DoD's $3.74B BAE Systems contract for armored vehicles shows strong competition and long-term performance

Contract Overview

Contract Amount: $3,743,350,302 ($3.7B)

Contractor: BAE Systems Land and Armaments L.P.

Awarding Agency: Department of Defense

Start Date: 2015-11-24

End Date: 2028-06-30

Contract Duration: 4,602 days

Daily Burn Rate: $813.4K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 5

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: IGF::OT::IGF

Place of Performance

Location: YORK, YORK County, PENNSYLVANIA, 17408

State: Pennsylvania Government Spending

Plain-Language Summary

Department of Defense obligated $3.74 billion to BAE SYSTEMS LAND AND ARMAMENTS L.P. for work described as: IGF::OT::IGF Key points: 1. The contract demonstrates a commitment to long-term vehicle sustainment and modernization. 2. A high number of bidders suggests a competitive market for armored vehicle manufacturing. 3. The firm-fixed-price structure shifts cost risk to the contractor. 4. Performance is benchmarked against similar defense manufacturing contracts. 5. This contract positions BAE Systems as a key supplier in the armored vehicle sector. 6. The duration indicates a strategic, multi-year investment in defense capabilities.

Value Assessment

Rating: good

The contract's value of over $3.7 billion over its lifespan suggests significant investment in armored vehicle capabilities. While specific per-unit costs are not detailed here, the firm-fixed-price nature of the award indicates that the government has negotiated a set price, which can be advantageous for budget predictability. Benchmarking against similar large-scale defense manufacturing contracts would be necessary for a definitive value-for-money assessment, but the long-term nature and competitive award suggest a reasonable allocation of resources for critical defense assets.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that multiple qualified vendors were encouraged to bid. The presence of 5 bidders suggests a healthy level of competition within the armored vehicle manufacturing sector. This broad competition is generally favorable for price discovery and ensures that the government receives proposals from a range of capable suppliers, potentially leading to more competitive pricing and innovative solutions.

Taxpayer Impact: The robust competition for this significant contract is beneficial for taxpayers, as it likely drove down prices and ensured the government secured services from the most capable and cost-effective provider.

Public Impact

The U.S. Department of Defense benefits from the acquisition of advanced armored vehicles essential for national security. This contract supports the modernization of the Army's ground vehicle fleet. The contract has implications for the defense industrial base, particularly in armored vehicle manufacturing. Workforce in Pennsylvania and potentially other locations involved in defense manufacturing will be supported.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Long contract duration could lead to potential cost overruns if not managed effectively.
Reliance on a single primary contractor for such a critical capability warrants close oversight.
Potential for scope creep or changes in requirements over the contract's extended period.

Positive Signals

Firm-fixed-price contract structure provides cost certainty and shifts risk to the contractor.
Awarded under full and open competition, indicating a competitive process.
Long-term nature allows for strategic planning and sustainment of critical defense assets.
Contractor BAE Systems has a significant track record in defense manufacturing.

Sector Analysis

The armored vehicle manufacturing sector is a critical component of the defense industrial base, characterized by high barriers to entry, significant R&D investment, and long production cycles. This contract falls within the broader category of defense manufacturing, specifically focusing on military armored vehicles. Spending in this area is driven by geopolitical factors, modernization needs, and national security strategies. Comparable spending benchmarks would typically involve other large-scale vehicle procurement contracts within the Department of Defense or allied nations.

Small Business Impact

The data indicates this contract was not set aside for small businesses (ss: false, sb: false). While the primary awardee is a large defense contractor, there may be opportunities for small businesses to participate as subcontractors within BAE Systems' supply chain. The extent of small business subcontracting will depend on BAE Systems' internal policies and the specific requirements outlined in the contract, which are not detailed here. Further analysis would be needed to assess the impact on the small business ecosystem.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy and the Department of Defense's contracting and program management offices. Accountability measures are inherent in the firm-fixed-price structure, which obligates the contractor to deliver specified goods at an agreed-upon price. Transparency is facilitated through contract award databases and reporting requirements. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse.

Related Government Programs

Department of Defense Vehicle Procurement
Ground Combat Vehicle Programs
BAE Systems Defense Contracts
Armored Personnel Carrier Manufacturing
Main Battle Tank Production

Risk Flags

Long contract duration may increase risk of cost escalation or obsolescence.
Potential for contractor performance issues over an extended period.
Need for robust oversight to ensure value and adherence to specifications.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $3.74 billion to BAE SYSTEMS LAND AND ARMAMENTS L.P.. IGF::OT::IGF

Who is the contractor on this award?

The obligated recipient is BAE SYSTEMS LAND AND 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 $3.74 billion.

What is the period of performance?

Start: 2015-11-24. End: 2028-06-30.

What is BAE Systems' track record with similar large-scale defense vehicle contracts?

BAE Systems Land and Armaments L.P. has a substantial and well-established track record in producing and sustaining a wide array of military vehicles for the U.S. and international markets. They are known for programs such as the Bradley Fighting Vehicle, M109 Paladin self-propelled howitzer, and various armored personnel carriers. Their experience includes managing complex supply chains, integrating advanced technologies, and fulfilling long-term sustainment requirements. This extensive history suggests a high degree of capability and reliability in executing large, complex defense contracts like the one awarded by the Department of the Navy.

How does the $3.74 billion contract value compare to historical spending on armored vehicles?

The $3.74 billion total contract value, spanning from 2015 to 2028, represents a significant, but not necessarily anomalous, level of investment in armored vehicles. Defense spending fluctuates based on geopolitical needs, technological advancements, and strategic priorities. To contextualize this figure, one would compare it to the average annual spending on similar vehicle classes over the past decade, or to other major platform procurements (e.g., aircraft, ships). Given the long duration and the nature of armored vehicle production and sustainment, this value suggests a sustained commitment to maintaining and modernizing a critical component of the ground force.

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

The primary risks associated with a contract of this duration (over 12 years) and value ($3.74 billion) include potential cost overruns due to inflation or unforeseen technical challenges, the risk of technological obsolescence if requirements change significantly, and contractor performance degradation over time. There's also a strategic risk if the military's needs evolve away from the specific capabilities this contract addresses. Effective risk mitigation requires robust contract management, regular performance reviews, and flexibility to adapt to changing requirements or technologies.

How effective is the firm-fixed-price (FFP) contract type in managing costs for armored vehicles?

The firm-fixed-price (FFP) contract type is generally considered effective for managing costs when the scope of work is well-defined and the risks are understood. For armored vehicle manufacturing, where designs and production processes can be standardized to a degree, FFP shifts the cost risk from the government to the contractor. This incentivizes the contractor to control costs efficiently to maximize profit. However, if unforeseen technical issues or significant design changes arise, FFP can lead to contractor claims for additional compensation or potentially impact quality if the contractor seeks to cut corners.

What is the significance of 'full and open competition' for this type of defense contract?

Awarding a contract of this magnitude under 'full and open competition' is highly significant. It means that all responsible sources were permitted to submit a bid, fostering a competitive environment. This process is designed to ensure that the government obtains the best value by leveraging the capabilities and pricing of multiple potential suppliers. The presence of 5 bidders, as indicated, suggests a healthy market and increases the likelihood that the selected contractor, BAE Systems, offered a competitive proposal in terms of both technical merit and price.

What are the potential workforce implications of this long-term armored vehicle contract?

A contract of this scale and duration has significant workforce implications, primarily benefiting the defense industrial base. It supports skilled manufacturing jobs, engineering roles, and supply chain positions associated with BAE Systems and its subcontractors. Given that BAE Systems has facilities in Pennsylvania (SN: PENNSYLVANIA), there will likely be a direct impact on the workforce in that region. The long-term nature provides job stability and allows for workforce development and training in specialized manufacturing techniques required for armored vehicles.

Industry Classification

NAICS: Manufacturing › Other Transportation Equipment Manufacturing › Military Armored Vehicle, Tank, and Tank Component 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: M6785415R0001

Offers Received: 5

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Ball Corporation

Address: 34201 VAN DYKE AVE, STERLING HEIGHTS, MI, 48312

Business Categories: Category Business, Manufacturer of Goods, Not Designated a Small Business, Partnership or Limited Liability Partnership, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $3,863,741,018

Exercised Options: $3,785,729,921

Current Obligation: $3,743,350,302

Actual Outlays: $1,219,874,811

Subaward Activity

Number of Subawards: 1859

Total Subaward Amount: $1,302,770,433

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline