DoD's $42.6M engineering services contract with BAE Systems awarded without competition

Contract Overview

Contract Amount: $42,598,303 ($42.6M)

Contractor: BAE Systems Information and Electronic Systems Integration Inc.

Awarding Agency: Department of Defense

Start Date: 2010-06-23

End Date: 2016-04-30

Contract Duration: 2,138 days

Daily Burn Rate: $19.9K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST NO FEE

Sector: Defense

Official Description: ENGINEERING SERVICES

Place of Performance

Location: TOTOWA, PASSAIC County, NEW JERSEY, 07512

State: New Jersey Government Spending

Plain-Language Summary

Department of Defense obligated $42.6 million to BAE SYSTEMS INFORMATION AND ELECTRONIC SYSTEMS INTEGRATION INC. for work described as: ENGINEERING SERVICES Key points: 1. Contract awarded on a sole-source basis, raising questions about potential cost efficiencies. 2. Long contract duration of 2138 days suggests a sustained need for these engineering services. 3. The 'Cost No Fee' contract type shifts risk to the government, potentially increasing overall cost. 4. Lack of competition limits opportunities for other firms and may reduce price discovery. 5. The contract falls under the 'Engineering Services' category, indicating specialized technical support. 6. Awarded by the Department of the Air Force, highlighting a specific military branch's requirements.

Value Assessment

Rating: questionable

The 'Cost No Fee' contract type is a significant concern, as it places the financial risk entirely on the government. Without a fixed price or incentive structure, there's less motivation for the contractor to control costs effectively. Benchmarking the value is difficult without knowing the specific services rendered and the associated costs incurred by BAE Systems. However, the absence of competition and the risk-laden contract type suggest that the government may not be achieving optimal value for its investment.

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. This indicates that the Department of the Air Force likely identified BAE Systems as the only capable or appropriate provider for these specific engineering services at the time of award. The lack of competition means there were no other bidders to compare against, and no market pressure to drive down prices through a bidding process.

Taxpayer Impact: Sole-source awards can lead to higher costs for taxpayers as there is no competitive pressure to ensure the most economical price is achieved. It also limits opportunities for other businesses to secure government contracts.

Public Impact

The primary beneficiary is BAE Systems, which received a substantial contract for engineering services. The Department of the Air Force benefits from specialized engineering expertise to support its operations. The contract's geographic impact is centered in New Jersey, where BAE Systems' relevant division is located. The workforce implications include employment for engineers and technical staff at BAE Systems.

Waste & Efficiency Indicators

Waste Risk Score: 30 / 10

Warning Flags

Sole-source award limits competitive pricing and potentially increases costs for the government.
Cost-plus-no-fee contract type places all financial risk on the government, incentivizing cost overruns.
Long contract duration could lead to scope creep or outdated technology if not managed closely.
Lack of transparency in cost breakdown due to 'Cost No Fee' structure.

Positive Signals

BAE Systems is a large, established defense contractor with a track record in electronic systems integration.
The contract addresses a specific need for engineering services within the Department of the Air Force.
The contract was awarded to a single, presumably capable, provider.

Sector Analysis

This contract falls within the Engineering Services sector, which is a critical component of the broader aerospace and defense industry. The market for specialized engineering services is often characterized by high barriers to entry due to required expertise, security clearances, and established relationships. The Department of Defense is a major consumer of such services, often requiring highly specialized technical support for complex weapon systems and platforms. Comparable spending benchmarks are difficult to establish without more detail on the specific engineering disciplines involved, but large-scale, long-term engineering support contracts are common within the defense sector.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb: false'. Furthermore, BAE Systems is a large corporation, making it unlikely that significant subcontracting opportunities would be directed towards small businesses under this specific award. The lack of a small business focus means this contract does not directly contribute to the small business ecosystem or provide set-aside benefits.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Air Force's contracting and program management offices. Given the 'Cost No Fee' structure, rigorous oversight of incurred costs and performance is crucial to ensure the government is not overpaying. Transparency may be limited due to the nature of the contract type. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Defense Engineering Services
Aerospace Engineering Support
Information and Electronic Systems Integration
Department of the Air Force Contracts
Sole-Source Defense Contracts

Risk Flags

Sole-source award
Cost-plus-no-fee contract type
Lack of competition
Long contract duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $42.6 million to BAE SYSTEMS INFORMATION AND ELECTRONIC SYSTEMS INTEGRATION INC.. ENGINEERING SERVICES

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 $42.6 million.

What is the period of performance?

Start: 2010-06-23. End: 2016-04-30.

What specific engineering services were provided under this contract, and how were they critical to the Air Force's mission?

The contract data indicates 'ENGINEERING SERVICES' (NAICS 541330) were provided by BAE SYSTEMS INFORMATION AND ELECTRONIC SYSTEMS INTEGRATION INC. While the specific nature of these services is not detailed in the provided data, engineering services in the defense sector typically encompass a wide range of activities. This could include design, development, testing, analysis, and integration of complex systems, such as avionics, radar, communication systems, or electronic warfare capabilities. Given the award by the Department of the Air Force, these services were likely critical for maintaining, upgrading, or developing platforms and technologies essential for air and space operations. The long duration (2138 days) suggests ongoing support rather than a one-time project, potentially related to sustainment, modernization, or lifecycle management of key Air Force assets.

How does the 'Cost No Fee' (CNF) contract type typically impact government spending and contractor incentives compared to other contract types?

The 'Cost No Fee' (CNF) contract type is a variation of cost-plus contracts where the contractor is reimbursed for allowable costs but receives no fee or profit. This structure is generally used when the level of risk for the contractor is very high, or when the scope of work is uncertain, making it difficult to establish a fair price beforehand. For the government, the primary implication is that the contractor has minimal financial incentive to control costs, as their profit is not tied to efficiency or cost savings. The government bears all the financial risk. This contrasts sharply with fixed-price contracts, where the contractor has a strong incentive to manage costs to maximize profit, or cost-plus-incentive-fee (CPIF) contracts, which share cost savings and overruns between the government and contractor, aligning incentives for cost control.

What are the potential risks associated with awarding a large, long-term contract like this on a sole-source basis?

Awarding a large, long-term contract on a sole-source basis carries several potential risks. Firstly, it eliminates the possibility of achieving cost savings through competition. Without competing bids, the government may end up paying a higher price than if multiple contractors had vied for the work. Secondly, it can stifle innovation and efficiency, as the sole-source contractor may face less pressure to improve processes or offer better solutions. Thirdly, it can create a dependency on a single provider, making it difficult to switch contractors in the future if performance issues arise or if market conditions change. Finally, it raises concerns about fairness and equal opportunity for other qualified businesses that were not given a chance to bid on the contract.

Can we assess the contractor's track record with the Department of the Air Force based on this single contract award?

Assessing BAE Systems' overall track record with the Department of the Air Force based solely on this one contract award is limited. This data point shows a significant sole-source award for engineering services from 2010 to 2016. While the award itself indicates the Air Force's willingness to contract with BAE Systems for substantial engineering needs, it doesn't provide insight into their performance quality, adherence to schedule, or cost management on this specific contract, especially given the 'Cost No Fee' structure. To gain a comprehensive understanding of their track record, one would need to examine multiple contracts, performance reviews (e.g., Contractor Performance Assessment Reporting System - CPARS), and any documented issues or successes across various programs and time periods.

How does the contract's duration (2138 days) influence the assessment of its value and potential risks?

A contract duration of 2138 days, approximately 5.8 years, significantly influences the assessment of its value and risks. On the positive side, such a long duration suggests a stable, long-term need for the services, potentially allowing for deeper integration and expertise development by the contractor, which could lead to efficiencies over time. It also provides continuity for the government's programs. However, the risks are also amplified. Over nearly six years, technology can become outdated, requirements can shift, and the 'Cost No Fee' structure becomes more problematic as cumulative costs escalate. Managing scope creep and ensuring continued relevance and value delivery over such an extended period requires robust government oversight and proactive contract management to mitigate risks of cost overruns and obsolescence.

Industry Classification

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

Product/Service Code: SUPPORT SVCS (PROF, ADMIN, MGMT) › PROFESSIONAL SERVICES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: COST NO FEE (S)

Evaluated Preference: NONE

Contractor Details

Parent Company: BAE Systems PLC (UEI: 217304393)

Address: 100 CAMPUS RD STE 1, TOTOWA, NJ, 07512

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

Financial Breakdown

Contract Ceiling: $42,598,303

Exercised Options: $42,598,303

Current Obligation: $42,598,303

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline