Department of the Army awards $270M contract for ammunition manufacturing to American Ordnance LLC

Contract Overview

Contract Amount: $269,732,548 ($269.7M)

Contractor: American Ordnance LLC

Awarding Agency: Department of Defense

Start Date: 2016-09-27

End Date: 2024-02-29

Contract Duration: 2,711 days

Daily Burn Rate: $99.5K/day

Competition Type: FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: M795 TNT - AWARD OF FY16 REQUIREMENTS.

Place of Performance

Location: MIDDLETOWN, DES MOINES County, IOWA, 52638

State: Iowa Government Spending

Plain-Language Summary

Department of Defense obligated $269.7 million to AMERICAN ORDNANCE LLC for work described as: M795 TNT - AWARD OF FY16 REQUIREMENTS. Key points: 1. Contract awarded through full and open competition after exclusion of sources, indicating a structured procurement process. 2. The contract spans over 8 years, suggesting a long-term need for these services. 3. Fixed-price contract type implies that the contractor bears the risk of cost overruns. 4. The award is a delivery order against a larger requirements contract. 5. The North American Industry Classification System (NAICS) code 332993 points to a specialized manufacturing sector. 6. The contract is not set aside for small businesses, suggesting large-scale production capabilities are required.

Value Assessment

Rating: good

The contract value of $269.7 million over approximately 8 years represents a significant investment in ammunition manufacturing. Benchmarking this against similar long-term defense manufacturing contracts is challenging without more specific details on the exact types and quantities of ammunition. However, the firm fixed-price nature of the contract suggests a degree of cost certainty for the government, provided the contractor can manage production efficiently. The absence of a stated base year value and the nature of it being a delivery order makes direct per-unit cost comparison difficult without further data.

Cost Per Unit: N/A

Competition Analysis

Competition Level: limited

The contract was awarded under 'Full and Open Competition After Exclusion of Sources.' This indicates that while competition was sought, certain sources may have been excluded based on specific criteria, potentially related to existing capabilities, security clearances, or prior performance on related contracts. The exact number of bidders and the rationale for excluding other sources are not detailed, but this approach suggests a deliberate effort to ensure a competitive environment while focusing on qualified entities.

Taxpayer Impact: This procurement method aims to balance competitive pricing with the need for specialized capabilities, potentially leading to better value for taxpayers than a sole-source award, while ensuring specific requirements are met.

Public Impact

The primary beneficiaries are the Department of the Army and potentially other branches of the U.S. military requiring ammunition. The contract supports the production and delivery of ammunition, crucial for military readiness and operations. The contract is associated with a facility in Iowa, implying a positive impact on the regional workforce and economy. This award contributes to the industrial base supporting national defense.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for limited competition due to specialized manufacturing requirements.
Long contract duration could lead to complacency if not actively managed.
Reliance on a single contractor for a critical supply chain component carries inherent risks.

Positive Signals

Firm fixed-price contract shifts cost risk to the contractor.
Awarded through a competitive process, suggesting an effort to secure favorable terms.
Long-term nature indicates a stable demand and potential for economies of scale.

Sector Analysis

This contract falls within the defense manufacturing sector, specifically focusing on ammunition production. The market for defense manufacturing is characterized by high barriers to entry due to specialized technology, stringent quality control, and government regulations. Spending in this sector is driven by national security needs and geopolitical factors. Comparable spending benchmarks would typically involve analyzing the total U.S. government expenditure on ammunition procurement across different fiscal years and defense branches.

Small Business Impact

The contract data indicates that this award was not set aside for small businesses (ss: false, sb: false). This suggests that the scale and technical requirements of the ammunition manufacturing likely favored larger, established defense contractors. There is no explicit information on subcontracting plans for small businesses, but given the nature of the award, it's possible that opportunities may exist within the supply chain for specialized components or services.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of the Army's contracting and program management offices. The firm fixed-price nature provides some level of financial oversight by limiting cost increases. Transparency is generally maintained through contract award databases like FPDS. Inspector General (IG) jurisdiction would apply in cases of fraud, waste, or abuse. The long duration necessitates ongoing performance monitoring and quality assurance checks.

Related Government Programs

Department of Defense Ammunition Procurement
Ordnance Manufacturing Contracts
Military Readiness Support Contracts
Long-Term Defense Supply Contracts

Risk Flags

Long-term contract duration
Potential for supply chain disruption
Limited competition dynamics

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $269.7 million to AMERICAN ORDNANCE LLC. M795 TNT - AWARD OF FY16 REQUIREMENTS.

Who is the contractor on this award?

The obligated recipient is AMERICAN ORDNANCE 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 $269.7 million.

What is the period of performance?

Start: 2016-09-27. End: 2024-02-29.

What is the historical spending pattern for ammunition manufacturing by the Department of the Army?

Analyzing historical spending patterns for ammunition manufacturing by the Department of the Army requires access to comprehensive procurement data over multiple fiscal years. This contract, awarded in FY16 and ending in FY24, represents a significant portion of spending within that period. Generally, defense spending on ammunition fluctuates based on operational tempo, strategic priorities, and inventory management. The Army procures a wide range of ammunition, from small arms to large-caliber munitions, with contracts often awarded through competitive bidding processes. Understanding the historical context involves examining trends in contract values, types of ammunition procured, and the primary contractors involved. Without specific historical data for this NAICS code or similar ammunition categories, it's difficult to provide precise figures, but such spending is a consistent and substantial part of the defense budget.

How does the value of this contract compare to other ammunition manufacturing contracts awarded by the DoD?

The $269.7 million value of this contract for ammunition manufacturing is substantial, placing it among significant awards within the defense sector. To compare it effectively, one would need to analyze the total value and duration of other ammunition manufacturing contracts awarded by the Department of Defense (DoD) over similar timeframes. The DoD procures vast quantities and types of ammunition, leading to a wide range of contract values. Contracts for large-caliber munitions, missile components, or specialized ordnance can often exceed this amount, while contracts for smaller-caliber ammunition might be lower. This particular contract's value suggests a significant production run or a long-term supply agreement for a critical type of ammunition. Benchmarking requires a detailed analysis of the specific items manufactured, quantities, and market prices for comparable defense contracts.

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

Key Performance Indicators (KPIs) for a contract of this nature typically focus on delivery timeliness, quality control, production output, and cost adherence. For ammunition manufacturing, critical KPIs would include meeting specified production schedules, ensuring munitions meet stringent safety and performance standards (e.g., defect rates, reliability), and maintaining compliance with environmental and safety regulations. The firm fixed-price nature of the contract also implies that cost management and efficiency are implicitly monitored. The government would likely track on-time delivery rates, rejection rates during quality inspections, and adherence to production quotas. Performance would also be assessed against the technical specifications outlined in the contract, ensuring the ammunition functions as intended under various conditions.

What is the typical profit margin for defense contractors in the ammunition manufacturing sector?

Determining the typical profit margin for defense contractors in the ammunition manufacturing sector is complex, as margins can vary significantly based on contract type, competition level, specific product, and the contractor's operational efficiency. Under firm fixed-price contracts, like this one, contractors aim to achieve a profit margin by managing their costs effectively. Historically, profit margins in the defense industry have ranged from low single digits to potentially higher percentages for highly specialized or sole-source contracts. However, competitive bidding, as indicated in this award, generally drives down profit margins to ensure value for the government. Without access to the contractor's specific cost structure and the negotiated profit rate for this award, providing an exact figure is not possible. Industry averages often hover in the 5-15% range, but this is a broad generalization.

What are the risks associated with relying on a single contractor for a long-term ammunition supply?

Relying on a single contractor for a long-term ammunition supply presents several risks. Firstly, it can reduce competitive pressure, potentially leading to higher prices or less innovation over time. Secondly, it creates a single point of failure; if the contractor experiences production issues, financial instability, or faces unforeseen disruptions (e.g., natural disasters, labor strikes), the entire supply chain for that specific ammunition could be jeopardized, impacting military readiness. Thirdly, it may limit the government's flexibility to adapt to changing technological requirements or to switch to alternative suppliers if performance is unsatisfactory. While this contract was awarded competitively, the long duration and the nature of specialized manufacturing can lead to a de facto single-source situation over its lifespan, necessitating robust government oversight and contingency planning.

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: NEGOTIATED PROPOSAL/QUOTE

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 17575 HIGHWAY 79, MIDDLETOWN, IA, 52638

Business Categories: Category Business, Limited Liability Corporation, Manufacturer of Goods, Not Designated a Small Business, Partnership or Limited Liability Partnership, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $269,732,548

Exercised Options: $269,732,548

Current Obligation: $269,732,548

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: W52P1J16D0050

IDV Type: IDC

Timeline