DoD's $46.8M BAE Systems contract for armored vehicle support lacked competition, raising value concerns

Contract Overview

Contract Amount: $46,830,761 ($46.8M)

Contractor: BAE Systems Land & Armaments L.P.

Awarding Agency: Department of Defense

Start Date: 2009-02-19

End Date: 2015-03-05

Contract Duration: 2,205 days

Daily Burn Rate: $21.2K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: TECHNICAL, ENGINEERING AND MANAGEMENT SUPPORT (TEAMS) FOR AAV SUSTAINMENT.

Place of Performance

Location: YORK, YORK County, PENNSYLVANIA, 17408

State: Pennsylvania Government Spending

Plain-Language Summary

Department of Defense obligated $46.8 million to BAE SYSTEMS LAND & ARMAMENTS L.P. for work described as: TECHNICAL, ENGINEERING AND MANAGEMENT SUPPORT (TEAMS) FOR AAV SUSTAINMENT. Key points: 1. Contract awarded on a sole-source basis, limiting price discovery and potentially increasing costs. 2. Significant duration of over 6 years suggests a long-term need for these sustainment services. 3. The contract type (Cost Plus Fixed Fee) can incentivize cost overruns if not closely monitored. 4. Focus on sustainment indicates a mature program requiring ongoing maintenance and support. 5. The specific nature of armored vehicle sustainment suggests a specialized, high-skill workforce is required. 6. Lack of small business involvement noted, with no set-aside or subcontracting requirements.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to its sole-source nature and specific technical requirements for armored vehicle sustainment. The Cost Plus Fixed Fee (CPFF) contract type, while common for R&D or uncertain scope, carries inherent risks of cost escalation. Without competitive bids, it's difficult to ascertain if the fixed fee and cost reimbursement represent a fair market price. The total value of over $46 million over approximately six years warrants scrutiny to ensure efficient use of taxpayer funds, especially given the lack of competitive pressure.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning BAE Systems Land & Armaments L.P. was the only bidder considered. This approach is typically justified when only one responsible source can provide the required supplies or services. However, it bypasses the standard competitive bidding process, which is designed to foster price reduction and innovation through market forces. The absence of competition means there was no direct pressure on BAE Systems to offer the most cost-effective solution.

Taxpayer Impact: Sole-source awards limit the government's ability to secure the best possible pricing, as there is no competitive pressure to drive down costs. Taxpayers may end up paying a premium for services that could have been obtained at a lower price through a competitive process.

Public Impact

The primary beneficiaries are the U.S. Army personnel who rely on well-maintained armored vehicles for operational readiness. Services delivered include technical, engineering, and management support crucial for the sustainment of Armored vehicles. The geographic impact is likely concentrated around military bases and maintenance facilities where these vehicles are operated and serviced. Workforce implications include the need for highly skilled technicians, engineers, and logistics personnel specializing in military hardware.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing and value for money.
Cost Plus Fixed Fee contract type can incentivize higher costs if not managed stringently.
Lack of transparency in pricing due to absence of competitive bids.
Long contract duration without clear performance metrics for cost efficiency.
Potential for vendor lock-in given the specialized nature of armored vehicle sustainment.

Positive Signals

Ensures continuity of essential sustainment services for critical defense assets.
BAE Systems is a known entity with established expertise in armored vehicle systems.
Contract provides necessary technical and engineering support to maintain operational readiness.
Fixed fee component provides some level of cost predictability for the government.

Sector Analysis

The defense industrial base, particularly the segment focused on armored vehicle manufacturing and sustainment, is characterized by high barriers to entry due to specialized technology, stringent quality requirements, and long product lifecycles. Contracts like this are essential for maintaining the operational readiness of military equipment. Spending in this sector is often driven by geopolitical factors and modernization programs. Comparable spending benchmarks are difficult to establish precisely due to the unique nature of sustainment for specific vehicle platforms, but overall defense spending on vehicle maintenance and upgrades runs into billions annually.

Small Business Impact

This contract does not appear to have included any small business set-aside provisions, nor are there explicit indications of subcontracting goals for small businesses. The nature of specialized defense sustainment services often favors large, established prime contractors with extensive experience and infrastructure. This lack of small business participation means that opportunities for smaller firms to contribute to this specific defense need were likely limited, potentially impacting the broader small business defense ecosystem.

Oversight & Accountability

Oversight for this contract would typically fall under the purview of the Defense Contract Management Agency (DCMA), which is responsible for ensuring contractor performance and compliance. The contract's Cost Plus Fixed Fee structure necessitates rigorous financial oversight to scrutinize costs and ensure the fixed fee is reasonable. Transparency is limited by the sole-source nature, but reporting requirements within the contract would provide some visibility. Inspector General (IG) investigations could be initiated if performance or cost issues arise.

Related Government Programs

Armored Vehicle Modernization Programs
Military Vehicle Maintenance and Repair
Defense Logistics Support Services
Combat Vehicle Sustainment Contracts
Department of Defense Engineering Services

Risk Flags

Sole-source award
Cost-reimbursable contract type
Lack of competition
Potential for cost overruns
Limited transparency in pricing

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $46.8 million to BAE SYSTEMS LAND & ARMAMENTS L.P.. TECHNICAL, ENGINEERING AND MANAGEMENT SUPPORT (TEAMS) FOR AAV SUSTAINMENT.

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 (Defense Contract Management Agency).

What is the total obligated amount?

The obligated amount is $46.8 million.

What is the period of performance?

Start: 2009-02-19. End: 2015-03-05.

What is the track record of BAE Systems Land & Armaments L.P. in providing similar technical, engineering, and management support for armored vehicles?

BAE Systems Land & Armaments L.P. is a major defense contractor with extensive experience in the design, manufacturing, and sustainment of armored vehicles. They are known for producing a range of combat vehicles, including the Bradley Fighting Vehicle and the M109 Paladin. Their sustainment services typically encompass lifecycle support, including maintenance, repair, overhaul, and upgrades. Historical performance data, often found in contract performance reports (e.g., CPARS), would provide a more granular assessment of their past performance on similar contracts, including timeliness, quality of work, and cost control. Given their established presence in this niche, it is likely they possess the requisite expertise, but the specific performance on this $46.8M contract warrants detailed review.

How does the pricing structure (Cost Plus Fixed Fee) compare to industry standards for similar defense sustainment contracts?

The Cost Plus Fixed Fee (CPFF) contract type is common in defense contracting, particularly when the scope of work involves uncertainties or requires significant research and development, or when dealing with specialized sustainment where exact future needs are hard to predict. In a CPFF contract, the contractor is reimbursed for allowable costs plus a fixed fee representing profit. While the fixed fee provides some cost certainty for the government compared to a Cost Plus Incentive Fee (CPIF) or Cost Plus Award Fee (CPA F), it does not inherently guarantee the lowest possible cost. Industry standards often favor fixed-price contracts for well-defined scopes to drive cost efficiency. However, for complex sustainment requiring extensive engineering and technical support, CPFF can be deemed appropriate if risks are managed. Benchmarking the fixed fee percentage against similar sole-source sustainment contracts would be crucial for assessing value.

What are the primary risks associated with a sole-source award for armored vehicle sustainment, and how were they mitigated?

The primary risk of a sole-source award is the lack of competitive pressure, which can lead to inflated pricing and reduced incentive for the contractor to optimize efficiency. This 'vendor lock-in' can also occur if the contractor possesses unique knowledge or capabilities essential for the sustainment. For this contract, the risk of higher costs is significant. Mitigation strategies would typically involve robust government oversight, detailed cost analysis, negotiation of fair and reasonable pricing for the fixed fee, and potentially establishing clear performance metrics. However, without a competitive baseline, assessing the 'fairness' of the price remains challenging. The long duration of the contract exacerbates these risks if not actively managed.

What is the historical spending pattern for armored vehicle sustainment services by the Department of Defense, and how does this contract fit within that trend?

The Department of Defense consistently allocates substantial funds towards the sustainment of its vast fleet of armored vehicles. This spending is driven by the operational tempo, aging platforms requiring maintenance and upgrades, and the continuous need for readiness. Historical spending patterns show a significant and ongoing investment in vehicle maintenance, repair, and modernization, often spanning decades for major platforms. This $46.8 million contract, awarded in 2009 and ending in 2015, represents a specific allocation for the sustainment of particular armored vehicle systems (AAVs). It fits within the broader trend of sustained investment in maintaining combat readiness, though the specific amount reflects the scope and duration of support for the targeted vehicle fleet.

Are there any performance metrics or key performance indicators (KPIs) associated with this contract that demonstrate its effectiveness in ensuring armored vehicle readiness?

While the provided data does not explicitly list Key Performance Indicators (KPIs) or specific performance metrics for this contract, sustainment contracts of this nature typically include requirements related to response times for technical support, availability of spare parts, quality of repair work, and adherence to maintenance schedules. For a Cost Plus Fixed Fee contract, the government would likely monitor metrics related to cost control and adherence to the fixed fee. The ultimate measure of effectiveness would be the operational readiness and availability rates of the Armored Amphibious Vehicles (AAVs) supported under this contract. Detailed performance reports, if available, would shed light on whether these implicit or explicit KPIs were met.

Industry Classification

NAICS: Manufacturing › Other Transportation Equipment Manufacturing › Military Armored Vehicle, Tank, and Tank Component Manufacturing

Product/Service Code: MOTOR VEHICLES, CYCLES, TRAILERS

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: M6785408R6041

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: BAE Systems PLC (UEI: 217304393)

Address: 1100 BAIRS RD, YORK, PA, 17408

Business Categories: Category Business, Manufacturer of Goods, Not Designated a Small Business, Partnership or Limited Liability Partnership

Financial Breakdown

Contract Ceiling: $46,830,761

Exercised Options: $46,830,761

Current Obligation: $46,830,761

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline