DoD awards $796M contract for electronic assemblies, raising questions about competition and value

Contract Overview

Contract Amount: $39,962,402 ($40.0M)

Contractor: BAE Systems Information and Electronic Systems Integration Inc.

Awarding Agency: Department of Defense

Start Date: 2005-03-11

End Date: 2011-06-30

Contract Duration: 2,302 days

Daily Burn Rate: $17.4K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: 200506!000163!5700!FA8208!OO-ALC/PKI/LGJP !FA820805C0006 !A!N! !N! ! !20050311!20060411!795958482!876861790!217304393!N!BAE SYSTEMS INFORMATION & ELEC!450 PULASKI ROAD !GREENLAWN !NY!11740!30543!103!36!GREENLAWN !SUFFOLK !NEW YORK !+000004406472!N!N!000000000000!5998!ELECTRICAL & ELCT BOARDS, CARDS & ASSCTED HRDWRE !A1C!OTHER AIRCRAFT EQUIPMENT !000 !* !334418!E! !1! ! ! ! ! !20200930!B! ! !N!A!D!U!J!1!001!N!2A!A!N!Z! ! !N!C!N! ! ! !A!A!A!A!000!A!C!N! ! ! !Y! ! !0001! !

Place of Performance

Location: GREENLAWN, SUFFOLK County, NEW YORK, 11740

State: New York Government Spending

Plain-Language Summary

Department of Defense obligated $40.0 million to BAE SYSTEMS INFORMATION AND ELECTRONIC SYSTEMS INTEGRATION INC. for work described as: 200506!000163!5700!FA8208!OO-ALC/PKI/LGJP !FA820805C0006 !A!N! !N! ! !20050311!20060411!795958482!876861790!217304393!N!BAE SYSTEMS INFORMATION & ELEC!450 PULASKI ROAD !GREENLAWN !NY!11740!30543!103!36!GREENLAWN !SUFF… Key points: 1. Contract awarded on a sole-source basis, limiting price discovery and potentially increasing costs. 2. Significant duration of over 6 years suggests a long-term need for these electronic components. 3. The contract's value of nearly $800 million indicates a substantial investment in defense electronics. 4. Awarded by the Department of the Air Force, highlighting its role in supporting aviation systems. 5. The specific product code points to a niche but critical component within the defense supply chain. 6. Lack of competition raises concerns about whether the government secured the best possible price.

Value Assessment

Rating: questionable

The contract value of $795,958,482 for Printed Circuit Assembly (Electronic Assembly) Manufacturing is substantial. Without comparable sole-source contracts for similar complex electronic assemblies, it is difficult to definitively benchmark the value. However, the absence of competition inherently limits the government's ability to ensure optimal pricing. The fixed-price nature of the contract shifts some risk to the contractor, but the lack of competitive bidding means the initial price may not reflect the lowest achievable market rate.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning it was not competed among multiple vendors. This approach is typically used when only one vendor possesses the necessary capabilities, technology, or security clearances. The lack of competition means that the government did not benefit from the price reductions and innovation that typically arise from a competitive bidding process.

Taxpayer Impact: For taxpayers, a sole-source award means there is a higher risk of paying a premium for goods or services, as there was no competitive pressure to drive down costs. This can lead to less efficient use of public funds.

Public Impact

The primary beneficiaries are likely the Department of Defense, specifically the Air Force, which receives critical electronic components for its operations. The contract delivers essential Printed Circuit Assembly (Electronic Assembly) Manufacturing services, vital for the functionality of various defense systems. The geographic impact is centered around the contractor's location in Greenlawn, New York, and potentially extends to defense installations receiving the components. Workforce implications include employment at BAE SYSTEMS INFORMATION & ELEC and its supply chain partners, particularly in the specialized field of electronic manufacturing.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing, potentially leading to higher costs for taxpayers.
Long contract duration (over 6 years) may lock the government into potentially suboptimal pricing for an extended period.
Lack of transparency in the sole-source justification could obscure potential cost savings missed.
The specific nature of the electronic assembly might indicate a limited supplier base, but this should be periodically re-evaluated.

Positive Signals

Award to a known entity, BAE SYSTEMS INFORMATION & ELEC, suggests a potentially reliable supplier with established capabilities.
Firm Fixed Price contract type provides cost certainty for the government, assuming the initial price was fair.
The contract addresses a specific need for critical electronic components, ensuring operational readiness.
The duration indicates a stable, long-term relationship which can foster efficiency and expertise.

Sector Analysis

The defense electronics sector is characterized by high barriers to entry due to specialized technology, stringent quality requirements, and security clearances. Contracts for components like Printed Circuit Assemblies are crucial for the production and maintenance of advanced military platforms. The market often involves a limited number of highly capable suppliers, making competition dynamics complex. Benchmarking spending in this area requires comparing against similar sole-source or highly specialized procurements within the defense industrial base.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'ss': false. The prime contractor, BAE SYSTEMS INFORMATION AND ELECTRONIC SYSTEMS INTEGRATION INC., is a large business. There is no explicit information provided regarding subcontracting plans to small businesses. Without this data, it's difficult to assess the impact on the small business ecosystem, though large sole-source contracts often have limited direct benefit for small businesses unless specific subcontracting goals are mandated and met.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contracting and program management offices. The Inspector General's office for the Department of the Air Force would have jurisdiction to investigate any potential fraud, waste, or abuse. Transparency is limited due to the sole-source nature, but contract modifications, performance reports, and payment data would typically be subject to internal review and potentially public disclosure under FOIA, depending on classification.

Related Government Programs

Defense Electronics Manufacturing
Aerospace Component Procurement
Military Aircraft Systems
Sole-Source Defense Contracts
Printed Circuit Board Assembly

Risk Flags

Sole-source award
Lack of competition
High contract value
Long contract duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $40.0 million to BAE SYSTEMS INFORMATION AND ELECTRONIC SYSTEMS INTEGRATION INC.. 200506!000163!5700!FA8208!OO-ALC/PKI/LGJP !FA820805C0006 !A!N! !N! ! !20050311!20060411!795958482!876861790!217304393!N!BAE SYSTEMS INFORMATION & ELEC!450 PULASKI ROAD !GREENLAWN !NY!11740!30543!103!36!GREENLAWN !SUFFOLK !NEW YORK !+000004406472!N!N!000000000000!5998!ELECTRICAL & ELCT BOARDS, CARDS & ASSCTED HRDWRE !A1C!OTHER AIRCRAFT EQUIPMENT !000 !* !334418!E! !1! ! ! ! ! !202

Who is the contractor on this award?

The obligated recipient is BAE SYSTEMS INFORMATION AND ELECTRONIC SYSTEMS INTEGRATION INC..

Which agency awarded this contract?

Awarding agency: Department of Defense (Department of the Air Force).

What is the total obligated amount?

The obligated amount is $40.0 million.

What is the period of performance?

Start: 2005-03-11. End: 2011-06-30.

What is the track record of BAE SYSTEMS INFORMATION & ELEC with similar sole-source defense contracts?

BAE SYSTEMS INFORMATION & ELEC, a major defense contractor, has a history of securing significant sole-source contracts across various defense platforms. Analyzing their past performance on similar sole-source awards for electronic assemblies would provide insight into their reliability, pricing consistency, and ability to meet stringent military specifications. Publicly available contract databases can reveal patterns in contract values, durations, and any reported performance issues or successes. A review of their contract history would help determine if this specific award aligns with typical sole-source engagements for this type of specialized component, or if it represents an outlier in terms of value or terms.

How does the $796 million contract value compare to market rates for similar electronic assemblies?

Benchmarking the $796 million contract value against market rates for similar electronic assemblies is challenging due to the sole-source nature and the specialized requirements of defense components. Typically, competitive bidding allows for direct price comparison. In the absence of competition, value is assessed by comparing to historical data for similar sole-source awards, analyzing the contractor's cost structure (if available), and considering the complexity and criticality of the assemblies. Without access to detailed cost breakdowns or comparable competitive bids, it's difficult to ascertain if this price represents optimal value. The long duration and fixed-price nature suggest an attempt to lock in costs, but the initial price point remains a key area for scrutiny.

What are the primary risks associated with this sole-source contract for the Department of Defense?

The primary risk associated with this sole-source contract is the potential for inflated pricing due to the lack of competitive pressure. The government may be paying more than necessary for the electronic assemblies. Another risk is contractor performance; while BAE SYSTEMS is a large entity, any disruption in their production or supply chain could significantly impact defense readiness, given the critical nature of these components. There's also a risk of technological obsolescence if the assemblies are for systems with rapidly evolving technology, although the contract duration suggests a stable requirement. Finally, the lack of transparency inherent in sole-source awards can obscure potential inefficiencies or cost overruns.

How effective is the Department of the Air Force in ensuring value for money on sole-source procurements like this?

The effectiveness of the Department of the Air Force (DAF) in ensuring value for money on sole-source procurements hinges on robust internal processes, including thorough market research, independent cost estimates, and negotiation strategies. For sole-source awards, the DAF relies heavily on justification and approval (J&A) processes to document why competition is not feasible. They may employ techniques like should-cost analysis and should-cost-to-competed analysis. However, the inherent limitation of sole-source awards is the absence of direct price competition. Therefore, effectiveness is measured by how well the DAF mitigates the risks of higher costs through rigorous oversight, negotiation, and by ensuring the contractor's proposed price is fair and reasonable based on available data and benchmarks.

What has been the historical spending pattern for Printed Circuit Assembly (Electronic Assembly) Manufacturing by the Department of Defense?

Historical spending patterns for Printed Circuit Assembly (Electronic Assembly) Manufacturing by the Department of Defense are substantial and span decades, reflecting the critical role of electronics in modern military systems. This spending is distributed across various branches, including the Air Force, Navy, and Army, and encompasses a wide range of applications from aircraft and ships to ground vehicles and communication systems. Contracts can range from small, specialized R&D efforts to large-scale production runs for major weapon systems. Analyzing historical data reveals trends in contract types (fixed-price vs. cost-plus), competition levels (competitive vs. sole-source), and average contract values. This specific $796 million award, while large, fits within the broader context of significant DoD investment in advanced electronic components.

Industry Classification

NAICS: Manufacturing › Semiconductor and Other Electronic Component Manufacturing › Printed Circuit Assembly (Electronic Assembly) Manufacturing

Product/Service Code: ELECTRICAL/ELECTRONIC EQPT COMPNTS

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: BAE Systems PLC (UEI: 217304393)

Address: 450 PULASKI ROAD, GREENLAWN, NY, 01

Business Categories: Category Business, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Contract Characteristics

Cost or Pricing Data: NO

Timeline