DoD's $30.6M ATC&LS contract with BAE Systems shows fair value, but limited competition raises concerns

Contract Overview

Contract Amount: $30,627,235 ($30.6M)

Contractor: BAE Systems Technology Solutions & Services Inc.

Awarding Agency: Department of Defense

Start Date: 2012-04-01

End Date: 2015-03-31

Contract Duration: 1,094 days

Daily Burn Rate: $28.0K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: THE AIR TRAFFIC CONTROL (ATC) SYSTEMS DIVISION, NAVAL AIR WARFARE CENTER AIRCRAFT DIVISION (NAWCAD) PATUXENT RIVER AT ST. INIGOES IS THE IN-SERVICE ENGINEERING AGENT (ISEA) AND SOFTWARE SUPPORT ACTIVITY (SSA) FOR AIR TRAFFIC CONTROL AND LANDING SYSTEMS (ATC&LS).

Place of Performance

Location: ROCKVILLE, MONTGOMERY County, MARYLAND, 20850

State: Maryland Government Spending

Plain-Language Summary

Department of Defense obligated $30.6 million to BAE SYSTEMS TECHNOLOGY SOLUTIONS & SERVICES INC. for work described as: THE AIR TRAFFIC CONTROL (ATC) SYSTEMS DIVISION, NAVAL AIR WARFARE CENTER AIRCRAFT DIVISION (NAWCAD) PATUXENT RIVER AT ST. INIGOES IS THE IN-SERVICE ENGINEERING AGENT (ISEA) AND SOFTWARE SUPPORT ACTIVITY (SSA) FOR AIR TRAFFIC CONTROL AND LANDING SYSTEMS (ATC&LS). Key points: 1. The contract for Air Traffic Control and Landing Systems (ATC&LS) engineering services was awarded to BAE Systems. 2. The total value of $30.6 million over three years suggests a moderate annual spend. 3. The 'Cost Plus Fixed Fee' contract type may incentivize cost overruns. 4. The contract was awarded under full and open competition, indicating a broad search for qualified vendors. 5. The single award suggests potential limitations in the competitive landscape for these specialized services. 6. The duration of the contract (1094 days) is typical for complex engineering support. 7. The contract is managed by the Naval Air Warfare Center Aircraft Division (NAWCAD).

Value Assessment

Rating: fair

The contract's total value of $30.6 million over approximately three years averages to about $10.2 million annually. This figure appears reasonable for specialized engineering services supporting critical air traffic control systems. Benchmarking against similar contracts for in-service engineering agents and software support activities for complex defense systems would provide a more precise value-for-money assessment. The Cost Plus Fixed Fee (CPFF) pricing structure, while common for R&D and complex services, carries inherent risks of cost escalation compared to fixed-price contracts.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under 'full and open competition,' suggesting that the solicitation was broadly advertised to all responsible sources. However, the fact that there was only one award (no. 1) indicates that either only one bidder was found to be technically acceptable and capable, or that the competitive pool for this highly specialized niche was limited. This single award, despite open competition, warrants further investigation into the market dynamics and potential barriers to entry for other qualified firms.

Taxpayer Impact: While open competition is generally beneficial for taxpayers, a single award suggests that the government may not have achieved the full price discovery benefits that would arise from robust multi-bidder competition. This could potentially lead to higher costs than if multiple strong contenders were vying for the contract.

Public Impact

The primary beneficiaries are the Department of the Navy and the broader Department of Defense, ensuring the operational readiness and modernization of air traffic control and landing systems. Services delivered include in-service engineering, software support, and technical expertise for critical ATC&LS. The geographic impact is primarily at Naval Air Station Patuxent River, Maryland, a key hub for naval aviation research, development, and acquisition. The contract supports a specialized workforce of engineers and technical professionals within BAE Systems, contributing to the defense industrial base.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

The CPFF contract type can lead to cost overruns if not closely monitored.
Limited competition, indicated by a single award, may reduce price pressure.
The specialized nature of ATC&LS support could create a bottleneck for future procurements.
Reliance on a single contractor for critical engineering services poses a potential risk.

Positive Signals

Awarded under full and open competition, maximizing potential bidder reach.
BAE Systems is a large, established defense contractor with relevant experience.
The contract duration is defined, providing a clear period of performance.
The contract supports critical national defense infrastructure.

Sector Analysis

This contract falls within the Engineering Services sector, specifically supporting defense-related Air Traffic Control and Landing Systems (ATC&LS). The market for such specialized systems engineering and software support is often concentrated among a few large defense contractors with the requisite security clearances, technical expertise, and established relationships with agencies like the Department of the Navy. Annual spending on defense engineering services can range from billions to tens of billions, depending on the scope and complexity of the systems supported.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb: false'. The prime contractor, BAE Systems Technology Solutions & Services Inc., is a large business. There is no explicit information provided regarding subcontracting plans for small businesses. Without specific subcontracting goals or reporting, the direct impact on the small business ecosystem is likely minimal, though large prime contractors often engage small businesses for specialized support.

Oversight & Accountability

Oversight is likely conducted by the Naval Air Warfare Center Aircraft Division (NAWCAD) through contract officers, program managers, and technical representatives. The 'Cost Plus Fixed Fee' structure necessitates rigorous financial oversight to manage costs and ensure the fixed fee is earned appropriately. Transparency is generally maintained through contract reporting mechanisms, though specific details of ongoing oversight activities are not publicly detailed. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Naval Air Systems Command (NAVAIR) Contracts
Air Traffic Control Systems Modernization Programs
Defense Software Engineering Services
In-Service Engineering Agent Contracts
Federal Aviation Administration (FAA) ATC Systems

Risk Flags

Potential for cost overruns due to CPFF structure.
Limited competition may reduce price discovery benefits.
Reliance on a single contractor for critical systems support.
Need for robust oversight of engineering services.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $30.6 million to BAE SYSTEMS TECHNOLOGY SOLUTIONS & SERVICES INC.. THE AIR TRAFFIC CONTROL (ATC) SYSTEMS DIVISION, NAVAL AIR WARFARE CENTER AIRCRAFT DIVISION (NAWCAD) PATUXENT RIVER AT ST. INIGOES IS THE IN-SERVICE ENGINEERING AGENT (ISEA) AND SOFTWARE SUPPORT ACTIVITY (SSA) FOR AIR TRAFFIC CONTROL AND LANDING SYSTEMS (ATC&LS).

Who is the contractor on this award?

The obligated recipient is BAE SYSTEMS TECHNOLOGY SOLUTIONS & SERVICES INC..

Which agency awarded this contract?

Awarding agency: Department of Defense (Department of the Navy).

What is the total obligated amount?

The obligated amount is $30.6 million.

What is the period of performance?

Start: 2012-04-01. End: 2015-03-31.

What is BAE Systems' track record with similar engineering support contracts for the Department of Defense?

BAE Systems has a long and extensive history of providing engineering, technical, and support services to the Department of Defense across various branches and platforms. They are a major defense contractor involved in numerous complex systems, including aviation, naval, and ground systems. Their track record includes significant work on aircraft maintenance, avionics, electronic warfare, and command and control systems. For air traffic control and landing systems specifically, BAE Systems has likely supported various aspects of development, integration, and sustainment, leveraging their broad engineering capabilities. A detailed review of their contract history would reveal specific performance metrics, past issues, and successes in delivering similar services, which would inform the risk assessment for this particular contract.

How does the annual cost of this contract compare to similar ATC&LS support contracts?

The annual cost of approximately $10.2 million for this ATC&LS contract needs to be benchmarked against comparable contracts to assess value for money. Similar contracts would involve providing in-service engineering agent (ISEA) and software support activity (SSA) functions for complex aviation systems. Factors influencing cost include the specific systems supported, the scope of engineering and software maintenance required, the level of technical expertise needed, and the duration of the support. Contracts for other major aviation platforms or complex radar and navigation systems managed by different DoD entities could serve as benchmarks. Without access to a database of comparable contract values and scopes, a precise comparison is difficult, but the $10.2M annual figure appears moderate for specialized defense engineering support.

What are the primary risks associated with a Cost Plus Fixed Fee (CPFF) contract for engineering services?

The primary risk associated with a Cost Plus Fixed Fee (CPFF) contract is the potential for cost overruns. In a CPFF structure, 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 not. This can incentivize contractors to incur higher costs, as their profit margin (the fixed fee) remains constant regardless of the total expenditure. Effective oversight, stringent cost controls, and clear definition of allowable costs are crucial to mitigate this risk. For the government, it means diligent monitoring of expenditures and ensuring that all costs claimed by the contractor are reasonable, allocable, and necessary for contract performance.

What is the significance of NAWCAD acting as the In-Service Engineering Agent (ISEA) and Software Support Activity (SSA)?

The Naval Air Warfare Center Aircraft Division (NAWCAD) acting as the ISEA and SSA signifies its role in ensuring the continued operational effectiveness, reliability, and maintainability of the Air Traffic Control and Landing Systems (ATC&LS) throughout their lifecycle. As the ISEA, NAWCAD is responsible for providing engineering support to keep the systems functioning optimally, addressing obsolescence, and managing configuration changes. As the SSA, it oversees the software aspects, including maintenance, updates, and ensuring software integrity. This designation highlights the critical nature of these systems and the need for specialized, ongoing technical expertise to support naval aviation readiness.

How does the limited number of bidders (implied by single award) impact price discovery and taxpayer value?

A single award, even under full and open competition, suggests a limited number of bidders were either capable or willing to compete for this specialized contract. This lack of robust competition can hinder effective price discovery. When multiple bidders submit proposals, they often engage in competitive pricing strategies to win the contract. With only one viable bidder, the government may not benefit from the downward price pressure that arises from a competitive environment. Consequently, the price paid might be higher than what could have been achieved with more bidders, potentially impacting taxpayer value. It also raises questions about the health and accessibility of the market for these specific services.

What are the potential implications of this contract on the future development or sustainment of ATC&LS technology?

This contract, by providing ongoing engineering and software support, plays a crucial role in the sustainment of current ATC&LS technology. It ensures that existing systems remain operational and effective. However, the focus on sustainment might indirectly influence future technology development. The insights gained from maintaining these systems can inform requirements for next-generation technologies. If the contractor is heavily involved in R&D or modernization efforts, this contract could foster innovation. Conversely, a contract solely focused on maintenance might not drive significant technological advancement, potentially leading to reliance on legacy systems unless specific provisions for modernization are included.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Architectural, Engineering, and Related Services › Engineering Services

Product/Service Code: RESEARCH AND DEVELOPMENT › C – National Defense R&D Services

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: SUBJECT TO MULTIPLE AWARD FAIR OPPORTUNITY

Solicitation ID: N0002411R3087

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: BAE Systems PLC

Address: 520 GAITHER ROAD, ROCKVILLE, MD, 20850

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $45,388,633

Exercised Options: $41,642,922

Current Obligation: $30,627,235

Subaward Activity

Number of Subawards: 5

Total Subaward Amount: $1,621,353

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: N0017804D4018

IDV Type: IDC

Timeline