Government procurement provides potential profit

DOD buys nearly $50 million worth of tube and pipe annually

TPJ - THE TUBE & PIPE JOURNAL® APRIL/MAY 2011

April 27, 2011

By:

The U.S. military has a large and stable demand for tube and pipe. Learning about this demand is the first step for a fabricator interested in becoming a U.S. government supplier.

Military jet

Despite a weak economy, U.S. Department of Defense (DOD) demand for tubing has been stable over the past five years, with annual purchases averaging more than $50 million (see Figure 1). Metal tube and pipe are integral components of the military in all of its branches. It relies on tubular components for high-profile items such as aircraft, ships, and vehicles and less obvious areas such as barracks construction and equipment maintenance and repair.

The military uses all types and sizes, from common dimensional stock to custom assemblies. Numerous types of distributive systems on Navy ships use piping systems to deliver drinking water and provide fire suppression, compressed air, steam, and hydraulic fluid. A typical aircraft carrier spans more than 1,000 feet and uses a lot of pipe.

Airborne Tube and Pipe

Several of the major consumers are aerospace suppliers (see Figure 2). An analysis of the competitive landscape reveals that Sikorsky Aircraft Corp. is the top contractor by number of contracts, about 1,480. Based in Stratford, Conn., it has 22 facilities throughout the world, 17,457 employees, and annual revenues of more than $5 billion.

The largest contract for prime manufacturer Sikorsky Aircraft in 2010 was long-term contract No. SPM4AX09D9404. The contract covered many parts, including a ½-in. metal tube assembly (national stock number [NSN] 4710-01-095-6934) made from aluminum alloy. The contract originally was awarded to the company in 2005 under contract No. SPM400-05-D-9413. It has a base period of one year with options to extend (both bilateral and unilateral) for up to 10 years. The total contract amount for the base period of one year was an estimated value of $74,805,917.23 and covered dozens of different parts. It contains several NSN items sole-sourced to Sikorsky. The contract is currently in its fifth year. It also includes a performance fee, which gives the contractor the ability to earn an extra 14 to 25 percent by exceeding the contract requirements for on-time delivery during its evaluation period.

An analysis of annual sales reveals a different picture (see Figure 3). In dollars, GE Aviation takes the No. 1 spot. Much of this is awarded through long-term contracts, arrangements by which a vendor supplies parts to the DOD over several years. The government issues periodic delivery orders against these long-term contracts, reducing the need for a competitive bid every time it stocks up. These contracts expire periodically, giving prudent contractors a chance to bid on the business.

Opportunity Knocks

Contracts such as these are opportunities for any fabrication shop. Prime manufacturers such as Sikorsky typically have subcontractors produce many of the components used in the final item, such as the Black Hawk helicopter. Furthermore, the federal government is always searching for additional suppliers of items that it consumes, especially items that have only one source or, on occasion, no source. Companies interested in starting or increasing government sales typically seek out these sole-source items because the competition is limited and potential profit margin is substantial.

Many companies use a three-step process:

  • Determine which items are worth pursuing.
  • Obtain the actual part from the government or obtain part data if it’s available.
  • Reverse-engineer the item and become an approved source.

Learn More

Many resources are available to help fabricators get started in bidding on government contracts.

  • For an overview of the bidding and contract fulfillment process, see “10 steps to winning a government contract,” a series of articles posted at www.thefabricator.com.

  • The U.S. Small Business Administration’s Office of Government Contracting (GC) is dedicated to providing procurement advocacy for small businesses. Its mission is to “create an environment for maximum participation by small, disadvantaged, and woman-owned businesses in federal government contract awards and large prime subcontract awards.” See www.sba.gov.

  • BidLink.net has data on millions of defense contracts, including part numbers, procurement history, and vendor details. It provides services such as bid consolidation, searching and notification, and part number lookup.


Tom Gerbe

Military Data Analyst
BidLink.net
29313 Clemens Road
#2-A
Westlake, OH 44145
USA
Phone: 866-226-4488

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TPJ - The Tube & Pipe Journal®

TPJ - The Tube & Pipe Journal® became the first magazine dedicated to serving the metal tube and pipe industry in 1990. Today, it remains the only North American publication devoted to this industry and it has become the most trusted source of information for tube and pipe professionals. Subscriptions are free to qualified tube and pipe professionals in North America.

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