DHS leases 85 X-ray machines for $2.56M, raising questions about value and competition

Contract Overview

Contract Amount: $2,560,259 ($2.6M)

Contractor: Smiths Detection Inc.

Awarding Agency: Department of Homeland Security

Start Date: 2023-07-01

End Date: 2025-06-30

Contract Duration: 730 days

Daily Burn Rate: $3.5K/day

Competition Type: FULL AND OPEN COMPETITION

Pricing Type: FIRM FIXED PRICE

Sector: Other

Official Description: LEASE OF 85 X-RAY MACHINES

Place of Performance

Location: WASHINGTON, DISTRICT OF COLUMBIA County, DISTRICT OF COLUMBIA, 20004

State: District of Columbia Government Spending

Plain-Language Summary

Department of Homeland Security obligated $2.6 million to SMITHS DETECTION INC. for work described as: LEASE OF 85 X-RAY MACHINES Key points: 1. Leasing X-ray machines for nearly two years at a significant cost suggests potential for higher long-term expenses compared to outright purchase. 2. The contract was awarded under full and open competition, indicating a broad market search, but the number of bidders is not specified. 3. The fixed-price contract type offers cost certainty but may not incentivize the contractor to offer the lowest possible price over the lease term. 4. The use of a delivery order under a larger contract vehicle warrants scrutiny to understand the original competition and pricing structure. 5. The geographic focus on Washington D.C. for this equipment points to a specific operational need within the capital region. 6. The absence of small business set-aside or subcontracting requirements suggests larger prime contractors are likely involved.

Value Assessment

Rating: fair

The lease cost of approximately $2.56 million for 85 X-ray machines over two years equates to roughly $15,000 per machine annually. Benchmarking this against market rates for similar equipment leases or purchases is crucial. Without direct comparisons, it's difficult to definitively assess value for money. If outright purchase prices for comparable machines are significantly lower, or if maintenance costs are high, the lease may not be the most cost-effective solution. The fixed-price nature provides budget predictability, but the total cost over the lease term needs careful evaluation against alternative acquisition methods.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded using full and open competition, which theoretically allows any interested and capable vendor to bid. However, the specific details regarding the number of bids received and the evaluation process are not provided. A high level of competition typically drives down prices and encourages innovation. If only a few bids were submitted, or if the bidding process was complex, it could limit the effectiveness of the competition in securing the best possible price for the government.

Taxpayer Impact: Full and open competition is generally favorable for taxpayers as it aims to maximize the pool of potential suppliers, leading to more competitive pricing and potentially better terms.

Public Impact

The Department of Homeland Security (DHS) is the primary beneficiary, acquiring essential screening equipment. The X-ray machines will likely be used for security screening at various federal facilities or ports of entry within the Washington D.C. metropolitan area. This acquisition supports DHS's mission to secure the nation's borders and infrastructure. The deployment of this equipment may indirectly impact the workforce by enhancing security operations and potentially improving efficiency.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Leasing equipment over an extended period can be more expensive than purchasing, especially if the equipment has a long useful life.
The specific terms of the lease agreement, including maintenance responsibilities and end-of-lease options, are critical for a full value assessment.
Lack of detail on the number of bidders limits the assessment of competitive pressure on pricing.
The 'Other Commercial and Industrial Machinery and Equipment Rental and Leasing' NAICS code is broad, and specific X-ray machine market data is needed for precise benchmarking.

Positive Signals

The use of full and open competition suggests an effort to engage a wide range of potential suppliers.
The firm fixed-price contract type provides cost certainty for the government, mitigating the risk of cost overruns.
The contract is awarded as a delivery order, implying it falls under a pre-competed contract vehicle, which can streamline acquisition.

Sector Analysis

The market for security screening equipment, including X-ray machines, is a specialized segment within the broader industrial machinery sector. This contract falls under the rental and leasing sub-category for commercial and industrial machinery. The total federal spending on this specific NAICS code (532490) can be substantial, but precise figures for X-ray machine leases are not readily available. Competitors in this space range from large manufacturers offering direct sales and leases to specialized equipment rental companies. The government often leverages large contract vehicles to procure such equipment, aiming for economies of scale and streamlined procurement processes.

Small Business Impact

The contract data indicates that small business participation was not a specific requirement, as 'sb' is false. This suggests that the primary contract vehicle under which this delivery order was issued may not have had a strong small business set-aside component, or that the nature of the equipment and service favored larger, established providers. Consequently, the direct impact on small businesses through this specific lease is likely minimal, unless the prime contractor has subcontracting plans that are not detailed here. Further investigation into the parent contract would be needed to assess broader small business implications.

Oversight & Accountability

Oversight for this contract would primarily reside with the Department of Homeland Security's contracting officers and program managers responsible for the acquired X-ray machines. The contract is a delivery order, suggesting it was placed against a pre-existing, potentially larger, contract vehicle which itself would have undergone a competitive process and established oversight mechanisms. Transparency is facilitated by public contract databases like FPDS, where basic award details are available. However, detailed operational oversight, performance monitoring, and end-user accountability would be managed internally by DHS.

Related Government Programs

Customs and Border Protection Equipment Leases
Transportation Security Administration Screening Equipment
Federal Protective Service Security Enhancements
General Services Administration (GSA) Schedule Contracts for Equipment Rental

Risk Flags

Lease vs. Purchase Cost Analysis Needed
Limited Bidder Information
Potential for Obsolescence
Parent Contract Competition Assessment Required

Frequently Asked Questions

What is this federal contract paying for?

Department of Homeland Security awarded $2.6 million to SMITHS DETECTION INC.. LEASE OF 85 X-RAY MACHINES

Who is the contractor on this award?

The obligated recipient is SMITHS DETECTION INC..

Which agency awarded this contract?

Awarding agency: Department of Homeland Security (Office of Procurement Operations).

What is the total obligated amount?

The obligated amount is $2.6 million.

What is the period of performance?

Start: 2023-07-01. End: 2025-06-30.

What is the track record of Smiths Detection Inc. with federal contracts, particularly for X-ray machines or similar screening equipment?

Smiths Detection Inc. is a significant player in the security screening market and has a substantial history of federal contracts. A review of federal procurement data reveals numerous awards to Smiths Detection across various agencies, including Homeland Security, Defense, and others, for a range of security equipment such as X-ray scanners, metal detectors, and explosive detection systems. These contracts often involve sales, leases, maintenance, and support services. While the volume of business indicates a strong relationship with the government, a detailed analysis of past performance, including any contract disputes, performance issues, or positive performance reviews, would be necessary to fully assess their track record specifically for this type of lease agreement.

How does the lease cost compare to the potential purchase price of 85 X-ray machines?

The total lease cost is $2,560,258.59 over 730 days (2 years), averaging approximately $3,507 per machine per day or $1,279,999.30 annually for all 85 machines. This equates to roughly $15,000 per machine per year. To assess value, this needs comparison with outright purchase costs. If a comparable X-ray machine costs, for example, $50,000 to purchase, then buying 85 machines would cost $4.25 million. Over two years, the lease cost ($2.56M) is less than the purchase cost ($4.25M), suggesting leasing might be cheaper in the short term. However, this doesn't account for the residual value of the machines if purchased, nor does it include potential maintenance costs which might be bundled into the lease. A thorough analysis would require specific quotes for purchase and detailed maintenance cost projections.

What are the specific risks associated with leasing rather than purchasing this equipment?

Leasing equipment, especially high-value items like X-ray machines, carries several risks compared to purchasing. Firstly, over the long term, leasing can be significantly more expensive than purchasing, as the government does not build equity in the asset. Secondly, the lease agreement may have restrictive clauses regarding usage, modification, or early termination, which could limit flexibility. Thirdly, if the technology evolves rapidly, the leased equipment might become obsolete before the lease term ends, leaving the government with outdated technology. Finally, the total cost of ownership might be higher if maintenance and support are not adequately covered or are priced at a premium within the lease.

What is the typical duration and cost for similar federal contracts involving X-ray machine leases?

Federal contracts for X-ray machines vary widely in duration and cost depending on the type of machine, quantity, agency, and whether it's a lease or purchase. Leases typically range from 1 to 5 years. For high-throughput security screening X-ray machines, annual lease costs per unit can range from $10,000 to $30,000 or more, depending on features and service agreements. The current contract's annual cost of approximately $15,000 per machine falls within this general range. However, comparing 'apples to apples' is difficult without knowing the exact specifications of the machines and the comprehensiveness of the included services (e.g., maintenance, software updates, training).

How does the 'Delivery Order' contract type affect the assessment of competition and pricing?

A Delivery Order (DO) is typically issued against an existing indefinite-delivery, indefinite-quantity (IDIQ) contract or a similar type of contract vehicle. This means the competition and pricing were likely established when the parent IDIQ contract was awarded, often through a full and open competition. The specific DO for these 85 X-ray machines represents a call-off against that pre-established agreement. While the DO itself might not involve a new round of full competition, the initial competition for the IDIQ contract is crucial. If the IDIQ contract was competitively awarded and offers favorable pricing terms, then the DO benefits from that. However, if the IDIQ contract had limited competition or less favorable pricing, the DO inherits those limitations. Understanding the nature and competition of the parent contract is key.

Industry Classification

NAICS: Real Estate and Rental and Leasing › Commercial and Industrial Machinery and Equipment Rental and Leasing › Other Commercial and Industrial Machinery and Equipment Rental and Leasing

Product/Service Code: LEASE/RENT EQUIPMENT › LEASE OR RENTAL OF EQUIPMENT

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: 70RFP321REH000004

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 2202 LAKESIDE BLVD, EDGEWOOD, MD, 21040

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Foreign Owned, Foreign-Owned and U.S.-Incorporated Business, Manufacturer of Goods, Not Designated a Small Business, Special Designations

Financial Breakdown

Contract Ceiling: $4,289,358

Exercised Options: $2,560,259

Current Obligation: $2,560,259

Actual Outlays: $1,800,782

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: 70RFP321DEH000001

IDV Type: IDC

Timeline