By Doug Cameron

BAE Systems won a new 10-year contract worth $8.8 billion to manage the U.S. Army's main ammunition plant in Tennessee as efforts continue to surge production of artillery shells, missiles and other weapons, the Pentagon said on Tuesday.

The UK defense company's U.S. arm has overseen the Holston Army Ammunition Plant in Kingsport since 1999. It beat out competing bids from General Dynamics and Day & Zimmerman, according to people familiar with the Army's decision. Both operate other Army ammo facilities.

Holston is being upgraded as part of Pentagon plans to address shortcomings that the conflict in Ukraine exposed in the ability of the U.S. to produce more weapons, as well as the fragility of global supply chains.

The Army has already doubled monthly production of 155mm artillery shells to almost 30,000, and wants to raise that to 100,000 over the next two years by investing in new and more automated facilities.

Holston is crucial to the surge through its role as the Army's largest explosives plant, with recent improvements including upgrades to the production line for RDX, a commonly-used compound more powerful than TNT.

The sprawling 6,000-acre complex dates back to World War II, and is big and remote enough to have its own annual deer cull--with bows and arrows rather than guns.

Holston was built in a remote valley in eastern Tennessee, once run by Eastman Kodak in a reflection of how big industrial companies once dominated the defense sector. The plant has brought employment, but also pollution from chemicals that have leached into the environment, complicating plans to invest in the facility's expansion.

BAE also runs the Radford Army Ammunition Plant in Virginia, one of five government-owned, contractor-operated ammunition plants.

The seventh-largest arms maker by sales makes everything from aircraft carriers and nuclear submarines to howitzers, armored cars and parts for the F-35 combat jet. It has expanded in the U.S. through a series of acquisitions, and its planned $5.55 billion purchase of Ball Aerospace would lift the country's share of group sales to around 50%.

Write to Doug Cameron at doug.cameron@wsj.com


(END) Dow Jones Newswires

12-12-23 1757ET