DoD's $495.7M contract with Sierra Nevada Company for advanced systems manufacturing shows strong competition

Contract Overview

Contract Amount: $495,717,968 ($495.7M)

Contractor: Sierra Nevada Company, LLC

Awarding Agency: Department of Defense

Start Date: 2020-07-15

End Date: 2029-03-31

Contract Duration: 3,181 days

Daily Burn Rate: $155.8K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 3

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: ENGINEERING&MANUFACTURING DEVELOPMENT

Place of Performance

Location: CENTENNIAL, ARAPAHOE County, COLORADO, 80112

State: Colorado Government Spending

Plain-Language Summary

Department of Defense obligated $495.7 million to SIERRA NEVADA COMPANY, LLC for work described as: ENGINEERING&MANUFACTURING DEVELOPMENT Key points: 1. The contract value of $495.7 million over its period of performance represents a significant investment in advanced systems. 2. Full and open competition suggests a healthy market and potential for competitive pricing. 3. The definitive contract type with a firm fixed price indicates clear cost expectations and risk allocation. 4. The contract duration of over 8 years allows for long-term program development and execution. 5. The North American Industry Classification System (NAICS) code 334511 points to a specialized manufacturing sector. 6. The award to Sierra Nevada Company, LLC, highlights a key player in defense systems development.

Value Assessment

Rating: good

The total contract value of $495.7 million over nearly nine years suggests a substantial investment. Benchmarking this against similar contracts for advanced systems development is challenging without more specific details on the deliverables. However, the firm fixed-price structure implies that the government has negotiated a set price, which can be advantageous if the contractor can deliver efficiently. The absence of specific per-unit cost data makes a direct value-for-money assessment difficult, but the competitive nature of the award is a positive indicator.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that all responsible sources were permitted to submit bids. The presence of three bidders (no=3) suggests a reasonable level of competition for this specialized area. While more bidders would ideally lead to greater price discovery, three offers in a niche market like advanced systems manufacturing is a positive sign. This competitive process likely helped the U.S. Special Operations Command secure a fair price.

Taxpayer Impact: Full and open competition generally benefits taxpayers by fostering a competitive environment that can drive down costs and encourage innovation, leading to better value for public funds.

Public Impact

The primary beneficiaries are likely U.S. Special Operations Command and its personnel, who will receive advanced systems for critical missions. The contract supports the development and manufacturing of search, detection, navigation, guidance, aeronautical, and nautical systems. The geographic impact is primarily centered around the contractor's operations in Colorado, with potential ripple effects in the supply chain. This contract is expected to support skilled jobs in engineering, manufacturing, and related technical fields within the defense sector.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Long contract duration could lead to scope creep or cost overruns if not managed tightly.
Reliance on a single contractor for specialized systems development may create long-term dependencies.
The complexity of advanced systems can introduce unforeseen technical challenges and risks.

Positive Signals

Firm fixed-price contract provides cost certainty for the government.
Full and open competition indicates a robust bidding process and potential for competitive pricing.
Award to an established company like Sierra Nevada Company suggests a degree of reliability and expertise.

Sector Analysis

The contract falls within the broader aerospace and defense manufacturing sector, specifically focusing on advanced systems and instrumentation. This sector is characterized by high R&D investment, stringent quality requirements, and long product development cycles. The market size for such specialized defense systems is substantial, driven by national security needs. Comparable spending benchmarks would typically involve other large-scale development contracts for sophisticated military hardware and software.

Small Business Impact

The data indicates that this contract was not set aside for small businesses (sb=false) and there is no explicit mention of small business subcontracting goals (ss=false). This suggests that the primary award went to a large business, and opportunities for small businesses would likely be through subcontracting if Sierra Nevada Company chooses to engage them. The lack of a specific set-aside or subcontracting plan in the provided data means the direct impact on the small business ecosystem is not immediately clear and would require further investigation into the contractor's practices.

Oversight & Accountability

Oversight for this contract would primarily fall under the U.S. Special Operations Command and the Department of Defense's contracting and program management offices. Accountability measures are inherent in the firm fixed-price contract type, which incentivizes the contractor to meet cost targets. Transparency is generally maintained through contract award databases and reporting requirements, though specific program details may be sensitive. Inspector General jurisdiction would apply to any allegations of fraud, waste, or abuse related to the contract.

Related Government Programs

Advanced Avionics Systems
Defense Electronics Manufacturing
Special Operations Equipment Procurement
Navigation and Guidance Systems Development
Sensor Technology Contracts

Risk Flags

Long contract duration increases risk of cost escalation and requirement changes.
Complexity of advanced systems development carries inherent technical risks.
Firm Fixed Price requires careful contractor cost management and government oversight to ensure quality.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $495.7 million to SIERRA NEVADA COMPANY, LLC. ENGINEERING&MANUFACTURING DEVELOPMENT

Who is the contractor on this award?

The obligated recipient is SIERRA NEVADA COMPANY, LLC.

Which agency awarded this contract?

Awarding agency: Department of Defense (U.S. Special Operations Command).

What is the total obligated amount?

The obligated amount is $495.7 million.

What is the period of performance?

Start: 2020-07-15. End: 2029-03-31.

What is Sierra Nevada Company's track record with similar Department of Defense contracts?

Sierra Nevada Company (SNC) has a significant track record with the Department of Defense, often involved in complex aerospace and defense systems. They have a history of delivering advanced technologies for various military branches, including intelligence, surveillance, and reconnaissance (ISR) platforms, electronic warfare systems, and communication technologies. Their involvement in programs like the Dream Chaser spaceplane, while commercial, demonstrates their advanced engineering capabilities. For DoD contracts specifically, SNC has been awarded numerous awards for aircraft modifications, sensor integration, and specialized mission systems. A review of federal procurement data would reveal the scale and nature of their past performance, including any instances of contract disputes or performance issues. Their established presence suggests a capacity to handle large, complex development contracts like the one detailed.

How does the $495.7 million contract value compare to typical spending for advanced systems manufacturing within SOCOM?

The $495.7 million contract value for advanced systems manufacturing is substantial and aligns with the significant investments typically made by U.S. Special Operations Command (SOCOM) for specialized capabilities. SOCOM often procures highly customized and technologically advanced equipment to meet unique operational requirements that differ from conventional military needs. While specific benchmarks for 'advanced systems manufacturing' can vary widely based on the technology's maturity and complexity, a contract of this magnitude over an eight-year period suggests a program of considerable scope and importance. It is likely within the upper range of individual development and production contracts for specialized platforms or integrated systems within SOCOM's portfolio, reflecting the high cost associated with cutting-edge defense technology.

What are the primary risks associated with a definitive contract of this size and duration?

The primary risks associated with a definitive contract of this size ($495.7 million) and duration (over 8 years) include potential cost overruns if the firm fixed-price (FFP) structure doesn't adequately account for unforeseen inflation or material cost increases, although FFP aims to mitigate this. Schedule delays are a significant risk, especially in complex engineering and manufacturing development, which can impact operational readiness. Technical risks are also inherent, as developing advanced systems may encounter unforeseen engineering challenges or integration issues. Furthermore, there's a risk of contractor performance degradation over a long period, or potential shifts in government requirements that may necessitate costly contract modifications. Dependence on a single contractor for critical technology can also pose a long-term strategic risk.

What does the firm fixed-price (FFP) contract type imply about the government's risk and the contractor's incentives?

A firm fixed-price (FFP) contract type places the majority of the cost risk on the contractor. This means Sierra Nevada Company is obligated to complete the work for the agreed-upon price, regardless of their actual costs. This structure incentivizes the contractor to manage costs efficiently, control performance, and avoid scope creep to maximize their profit margin. For the government, the primary benefit is cost certainty; the total expenditure is known upfront, barring any contract modifications. However, the government assumes the risk that the contractor might cut corners on quality or performance to meet the fixed price, necessitating robust oversight and quality assurance measures. The FFP structure is generally preferred for well-defined requirements where cost and performance can be reasonably estimated.

How does the NAICS code 334511 (Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing) inform our understanding of this contract?

The NAICS code 334511 provides critical context by defining the specific industry segment this contract serves. It indicates that the contract is for the manufacturing of sophisticated systems and instruments used for search, detection, navigation, and guidance, applicable to both aeronautical and nautical applications. This suggests the contract likely involves the development or production of components or complete systems such as radar, sonar, GPS receivers, inertial navigation systems, flight control instruments, or similar high-technology equipment. Companies operating under this NAICS code typically possess specialized engineering expertise, advanced manufacturing capabilities, and often work with sensitive technologies, aligning with the defense sector and the nature of SOCOM's requirements for advanced operational tools.

What is the significance of the contract award date (2020-07-15) and estimated completion date (2029-03-31) for assessing its value?

The award date of July 15, 2020, and the estimated completion date of March 31, 2029, establish a performance period of approximately 8 years and 9 months. This extended duration is significant for a contract focused on 'ENGINEERING & MANUFACTURING DEVELOPMENT.' It suggests a long-term program involving complex research, development, testing, and potentially initial production phases. For assessing value, this long timeframe allows for amortization of development costs over a larger base and potentially for incorporating technological advancements during the contract period. However, it also increases the risk of cost escalation due to inflation, changes in technology, or evolving requirements. The government's commitment over this extended period underscores the strategic importance of the systems being developed.

Industry Classification

NAICS: Manufacturing › Navigational, Measuring, Electromedical, and Control Instruments Manufacturing › Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing

Product/Service Code: RESEARCH AND DEVELOPMENT › C – National Defense R&D Services

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: H9240820R0003

Offers Received: 3

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 11551 E ARAPAHOE RD, CENTENNIAL, CO, 80112

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

Financial Breakdown

Contract Ceiling: $523,295,625

Exercised Options: $517,619,877

Current Obligation: $495,717,968

Subaward Activity

Number of Subawards: 122

Total Subaward Amount: $266,548,759

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline