DoD's $45.5M contract with BAE SYSTEMS for fabricated metal products shows long duration and sole-source award

Contract Overview

Contract Amount: $45,502,748 ($45.5M)

Contractor: BAE Systems Land & Armaments L.P.

Awarding Agency: Department of Defense

Start Date: 2005-11-22

End Date: 2014-11-17

Contract Duration: 3,282 days

Daily Burn Rate: $13.9K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Place of Performance

Location: SANTA CLARA, SANTA CLARA County, CALIFORNIA, 95050

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $45.5 million to BAE SYSTEMS LAND & ARMAMENTS L.P. for work described as: Key points: 1. Contract awarded on a sole-source basis, raising questions about price discovery and potential for overpayment. 2. The contract's extended duration of over 9 years suggests a long-term need for these fabricated metal products. 3. Awarded to a single contractor, limiting opportunities for smaller businesses to participate. 4. The 'All Other Miscellaneous Fabricated Metal Product Manufacturing' NAICS code indicates a broad scope of potential products. 5. The contract type 'COST PLUS FIXED FEE' can incentivize cost overruns if not closely monitored. 6. Geographic location of the contractor in California may influence regional economic impact.

Value Assessment

Rating: questionable

Benchmarking the value of this $45.5 million contract is challenging due to its sole-source nature and broad NAICS classification. Without competitive bids, it's difficult to ascertain if the pricing reflects fair market value. The Cost Plus Fixed Fee (CPFF) contract type, while sometimes necessary for R&D or uncertain scopes, carries inherent risks of cost escalation. The long duration of over nine years further complicates value assessment, as market conditions and material costs can fluctuate significantly over such a period. A comparison to similar sole-source awards for fabricated metal products would be necessary for a more robust assessment.

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 typically occurs when only one responsible source is available or when a compelling justification for other than full and open competition exists. The lack of competition means that multiple bidders were not evaluated, and the government did not benefit from the price reductions and innovation that can arise from a competitive bidding process. This can lead to higher prices and potentially less optimal solutions.

Taxpayer Impact: Taxpayers may have paid a premium due to the absence of competitive pressure. The government missed an opportunity to leverage market forces to secure the best possible price and terms for these fabricated metal products.

Public Impact

The primary beneficiary is the Department of the Navy, which receives fabricated metal products essential for its operations. The contract supports the defense industrial base by providing work for BAE SYSTEMS LAND & ARMAMENTS L.P. The services delivered are within the manufacturing sector, specifically related to fabricated metal products. The geographic impact is concentrated in California, where the contractor is located, potentially creating or sustaining local jobs.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competition and potentially increases costs for taxpayers.
Cost Plus Fixed Fee contract type can lead to cost overruns if not managed effectively.
Long contract duration (over 9 years) increases exposure to market volatility and potential inefficiencies.
Broad NAICS code may obscure the specific nature of the fabricated metal products, hindering detailed performance analysis.

Positive Signals

Contract awarded to a major defense contractor (BAE SYSTEMS) with established capabilities.
The contract addresses a specific need within the Department of the Navy.
The fixed fee component of the CPFF contract provides some level of cost certainty for the contractor's profit.

Sector Analysis

The fabricated metal products manufacturing sector is diverse, encompassing a wide range of goods from structural components to specialized equipment. This contract falls under NAICS code 332999, 'All Other Miscellaneous Fabricated Metal Product Manufacturing,' indicating a broad scope. The defense industry is a significant consumer of fabricated metal products, utilizing them in shipbuilding, vehicle manufacturing, and infrastructure development. Comparable spending benchmarks are difficult to establish without knowing the specific items procured, but the overall defense spending on manufactured goods is substantial.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. Furthermore, the sole-source award to a large prime contractor like BAE SYSTEMS suggests limited opportunities for small businesses to participate directly as subcontractors unless specifically required by the prime. The absence of subcontracting plans or set-asides means the direct economic benefit to the small business ecosystem from this specific contract is likely minimal.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy's contracting and program management offices. As a Cost Plus Fixed Fee contract, rigorous financial oversight and auditing would be expected to monitor costs and ensure the fixed fee is earned appropriately. Transparency may be limited due to the sole-source nature, but contract modifications, performance reports, and payment data should be accessible through federal procurement databases. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Department of Defense Procurement
Naval Ship Systems
Fabricated Metal Product Manufacturing
Sole-Source Contracts
Cost-Plus Contracts

Risk Flags

Sole-source award may lead to higher costs.
CPFF contract type carries risk of cost overruns.
Long contract duration increases exposure to market changes.
Broad NAICS code limits specificity in performance and cost analysis.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $45.5 million to BAE SYSTEMS LAND & ARMAMENTS L.P.. See the official description on USAspending.

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 $45.5 million.

What is the period of performance?

Start: 2005-11-22. End: 2014-11-17.

What specific fabricated metal products were procured under this contract?

The provided data indicates the contract falls under NAICS code 332999, 'All Other Miscellaneous Fabricated Metal Product Manufacturing.' This is a broad category that can include a wide array of items such as metal tanks, boilers, industrial valves, pipe fittings, and other custom metal components. Without further details or access to the contract's statement of work, it is impossible to specify the exact products. The 'All Other' classification suggests that the items procured did not fit neatly into more specific fabricated metal product manufacturing categories. This lack of specificity can make it challenging to benchmark costs or assess performance effectively.

What is the justification for the sole-source award?

The data indicates the contract was 'NOT COMPETED' and has a contract type 'ST' (Sole Source). Federal regulations (e.g., FAR Part 6) allow for sole-source procurements under specific circumstances, such as when only one responsible source is capable of providing the required supplies or services, or when there is a compelling justification for other than full and open competition. For a contract of this magnitude and duration, the justification would likely involve unique technical capabilities, proprietary technology, or a critical need where competition is not feasible or advantageous. A formal justification document would typically be required and should outline the rationale in detail.

How does the Cost Plus Fixed Fee (CPFF) contract type impact cost control?

The Cost Plus Fixed Fee (CPFF) contract type involves the contractor being reimbursed for all allowable costs incurred, plus a predetermined fixed fee representing profit. While the fixed fee provides the contractor with a stable profit margin, it can create an incentive for cost overruns, as the contractor is guaranteed their fee regardless of the final cost. Effective cost control under a CPFF contract relies heavily on robust government oversight, detailed cost accounting standards, and stringent auditing of incurred costs. The government must actively monitor expenditures and ensure that all costs claimed by the contractor are reasonable, allocable, and allowable according to the contract terms.

What are the implications of the contract's long duration (over 9 years)?

A contract duration of 3,282 days (approximately 9 years) for fabricated metal products is quite extensive. This suggests a long-term, stable requirement for the specific items being procured. Such a long duration can offer benefits like price stability and a predictable supply chain for the government. However, it also exposes the contract to risks such as inflation, changes in technology, potential contractor complacency, and the possibility that the initial pricing may become uncompetitive over time. Regular reviews and potential renegotiations might be necessary to ensure continued value for money throughout the contract's life.

What is the significance of the 'All Other Miscellaneous Fabricated Metal Product Manufacturing' NAICS code?

The NAICS code 332999, 'All Other Miscellaneous Fabricated Metal Product Manufacturing,' signifies that the products procured under this contract do not fit into more specific categories within the fabricated metal products industry. This broad classification can encompass a wide variety of items, from custom-designed components to specialized equipment. While it allows for flexibility in procurement, it also presents challenges in terms of benchmarking costs, assessing specific performance metrics, and understanding the precise nature of the goods delivered. It suggests a potentially unique or highly customized set of requirements that didn't align with standard industry classifications.

Industry Classification

NAICS: Manufacturing › Other Fabricated Metal Product Manufacturing › All Other Miscellaneous Fabricated Metal Product Manufacturing

Product/Service Code: ORES, MINERALS AND PRIMARY PRODUCTS

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: 2890 DE LA CRUZ BLVD, SANTA CLARA, CA, 17

Business Categories: Category Business, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Contract Characteristics

Cost or Pricing Data: NO

Timeline