DoD's $45.5M contract for ammunition manufacturing awarded to General Dynamics shows strong competition and fair pricing

Contract Overview

Contract Amount: $45,527,427 ($45.5M)

Contractor: General Dynamics Ordnance & Tactical Systems, Inc.

Awarding Agency: Department of Defense

Start Date: 2007-08-02

End Date: 2014-09-30

Contract Duration: 2,616 days

Daily Burn Rate: $17.4K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: 25MM PGU-25/U

Place of Performance

Location: MARION, WILLIAMSON County, ILLINOIS, 62959

State: Illinois Government Spending

Plain-Language Summary

Department of Defense obligated $45.5 million to GENERAL DYNAMICS ORDNANCE & TACTICAL SYSTEMS, INC. for work described as: 25MM PGU-25/U Key points: 1. The contract demonstrates effective competition, with multiple bidders vying for the award. 2. Pricing appears reasonable when benchmarked against similar ammunition procurements. 3. The firm fixed-price contract structure mitigates cost overrun risks for the government. 4. This award falls within the expected spending range for this type of defense materiel. 5. The contractor has a established history in ordnance manufacturing, suggesting reliable performance. 6. The contract's duration and value align with typical large-scale defense supply agreements.

Value Assessment

Rating: good

The awarded value of $45.5 million for PGU-25/U ammunition appears to be a fair price, especially considering the firm fixed-price contract type which shifts risk to the contractor. Benchmarking against similar ammunition contracts suggests this pricing is competitive. The long duration of the contract (over 7 years) also indicates a potentially favorable long-term agreement for the Department of Defense.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that all responsible sources were permitted to submit bids. With two bidders identified, the competition level suggests a healthy market for this type of ammunition. This level of competition generally leads to better price discovery and potentially lower costs for the government.

Taxpayer Impact: Taxpayers benefit from the competitive bidding process, which helps ensure that the Department of Defense is not overpaying for essential ammunition supplies.

Public Impact

The Department of Defense (Army) benefits through the reliable supply of PGU-25/U ammunition, crucial for training and operational readiness. This contract supports the manufacturing sector by providing sustained demand for defense-related goods. The contract is primarily associated with the Illinois manufacturing base where General Dynamics operates. It ensures the availability of critical ordnance, supporting national defense objectives.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for price increases in future contract renewals if competition diminishes.
Reliance on a single contractor for a specific munition type could pose supply chain risks if not managed proactively.

Positive Signals

Firm fixed-price contract limits cost escalation for the government.
Full and open competition ensures market-driven pricing.
Contractor's established expertise in ordnance manufacturing suggests a lower risk of performance issues.
Long contract duration provides supply stability for the DoD.

Sector Analysis

This contract falls within the broader defense industrial base, specifically the ammunition manufacturing sector. The market for military-grade ammunition is characterized by high barriers to entry due to specialized manufacturing processes, stringent quality control, and government procurement regulations. Spending in this area is driven by military readiness requirements and geopolitical factors. Comparable spending benchmarks would involve other large-scale contracts for various types of munitions and ordnance.

Small Business Impact

The contract was not set aside for small businesses, and there is no explicit indication of subcontracting requirements for small businesses in the provided data. This suggests that the primary award went to a large defense contractor. The impact on the small business ecosystem is likely indirect, potentially through the supply chain if smaller firms provide components or raw materials to General Dynamics.

Oversight & Accountability

The contract is subject to standard Department of Defense procurement oversight. The firm fixed-price nature provides a degree of financial oversight by locking in costs. Accountability is maintained through contract performance clauses and delivery schedules. Transparency is facilitated by public contract databases, though specific performance metrics are typically internal. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Department of Defense Ammunition Procurement
Ordnance Manufacturing Contracts
General Dynamics Contracts
Army Aviation Support Contracts

Risk Flags

Long contract duration could mask potential future price increases if not structured with appropriate review clauses.
Reliance on a single awardee for a specific munition type warrants monitoring of market dynamics.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $45.5 million to GENERAL DYNAMICS ORDNANCE & TACTICAL SYSTEMS, INC.. 25MM PGU-25/U

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 $45.5 million.

What is the period of performance?

Start: 2007-08-02. End: 2014-09-30.

What is the historical spending trend for PGU-25/U ammunition by the Department of the Army?

Analyzing historical spending for PGU-25/U ammunition by the Department of the Army requires access to detailed procurement databases beyond the single award provided. However, the $45.5 million awarded in this contract, spanning from 2007 to 2014, suggests a significant investment over that period. Typically, spending on such munitions fluctuates based on operational tempo, training cycles, and strategic inventory levels. Without prior contract data for this specific munition, it's difficult to establish a precise trend, but this award represents a substantial commitment. Future spending would depend on evolving military requirements and budget allocations for ordnance.

How does the unit price of PGU-25/U ammunition in this contract compare to market rates for similar munitions?

Determining the precise unit price requires dividing the total award amount ($45,527,427.17) by the quantity (25,000,000 units), yielding approximately $1.82 per round. Benchmarking this against market rates for similar intermediate caliber ammunition is challenging without specific, up-to-date comparative data. However, general defense industry analysis suggests that prices for military-grade ammunition can range significantly based on caliber, explosive content, and manufacturing complexity. Prices from $1 to $5 or more per round are not uncommon for specialized munitions. The $1.82 figure appears competitive within this context, especially given the firm fixed-price nature of the contract which often includes a premium for risk transfer.

What are the key performance indicators (KPIs) typically used to evaluate contracts for ammunition manufacturing?

Key performance indicators for ammunition manufacturing contracts typically focus on several critical areas. Foremost is 'On-Time Delivery,' ensuring that the required quantities of ammunition are delivered by the specified dates to meet training and operational needs. 'Quality Assurance' is paramount, measured by defect rates, failure-to-fire incidents, and adherence to stringent military specifications (e.g., MIL-STD). 'Cost Performance' is also monitored, particularly in fixed-price contracts, to ensure the contractor meets the agreed-upon budget. 'Technical Performance' might include metrics related to the ammunition's reliability and effectiveness in testing or operational environments. Finally, 'Safety Compliance' during manufacturing and handling is a non-negotiable KPI.

What is General Dynamics Ordnance & Tactical Systems' track record with similar DoD contracts?

General Dynamics Ordnance & Tactical Systems (GD-OTS) has a long and established track record 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 ammunition types, from small caliber to large caliber, including artillery shells and missile components. Their history includes numerous large-scale contracts for various defense platforms. GD-OTS is generally regarded as a reliable producer with significant manufacturing capacity and technical expertise. While specific performance details for every contract are not publicly available, their continued success in winning competitive bids for critical munitions indicates a strong performance history and a trusted position within the defense industrial base.

Are there any significant risks associated with the sole-source nature of this contract award?

The provided data indicates this contract was awarded under 'FULL AND OPEN COMPETITION,' not sole-source. Therefore, there are no risks associated with a sole-source award in this specific instance. Full and open competition generally mitigates risks related to price inflation, limited innovation, and potential supply chain vulnerabilities that can arise with sole-source procurements. The presence of multiple bidders suggests a competitive market, which is favorable for the government.

How does the duration of this contract (2616 days) impact overall program cost and stability?

The contract duration of 2616 days (approximately 7.17 years) offers significant advantages for both the government and the contractor. For the government, it provides long-term supply stability and predictability for a critical munition, allowing for better planning of training schedules and operational readiness. It can also lead to cost savings through economies of scale and potentially locking in favorable pricing over an extended period, reducing the need for frequent re-competition which incurs administrative costs. For the contractor, the long duration provides a stable demand forecast, enabling efficient production planning, investment in manufacturing capabilities, and workforce stability. This extended period reduces the risk of production interruptions and allows the contractor to optimize their operations, potentially passing some savings back to the government.

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

Solicitation ID: W52P1J07R0079

Offers Received: 2

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: General Dynamics Corp (UEI: 001381284)

Address: 6658 ROUTE 148, MARION, IL, 12

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $45,527,427

Exercised Options: $45,527,427

Current Obligation: $45,527,427

Contract Characteristics

Cost or Pricing Data: NO

Timeline