DoD's $13.2M R&D contract with BAE Systems shows fair value, but limited competition raises concerns

Contract Overview

Contract Amount: $13,245,815 ($13.2M)

Contractor: BAE Systems Information and Electronic Systems Integration Inc.

Awarding Agency: Department of Defense

Start Date: 2006-12-07

End Date: 2009-05-31

Contract Duration: 906 days

Daily Burn Rate: $14.6K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: COST PLUS FIXED FEE

Sector: R&D

Official Description: BASE EFFORT (PHASE 3A)

Place of Performance

Location: NASHUA, HILLSBOROUGH County, NEW HAMPSHIRE, 03060

State: New Hampshire Government Spending

Plain-Language Summary

Department of Defense obligated $13.2 million to BAE SYSTEMS INFORMATION AND ELECTRONIC SYSTEMS INTEGRATION INC. for work described as: BASE EFFORT (PHASE 3A) Key points: 1. Contract value appears reasonable given the R&D nature and duration. 2. Limited competition suggests potential for higher pricing than in fully competed contracts. 3. Contract type (Cost Plus Fixed Fee) can incentivize cost overruns. 4. Performance period of over 2.5 years indicates a significant R&D undertaking. 5. This contract falls within the Defense sector's substantial R&D spending. 6. No small business set-aside was applied, potentially limiting broader participation.

Value Assessment

Rating: good

The contract's base effort of $13.2 million over approximately 906 days (2.5 years) for R&D services appears to be within a reasonable range for complex defense-related research. Benchmarking against similar R&D contracts is challenging without more specific details on the research scope. However, the Cost Plus Fixed Fee (CPFF) contract type, while common for R&D, carries inherent risks of cost escalation if not closely managed. The fixed fee component provides some cost certainty for the contractor, but the government bears the majority of the cost risk.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that all responsible sources were permitted to submit offers. However, the data shows only two offers were received. While full and open competition was the method, the low number of bidders suggests that the market for this specific R&D requirement may be limited, or that other potential bidders chose not to participate for various reasons. This level of competition can still lead to price discovery, but it is less robust than with a larger number of bids.

Taxpayer Impact: With only two offers received under full and open competition, taxpayers may not have benefited from the most competitive pricing possible. A higher number of bidders typically drives down costs more effectively.

Public Impact

The primary beneficiary is the Department of Defense, which receives advanced research and development capabilities. The services delivered are likely to be in the physical, engineering, or life sciences, contributing to national security. The geographic impact is primarily within New Hampshire, where BAE Systems' relevant facility is located. Workforce implications include skilled researchers, engineers, and technical staff employed by BAE Systems.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost Plus Fixed Fee contract type can lead to cost overruns if not managed diligently.
Limited number of bidders (2) in a full and open competition may indicate a constrained market or reduced competitive pressure.
The specific R&D area is not detailed, making it difficult to assess the true innovation and potential for broader application.
Long performance period increases the risk of scope creep or evolving requirements impacting final cost.

Positive Signals

Awarded under full and open competition, adhering to principles of broad market access.
BAE Systems is a well-established defense contractor with a track record in complex R&D.
The contract aims to advance specific research and development capabilities for the DoD.
The fixed fee component provides a degree of cost predictability for the government on the contractor's profit.

Sector Analysis

This contract falls within the Research and Development (R&D) sector, specifically NAICS code 541710. The R&D sector is a critical component of the defense industrial base, driving innovation and technological superiority. Federal spending in this area is substantial, with significant investments made by the Department of Defense to maintain a technological edge. Comparable spending benchmarks are difficult without knowing the specific R&D focus, but R&D contracts can range from millions to billions of dollars depending on complexity and scope.

Small Business Impact

This contract was not set aside for small businesses, and the data indicates no indication of subcontracting plans for small businesses. As a large prime contractor, BAE Systems likely has established supply chains that may or may not significantly involve small businesses for this specific R&D effort. The absence of a small business set-aside means that opportunities for small businesses to directly compete or participate as subcontractors were not mandated by this contract's structure.

Oversight & Accountability

Oversight for this contract would typically be managed by the Defense Contract Management Agency (DCMA), which is responsible for ensuring contractor performance and compliance. Accountability measures are embedded within the contract terms, including reporting requirements and performance milestones. Transparency is generally maintained through contract databases like FPDS, though specific R&D details might be sensitive. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Department of Defense Research and Development Programs
Advanced Technology Development Contracts
BAE Systems Federal Contracts
Cost Plus Fixed Fee Contracts
Research and Development in Physical Sciences

Risk Flags

Cost Plus Fixed Fee contract type carries inherent cost overrun risk.
Low number of bidders (2) in full and open competition may indicate limited market interest or reduced price competition.
Lack of specific R&D details makes independent value assessment difficult.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $13.2 million to BAE SYSTEMS INFORMATION AND ELECTRONIC SYSTEMS INTEGRATION INC.. BASE EFFORT (PHASE 3A)

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 (Defense Contract Management Agency).

What is the total obligated amount?

The obligated amount is $13.2 million.

What is the period of performance?

Start: 2006-12-07. End: 2009-05-31.

What is BAE Systems' track record with similar Cost Plus Fixed Fee R&D contracts within the Department of Defense?

BAE Systems Information and Electronic Systems Integration Inc. has a substantial history of performing on various contract types, including Cost Plus Fixed Fee (CPFF), particularly within the Department of Defense. Their track record generally indicates experience in complex engineering, research, and development projects. Analyzing their past performance on similar CPFF R&D contracts would involve reviewing metrics such as cost performance (did they stay within budget?), schedule adherence, and the successful delivery of research outcomes. While specific data on cost overruns or underruns for all their past CPFF contracts isn't publicly detailed in aggregate, their continued awards suggest a generally acceptable performance level. However, CPFF contracts inherently carry a higher risk of cost growth for the government compared to fixed-price contracts, regardless of the contractor's historical performance.

How does the $13.2 million value compare to other R&D contracts for similar technologies or research areas?

Directly comparing the $13.2 million value of this specific contract to 'similar' R&D contracts is challenging without precise details on the research scope, technological focus, and deliverables. The NAICS code 541710 (Research and Development in the Physical, Engineering, and Life Sciences) is broad. However, for R&D efforts within the Department of Defense, $13.2 million represents a mid-tier investment. Contracts in this category can range from a few million dollars for focused studies to hundreds of millions or even billions for large-scale, multi-year programs involving advanced materials, complex systems integration, or foundational scientific research. Given the contract duration of approximately 906 days (2.5 years), the annual spending rate is roughly $4.4 million, which is a significant but not exceptionally large sum for specialized defense R&D.

What are the primary risks associated with the Cost Plus Fixed Fee (CPFF) contract type for this R&D effort?

The primary risk associated with the CPFF contract type for this R&D effort is cost overrun. In a CPFF contract, the contractor is reimbursed for all allowable costs incurred, plus a predetermined fixed fee representing their profit. While the fee is fixed, the total cost is variable. This structure incentivizes the contractor to complete the work efficiently to protect their fee, but it places the financial risk of cost escalation primarily on the government. For R&D, where the scope can be uncertain and challenges may arise, there's a heightened risk that actual costs could significantly exceed initial estimates. Effective government oversight, rigorous cost tracking, and clear definition of allowable costs are crucial to mitigate this risk.

What does the limited number of bidders (2) in a 'full and open competition' imply for the government's negotiating position?

A limited number of bidders, such as the two received in this 'full and open competition,' can weaken the government's negotiating position compared to a scenario with numerous competitive offers. While the competition was technically open, the low bid count suggests that the pool of qualified contractors for this specific R&D requirement might be small, or that market conditions (e.g., other priorities for potential bidders, high perceived risk) discouraged broader participation. With fewer bidders, the government has less leverage to negotiate aggressive pricing, as the remaining bidders may have more confidence in securing the award. This can potentially lead to higher prices than might be achieved in a more robustly competed environment.

How has federal spending in R&D (NAICS 541710) trended over the past 5-10 years, and where does this contract fit?

Federal spending in R&D, particularly under NAICS code 541710, has generally seen consistent investment, driven largely by defense and health agencies. Over the past 5-10 years, defense R&D spending has remained a significant portion of the federal R&D budget, fluctuating with national security priorities and budget cycles. This $13.2 million contract fits within the broader trend of federal investment in scientific and technological advancement for defense applications. While not a flagship program, it represents a typical allocation for specific research projects aimed at developing new capabilities or improving existing ones. The overall trend indicates a sustained commitment to R&D across various scientific and engineering disciplines.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Scientific Research and Development Services › Research and Development in the Physical, Engineering, and Life Sciences

Product/Service Code: RESEARCH AND DEVELOPMENT › DEFENSE (OTHER) R&D

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: BASIC RESEARCH

Offers Received: 2

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Compagnie DE Developpement DE L'eau S.A.

Address: 65 SPIT BROOK RD, NASHUA, NH, 03060

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $14,872,153

Exercised Options: $13,284,283

Current Obligation: $13,245,815

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline