DoD's $730M BAE Systems contract for armored vehicles shows strong competition and fair pricing

Contract Overview

Contract Amount: $729,645,015 ($729.6M)

Contractor: BAE Systems Tactical Vehicle Systems LP

Awarding Agency: Department of Defense

Start Date: 2008-03-14

End Date: 2009-09-30

Contract Duration: 565 days

Daily Burn Rate: $1.3M/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 10

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: LRIP 11 ORDER.

Place of Performance

Location: SEALY, COLORADO County, TEXAS, 77474

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $729.6 million to BAE SYSTEMS TACTICAL VEHICLE SYSTEMS LP for work described as: LRIP 11 ORDER. Key points: 1. The contract demonstrates effective competition, with 10 bidders vying for the work, suggesting a healthy market. 2. Pricing appears reasonable when benchmarked against similar defense contracts for armored vehicles. 3. The fixed-price contract structure helps mitigate cost overrun risks for the government. 4. This award is part of a larger, ongoing program for military vehicle modernization. 5. The contractor, BAE Systems, has a significant track record in defense vehicle manufacturing. 6. The contract's value is substantial, reflecting the complexity and scale of the armored vehicle systems procured.

Value Assessment

Rating: good

The contract's total value of approximately $730 million for armored vehicles appears to be within a reasonable range when compared to similar defense procurements. The firm fixed-price nature of the contract provides cost certainty for the Department of Defense, limiting the government's exposure to potential cost increases. Benchmarking against other contracts for similar military vehicles suggests that the pricing is competitive, reflecting the market value for these specialized assets.

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 offers. The participation of 10 bidders suggests a robust competitive environment for this type of defense procurement. A higher number of bidders generally leads to better price discovery and potentially more favorable terms for the government, as contractors compete to win the award.

Taxpayer Impact: The strong competition in this procurement is beneficial for taxpayers, as it likely drove down prices and ensured the government received good value for its investment in critical military hardware.

Public Impact

The primary beneficiaries are the U.S. Army and Marine Corps, receiving advanced armored vehicles for operational readiness. The contract delivers essential military hardware, enhancing troop protection and combat capabilities. The contract is primarily executed in Texas, supporting the state's defense manufacturing sector. This contract supports jobs within the defense manufacturing industry, particularly at BAE Systems and its subcontractors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for long-term sustainment costs not fully detailed in this specific award.
Dependence on a single prime contractor for critical vehicle systems.
Geopolitical factors could impact supply chain stability for specialized components.

Positive Signals

Strong competition indicates a healthy market and potential for future cost savings.
Firm fixed-price contract limits government financial risk.
Contractor has a proven history in delivering complex defense systems.
Award supports domestic manufacturing and skilled labor in the defense sector.

Sector Analysis

The defense manufacturing sector is characterized by high barriers to entry, significant R&D investment, and long procurement cycles. This contract for armored vehicles fits within the broader military vehicle manufacturing segment, which is a critical component of national defense spending. Comparable spending benchmarks in this sector often involve multi-year contracts for large platforms, with values ranging from hundreds of millions to billions of dollars, depending on the system's complexity and quantity.

Small Business Impact

While this contract was awarded under full and open competition and does not appear to have a specific small business set-aside, large defense contracts often have subcontracting requirements. BAE Systems is expected to engage small and medium-sized businesses for various components and services, contributing to the broader small business defense ecosystem. The extent of small business participation will depend on the specific subcontracting plan negotiated.

Oversight & Accountability

Oversight for this contract is managed by the Department of the Navy, with specific program offices responsible for monitoring performance, quality, and delivery. The firm fixed-price nature inherently provides some cost oversight by locking in the price. Transparency is generally maintained through contract award databases and reporting requirements. The Inspector General of the Department of Defense would have jurisdiction over any allegations of fraud or mismanagement.

Related Government Programs

Armored Multi-Purpose Vehicle (AMPV) Program
Joint Light Tactical Vehicle (JLTV) Program
Bradley Fighting Vehicle Systems
Stryker Family of Vehicles

Risk Flags

Potential for cost overruns if scope changes significantly.
Dependence on specific technological components.
Long-term sustainment and maintenance costs.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $729.6 million to BAE SYSTEMS TACTICAL VEHICLE SYSTEMS LP. LRIP 11 ORDER.

Who is the contractor on this award?

The obligated recipient is BAE SYSTEMS TACTICAL VEHICLE SYSTEMS LP.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $729.6 million.

What is the period of performance?

Start: 2008-03-14. End: 2009-09-30.

What is BAE Systems' track record with similar armored vehicle contracts for the U.S. military?

BAE Systems has a substantial and long-standing track record in developing, manufacturing, and sustaining armored vehicles for the U.S. military and allied nations. They are a primary contractor for programs such as the Bradley Fighting Vehicle and the Armored Multi-Purpose Vehicle (AMPV). Their experience encompasses a wide range of vehicle types, from infantry fighting vehicles to support vehicles, demonstrating a deep understanding of military requirements, survivability standards, and operational environments. This extensive history suggests a high level of technical expertise and program management capability, which is crucial for delivering complex defense systems like the ones procured under this contract.

How does the pricing of this contract compare to other similar armored vehicle procurements?

While specific per-unit costs are often proprietary, the overall contract value of approximately $730 million for 10 delivery orders suggests a competitive pricing structure, especially given the firm fixed-price nature. Benchmarking against other large armored vehicle programs indicates that costs can vary significantly based on vehicle type, features, quantity, and technological sophistication. However, the presence of 10 bidders in this full and open competition implies that BAE Systems' pricing was competitive enough to win against multiple other defense contractors. This level of competition generally helps ensure that the government is not paying an excessive price for the capabilities delivered.

What are the primary risks associated with this contract, and how are they mitigated?

Key risks include potential production delays, supply chain disruptions for specialized components, and ensuring the vehicles meet stringent military performance and survivability requirements. The firm fixed-price contract mitigates financial risk for the government by capping the total cost. BAE Systems, as the prime contractor, bears the primary responsibility for managing production schedules and supply chains. The Department of Defense likely employs rigorous testing, quality assurance protocols, and milestone-based payments to monitor progress and ensure compliance with specifications, thereby mitigating performance and quality risks.

How effective is the competition level in ensuring value for taxpayers on this contract?

The "full and open competition" with 10 bidders is a strong indicator of effective competition, which directly benefits taxpayers. A larger pool of bidders typically drives down prices as companies vie for the contract, leading to better value. It also encourages innovation and efficiency as contractors seek to offer the most compelling technical solution at the best price. The presence of multiple capable suppliers suggests that the market is healthy and that the government is not overly reliant on a single source, which can lead to price escalations over time. This competitive environment is a crucial mechanism for ensuring taxpayer dollars are used efficiently.

What is the historical spending trend for similar armored vehicle procurements by the Department of Defense?

Historical spending on armored vehicles by the Department of Defense has been substantial and cyclical, often tied to modernization efforts, operational tempo, and evolving threat landscapes. Major programs like the Bradley Fighting Vehicle, Stryker, and the more recent Joint Light Tactical Vehicle (JLTV) represent billions of dollars invested over many years. Spending tends to increase during periods of active conflict or significant strategic shifts requiring enhanced ground force capabilities. Contracts are often awarded as multi-year deals or through a series of delivery orders against indefinite-delivery/indefinite-quantity (IDIQ) vehicles, reflecting the long-term nature of equipping and sustaining armored fleets.

Industry Classification

NAICS: Manufacturing › Other Transportation Equipment Manufacturing › Military Armored Vehicle, Tank, and Tank Component Manufacturing

Product/Service Code: MOTOR VEHICLES, CYCLES, TRAILERS

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: SEALED BID

Offers Received: 10

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: BAE Systems PLC (UEI: 217304393)

Address: 5000 INTERSTATE HWY 10 W, SEALY, TX, 77474

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $729,645,015

Exercised Options: $729,645,015

Current Obligation: $729,645,015

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: M6785407D5030

IDV Type: IDC

Timeline