DoD awards $39.4M contract for 155mm artillery shells to General Dynamics for Ukraine support

Contract Overview

Contract Amount: $39,424,752 ($39.4M)

Contractor: General Dynamics Ordnance & Tactical Systems, Inc.

Awarding Agency: Department of Defense

Start Date: 2024-06-27

End Date: 2025-03-31

Contract Duration: 277 days

Daily Burn Rate: $142.3K/day

Competition Type: NOT COMPETED

Pricing Type: FIXED PRICE INCENTIVE

Sector: Defense

Official Description: PROCUREMENT OF FIRST ARTICLE TEST AND LIMITED RATE INITIAL PRODUCTION QUANTITY OF 155MM M795 METAL PARTS IN SUPPORT OF UKRAINE.

Place of Performance

Location: MESQUITE, DALLAS County, TEXAS, 75149

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $39.4 million to GENERAL DYNAMICS ORDNANCE & TACTICAL SYSTEMS, INC. for work described as: PROCUREMENT OF FIRST ARTICLE TEST AND LIMITED RATE INITIAL PRODUCTION QUANTITY OF 155MM M795 METAL PARTS IN SUPPORT OF UKRAINE. Key points: 1. Contract focuses on critical munitions for international security assistance. 2. Sole-source award raises questions about price discovery and potential cost savings. 3. Limited rate initial production suggests a ramp-up phase for future orders. 4. Fixed-price incentive contract structure aims to balance cost and performance. 5. Delivery order mechanism allows for phased execution and payment. 6. Texas-based contractor highlights domestic manufacturing capacity for defense needs.

Value Assessment

Rating: fair

The contract value of $39.4 million for 155mm artillery shells appears to be within a reasonable range for specialized munitions, especially considering the urgency and specific requirements for supporting Ukraine. However, without direct comparable contracts for this exact configuration and quantity, a precise value-for-money assessment is challenging. The fixed-price incentive (FPI) contract type suggests an effort to control costs while incentivizing performance, but the final price could fluctuate based on achieved targets. Benchmarking against historical DoD procurements of similar artillery components would provide a clearer picture of cost-effectiveness.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one vendor, General Dynamics Ordnance & Tactical Systems, Inc., was solicited. This approach is often used when there are unique capabilities, urgent needs, or limited sources available. While it ensures rapid acquisition, it bypasses the competitive process, which typically drives down prices through multiple bids. The lack of competition means taxpayers do not benefit from the price discovery that occurs in a more open bidding environment.

Taxpayer Impact: Sole-source awards can lead to higher costs for taxpayers as the government does not have the benefit of competitive pricing. This contract's price was determined through negotiation rather than market forces, potentially resulting in a less favorable outcome for the government's budget.

Public Impact

The primary beneficiaries are the Ukrainian armed forces, receiving essential artillery ammunition for defense. The contract delivers first article testing and limited rate initial production of 155mm M795 metal parts. Geographic impact is primarily domestic, supporting manufacturing operations in Texas. Workforce implications include maintaining and potentially expanding skilled labor in defense manufacturing at General Dynamics facilities.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure, potentially increasing costs.
Fixed-price incentive contract can lead to cost overruns if targets are not met efficiently.
Urgency of need for Ukraine may have influenced negotiation leverage.

Positive Signals

Contract supports critical national security objectives by aiding an ally.
General Dynamics is an established defense contractor with proven manufacturing capabilities.
Fixed-price incentive contract aims to align contractor and government interests on cost and performance.

Sector Analysis

The defense sector, specifically ammunition manufacturing, is characterized by high barriers to entry, specialized technology, and significant government procurement. The market for 155mm artillery shells is crucial for modern military operations, and demand can fluctuate based on geopolitical events. This contract fits within the broader category of defense industrial base sustainment and foreign military sales support. Comparable spending benchmarks are difficult to ascertain publicly due to the sensitive nature of munitions production and specific contract terms.

Small Business Impact

This contract was not set aside for small businesses, nor does it appear to have specific subcontracting requirements for small businesses mentioned in the provided data. The award to a large prime contractor like General Dynamics suggests that the primary manufacturing will occur within their facilities or their established supply chain, which may or may not include significant small business participation. Further analysis of subcontracting plans would be needed to assess the impact on the small business ecosystem.

Oversight & Accountability

Oversight for this contract will likely be managed by the Department of the Army, with potential involvement from the Defense Contract Management Agency (DCMA) for quality assurance and delivery monitoring. The fixed-price incentive contract structure includes performance targets that will be reviewed. Transparency is limited due to the sole-source nature and the defense context, but contract modifications and performance reports would be subject to internal DoD oversight and potentially Inspector General reviews if issues arise.

Related Government Programs

Foreign Military Financing Program
Ukraine Security Assistance Initiative
Department of Defense Ammunition Procurement
155mm Artillery Shell Production

Risk Flags

Sole-source award
Potential for cost overruns
Urgent need justification
Limited competition in defense sector

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $39.4 million to GENERAL DYNAMICS ORDNANCE & TACTICAL SYSTEMS, INC.. PROCUREMENT OF FIRST ARTICLE TEST AND LIMITED RATE INITIAL PRODUCTION QUANTITY OF 155MM M795 METAL PARTS IN SUPPORT OF UKRAINE.

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 $39.4 million.

What is the period of performance?

Start: 2024-06-27. End: 2025-03-31.

What is General Dynamics Ordnance & Tactical Systems, Inc.'s track record with DoD contracts for artillery components?

General Dynamics Ordnance & Tactical Systems, Inc. (GD-OTS) has a long-standing history as a major supplier of munitions and ordnance to the U.S. Department of Defense and allied nations. They are known for producing a wide range of artillery shells, including 155mm variants, as well as mortar rounds, tank ammunition, and other related defense products. Their track record typically involves large-scale production contracts, often awarded through competitive processes, but also through sole-source mechanisms when specific capabilities or urgent needs are identified. GD-OTS has been a key player in sustaining the U.S. industrial base for critical munitions. While specific performance metrics for past contracts are often not publicly disclosed, their continued role as a primary supplier indicates a generally reliable performance history in meeting production schedules and quality standards for the DoD.

How does the pricing of this contract compare to similar 155mm shell procurements?

Direct comparison of pricing for this specific contract is challenging due to its sole-source nature and the inclusion of 'first article test and limited rate initial production' phases. Publicly available data on 155mm shell unit costs can vary significantly based on the specific shell type (e.g., M795, M107, M982 Excalibur), quantity ordered, contract type (fixed-price, cost-plus), and the specific requirements of the procurement (e.g., advanced features, specific testing). Historically, standard 155mm projectile costs have ranged from several hundred to over a thousand dollars per unit, with more advanced guided munitions costing significantly more. The $39.4 million award for an unspecified quantity of M795 metal parts suggests a unit cost that would need to be benchmarked against other FPI or sole-source awards for similar components to assess value. The lack of competition inherently limits the ability to determine if this price represents optimal market value.

What are the primary risks associated with this sole-source contract for ammunition production?

The primary risk associated with this sole-source contract is the potential for inflated pricing due to the absence of competitive bidding. Without multiple vendors vying for the contract, the government may not achieve the most cost-effective price. Another risk is the potential for less robust innovation or efficiency improvements, as the contractor faces limited market pressure to enhance processes. Furthermore, sole-source awards can sometimes indicate a lack of robust competition within the defense industrial base for specific critical items, which itself is a strategic risk. There's also a risk that the contractor might prioritize other contracts or face production challenges, impacting the timely delivery of these essential munitions, especially given the urgent context of supporting Ukraine.

How effective is the fixed-price incentive (FPI) contract type in managing costs for this type of defense procurement?

The Fixed-Price Incentive (FPI) contract type is designed to provide a middle ground between fixed-price (which places all risk on the contractor) and cost-plus (which places most risk on the government). In an FPI contract, the final price is adjusted based on the contractor's performance against target cost and target profit objectives. There is typically a price ceiling that the government will not exceed. This structure incentivizes the contractor to control costs and meet performance targets to achieve a higher profit. For ammunition production, where material costs and manufacturing processes can be complex, FPI can be effective in encouraging efficiency while providing the government with some cost certainty up to the ceiling. However, the effectiveness hinges on realistic target setting and diligent oversight to ensure the contractor is genuinely motivated to achieve savings rather than simply meeting minimum requirements.

What are the historical spending patterns for 155mm artillery shell production by the Department of Defense?

The Department of Defense consistently allocates significant funding towards the procurement of 155mm artillery shells, reflecting their critical role in conventional warfare. Historical spending patterns show substantial annual investments, often in the hundreds of millions, and sometimes exceeding a billion dollars, depending on global security conditions and operational tempo. These procurements are typically awarded through a mix of competitive bids and sole-source contracts, particularly for specialized variants or during periods of heightened demand, such as current support for Ukraine. Spending fluctuates based on strategic needs, inventory levels, and the sustainment of the defense industrial base. Recent geopolitical events have likely increased the demand and, consequently, the spending on 155mm ammunition production to replenish stocks and support allies.

What is the significance of 'first article test and limited rate initial production' in this contract?

The inclusion of 'first article test' (FAT) and 'limited rate initial production' (LRIP) signifies a phased approach to bringing a new or modified munitions capability into full-scale production. FAT involves producing a small quantity of the item to verify that the manufacturing process, materials, and design meet all specifications before committing to larger quantities. LRIP is a production stage where a limited number of units are produced at a planned rate. This allows the government and contractor to identify and resolve any production issues, refine manufacturing processes, and confirm the system's reliability and performance in a near-operational setting before scaling up to full-rate production. For taxpayers, this phased approach helps mitigate the risk of investing heavily in a production line that may encounter unforeseen problems, ultimately aiming for a more efficient and cost-effective transition to sustained supply.

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

Pricing Type: FIXED PRICE INCENTIVE (L)

Evaluated Preference: NONE

Contractor Details

Parent Company: Wico Limited

Address: 19850 INTERSTATE HIGHWAY 635, MESQUITE, TX, 75149

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: $39,424,752

Exercised Options: $39,424,752

Current Obligation: $39,424,752

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: W15QKN24D0037

IDV Type: IDC

Timeline