DoD's $11.2M contract for SLBM disassembly raises questions on value and competition

Contract Overview

Contract Amount: $11,264,323 ($11.3M)

Contractor: Open Joint Stock Company Academician V.P. Makeyev State Rocket Centre

Awarding Agency: Department of Defense

Start Date: 2007-06-01

End Date: 2012-09-30

Contract Duration: 1,948 days

Daily Burn Rate: $5.8K/day

Competition Type: NOT AVAILABLE FOR COMPETITION

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: DISASSEMBLE SLBMS AT ZMZ

Plain-Language Summary

Department of Defense obligated $11.3 million to OPEN JOINT STOCK COMPANY ACADEMICIAN V.P. MAKEYEV STATE ROCKET CENTRE for work described as: DISASSEMBLE SLBMS AT ZMZ Key points: 1. The contract's value appears high relative to the limited scope of disassembly services. 2. Lack of competition suggests potential for inflated pricing and reduced taxpayer value. 3. The firm fixed-price structure offers some cost certainty but doesn't mitigate pricing concerns. 4. Performance context is limited due to the specialized and sensitive nature of the work. 5. This contract falls within the defense sector, specifically related to strategic weapons. 6. The duration of the contract (1948 days) is substantial for a service of this nature.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to the highly specialized nature of SLBM disassembly. However, the $11.2 million price tag for what appears to be a discrete service raises concerns about value for money, especially given the lack of competitive bidding. Without comparable contracts or market rates for such unique services, it's difficult to definitively assess if the price is fair. The firm fixed-price nature provides some predictability but does not inherently guarantee a competitive price.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was not competed, being awarded as a sole-source procurement. This lack of competition means there was no opportunity for multiple vendors to bid, which typically drives down prices and encourages innovation. The absence of a competitive process limits the government's ability to ensure it is receiving the best possible price and service.

Taxpayer Impact: The sole-source nature of this award means taxpayers may have paid a premium, as there was no market pressure to offer competitive pricing. This reduces the overall efficiency of federal spending.

Public Impact

The primary beneficiary is the Department of Defense, specifically the Defense Threat Reduction Agency, in managing strategic assets. The service delivered is the disassembly of Submarine-Launched Ballistic Missiles (SLBMs). The geographic impact is likely confined to specific secure military facilities involved in weapons dismantlement. Workforce implications are specialized, requiring personnel with expertise in handling and dismantling sensitive ordnance.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to overpayment.
Limited transparency on pricing justification due to sole-source award.
Potential for cost overruns if not managed tightly, despite fixed-price.
Specialized nature of work could create single points of failure in contractor capability.

Positive Signals

Firm fixed-price contract provides cost certainty.
Awarded to a known entity (implied by sole-source) potentially with relevant expertise.
Addresses a critical national security requirement for weapons dismantlement.

Sector Analysis

The defense sector, particularly within the realm of strategic weapons and dismantlement, is characterized by highly specialized requirements and often limited vendor pools. Contracts in this area can be substantial due to the complexity and security protocols involved. Benchmarking is difficult as comparable services are rare and often classified. This contract fits within the broader category of defense readiness and arms control.

Small Business Impact

There is no indication that this contract involved small business set-asides or subcontracting opportunities. The specialized nature of SLBM disassembly likely restricts the pool of eligible contractors to large, highly specialized defense firms, potentially excluding small businesses.

Oversight & Accountability

Oversight would typically be managed by the contracting agency (Defense Threat Reduction Agency) and potentially the Department of Defense Inspector General. However, the sensitive nature of the work might limit public transparency regarding specific oversight activities and accountability measures.

Related Government Programs

Defense Threat Reduction Agency Contracts
Strategic Weapons Dismantlement Programs
Missile Manufacturing and Maintenance
Department of Defense Procurement

Risk Flags

Sole-source award lacks competitive pricing.
High value for specialized, potentially limited scope service.
Contractor is a foreign entity, raising geopolitical considerations.
Lack of public data on comparable services hinders value assessment.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $11.3 million to OPEN JOINT STOCK COMPANY ACADEMICIAN V.P. MAKEYEV STATE ROCKET CENTRE. DISASSEMBLE SLBMS AT ZMZ

Who is the contractor on this award?

The obligated recipient is OPEN JOINT STOCK COMPANY ACADEMICIAN V.P. MAKEYEV STATE ROCKET CENTRE.

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Threat Reduction Agency).

What is the total obligated amount?

The obligated amount is $11.3 million.

What is the period of performance?

Start: 2007-06-01. End: 2012-09-30.

What is the specific expertise of the contractor, OPEN JOINT STOCK COMPANY ACADEMICIAN V.P. MAKEYEV STATE ROCKET CENTRE, in SLBM disassembly?

The contractor, OPEN JOINT STOCK COMPANY ACADEMICIAN V.P. MAKEYEV STATE ROCKET CENTRE, is a Russian entity known for its work in rocket and missile technology, including the design and development of ballistic missiles. While their expertise in missile systems is established, specific details regarding their capabilities and experience in the disassembly of U.S. Submarine-Launched Ballistic Missiles (SLBMs) under this contract are not publicly available. The nature of this service suggests a need for highly specialized technical knowledge, safety protocols, and potentially unique facilities to handle and neutralize such sensitive ordnance. Given the sole-source nature of the award, it is presumed the contracting agency assessed this entity as having the requisite unique capabilities, though public documentation supporting this assessment is limited.

How does the $11.2 million cost compare to similar SLBM disassembly contracts?

Direct comparisons for SLBM disassembly contracts are exceedingly difficult to establish due to the highly specialized, sensitive, and often classified nature of such work. This contract, valued at $11.2 million, was awarded on a sole-source basis by the Defense Threat Reduction Agency (DTRA) to a Russian entity. Publicly available data on similar U.S. domestic or international contracts for the disassembly of strategic ballistic missiles is scarce. The lack of competitive bidding further complicates value assessment. Without benchmark data from multiple bids or comparable projects, it is challenging to determine if $11.2 million represents a fair market price or an efficient use of taxpayer funds for the services rendered over the contract's duration.

What are the primary risks associated with a sole-source contract for SLBM disassembly?

The primary risks associated with a sole-source contract for SLBM disassembly are significant. Firstly, the lack of competition means the government cannot leverage market forces to secure the best possible price, potentially leading to overpayment. Secondly, there is reduced incentive for the contractor to innovate or optimize processes, as there is no competitive pressure. Thirdly, transparency regarding the justification for the sole-source award and the pricing structure may be limited, making oversight more challenging. Finally, reliance on a single provider, especially a foreign entity, introduces supply chain and geopolitical risks, as well as potential challenges in ensuring adherence to U.S. security and environmental standards throughout the disassembly process.

What is the historical spending pattern for SLBM disassembly by the Defense Threat Reduction Agency?

Information on historical spending patterns specifically for SLBM disassembly by the Defense Threat Reduction Agency (DTRA) is not readily available in the public domain. DTRA's mission involves reducing the threat from weapons of mass destruction, which can include dismantlement activities. However, the specifics of their budget allocation for SLBM disassembly, the number of such contracts awarded historically, and the typical values are considered sensitive or classified. This particular $11.2 million contract, awarded in 2007, appears to be a discrete instance rather than part of a consistently published spending trend. Without access to detailed historical procurement data, it's impossible to analyze patterns or trends in this specific area of DTRA's operations.

How does the firm fixed-price (FFP) contract type mitigate or exacerbate risks in this context?

The Firm Fixed-Price (FFP) contract type aims to mitigate cost uncertainty for the buyer by establishing a single, final price for the goods or services delivered. In the context of SLBM disassembly, this means the contractor bears the primary risk of cost overruns. This can be beneficial for the government, as it caps the total expenditure at $11.2 million. However, FFP contracts can exacerbate risks if the initial price is not well-justified due to the lack of competition. The contractor might inflate the price upfront to cover potential unforeseen issues, knowing there's no competitive pressure to offer a lower rate. Furthermore, if the scope of work is not perfectly defined, disputes can arise, and the contractor may have less incentive to perform efficiently if they believe the fixed price is too low, potentially impacting quality or safety if not rigorously overseen.

Industry Classification

NAICS: Manufacturing › Aerospace Product and Parts Manufacturing › Guided Missile and Space Vehicle Manufacturing

Product/Service Code: NUCLEAR ORDNANCE

Competition & Pricing

Extent Competed: NOT AVAILABLE FOR COMPETITION

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 1 TURGOYAKSKOE SHOSSE, MIASS

Business Categories: Category Business, Foreign Owned, Not Designated a Small Business, Special Designations

Financial Breakdown

Contract Ceiling: $11,264,323

Exercised Options: $11,264,323

Current Obligation: $11,264,323

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline