The Roanoke Times
File 2000 The sprawling Radford Army Ammunition Plant has been making military explosives and propellants since 1941.
BAE Systems has been awarded a government contract to take over operations at the Radford Army Ammunition Plant, the company announced Friday.
The move from Alliant Techsystems to BAE represents the first significant change in management at the arsenal since it opened in 1941.
No major staffing changes are expected, and the facility could start manufacturing commercial products along with Army products, officials said.
“Our team is committed to working with our customers to ensure we provide a seamless transition in the management of Radford and to prevent any unnecessary distractions to the valuable workforce that is currently supporting the critical infrastructure at Radford,” said Jerry Hammonds, vice president and general manager of BAE Systems Ordnance Systems division.
BAE and Minneapolis-based ATK had been competing for the contract. Contracts for the plant include sales of explosives and propellants to the U.S. military and overseeing $400 million to improve facilities, according to arsenal briefing papers.
ATK had won consecutive contract renewals since 1995, the year it bought the original arsenal contractor, Delaware-based Hercules Inc. Before that, Hercules had run the arsenal since building it in 1941.
The operating contract includes a 10-year base plus three five-year options, BAE officials said Friday morning. A contract will be signed in the coming days or weeks, and the changeover will take place six months from that date, said David Herr, president of BAE Systems Support Solutions.
The full value of the contract is yet to be determined, but initially BAE has been awarded $850 million for 10 years, Herr said.
“We’re thrilled about the opportunity to partner with the U.S. Army customer in maintaining this facility,” Herr said. “The Radford Army Ammunition Plant provides essential products that support the men and women around the world who defend our nation.”
BAE is an English company with a U.S. unit based in Arlington. It runs the Holston Army Ammunition Plant in Kingsport, Tenn., with a contract set to expire in 2023.
That partnership may have had something to do with the bid, but it will be unclear until an Army announcement.
The company plans to modernize the facilities and begin manufacturing commercial products, such as sports ammunition, along with government products.
“These revenues allow us to maintain the cost of the products we furnish for the military applications at as low a price as we can,” Hammonds said.
Plans call for a new, $200 million nitrocellulose facility. That is one component for explosives and propellants used to fight the war in Afghanistan and for much of the ammo used by both police officers and recreational shooters.
Plans also call for the reduction of idle facilities costs and reduction of the facility’s overall footprint.
The company anticipates 600 to 800 to be employed directly by BAE, including subcontractors, Hammonds said.
That does not include the number of employees from other tenants on-site, he said.
“We expect to work with ATK and New River Energetics, all the other current tenants and retain them on-site,” Hammonds said.
ATK issued the following statement on the news: “ATK Energetic Systems has been notified that we were not the successful bidder on our proposal for the Operation and Maintenance of the Radford Army Ammunition Plant. We look forward to a debriefing from our government partners on this outcome. We remain committed to operating the facility at the highest level of dedication to quality, safety, and environmental stewardship throughout the transition period.”
While the arsenal has long been an economic force in the New River Valley and a key supplier of the U.S. armed forces, it has also generated some environmental concerns.
BAE will be taking over at a key time in the arsenal’s efforts to mend the environmental damage from years of making a volatile product and, at times, leaving toxic industrial waste behind.
The U.S. Environmental Protection Agency is expected to decide later this year whether to renew a permit that covers the cleanup of old dumping grounds and operations that leaked contamination into the surrounding soil and groundwater.
The waste includes remnants of trinitrotoluene, dinitrotoluene, nitroglycerin, lead, chromium, cadmium, volatile materials and perchlorates. While those materials have been found on arsenal grounds, EPA and plant officials say they have no evidence of the pollution migrating to the surrounding community.
EPA spokesman Mike Frankel said a renewed permit for the continuing cleanup will be issued to the U.S. Army, not the contractor. He could not say Friday what effect a change of contractors will have on the process.
Of 77 potential sites of contamination identified in 2000, most have either been cleaned up or determined not to pose a hazard. Just seven known sites remain.
While the EPA has been working with the plant on the cleanup of old hazardous waste, the Virginia Department of Environmental Quality has been monitoring current emissions.
Since 2003, the state has cited the arsenal seven times for violations of environmental regulations. While that’s more than most Southwest Virginia facilities, DEQ officials have noted the large size of the arsenal and the fact that two of the violations involved record keeping.
State regulators in Tennessee, where BAE operates the Holston Army Ammunition Plant, have issued two enforcement orders against that operation since 2007. A spokeswomen for the Tennessee Department of Environment and Conservation declined to comment on how that compares to other businesses and utilities, saying there are too many variables involved.
MORE from REUTERS NEWS Agency
By Andrea Shalal-Esa and Jim Wolf
WASHINGTON, May 13 (Reuters) - Britain’s BAE Systems Plc (BAES.L) said on Friday it had won an initial 10-year, $850 million contract to run the U.S. Army’s Radford ammunition plant in Virginia, the only domestic producer of a key material used in explosives and propellants.
BAE bested incumbent Alliant Techsystems Inc (ATK.N) for the deal that includes three 5-year options that could stretch through 2036 and add significant new revenue, the company said.
Radford Army Ammunition Plant is a 6,900-acre government-owned, contractor-operated facility established in 1941 that produces rocket and gun propellants. It is the sole U.S. producer of nitrocellulose, the feedstock for ammunition used by the military, police officers, hunters and other recreational shooters.
Alliant Techsystems, also known as ATK, had operated the plant since 1995, when it completed the acquisition of Hercules Powder Co, which built the plant to meet World War Two military ammunition requirements.
ATK looks forward to “a debriefing from our government partners on this outcome,” said Bryce Hallowell, a company spokesman. The handover is due to take place after a six-month transition period.
J.P. Morgan North America Equity Research cut its earnings per share estimate for ATK by about 15 cents on an annualized basis after the announcement. Radford was contributing about 5 percent of company-wide sales, or about $240 million, it said.
The Radford loss also “heightened concerns” about ATK’s ability to hang on to a far larger contract to manage the Army ammunition plant at Lake City, Missouri, which is up for grabs in 2013, a note to investors said.
RBC Capital Markets recommended buying ATK on weakness Friday, saying ATK shares already had been trading at an 11 percent discount to arms makers overall.
BAE Systems shares were up 1.4 percent Friday at 339.7 pence in late trading on the London Stock Exchange. ATK shares were down 5.1 percent at $72.13 on the New York Stock Exchange.
The Radford facility sits on two sites straddling Virginia’s New River and employs more than 850 people. BAE already operates the U.S. Army’s Holston ammunition plant in Kingsport, Tennessee, under an Army contract awarded in 1998 that runs through 2023.
The ousting of ATK comes at an important time for BAE, which said last month that it was laying off 600 workers at its Sealy, Texas, plant after losing a big Army truck contract.
BAE executives said in a teleconference that they would seek U.S. permission for possible exports to allies worldwide from the Radford plant.
“That is one of the major things that we want to address within the U.S. government … as we start expanding business operations at Radford,” said Jerry Hammonds, a BAE vice president for ordnance systems.
He said BAE also planned to expand commercial applications of the plant’s production such as sports ammunition even as it moves to consolidate and modernize operations, shrink the plant’s footprint and cut idle facility costs.
BAE is a major subcontractor to Lockheed Martin Corp (LMT.N) on the projected $382 billion F-35 fighter program, the Pentagon’s costliest arms program.
Facing tighter budgets for new weapons in Europe and the United States, the company has focused in recent years on the lucrative U.S. military market, including the maintenance, modernization and repair of Navy ships. (Reporting by Andrea Shalal-Esa and Jim Wolf; Editing by Muralikumar Anantharaman and Matthew Lewis)