I can't think of a single industry that doesn't give a decent discount for bulk orders specifically for this reason.
According to this article under the supposed contract the customer in this case may actually buy hardly any widgets.
only guaranteeing to purchase as little as 1,000 or 100,000 rounds per year.
Right, but again, we are dealing with the government here, idiots but with a long track history. Historically they have been the largest purchaser so they will get you greater orders than the average Joe. Second, the government is idiots. I wouldn't put it past them, as it has happened in the past, where they actually pay for 100 million but only take delivery of 1 million. The manufacturer gets the money. The government is that stupid.