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U.S. Army Explosives Production Contract Protested by Alliant Techsystems

Since the Nineties and the downsizing of the U.S. defense establishment due to the end of the Cold War the Department of Defense has leased its ammo production facilities to a variety of defense companies. Then they have awarded contracts for the delivery of small arms, artillery and other ammunition. With the fighting since 9/11 in Iraq and Afghanistan there has been substantial investment in these types of products as the U.S. military has consumed large amounts of small arm ammo and those for supporting weapons such as the 30mm cannon on the AH-64 Apache attack helicopter.

Alliant Techsystems (ATK) has been one of the major suppliers of ammunition and pyrotechnics for the U.S. military over the last decade. The company is a leading manufacturer of small arms rounds as well as larger artillery rounds, missiles and rocket engines. They have been able to operate two of the major production plants owned by the Government for several years. These are the ones in Radford, VA and Independence, MO.

Now the Army has awarded the contract to run the Radford plant to BAE Systems (BAE:LSE). It is estimated the contract will have a value of over $800 million during its ten year duration. Alliant has filed a protest with the Government over the award. Normally the Government Accountability Office (GAO) will resolve the protest within 100 days. The contract does not start until September so Alliant will continue running the plant until then pending the review of the protest.

If the GAO finds that there were irregularities in the award to BAE they may order a new competition, ask the Army to review how their source selection was conducted or even give the contract to Alliant. Most protests are denied and Alliant will have to hope that the Army did not carry out their source selection properly in order to get a ruling in their favor.

As the U.S. defense budget begins to decline and troops return from Iraq and Afghanistan demands for certain products like ammo and explosives will also be reduced. This means that locking in contracts now at the beginning of this process is very important. Alliant relies on this work for a large portion of their revenue and earnings. Losing the contracts will have an impact on their long term prospects and force them to try to expand their other product lines or look for new markets.

Photo from Yarden Sach’s flickr photostream.

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Insurgent threats in operational theatres are continuing to diversify. Without an effective munitions management and procurement strategy the ability of our forces to fight the irregular warfare battle will become diminished.

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