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Army Decides to Recompete Radford Contract

by: Matthew Potter
August 24, 2011

Category: Alliant Techsystems, BAE Systems, Business Line, Companies, Contract Additions, Contract Awards, Department of Defense, Earnings, Events, GAO, logistics, production program, Proposal, Protest, Restructuring, Services, U.S. Army | RSS 2.0

In June the U.S. Army announced that it had awarded a contract with BAE Systems (BAE:LSE) to run the U.S. explosives production facility at the Radford, VA Army Ammunition Plant. The losing company, ATK (ATK), who had had contracts to run the facility for several years protested the award. Under normal processes the Government Accountability Office (GAO) which is responsible for deciding these matters would have made a decision no later then September.

The protest though is now not necessary as the Army has decided to recompete the contract which led to the GAO dismissing the protest. After a review by the GAO the Army will change some parts of the Request for Proposals (RFP) and allow bidders to submit new ones. This is good news for ATK as the Radford contract had a value of over $800 million over its ten year duration.

Because of this decision ATK, the incumbent, will continue to operate the plant and be paid by the Army until a new contract is awarded. Both BAE and ATK have indicated they will submit new proposals and there is always a potential for other companies to also try to win the work.

If the U.S. defense budget does decline for any company the key will be keeping their existing contracts and then attempting to win new ones. Having a core of existing work will cushion any lack of new work caused by the reduced opportunities available in the next decade or so as the U.S. reduces its investment in Iraq and Afghanistan as well as new development programs or building up stockpiles of weapons and munitions.

ATK recently had a rough quarter with sales down which led to a drop of about 4% in profits when compared to the similar quarter last year. One areas where revenue was down was sales of ammunition to U.S. allies like Afghanistan. The loss of the Radford contract would have reduced annual revenue $80 million or so or about 2%. A chance to win the work back will only help the company in the future.

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