DoD awards $203M for ammunition manufacturing, with BAE Systems as sole contractor

Contract Overview

Contract Amount: $202,998,675 ($203.0M)

Contractor: BAE Systems Land & Armaments L.P.

Awarding Agency: Department of Defense

Start Date: 2011-10-26

End Date: 2027-02-17

Contract Duration: 5,593 days

Daily Burn Rate: $36.3K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIXED PRICE INCENTIVE

Sector: Defense

Official Description: AGS FOR DDG 1002

Place of Performance

Location: MINNEAPOLIS, ANOKA County, MINNESOTA, 55421

State: Minnesota Government Spending

Plain-Language Summary

Department of Defense obligated $203.0 million to BAE SYSTEMS LAND & ARMAMENTS L.P. for work described as: AGS FOR DDG 1002 Key points: 1. Contract awarded to a single, established defense contractor, raising questions about competitive pricing. 2. Long contract duration suggests a sustained need for these specific ammunition types. 3. The fixed-price incentive structure aims to balance cost control with contractor performance. 4. Lack of competition may limit opportunities for emerging suppliers and innovation. 5. Performance context is critical given the essential nature of ammunition in defense operations. 6. Sector positioning indicates a significant role for this contract within the defense industrial base.

Value Assessment

Rating: fair

The contract's value of $203 million over approximately 15 years requires careful benchmarking. Without specific comparable contracts for similar ammunition types and quantities, a precise value-for-money assessment is challenging. The fixed-price incentive (FPI) contract type suggests an attempt to manage costs by incentivizing the contractor to meet certain targets, but the absence of competition makes it difficult to determine if the pricing is truly competitive with market rates or alternative solutions.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one bidder, BAE Systems Land & Armaments L.P., was considered. This approach is typically justified when a specific capability or product is only available from a single source, or in cases of urgent need where full and open competition is not feasible. The lack of multiple bidders means there was no direct price comparison or negotiation driven by competitive pressures.

Taxpayer Impact: Sole-source awards can lead to higher costs for taxpayers as there is no competitive pressure to drive down prices. This necessitates robust oversight to ensure the awarded price is fair and reasonable.

Public Impact

The Department of Defense is the primary beneficiary, ensuring a supply of critical ammunition. Services delivered include the manufacturing of specific types of ammunition, essential for military readiness. Geographic impact is primarily centered around BAE Systems' manufacturing facilities, likely in Minnesota. Workforce implications include the sustainment of jobs within the defense manufacturing sector at the contractor's sites.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing and potential innovation.
Long contract duration may not reflect evolving technological needs or market shifts.
Lack of transparency in pricing justification due to non-competitive nature.

Positive Signals

Award to an established contractor with a track record in defense manufacturing.
Fixed-price incentive contract aims to align contractor performance with cost objectives.
Sustained supply of critical defense materiel ensures operational readiness.

Sector Analysis

This contract falls within the defense industrial base, specifically the manufacturing of ordnance and ammunition. The market for defense ammunition is characterized by long-standing relationships between government agencies and a limited number of specialized contractors. Spending in this sector is driven by military readiness requirements and geopolitical factors. Comparable spending benchmarks would typically involve analyzing historical awards for similar ammunition types and quantities from the Department of Defense.

Small Business Impact

The contract data indicates that small business participation is not a primary focus, as the award is not a small business set-aside and the prime contractor is a large entity. Subcontracting opportunities for small businesses may exist, but they are not explicitly detailed in the provided information. The impact on the small business ecosystem is likely indirect, potentially through lower-tier supply chains, rather than direct prime contract awards.

Oversight & Accountability

Oversight for this contract would typically be managed by the Defense Contract Management Agency (DCMA), responsible for ensuring contractor performance and compliance. Accountability measures are embedded within the fixed-price incentive contract structure, which links contractor profit to achieving cost and performance targets. Transparency is limited due to the sole-source nature of the award, making public scrutiny of pricing justification more challenging.

Related Government Programs

Department of Defense Ammunition Procurement
Defense Industrial Base Manufacturing
BAE Systems Defense Contracts
Fixed-Price Incentive Contracts

Risk Flags

Sole-source award
Long contract duration
Lack of competitive pricing data

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $203.0 million to BAE SYSTEMS LAND & ARMAMENTS L.P.. AGS FOR DDG 1002

Who is the contractor on this award?

The obligated recipient is BAE SYSTEMS LAND & ARMAMENTS L.P..

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Contract Management Agency).

What is the total obligated amount?

The obligated amount is $203.0 million.

What is the period of performance?

Start: 2011-10-26. End: 2027-02-17.

What is BAE Systems' track record with similar ammunition manufacturing contracts for the DoD?

BAE Systems Land & Armaments L.P. has a significant history of producing various types of munitions for the U.S. military. As a major defense contractor, they are involved in numerous contracts across different defense platforms. For ammunition, their capabilities often include large-caliber rounds, artillery shells, and other ordnance. While specific details on past performance for this exact type of ammunition are not provided, their established presence in the sector suggests a capacity to meet the contract's requirements. However, a deeper dive into past performance reviews, delivery timeliness, and quality metrics for comparable contracts would be necessary for a comprehensive assessment.

How does the $203 million contract value compare to historical spending on similar ammunition types?

Benchmarking the $203 million contract value against historical spending requires identifying comparable contracts for the specific ammunition types (NAICS 332993 - Ammunition (except Small Arms) Manufacturing) and the contract duration (5593 days, approx. 15.3 years). Without access to a detailed historical contract database filtered by precise ammunition specifications and quantities, a direct comparison is difficult. However, given the long duration and the nature of defense ammunition, this value appears substantial, reflecting the scale of production and the specialized manufacturing processes involved. The sole-source nature also implies that the price may not reflect the lowest possible cost achievable through competition.

What are the primary risks associated with a sole-source award for ammunition manufacturing?

The primary risks associated with a sole-source award for ammunition manufacturing include potential cost overruns and reduced innovation. Without competitive pressure, the contractor may have less incentive to optimize production processes or offer the most cost-effective pricing, potentially leading to higher costs for the government and taxpayers. Furthermore, a sole-source award can stifle innovation, as there is no external market pressure to develop new technologies or more efficient manufacturing methods. Dependence on a single supplier also creates a supply chain risk; any disruption at the contractor's facility could significantly impact military readiness.

How effective is the Fixed Price Incentive (FPI) contract type in managing costs for this ammunition contract?

The Fixed Price Incentive (FPI) contract type is designed to provide a middle ground between fixed-price and cost-reimbursement contracts, aiming to control costs while allowing for adjustments based on performance. In this case, it means BAE Systems is incentivized to meet certain cost and performance targets. If they exceed these targets (i.e., deliver at a lower cost or higher performance), they share in the savings with the government. Conversely, if costs exceed targets, the contractor bears a larger share of the overrun up to a ceiling. The effectiveness hinges on the realism of the target costs and the government's ability to monitor performance closely. For a sole-source award, the FPI structure is a crucial tool for cost management, but its success still depends heavily on negotiation and oversight.

What are the implications of the contract's long duration (over 15 years) for defense readiness and technology obsolescence?

A contract duration of over 15 years for ammunition manufacturing has significant implications. On the positive side, it ensures a stable and predictable supply of critical munitions, bolstering long-term defense readiness. This long-term commitment can also provide the contractor with the certainty needed for significant capital investments in manufacturing capabilities. However, a prolonged duration also increases the risk of technology obsolescence. Military requirements and battlefield technologies evolve rapidly. Ammunition designed and produced under specifications set today might become less effective or incompatible with future weapon systems. Furthermore, market conditions and material costs can fluctuate dramatically over such a long period, potentially impacting the initial pricing assumptions.

Industry Classification

NAICS: Manufacturing › Other Fabricated Metal Product Manufacturing › Ammunition (except Small Arms) 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 INCENTIVE (L)

Evaluated Preference: NONE

Contractor Details

Parent Company: BAE Systems PLC

Address: 4800 E RIVER RD, MINNEAPOLIS, MN, 55421

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

Financial Breakdown

Contract Ceiling: $230,268,578

Exercised Options: $213,459,678

Current Obligation: $202,998,675

Actual Outlays: $3,938

Subaward Activity

Number of Subawards: 288

Total Subaward Amount: $70,619,923

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline