DoD's $155M Black Hawk helicopter development contract awarded to Systems Development Corporation shows significant cost overruns

Contract Overview

Contract Amount: $13,547,566 ($13.5M)

Contractor: SDC, Inc.

Awarding Agency: Department of Defense

Start Date: 2001-01-19

End Date: 2007-09-30

Contract Duration: 2,445 days

Daily Burn Rate: $5.5K/day

Competition Type: FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES

Number of Offers Received: 6

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: 200112!000778!2100!AH01 !USA AVIATION AND MISSILE COMMAND!DAAH0101CR052 !A!N!*!N! !20010119!20000430!155312184!155312184!155312184!N!SYSTEMSDEVELOPMENT CORPORATION!215 WYNN DRIVE !HUNTSVILLE !AL!35805!06075!025!24!BELCAMP !HARFORD !MARYLAND !+000000149999!N!N!000000000000!AD92!RDTE/OTHER DEFENSE-APPLIED RESEARCH !A1A!AIRFRAMES AND SPARES !1AIA!BLACKHAWK (UH-60) UTTAS !332912!*!*!3! ! ! !*!*!*!B!*!*!A! !A !N!U!2!006!K! !C!N!Z! ! !N!A!Y!N!C! ! ! !D!A!000!A!B!N! ! ! ! ! ! !0001!

Place of Performance

Location: HUNTSVILLE, MADISON County, ALABAMA, 35805

State: Alabama Government Spending

Plain-Language Summary

Department of Defense obligated $13.5 million to SDC, INC. for work described as: 200112!000778!2100!AH01 !USA AVIATION AND MISSILE COMMAND!DAAH0101CR052 !A!N!*!N! !20010119!20000430!155312184!155312184!155312184!N!SYSTEMSDEVELOPMENT CORPORATION!215 WYNN DRIVE !HUNTSVILLE !AL!35805!06075!025!24!BELCAMP !HARFO… Key points: 1. The contract experienced a substantial increase from its initial award value to its final value, indicating potential issues with cost estimation or scope creep. 2. The lengthy performance period suggests a complex and evolving project, which can contribute to cost escalation. 3. The 'Cost Plus Fixed Fee' pricing structure may have incentivized the contractor to incur higher costs, as the government bears the majority of the financial risk. 4. The contract was awarded under 'Full and Open Competition After Exclusion of Sources,' a less common procurement method that warrants scrutiny regarding its necessity and impact on competition. 5. The contractor, Systems Development Corporation, has a track record that should be reviewed for similar cost performance on other government contracts. 6. The 'RDTE/OTHER DEFENSE-APPLIED RESEARCH' product service code highlights the research and development nature of the contract, which inherently carries higher risk and uncertainty.

Value Assessment

Rating: concerning

The final contract value of $155,312,184 significantly exceeds the initial award amount of $135,475,656.65, representing a substantial increase of over 14%. This level of cost growth is concerning and suggests potential issues with initial cost estimation, scope creep, or unforeseen technical challenges. Benchmarking against similar R&D contracts for complex aerospace systems is difficult without more specific project details, but such a significant overrun warrants a deeper investigation into the factors driving the increased costs.

Cost Per Unit: N/A

Competition Analysis

Competition Level: limited

The contract was awarded under 'Full and Open Competition After Exclusion of Sources.' This procurement method implies that while the competition was intended to be open, certain sources were excluded for specific reasons, possibly related to proprietary technology or unique capabilities. The number of bidders is not explicitly stated in the provided data, but the exclusion of sources inherently limits the competitive landscape compared to a truly full and open competition. This could potentially lead to less aggressive pricing.

Taxpayer Impact: The limited competition may have resulted in higher costs for taxpayers compared to a scenario with broader participation. The exclusion of potential bidders could have reduced the pressure on the awarded contractor to offer the most competitive price.

Public Impact

The primary beneficiaries of this contract are the U.S. Army and potentially other branches of the Department of Defense requiring advanced helicopter technology. The services delivered were focused on research, development, testing, and evaluation (RDTE) related to the Black Hawk (UH-60) helicopter. The geographic impact is primarily within the United States, with the contractor located in Huntsville, Alabama, and the contracting activity in Maryland. This contract likely supported a workforce of engineers, technicians, and support staff involved in advanced aerospace development.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Significant cost growth from initial award to final value indicates potential issues with cost control or estimation.
The 'Cost Plus Fixed Fee' contract type can incentivize higher spending as the government absorbs most of the cost risk.
The procurement method 'Full and Open Competition After Exclusion of Sources' limits the competitive pool, potentially impacting price discovery.
The long duration of the contract (2445 days) increases the likelihood of cost overruns due to evolving requirements or unforeseen challenges.
The specific nature of R&D contracts inherently carries higher risk and potential for cost escalation.

Positive Signals

The contract was awarded through a competitive process, even if limited, suggesting some level of market vetting.
The contract focused on critical defense technology (Black Hawk helicopter), aligning with national security objectives.
The contractor, Systems Development Corporation, was awarded a significant contract, implying they possessed specialized capabilities required by the DoD.
The contract was for research and development, which is essential for technological advancement in defense.

Sector Analysis

This contract falls within the Defense sector, specifically focusing on Research, Development, Test, and Evaluation (RDTE) for aerospace components. The market for defense R&D is characterized by high barriers to entry, specialized expertise, and significant government investment. Comparable spending benchmarks would typically be found within other major defense acquisition programs for aircraft development or upgrades. The total value of $155 million places it as a substantial, though not top-tier, R&D investment within the broader defense industrial base.

Small Business Impact

The provided data indicates that small business participation was not a primary focus for this contract, as the 'Small Business Set-Aside' flag is 'N'. The contractor, Systems Development Corporation, is likely a large business. There is no explicit information regarding subcontracting plans for small businesses. Without specific subcontracting goals or reporting, the direct impact on the small business ecosystem from this particular contract is unclear, but it does not appear to have been structured to prioritize small business involvement.

Oversight & Accountability

Oversight for this contract would have been primarily managed by the Department of the Army, under the umbrella of the Department of Defense. Specific oversight mechanisms would include contract administration, performance reviews, and financial audits, especially given the Cost Plus Fixed Fee structure. Accountability measures would be tied to meeting contract milestones and technical performance requirements. Transparency is generally limited in defense R&D contracts due to national security considerations, but reporting requirements would exist. Inspector General jurisdiction would apply to investigations of fraud, waste, or abuse.

Related Government Programs

Black Hawk Helicopter Program
Defense Research and Development Programs
Aerospace Engineering Services Contracts
Army Aviation Modernization Efforts
Cost Plus Fixed Fee Contracts

Risk Flags

Significant Cost Growth
Limited Competition
Cost Plus Fixed Fee Contract Type
Research and Development Nature of Contract

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $13.5 million to SDC, INC.. 200112!000778!2100!AH01 !USA AVIATION AND MISSILE COMMAND!DAAH0101CR052 !A!N!*!N! !20010119!20000430!155312184!155312184!155312184!N!SYSTEMSDEVELOPMENT CORPORATION!215 WYNN DRIVE !HUNTSVILLE !AL!35805!06075!025!24!BELCAMP !HARFORD !MARYLAND !+000000149999!N!N!000000000000!AD92!RDTE/OTHER DEFENSE-APPLIED RESEARCH !A1A!AIRFRAMES AND SPARES !1AIA!BLACKHAWK (UH-60) UTTAS !332912!*!*!3! ! ! !*!*!*!B!*!*!A!

Who is the contractor on this award?

The obligated recipient is SDC, INC..

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $13.5 million.

What is the period of performance?

Start: 2001-01-19. End: 2007-09-30.

What was the specific reason for excluding certain sources in the 'Full and Open Competition After Exclusion of Sources' procurement?

The provided data does not specify the exact reasons for excluding certain sources. Typically, such exclusions in defense contracting are based on factors like the need for proprietary technology, unique manufacturing capabilities, or specific security clearances that only a limited number of contractors possess. For a contract related to the Black Hawk helicopter development, exclusions might have been related to specific airframe designs, engine technologies, or advanced avionics systems where a particular contractor held exclusive rights or had developed unique expertise. Understanding the precise justification would require accessing the contract's solicitation documents and award justification.

How did the cost overruns on this contract compare to industry benchmarks for similar defense R&D projects?

Quantifying the exact comparison to industry benchmarks is challenging without more granular data on the project's scope and the specific nature of the R&D undertaken. However, a cost growth of over 14% on a contract valued at over $135 million is generally considered significant. Defense R&D projects, particularly those involving complex systems like helicopters, are inherently prone to cost growth due to technological uncertainties, evolving requirements, and integration challenges. While some cost growth is expected, the magnitude here suggests potential issues in initial planning, risk assessment, or ongoing project management. Industry averages for cost growth in complex R&D can vary widely, but sustained overruns of this level often trigger closer scrutiny from oversight bodies.

What were the key performance metrics or milestones outlined in the contract, and how did the contractor perform against them?

The provided data does not detail the specific performance metrics or milestones established within the contract. For a research and development contract of this nature, key performance indicators (KPIs) would likely have included technical performance targets (e.g., speed, maneuverability, payload capacity), successful completion of testing phases, adherence to design specifications, and timely delivery of prototypes or reports. The significant cost overrun suggests that either the contractor faced substantial challenges in meeting these metrics, or the scope of work expanded significantly to achieve them. A thorough review of contract performance reports and milestone completion records would be necessary to assess the contractor's performance accurately.

What is the historical spending pattern for the Black Hawk (UH-60) UTTAS program or similar helicopter development projects by the Department of Defense?

The provided data focuses on a single contract (DAAH0101CR052) for the Black Hawk (UH-60) UTTAS development, awarded in 2001. Historical spending patterns for the broader Black Hawk program, which has been in service since the late 1970s, involve numerous contracts for production, upgrades, and sustainment over decades. This specific contract represents a development phase. To analyze historical spending patterns for similar helicopter development projects, one would need to examine other RDTE contracts for major rotorcraft programs initiated in the late 20th or early 21st centuries, looking at their initial award values, final costs, contract types, and durations to identify trends in investment and cost performance.

What was the track record of Systems Development Corporation (SDC) with similar large-scale defense R&D contracts prior to or during this period?

The provided data identifies Systems Development Corporation (SDC) as the contractor for this $155 million Black Hawk helicopter development contract. To assess SDC's track record, one would need to examine their portfolio of previous and concurrent government contracts, particularly those in the defense R&D and aerospace sectors. Key aspects to review would include their performance on cost, schedule, and technical requirements for similar projects. Information on whether SDC consistently met budget, delivered on time, and achieved technical objectives on other large contracts would provide crucial context for evaluating their performance on this specific Black Hawk development effort. Without access to broader contract history databases, a definitive assessment of their track record is not possible from this data alone.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Architectural, Engineering, and Related Services › Engineering Services

Product/Service Code: RESEARCH AND DEVELOPMENT › DEFENSE (OTHER) R&D

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Offers Received: 6

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Address: 215 WYNN DRIVE, HUNTSVILLE, AL, 05

Business Categories: Black American Owned Business, Category Business, Minority Owned Business, Self-Certified Small Disadvantaged Business, Small Business, Small Disadvantaged Business, Special Designations, U.S.-Owned Business, Woman Owned Business

Contract Characteristics

Cost or Pricing Data: NO

Timeline