Department of Defense awards $33.7M contract for 153,896 155mm M107 ammunition rounds

Contract Overview

Contract Amount: $33,738,784 ($33.7M)

Contractor: American Ordnance LLC

Awarding Agency: Department of Defense

Start Date: 2008-10-02

End Date: 2018-02-20

Contract Duration: 3,428 days

Daily Burn Rate: $9.8K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: THIS ACQUISITION IS FOR 153,896 EACH 155MM M107.

Place of Performance

Location: MIDDLETOWN, DES MOINES County, IOWA, 52638

State: Iowa Government Spending

Plain-Language Summary

Department of Defense obligated $33.7 million to AMERICAN ORDNANCE LLC for work described as: THIS ACQUISITION IS FOR 153,896 EACH 155MM M107. Key points: 1. Contract awarded to American Ordnance LLC for a significant quantity of artillery shells. 2. The acquisition represents a substantial investment in munitions for the Department of the Army. 3. Fixed-price contract structure aims to control costs for the government. 4. The duration of the contract suggests a long-term supply need. 5. This award falls within the Ammunition (except Small Arms) Manufacturing sector. 6. The contract was awarded via full and open competition, indicating a broad search for qualified bidders.

Value Assessment

Rating: good

The contract value of $33.7 million for 153,896 units equates to approximately $219 per round. Benchmarking this against similar ammunition contracts is challenging without specific details on the M107 variant and its associated production costs. However, the firm fixed-price nature suggests the government sought to lock in a price, and the competitive award process should have driven a reasonable market price. The scale of the order may also allow for economies of scale in production.

Cost Per Unit: $219 per unit

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, meaning all responsible sources were permitted to submit offers. The data indicates two bids were received. While two bidders is more than a sole-source award, it represents a limited competitive landscape. A higher number of bidders typically leads to more robust price discovery and potentially lower prices for the government. The limited competition here might suggest a specialized market or a high barrier to entry for potential suppliers.

Taxpayer Impact: The full and open competition, despite only two bids, suggests an effort to find the best value. However, with limited bidders, taxpayers may not have benefited from the most aggressive pricing achievable in a more crowded market.

Public Impact

The primary beneficiaries are the Department of the Army and its operational units requiring 155mm artillery capabilities. The contract ensures the supply of critical ammunition for training and potential combat operations. The geographic impact is primarily centered around the contractor's facilities in Iowa, supporting local employment and industry. This contract supports the defense industrial base, specifically within the munitions manufacturing sector.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Limited competition with only two bidders could potentially lead to higher prices than a more robustly competed contract.
The long contract duration (over 8 years) introduces risks related to potential obsolescence or the need for contract modifications if requirements change.
Reliance on a single contractor for a significant portion of this specific munition could create supply chain vulnerabilities.

Positive Signals

The firm fixed-price contract structure provides cost certainty for the government.
Awarding to American Ordnance LLC, a known entity in munitions manufacturing, suggests a focus on proven capability.
The contract was competed under full and open procedures, indicating an attempt to solicit broad market interest.

Sector Analysis

The defense sector, particularly the munitions manufacturing sub-sector, is characterized by high barriers to entry due to specialized knowledge, capital investment, and stringent quality control requirements. The market for artillery shells is influenced by geopolitical factors, military readiness levels, and government procurement cycles. This contract for M107 shells fits within the broader category of ammunition manufacturing, which is a critical component of national defense spending. Comparable spending benchmarks would typically involve analyzing other large-volume ammunition procurements.

Small Business Impact

The data indicates that this contract was not set aside for small businesses (ss: false, sb: false). As a large-volume, specialized defense procurement, it is unlikely that small businesses would be primary contractors, though they may participate as subcontractors to American Ordnance LLC. The impact on the small business ecosystem would depend on the extent to which American Ordnance engages small businesses in its supply chain for raw materials or specialized components.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contracting and program management offices. Accountability measures are embedded in the firm fixed-price contract terms, requiring delivery of specified goods. Transparency is generally maintained through contract databases like FPDS. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse related to the contract.

Related Government Programs

Department of Defense Ammunition Procurement
Army Field Artillery Munitions
155mm Artillery Shells
Defense Industrial Base Contracts

Risk Flags

Limited Competition
Long Contract Duration
Potential Supply Chain Concentration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $33.7 million to AMERICAN ORDNANCE LLC. THIS ACQUISITION IS FOR 153,896 EACH 155MM M107.

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 $33.7 million.

What is the period of performance?

Start: 2008-10-02. End: 2018-02-20.

What is the track record of American Ordnance LLC in fulfilling large defense contracts, particularly for ammunition?

American Ordnance LLC has a significant history in producing munitions for the U.S. military. As a key player in the defense industrial base, the company has been involved in manufacturing various types of ammunition, including artillery shells. Their experience often includes meeting stringent military specifications and production schedules. While specific details on past performance for M107 shells are not provided in this data snippet, their role as a sole-source producer for certain munitions and their involvement in competitive bids suggest a recognized capability. Evaluating their track record would involve reviewing past contract performance reports, delivery timeliness, and quality metrics from government sources.

How does the per-unit cost of $219 for the M107 shell compare to historical or market benchmarks?

The per-unit cost of approximately $219 for the 155mm M107 shell is a key metric for value assessment. Without direct comparative data for this specific munition from the same period or similar competitive solicitations, a precise benchmark is difficult. However, historical trends in ammunition pricing can be influenced by factors such as raw material costs (propellants, explosives, metal casings), manufacturing complexity, production volume, and the level of competition. Given the long-term nature of this contract and the firm fixed-price structure, the government aimed to secure a stable price. Further analysis would require access to historical pricing data for M107 shells or comparable 155mm rounds from different manufacturers or contract types.

What are the primary risks associated with a long-duration contract (over 8 years) for ammunition supply?

Long-duration contracts for ammunition, like this one spanning over 8 years, present several risks. Firstly, there's the risk of price escalation for raw materials or labor, which, despite a fixed-price contract, might necessitate costly modifications or lead to contractor performance issues if not managed proactively. Secondly, technological advancements or changes in military doctrine could render the specific munition less relevant or obsolete before the contract's end, leading to underutilization of procured stock. Thirdly, supply chain disruptions, geopolitical events, or the financial stability of the contractor can pose risks over such an extended period. Finally, the government might miss opportunities to leverage newer, potentially more cost-effective technologies or production methods that emerge during the contract's life.

What is the significance of awarding this contract via 'full and open competition' when only two bids were received?

Awarding via 'full and open competition' signifies that the government solicited offers from all responsible sources, adhering to federal procurement regulations designed to maximize competition and achieve best value. However, receiving only two bids suggests that the market for this specific type of ammunition may be concentrated, or that the barriers to entry (technical expertise, production capacity, security clearances) are high. While it's preferable to have more bidders, 'full and open' ensures that the process was not artificially restricted. The limited number of bidders means the government's negotiating leverage might be less than in a scenario with numerous competitive offers, potentially impacting the final price achieved for taxpayers.

How does the contract type (Firm Fixed Price) influence the risk allocation between the government and the contractor?

A Firm Fixed Price (FFP) contract, as used here, places the majority of the cost risk on the contractor. The contractor agrees to a set price for the goods or services, and is responsible for managing their costs to ensure profitability. If the contractor's costs exceed the agreed-upon price, their profit margin shrinks, or they may incur a loss. Conversely, if they manage costs effectively and their actual expenses are lower than anticipated, their profit increases. For the government, FFP provides the highest degree of cost certainty, as the final price is known upfront and is not subject to adjustments based on the contractor's actual costs. This contract type is generally preferred for well-defined requirements like ammunition manufacturing where cost and specifications are clear.

What is the potential impact on the defense industrial base when a large contract like this is awarded to a single entity?

Awarding a large contract for critical munitions to a single entity like American Ordnance LLC can have a dual impact on the defense industrial base. On one hand, it provides stability and ensures a dedicated production capability for essential materiel, potentially fostering expertise and efficiency within that company. It can also signal market demand, encouraging investment in specialized manufacturing. On the other hand, it can lead to a concentration of capability, potentially reducing overall market resilience and increasing reliance on one supplier. This concentration might stifle competition in the long run and make the supply chain more vulnerable to disruptions affecting that specific contractor. Ensuring robust subcontracting opportunities for smaller businesses can mitigate some of these concentration risks.

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

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Offers Received: 2

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 2280 HIGHWAY 104 W STE 2, MILAN, TN, 38358

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

Financial Breakdown

Contract Ceiling: $33,738,784

Exercised Options: $33,738,784

Current Obligation: $33,738,784

Contract Characteristics

Consolidated Contract: Yes

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: W52P1J09D0001

IDV Type: IDC

Timeline