potential risks include supply chain disruptions (e.g., raw material shortages, geopolitical events impacting logistics), potential for cost overruns if contract terms are not tightly managed, and the risk of single-source dependency if alternative suppliers are not cultivated. Furthermore, any quality control failures could have significant operational impacts. The government mitigates these risks through contract oversight, performance monitoring, and maintaining strategic relationships with multiple suppliers where feasible, although this specific contract points to a more consolidated approach.

How has the exclusion of sources in the competition process impacted the overall cost-effectiveness of this procurement?

The exclusion of sources in the competition process for this $36.2 million contract likely had a negative impact on overall cost-effectiveness. Full and open competition typically fosters a more robust price discovery mechanism, encouraging bidders to offer their most competitive pricing to win the contract. When sources are excluded, the bidding pool shrinks, potentially reducing competitive pressure. This can lead to higher prices than might be achieved in a broader competition. While the government may have excluded sources based on specific technical requirements, security clearances, or past performance, the lack of a fully open market means taxpayers may not have received the lowest possible price for these medium caliber cartridges. Quantifying the exact cost impact requires comparing this contract's pricing to a hypothetical scenario with broader competition.

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: SUBJECT TO MULTIPLE AWARD FAIR OPPORTUNITY

Offers Received: 2

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: General Dynamics Corp (UEI: 001381284)

Address: 6658 ROUTE 148, MARION, IL, 12

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: $36,203,863

Exercised Options: $36,203,863

Current Obligation: $36,203,863

Contract Characteristics

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: W52P1J13D0038

IDV Type: IDC

Timeline