DoD's $648.9M Small Arms Ammunition contract awarded to Alliant Techsystems Operations LLC shows limited competition

Contract Overview

Contract Amount: $648,867,601 ($648.9M)

Contractor: Alliant Techsystems Operations LLC

Awarding Agency: Department of Defense

Start Date: 2009-10-27

End Date: 2013-09-14

Contract Duration: 1,418 days

Daily Burn Rate: $457.6K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Defense

Official Description: SMALL CAL REQUIREMENTS

Place of Performance

Location: INDEPENDENCE, JACKSON County, MISSOURI, 64056

State: Missouri Government Spending

Plain-Language Summary

Department of Defense obligated $648.9 million to ALLIANT TECHSYSTEMS OPERATIONS LLC for work described as: SMALL CAL REQUIREMENTS Key points: 1. The contract value of $648.9 million represents a significant investment in small arms ammunition manufacturing. 2. Awarded as a sole-source contract, it raises questions about potential price efficiencies and market competition. 3. The fixed-price with economic price adjustment structure may expose the government to cost fluctuations. 4. The contract duration of 1418 days (approx. 4 years) indicates a long-term need for these services. 5. The absence of small business set-asides suggests a focus on large prime contractors for this requirement. 6. The contract's performance in Missouri highlights a specific geographic concentration for ammunition production.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to its sole-source nature and the specialized market for small arms ammunition. Without competitive bids, it's difficult to ascertain if the pricing reflects optimal value for money. The fixed-price with economic price adjustment (FPEPA) clause introduces a degree of uncertainty regarding final costs, as it allows for adjustments based on economic factors. Further analysis would require comparing unit costs to historical government purchases or industry benchmarks for similar ammunition types, which are not readily available in the provided data.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded using a sole-source procurement method, meaning it was not openly competed. This approach is typically used when only one responsible source is available or when a compelling justification exists for not seeking competition. The lack of multiple bidders means there was no direct price pressure from a competitive market, potentially leading to higher costs for the government than if the contract had been competed. The justification for this sole-source award would need to be thoroughly reviewed to understand the rationale.

Taxpayer Impact: Taxpayers may have paid a premium due to the absence of competitive bidding. The government did not benefit from the price discovery mechanisms inherent in a competitive procurement process.

Public Impact

The Department of Defense benefits from a dedicated source for small arms ammunition, crucial for military operations. This contract ensures the supply of ammunition, supporting training and readiness for armed forces personnel. The manufacturing activities are concentrated in Missouri, potentially impacting the local and regional economy through job creation and related industries. The availability of ammunition directly supports the operational effectiveness and national security posture of the United States.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition and potential cost savings for taxpayers.
Economic price adjustment clause introduces risk of cost increases over the contract period.
Lack of transparency in the sole-source justification could obscure potential alternatives.
Absence of small business participation may limit broader economic benefits and innovation.

Positive Signals

Ensures a consistent and reliable supply of critical ammunition to the Department of Defense.
Award to a known entity (Alliant Techsystems) may leverage existing expertise and infrastructure.
Contract addresses a fundamental requirement for military readiness and operational capability.

Sector Analysis

The defense sector, particularly the manufacturing of munitions, is a critical component of national security spending. This contract falls under the broader category of defense manufacturing, which involves specialized production capabilities and often requires significant investment in facilities and technology. The market for small arms ammunition is relatively concentrated, with a few key players capable of meeting stringent military specifications. Benchmarking this contract's value against other defense manufacturing contracts would require detailed analysis of the specific types and quantities of ammunition procured.

Small Business Impact

The data indicates that this contract was not set aside for small businesses (ss: false, sb: false). This suggests that the requirement was either fulfilled by a large prime contractor or that subcontracting opportunities for small businesses were not explicitly mandated or tracked within this specific award data. The absence of a small business set-aside means that the direct economic benefits to the small business ecosystem from this prime contract are likely limited, though Alliant Techsystems may engage small businesses as subcontractors.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Defense's contracting and procurement regulations. The specific agency, the Department of the Army, would have contracting officers responsible for monitoring performance and compliance. Inspector General (IG) offices within the DoD may conduct audits or investigations into contract execution, cost management, and adherence to terms. Transparency regarding the sole-source justification and any subsequent modifications would be key to assessing accountability.

Related Government Programs

Department of Defense Ammunition Procurement
Small Arms Manufacturing Contracts
Defense Industrial Base Contracts
Fixed-Price with Economic Price Adjustment Contracts
Sole-Source Defense Contracts

Risk Flags

Sole-source award
Potential for cost overruns due to economic price adjustment
Lack of competitive bidding limits price discovery
Long contract duration increases exposure to economic fluctuations

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $648.9 million to ALLIANT TECHSYSTEMS OPERATIONS LLC. SMALL CAL REQUIREMENTS

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 $648.9 million.

What is the period of performance?

Start: 2009-10-27. End: 2013-09-14.

What is the track record of Alliant Techsystems Operations LLC in fulfilling defense contracts, particularly for ammunition?

Alliant Techsystems, now part of Northrop Grumman, has a long history of supplying munitions and defense systems to the U.S. military. They have been a significant player in the defense industrial base, involved in various ammunition programs, including small arms, artillery, and mortar rounds. Their experience often includes managing complex manufacturing processes, adhering to strict quality standards, and delivering large quantities of ordnance. While specific performance metrics for this particular $648.9 million contract are not detailed here, the company's general track record suggests a capacity to handle such requirements. However, any sole-source award warrants scrutiny of past performance to ensure continued value and reliability.

How does the unit cost of ammunition under this contract compare to historical government purchases or industry benchmarks?

Direct comparison of unit costs is not possible with the provided data, as it lacks specific unit quantities and prices. The contract is a 'Delivery Order' under a larger agreement, and the 'fixed price with economic price adjustment' (FPEPA) clause means the final unit cost could vary. To perform a benchmark analysis, one would need to identify the specific types and quantities of ammunition procured, the base unit prices, and the applicable economic adjustment factors. This information would then be compared against publicly available data for similar ammunition types procured by the DoD or other government agencies, as well as against commercial market rates, if applicable. Without this granular data, assessing value for money on a per-unit basis remains speculative.

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

The primary risks of a sole-source award for critical defense supplies include a lack of competitive pricing, potentially leading to higher costs for taxpayers. Without competition, there is reduced incentive for the contractor to innovate or optimize efficiency to secure future business. Furthermore, reliance on a single supplier can create supply chain vulnerabilities; if the sole source experiences production issues, quality control failures, or financial instability, the military's ammunition supply could be jeopardized. There's also a risk that the government may not be aware of or able to access potentially better technologies or more cost-effective solutions available from other manufacturers.

How effective is the 'fixed price with economic price adjustment' (FPEPA) clause in managing costs for long-term ammunition supply contracts?

The FPEPA clause aims to balance cost certainty for the government with protection for the contractor against unforeseen economic fluctuations, such as inflation in raw materials or labor costs. For long-term contracts like this one (1418 days), it can be effective in ensuring a stable supply by mitigating risks for the contractor, which might otherwise lead them to inflate initial prices to cover potential future cost increases. However, it also introduces uncertainty for the government, as the final price is not fixed and can increase. The effectiveness hinges on the specific economic indices used for adjustment and the fairness of the agreed-upon adjustment formula. Rigorous oversight is needed to ensure adjustments are justified and do not lead to excessive costs.

What are the historical spending patterns for small arms ammunition by the Department of the Army, and how does this contract fit within them?

Historical spending patterns for small arms ammunition by the Department of the Army are substantial, reflecting the continuous need for training, operational readiness, and strategic stockpiling. The Army procures vast quantities of various calibers of ammunition annually. This $648.9 million contract, awarded in 2009 and ending in 2013, represents a significant, multi-year investment within that broader spending context. Its sole-source nature suggests it may have addressed a specific, perhaps unique, requirement or a situation where competition was deemed impractical at the time. Understanding its place requires comparing its value and duration against other major ammunition procurement actions during that period and assessing if it represented a shift in procurement strategy or a continuation of existing practices.

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: $648,867,601

Exercised Options: $648,867,601

Current Obligation: $648,867,601

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: W52P1J09D0027

IDV Type: IDC

Timeline