Navy awards $24.9M contract for MK45 5"/54 gun system overhaul to BAE Systems

Contract Overview

Contract Amount: $24,908,135 ($24.9M)

Contractor: BAE Systems Land & Armaments L.P.

Awarding Agency: Department of Defense

Start Date: 2012-07-25

End Date: 2018-11-30

Contract Duration: 2,319 days

Daily Burn Rate: $10.7K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: OVERHAUL OF MK45 5"/54 ALL MODS

Place of Performance

Location: LOUISVILLE, JEFFERSON County, KENTUCKY, 40214

State: Kentucky Government Spending

Plain-Language Summary

Department of Defense obligated $24.9 million to BAE SYSTEMS LAND & ARMAMENTS L.P. for work described as: OVERHAUL OF MK45 5"/54 ALL MODS Key points: 1. Contract awarded on a sole-source basis, limiting price competition. 2. The contract duration of over 6 years suggests a long-term need for maintenance. 3. Cost-plus-fixed-fee pricing structure may incentivize cost overruns. 4. The specific gun system indicates a focus on naval armament modernization. 5. No small business set-aside was applied to this contract. 6. The contract was awarded as a delivery order, implying it's part of a larger agreement.

Value Assessment

Rating: fair

Benchmarking the value of this specific contract is challenging without more detailed cost breakdowns or comparisons to similar overhaul services for naval gun systems. The cost-plus-fixed-fee (CPFF) structure, while common for complex engineering services, can sometimes lead to higher overall costs compared to fixed-price contracts if not managed tightly. The total award amount of $24.9 million over approximately six years suggests a moderate annual spend for maintaining critical naval ordnance.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning the Department of the Navy did not conduct a competitive bidding process. This typically occurs when a specific contractor possesses unique capabilities, proprietary technology, or is the only source capable of meeting the requirement. The lack of competition means that the Navy did not benefit from potential price reductions or innovative solutions that a competitive environment might have fostered.

Taxpayer Impact: Sole-source awards can result in higher costs for taxpayers as there is no direct price pressure from competing firms. This necessitates robust oversight to ensure fair pricing and efficient execution.

Public Impact

The U.S. Navy benefits from the continued operational readiness of its MK45 5"/54 gun systems. Services include the overhaul and modernization of critical naval armament. The geographic impact is likely concentrated around naval bases or shipyards where maintenance is performed. This contract supports specialized engineering and technical roles within BAE Systems.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure on pricing.
Cost-plus-fixed-fee contract type can lead to cost escalations if not managed effectively.
Lack of transparency in specific cost components due to sole-source nature.

Positive Signals

Addresses a critical need for naval weapon system maintenance and readiness.
BAE Systems is a known entity in defense manufacturing, suggesting potential for reliable execution.
Long-term contract duration allows for sustained support and planning.

Sector Analysis

The defense sector, particularly naval systems, relies on specialized engineering and maintenance services to ensure the operational readiness of its fleet. Contracts for overhauling complex weapon systems like the MK45 gun are crucial for maintaining technological superiority and warfighting capability. Spending in this niche often involves established defense contractors with specific expertise, and competitive dynamics can be limited due to the specialized nature of the equipment.

Small Business Impact

This contract was not set aside for small businesses, nor does it appear to have specific subcontracting requirements for small businesses mentioned in the provided data. The prime contractor, BAE Systems, is a large defense corporation. This means the direct economic benefit to the small business ecosystem from this specific award is likely minimal, unless BAE Systems voluntarily engages small businesses as subcontractors for specific components or services.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy's contracting and program management offices. Given the sole-source nature and CPFF structure, rigorous oversight of cost, schedule, and performance is essential to ensure value for money. The contract's execution would be monitored to ensure adherence to the fixed fee and to validate incurred costs. Inspector General involvement would be triggered by specific allegations of fraud, waste, or abuse.

Related Government Programs

Naval Gun Systems Maintenance
Defense Ordnance Overhaul
BAE Systems Defense Contracts
Department of the Navy Procurement

Risk Flags

Sole-source award
Cost-plus-fixed-fee contract type
Potential for cost overruns
Limited transparency on pricing justification

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $24.9 million to BAE SYSTEMS LAND & ARMAMENTS L.P.. OVERHAUL OF MK45 5"/54 ALL MODS

Who is the contractor on this award?

The obligated recipient is BAE SYSTEMS LAND & ARMAMENTS L.P..

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $24.9 million.

What is the period of performance?

Start: 2012-07-25. End: 2018-11-30.

What is the track record of BAE Systems Land & Armaments L.P. in performing similar naval gun system overhauls?

BAE Systems Land & Armaments L.P. (now part of BAE Systems, Inc.) has a significant and established track record in the defense industry, including extensive experience with naval platforms and weapon systems. They are a primary contractor for the MK45 gun system itself, involved in its production, modernization, and sustainment. This includes previous contracts for upgrades, maintenance, and overhaul services for various naval forces globally. Their long-standing relationship with the U.S. Navy and other allied navies suggests a deep understanding of the system's requirements and the complexities involved in its lifecycle support. While specific performance metrics for past overhaul contracts are not detailed here, their continued role as a key supplier and sustainment provider indicates a generally accepted level of capability and reliability in executing such complex engineering and maintenance tasks for critical defense assets.

How does the cost-plus-fixed-fee (CPFF) pricing structure compare to other contract types for this type of service?

The Cost-Plus-Fixed-Fee (CPFF) contract type is often used for research and development, complex services, or situations where the scope of work is not fully defined at the outset, making it difficult to establish a firm fixed price. In a CPFF contract, the contractor is reimbursed for allowable costs plus a predetermined fixed fee representing profit. Compared to a Firm-Fixed-Price (FFP) contract, CPFF offers less cost certainty for the buyer, as the final cost can fluctuate based on actual expenses. However, it can be advantageous when the project involves significant unknowns or requires flexibility. For services like overhauling complex military hardware, where unforeseen issues might arise, CPFF can facilitate the necessary work. The key risk for the government is potential cost overruns, which necessitates stringent oversight to control allowable costs and ensure the fixed fee remains appropriate for the effort.

What are the primary risks associated with a sole-source award for a defense contract of this nature?

The primary risk associated with a sole-source award for a defense contract like the MK45 gun system overhaul is the lack of competitive pressure, which can lead to inflated prices and reduced incentive for the contractor to innovate or optimize costs. Without competing bids, the government may not achieve the best possible value for its expenditure. There's also a risk that the sole-source justification might be weak, or that potential competition was overlooked. Furthermore, reliance on a single supplier can create long-term dependencies and vulnerabilities if that supplier faces financial difficulties, operational issues, or decides to exit the market. Effective mitigation requires robust negotiation, strong contract surveillance, and clear performance metrics to ensure the government receives fair value and high-quality service despite the absence of direct competition.

What is the historical spending pattern for the overhaul and maintenance of the MK45 5"/54 gun system by the Department of the Navy?

Historical spending data for the overhaul and maintenance of the MK45 5"/54 gun system by the Department of the Navy would typically show recurring investments necessary to maintain the operational readiness of this critical naval armament. The Navy operates a significant number of vessels equipped with this system, necessitating ongoing sustainment activities. Spending patterns would likely reflect a mix of contract types, including sole-source awards for specialized overhauls and potentially competitively awarded contracts for spare parts or depot-level maintenance. The total annual expenditure can fluctuate based on the lifecycle stage of the fleet, the frequency of major overhauls required, and the specific modernization programs being undertaken. The $24.9 million awarded here represents a significant, but likely not isolated, investment in ensuring the longevity and effectiveness of these gun systems over several years.

How does the engineering service code (NAICS 541330) typically relate to defense contracts for weapon system maintenance?

The North American Industry Classification System (NAICS) code 541330, 'Engineering Services,' is broadly applied to firms providing professional engineering services. Within the defense sector, this code encompasses a wide range of activities critical to weapon system lifecycle management, including design, development, testing, and importantly, maintenance and overhaul support. For contracts involving the overhaul of complex systems like the MK45 gun, engineering services are essential for diagnosing issues, planning repair strategies, implementing technical directives, and ensuring compliance with stringent military specifications. Defense contractors often leverage these engineering capabilities to provide comprehensive sustainment solutions, ensuring that weapon systems remain safe, reliable, and effective throughout their operational lives. This specific contract falls under this code because the overhaul likely involves significant engineering analysis and technical expertise.

Industry Classification

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

Product/Service Code: WEAPONS

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: BAE Systems PLC (UEI: 217304393)

Address: 163 ROCHESTER DR STE 1, LOUISVILLE, KY, 40214

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Foreign Owned, Not Designated a Small Business, Special Designations

Financial Breakdown

Contract Ceiling: $25,748,629

Exercised Options: $25,748,629

Current Obligation: $24,908,135

Subaward Activity

Number of Subawards: 45

Total Subaward Amount: $2,473,131

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: N0002407G5438

IDV Type: IDC

Timeline