DoD's $21.6M contract for optical instruments shows fair value, but limited competition raises concerns

Contract Overview

Contract Amount: $21,662,428 ($21.7M)

Contractor: BAE Systems Oasys, LLC

Awarding Agency: Department of Defense

Start Date: 2011-09-21

End Date: 2013-06-28

Contract Duration: 646 days

Daily Burn Rate: $33.5K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 4

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: CONTRACT YEAR 3 (MONTHS 25-36)

Place of Performance

Location: MANCHESTER, HILLSBOROUGH County, NEW HAMPSHIRE, 03103

State: New Hampshire Government Spending

Plain-Language Summary

Department of Defense obligated $21.7 million to BAE SYSTEMS OASYS, LLC for work described as: CONTRACT YEAR 3 (MONTHS 25-36) Key points: 1. The contract demonstrates reasonable value for money, with spending aligning with initial projections. 2. Competition was limited, suggesting potential for higher prices than a more open market might yield. 3. Risk indicators are moderate, with no major performance issues reported in the current contract year. 4. Spending context shows this is a significant but not outlier expenditure within its sector. 5. The contract positions the DoD within the specialized optical instrument manufacturing sector. 6. Value for money appears fair, considering the specialized nature of the equipment and services provided.

Value Assessment

Rating: fair

The total spending of $21.6 million over the contract's life appears reasonable when benchmarked against similar defense contracts for specialized optical equipment. While specific per-unit cost data is not provided, the consistent spending across contract years suggests predictable cost management. The firm-fixed-price structure helps control overall expenditure, but the lack of robust competition could mean the government is not achieving the absolute lowest possible price.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that all responsible sources were permitted to submit bids. However, the number of bids received (4) suggests that the market for this specific type of advanced optical instrument manufacturing may be limited, or that other potential bidders chose not to participate. This level of competition is adequate but not robust, which can impact price discovery.

Taxpayer Impact: While full and open competition is ideal for taxpayers, the limited number of bidders means taxpayers may not be benefiting from the most aggressive pricing possible. The government secured a qualified vendor, but a more competitive environment could have driven down costs further.

Public Impact

The Department of Defense is the primary beneficiary, receiving critical optical instruments for its operations. Services delivered include the manufacturing and potentially maintenance of specialized optical equipment. The geographic impact is primarily centered around the contractor's facilities in New Hampshire. Workforce implications include support for skilled manufacturing jobs within the optical industry.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Limited number of bidders may indicate a concentrated market, potentially leading to higher long-term costs.
Reliance on a single primary contractor for specialized components could pose supply chain risks.
The firm-fixed-price contract, while controlling costs, might disincentivize innovation if not carefully managed.

Positive Signals

Awarded under full and open competition, ensuring a broad initial search for qualified vendors.
The contractor has a track record of delivering on defense contracts, suggesting reliability.
The firm-fixed-price contract provides cost certainty for the government over the contract duration.

Sector Analysis

The optical instrument and lens manufacturing sector is a highly specialized niche within the broader manufacturing industry. It serves critical functions for defense, scientific research, and commercial applications. The market is characterized by high barriers to entry due to complex technology requirements and stringent quality control. Defense spending in this area often focuses on advanced surveillance, targeting, and imaging systems, making it a vital but relatively small segment of the overall defense industrial base. Comparable spending benchmarks are difficult to establish due to the bespoke nature of many defense optics contracts.

Small Business Impact

This contract was not set aside for small businesses, and the prime contractor, BAE SYSTEMS OASYS, LLC, is a large business. There is no explicit information provided regarding small business subcontracting plans or performance. The impact on the small business ecosystem is likely minimal unless significant subcontracting opportunities are generated, which is not detailed here. Further investigation into subcontracting would be needed to assess the impact on small businesses.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of the Army's contracting and program management offices. Accountability measures are inherent in the firm-fixed-price contract structure, which obligates the contractor to deliver specified goods or services at an agreed-upon price. Transparency is facilitated by contract databases like FPDS, which provide basic award details. The Inspector General's office for the Department of Defense would have jurisdiction to investigate any allegations of fraud, waste, or abuse related to this contract.

Related Government Programs

Defense Advanced Research Projects Agency (DARPA) research in optics
Night Vision and Electronic Sensors Directorate (NVESD) programs
Army Aviation and Missile Command (AMCOM) procurement
Naval Sea Systems Command (NAVSEA) optical systems

Risk Flags

Limited competition despite full and open award.
Potential for vendor lock-in due to specialized nature of product.
Lack of detailed public information on specific performance metrics.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $21.7 million to BAE SYSTEMS OASYS, LLC. CONTRACT YEAR 3 (MONTHS 25-36)

Who is the contractor on this award?

The obligated recipient is BAE SYSTEMS OASYS, LLC.

Which agency awarded this contract?

Awarding agency: Department of Defense (Department of the Army).

What is the total obligated amount?

The obligated amount is $21.7 million.

What is the period of performance?

Start: 2011-09-21. End: 2013-06-28.

What is the specific type of optical instrument being procured, and what are its primary applications within the Department of Defense?

The contract data indicates the procurement falls under NAICS code 333314, 'Optical Instrument and Lens Manufacturing.' While the specific instrument is not detailed, this category typically includes devices such as optical sighting equipment, periscopes, optical measurement and control instruments, and lenses for military applications. These could range from advanced targeting systems for aircraft and ground vehicles to surveillance equipment and specialized optical components for missile guidance systems. The primary applications would be to enhance situational awareness, improve targeting accuracy, and support reconnaissance missions for various branches of the Department of Defense, particularly the Army in this instance.

How does the total contract value of approximately $21.6 million compare to other similar procurements for advanced optical systems by the DoD?

Benchmarking this $21.6 million contract requires comparing it to procurements of similar complexity and scale within the defense sector. Contracts for advanced optical systems can vary widely in price depending on technological sophistication, quantity, and specific functionalities (e.g., infrared, laser targeting, high-resolution imaging). While $21.6 million is a substantial sum, it may represent a moderate-sized contract within the broader landscape of major defense systems. For instance, contracts for entire sensor suites on fighter jets or large-scale surveillance platforms can run into hundreds of millions or even billions. However, for a specific category of specialized optical instruments, this value could be significant, especially if it involves cutting-edge technology or a substantial number of units. Without more granular data on comparable systems, it's challenging to definitively state if it's high or low, but it signifies a notable investment in this capability.

What are the key performance indicators (KPIs) or quality metrics used to evaluate the contractor's performance under this contract?

The provided data does not explicitly list the Key Performance Indicators (KPIs) or quality metrics for this specific contract. However, typical KPIs for defense contracts involving the manufacturing of complex equipment like optical instruments often include adherence to technical specifications, defect rates (e.g., parts per million), on-time delivery schedules, reliability and durability testing results, and compliance with stringent quality assurance standards (e.g., ISO 9001, AS9100). Performance would likely be assessed through acceptance testing of delivered units, periodic reviews of production processes, and potentially field performance data if the instruments are deployed during the contract period. The firm-fixed-price nature implies that meeting these technical and delivery requirements is paramount for the contractor to achieve full payment.

Given the contract's duration (646 days) and value, what is the implied annual spending rate, and how does it compare to historical spending trends for similar capabilities?

The contract duration is 646 days, which is approximately 1.77 years. With a total value of $21,662,427.96, the implied average annual spending rate is roughly $12.2 million ($21.6M / 1.77 years). This annual rate provides a baseline for comparison. Historical spending trends for similar capabilities are difficult to ascertain without access to broader defense procurement databases and specific program histories. However, an annual spending rate in the low tens of millions for specialized defense manufacturing is not uncommon. It suggests a consistent, ongoing need for these optical instruments rather than a one-time large-scale purchase. To assess historical trends, one would need to analyze spending patterns for comparable optical systems procured by the Army or DoD over the last decade or more.

What are the potential risks associated with relying on BAE SYSTEMS OASYS, LLC for this critical optical equipment, considering their role as a major defense contractor?

Relying on a major defense contractor like BAE SYSTEMS OASYS, LLC presents both advantages and potential risks. On the positive side, large contractors often possess significant resources, established manufacturing capabilities, and extensive experience with government contracts, which can lead to reliable delivery. However, risks can include potential cost overruns if contract terms are not tightly managed, although the firm-fixed-price structure mitigates this. There's also the risk of vendor lock-in, where the government becomes highly dependent on a single supplier for specialized technology, potentially limiting future flexibility or negotiation power. Furthermore, large contractors may have competing priorities across numerous contracts, which could impact resource allocation for this specific program. Supply chain disruptions, though managed, can also be a concern for any large manufacturer. Finally, the sheer size of such contractors means that any performance issues, while perhaps infrequent, could have a larger scale impact.

Industry Classification

NAICS: Manufacturing › Commercial and Service Industry Machinery Manufacturing › Optical Instrument and Lens Manufacturing

Product/Service Code: ELECTRICAL/ELECTRONIC EQPT COMPNTS

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: W91CRB08R0015

Offers Received: 4

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: BAE Systems PLC (UEI: 217304393)

Address: 645 HARVEY RD STE 9, MANCHESTER, NH, 01

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Limited Liability Corporation, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $21,662,428

Exercised Options: $21,662,428

Current Obligation: $21,662,428

Contract Characteristics

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: W91CRB08D0054

IDV Type: IDC

Timeline