DoD awards $229M contract for 155mm artillery shells, highlighting sole-source procurement for critical munitions

Contract Overview

Contract Amount: $229,346,070 ($229.3M)

Contractor: American Ordnance LLC

Awarding Agency: Department of Defense

Start Date: 2020-09-28

End Date: 2027-04-30

Contract Duration: 2,405 days

Daily Burn Rate: $95.4K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: M795 TNT 155MM HE PROJECTILES - FY20 REQUIREMENTS AWARDED.

Place of Performance

Location: MIDDLETOWN, DES MOINES County, IOWA, 52638

State: Iowa Government Spending

Plain-Language Summary

Department of Defense obligated $229.3 million to AMERICAN ORDNANCE LLC for work described as: M795 TNT 155MM HE PROJECTILES - FY20 REQUIREMENTS AWARDED. Key points: 1. Significant investment in essential artillery ammunition production. 2. Sole-source award raises questions about competition and potential cost efficiencies. 3. Long-term contract (2020-2027) ensures sustained supply chain for critical defense needs. 4. Focus on firm fixed-price contract aims to control costs, but requires careful oversight. 5. Contractor has a strong track record in ordnance manufacturing. 6. Geographic concentration of production in Iowa may present supply chain risks.

Value Assessment

Rating: fair

The contract value of $229.3 million for M795 TNT 155MM HE Projectiles over approximately 6.7 years represents a substantial investment in defense materiel. Benchmarking this specific award is challenging due to the sole-source nature and the specialized product. However, the firm fixed-price structure suggests an attempt to cap costs. Without competitive bids, it's difficult to definitively assess if this represents the best value for money, but the duration and quantity awarded imply a strategic procurement to meet long-term requirements.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one vendor, American Ordnance LLC, was considered. This approach is typically used when a specific capability or product is only available from a single source, or for urgent national security needs. The lack of competition means that the government did not benefit from a bidding process that could drive down prices through market forces. This necessitates a higher degree of scrutiny on the awarded price and the contractor's cost structure.

Taxpayer Impact: Taxpayers may be paying a premium due to the absence of competitive pressure. The government must rely on robust negotiation and oversight to ensure fair pricing in sole-source situations.

Public Impact

Ensures the U.S. Army has a consistent supply of 155mm high-explosive artillery projectiles. Supports national defense readiness by maintaining critical munitions manufacturing capabilities. Benefits the workforce and economy in Iowa, where the contractor is located. Contributes to the overall strategic stockpile of essential military equipment.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price discovery and potential cost savings.
Long contract duration could lead to price escalation if not managed effectively.
Geographic concentration in Iowa could pose supply chain risks in case of regional disruptions.

Positive Signals

Firm fixed-price contract provides cost certainty for the government.
Contractor is a known entity with experience in ordnance production.
Ensures availability of a critical munition for military operations.

Sector Analysis

The defense industry, particularly the munitions manufacturing sector, is characterized by high barriers to entry, specialized production processes, and significant government reliance. This contract falls within the Ammunition (except Small Arms) Manufacturing sub-sector. The market is often dominated by a few key players due to the technical expertise and capital investment required. Government procurement strategies, including sole-sourcing and long-term contracts, are common to ensure supply chain stability for critical defense articles.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb: false'. Furthermore, the prime contractor, American Ordnance LLC, is a large business. There is no explicit information provided regarding subcontracting plans with small businesses. Therefore, the direct impact on the small business ecosystem from this specific award is likely minimal, though the prime contractor's own supply chain may involve small businesses.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Army's contracting and program management offices. Given the sole-source nature and significant value, robust oversight is crucial to monitor performance, ensure compliance with contract terms, and validate pricing. The Defense Contract Audit Agency (DCAA) may also be involved in auditing costs. Transparency is facilitated through contract databases, but detailed performance metrics and cost breakdowns are typically not publicly disclosed.

Related Government Programs

M777 Howitzer Ammunition
Artillery Shell Production
Defense Ammunition Procurement
Department of the Army Contracts
Ordnance Manufacturing

Risk Flags

Sole-source procurement
Long-term contract duration
Geographic concentration of production

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $229.3 million to AMERICAN ORDNANCE LLC. M795 TNT 155MM HE PROJECTILES - FY20 REQUIREMENTS AWARDED.

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 $229.3 million.

What is the period of performance?

Start: 2020-09-28. End: 2027-04-30.

What is the historical spending pattern for M795 TNT 155MM HE Projectiles by the Department of Defense?

Analyzing historical spending for M795 TNT 155MM HE Projectiles requires accessing detailed procurement data over multiple fiscal years. While this specific award is for $229.3 million, understanding the broader trend involves looking at previous awards for the same or similar munitions. Factors such as geopolitical events, changes in military doctrine, and budget allocations significantly influence spending. Without access to a comprehensive historical database for this specific munition, it's difficult to provide precise figures. However, sustained investment in artillery ammunition is typical for major military powers to maintain readiness and replace expended stocks. The current award suggests a significant replenishment or sustainment effort.

How does the unit cost of these projectiles compare to similar contracts or market rates, given it's a sole-source award?

Directly comparing the unit cost of these projectiles is challenging due to the sole-source nature of this award and the proprietary nature of pricing data. In a sole-source scenario, the government negotiates directly with the contractor, and the absence of competitive bids means there isn't an immediate market benchmark. The firm fixed-price (FFP) contract type aims to provide cost certainty, but the initial negotiated price is critical. The Department of Defense would typically conduct extensive cost analysis, potentially including audits of the contractor's facilities and financial records, to ensure the price is fair and reasonable. However, without public disclosure of the negotiated unit price or comparable competitive bids, a definitive value-for-money assessment is limited.

What are the key performance indicators (KPIs) being used to evaluate American Ordnance LLC's performance under this contract?

Specific Key Performance Indicators (KPIs) for this contract are not publicly detailed. However, for ammunition production contracts, typical KPIs would likely include on-time delivery rates, adherence to quality specifications (e.g., defect rates, dimensional accuracy), production output volume, and potentially cost control measures if incentives or penalties are structured. The Department of the Army's contracting officer and program managers are responsible for monitoring these aspects. Performance is usually assessed through regular progress reports from the contractor and government inspections. Failure to meet critical KPIs could result in contract modifications, penalties, or even termination, depending on the severity.

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

American Ordnance LLC has a significant track record in fulfilling defense contracts, particularly in the realm of munitions manufacturing. The company is known for producing various types of artillery shells and related ordnance. Its operational history includes supplying critical munitions to the U.S. military. As a sole-source provider for this specific contract, it implies a recognized capability and potentially a long-standing relationship or unique expertise that the Department of Defense relies upon. Evaluating their past performance would involve reviewing contract award histories, any reported issues or successes, and their overall capacity to meet large-scale production demands reliably.

What are the potential risks associated with the sole-source nature of this procurement, and how are they being mitigated?

The primary risk of a sole-source procurement is the potential for inflated pricing due to the lack of competitive pressure, which can lead to reduced value for taxpayer money. Additionally, it can foster complacency in the contractor regarding innovation or efficiency improvements. Mitigation strategies employed by the government typically include rigorous price and cost analysis, potentially involving the Defense Contract Audit Agency (DCAA), to ensure the negotiated price is fair and reasonable. Long-term contracts can also include clauses for price reviews or adjustments based on market conditions or efficiency gains. Furthermore, the government may actively seek to develop alternative sources or maintain organic capabilities to reduce reliance on a single supplier for critical items in the future.

How does this contract align with the Department of Defense's broader strategy for munitions readiness and industrial base sustainment?

This contract directly aligns with the Department of Defense's (DoD) broader strategy for munitions readiness and industrial base sustainment. By awarding a substantial, multi-year contract for essential 155mm artillery projectiles, the DoD ensures a stable supply chain and production capacity for a critical warfighting capability. This type of long-term commitment helps sustain the industrial base by providing predictable demand, which is crucial for maintaining specialized manufacturing facilities and a skilled workforce. In an era of potential near-peer competition and ongoing global security challenges, securing the production of key munitions like these is a strategic imperative to maintain operational readiness and deterrence.

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

Solicitation ID: W52P1J18R0139

Offers Received: 1

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: $229,346,070

Exercised Options: $229,346,070

Current Obligation: $229,346,070

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline