DoD's $26M BAE Systems contract for AN/UPX-41(C) interrogators lacked competition, raising value concerns

Contract Overview

Contract Amount: $25,985,312 ($26.0M)

Contractor: BAE Systems Information and Electronic Systems Integration Inc.

Awarding Agency: Department of Defense

Start Date: 2012-08-27

End Date: 2022-02-28

Contract Duration: 3,472 days

Daily Burn Rate: $7.5K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: AN/UPX-41(C) DIGITAL INTERROGATORS AND MODE 5 FIELD CHANGE KITS

Place of Performance

Location: GREENLAWN, SUFFOLK County, NEW YORK, 11740

State: New York Government Spending

Plain-Language Summary

Department of Defense obligated $26.0 million to BAE SYSTEMS INFORMATION AND ELECTRONIC SYSTEMS INTEGRATION INC. for work described as: AN/UPX-41(C) DIGITAL INTERROGATORS AND MODE 5 FIELD CHANGE KITS Key points: 1. The contract awarded to BAE Systems for digital interrogators and mode 5 field change kits represents a significant investment in defense avionics. 2. Lack of competition for this contract raises questions about potential overpayment and the absence of market-driven price discovery. 3. The long contract duration (2012-2022) suggests a sustained need for these systems, but also a prolonged period without competitive pressure. 4. Performance context is limited without specific delivery metrics or operational success indicators for the AN/UPX-41(C) system. 5. This contract falls within the 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' sector, crucial for military operations. 6. The sole-source nature of this award warrants scrutiny regarding the justification for not seeking multiple bids.

Value Assessment

Rating: questionable

Benchmarking the value of this $25.99 million contract is challenging due to its sole-source nature and the specific, specialized equipment involved. Without competitive bids, it's difficult to ascertain if the price paid reflects fair market value or if alternative, more cost-effective solutions were overlooked. The absence of comparable contract data for the AN/UPX-41(C) system further complicates a direct value-for-money assessment. The long duration of the contract (2012-2022) could indicate either consistent demand or a lack of urgency in seeking better pricing through competition.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one bidder, BAE Systems Information and Electronic Systems Integration Inc., was considered. The justification for this approach is not detailed in the provided data. Typically, sole-source awards occur when only one responsible source can provide the required supplies or services. However, the lack of competition means there was no opportunity for price negotiation based on multiple offers, potentially leading to higher costs for the government.

Taxpayer Impact: Taxpayers may have paid a premium for these systems due to the absence of competitive bidding. Without competing offers, the government had limited leverage to negotiate the best possible price, potentially resulting in funds being spent less efficiently than if multiple vendors had vied for the contract.

Public Impact

The primary beneficiaries are the U.S. Navy's aviation units, which rely on the AN/UPX-41(C) system for identification friend or foe (IFF) capabilities. The services delivered include the provision of digital interrogators and essential Mode 5 field change kits, crucial for maintaining operational readiness and interoperability. The geographic impact is primarily within the operational theaters of the U.S. Navy, supporting naval aviation assets globally. Workforce implications include the specialized technical roles at BAE Systems required for the manufacturing, integration, and support of this advanced avionics equipment.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price discovery and potentially inflates costs.
Lack of transparency in the justification for sole-sourcing.
Long contract duration without competitive re-evaluation.
Absence of performance metrics makes value assessment difficult.

Positive Signals

BAE Systems is a known defense contractor with established expertise.
The contract addresses a critical defense need for IFF systems.
Firm Fixed Price contract type provides cost certainty once awarded.

Sector Analysis

This contract falls under the 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' industry, a specialized segment of the aerospace and defense sector. This market is characterized by high barriers to entry, significant R&D investment, and long product lifecycles. The total addressable market for such specialized avionics systems is substantial, driven by ongoing military modernization efforts and the need for advanced identification capabilities. Comparable spending benchmarks are difficult to establish without more specific system details, but defense spending on avionics and electronic warfare systems typically runs into billions annually.

Small Business Impact

The data indicates that this contract was not set aside for small businesses, nor does it appear to involve significant subcontracting opportunities for small businesses based on the prime contractor being BAE Systems. As a sole-source award to a large prime contractor, the direct impact on the small business ecosystem is likely minimal. There is no indication of specific small business subcontracting plans being a requirement or a focus for this particular contract.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of the Navy's contracting and program management offices. Accountability measures are generally tied to contract terms, delivery schedules, and performance specifications, though these are not detailed here. Transparency is limited by the sole-source nature and the lack of publicly available justification. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Identification Friend or Foe (IFF) Systems
Avionics Manufacturing
Defense Electronics
Naval Aviation Support Systems
Military Communications Equipment

Risk Flags

Sole-source award lacks competitive justification.
Potential for inflated pricing due to lack of competition.
Limited transparency regarding contract specifics and performance.
Long contract duration without re-competition.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $26.0 million to BAE SYSTEMS INFORMATION AND ELECTRONIC SYSTEMS INTEGRATION INC.. AN/UPX-41(C) DIGITAL INTERROGATORS AND MODE 5 FIELD CHANGE KITS

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 (Department of the Navy).

What is the total obligated amount?

The obligated amount is $26.0 million.

What is the period of performance?

Start: 2012-08-27. End: 2022-02-28.

What is the specific function and importance of the AN/UPX-41(C) system within the Department of Defense?

The AN/UPX-41(C) is a digital interrogator system, a critical component of the Identification Friend or Foe (IFF) system. IFF systems are essential for military operations, enabling friendly forces to distinguish between friendly and enemy aircraft, vehicles, and personnel. The AN/UPX-41(C) specifically transmits interrogation signals that are answered by transponders on friendly platforms, confirming their identity. Mode 5 is the latest generation of IFF cryptographic interrogation, providing enhanced security and reducing the risk of fratricide. Its importance lies in maintaining situational awareness, preventing friendly fire incidents, and ensuring the effective coordination of air and ground operations in complex combat environments. The Department of the Navy relies heavily on these systems for its aviation assets.

Why was this contract awarded on a sole-source basis, and what are the implications for cost?

The provided data states the contract was 'NOT COMPETED,' indicating a sole-source award. The specific justification for this sole-sourcing is not detailed but typically arises when only one vendor possesses the necessary technical capabilities, proprietary technology, or existing infrastructure to fulfill the requirement. For this AN/UPX-41(C) system, it's possible that BAE Systems holds patents or unique manufacturing processes. The implication for cost is significant: without competition, the government loses the benefit of multiple bids driving down prices through market forces. This can lead to higher unit costs and overall contract value than if competitive bids had been solicited, potentially resulting in less value for taxpayer money.

How does the $25.99 million contract value compare to typical spending on similar defense avionics systems?

Comparing the $25.99 million value directly is difficult without knowing the exact quantity of units and kits procured over the contract's lifespan (2012-2022). However, for specialized avionics components like IFF interrogators and cryptographic upgrades, this figure represents a substantial investment. Defense spending on avionics is generally high, with individual aircraft systems often costing millions. Contracts for the development, production, and sustainment of such critical components can easily reach tens or hundreds of millions of dollars over their lifecycle. The key concern here isn't the absolute dollar amount, but rather the lack of competitive pricing that might have secured a better deal for the government.

What are the potential risks associated with a long-term, sole-source contract for defense equipment?

A long-term, sole-source contract presents several risks. Firstly, there's the risk of 'vendor lock-in,' where the government becomes dependent on a single supplier, making it difficult and costly to switch providers even if better alternatives emerge. Secondly, the lack of competition can lead to complacency and reduced incentives for the contractor to innovate or improve efficiency, potentially resulting in higher costs over time. Thirdly, without regular competitive bidding, there's a risk that pricing may not reflect current market conditions or technological advancements. Finally, if the sole-source contractor faces financial difficulties or operational issues, it could severely disrupt the supply chain for critical defense equipment.

What is BAE Systems' track record with the Department of Defense, particularly regarding IFF systems?

BAE Systems is a major global defense contractor with a long-standing relationship with the Department of Defense and other allied nations. They have a significant presence in electronic warfare, avionics, and command and control systems. Within the realm of IFF systems, BAE Systems has been a key player, involved in the development and production of various generations of IFF equipment, including Mode 4 and Mode 5 technologies. Their track record generally includes delivering complex systems, though like any large contractor, they have faced scrutiny over contract costs and performance on specific programs. Their established position in this niche suggests they possess the required expertise and infrastructure for systems like the AN/UPX-41(C).

How does the 'Firm Fixed Price' contract type influence the risk allocation between the government and BAE Systems?

A Firm Fixed Price (FFP) contract type, as indicated for this award, places the majority of the cost risk on the contractor, BAE Systems. Under an FFP agreement, the contractor is obligated to complete the work for a predetermined price, regardless of their actual costs incurred. This means that if BAE Systems' costs for materials, labor, or manufacturing exceed their estimates, their profit margin will decrease, or they could even incur a loss. Conversely, if they manage their costs efficiently and complete the work for less than the fixed price, their profit will increase. This contract type is generally preferred by the government when the scope of work is well-defined, as it provides budget certainty and incentivizes the contractor to control costs.

Industry Classification

NAICS: Manufacturing › Navigational, Measuring, Electromedical, and Control Instruments Manufacturing › Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing

Product/Service Code: COMM/DETECT/COHERENT RADIATION

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0001912R1006

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: BAE Systems PLC (UEI: 217304393)

Address: 450 PULASKI RD, GREENLAWN, NY, 11740

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Foreign-Owned and U.S.-Incorporated Business, Manufacturer of Goods, Not Designated a Small Business, Special Designations

Financial Breakdown

Contract Ceiling: $26,016,449

Exercised Options: $26,016,449

Current Obligation: $25,985,312

Subaward Activity

Number of Subawards: 25

Total Subaward Amount: $2,842,320

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline