DoD awards $20.4M for aircraft transponders, raising questions about competition and value

Contract Overview

Contract Amount: $20,355,746 ($20.4M)

Contractor: BAE Systems Information and Electronic Systems Integration Inc.

Awarding Agency: Department of Defense

Start Date: 2013-12-27

End Date: 2019-12-29

Contract Duration: 2,193 days

Daily Burn Rate: $9.3K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: APX-123 IFF TRANSPONDER

Place of Performance

Location: GREENLAWN, SUFFOLK County, NEW YORK, 11740

State: New York Government Spending

Plain-Language Summary

Department of Defense obligated $20.4 million to BAE SYSTEMS INFORMATION AND ELECTRONIC SYSTEMS INTEGRATION INC. for work described as: APX-123 IFF TRANSPONDER Key points: 1. Contract awarded on a sole-source basis, limiting price discovery and potentially increasing costs. 2. The firm-fixed-price contract type offers some cost certainty but may not fully capture efficiencies. 3. Lack of competition is a significant risk indicator for potential overpayment. 4. The contract duration of over 6 years suggests a long-term need for these components. 5. The specific system (APX-123 IFF Transponder) is critical for military aviation safety and operations. 6. Spending on similar navigation and guidance systems warrants benchmarking to assess value.

Value Assessment

Rating: questionable

Without competitive bidding, it is difficult to definitively assess the value for money. The $20.4 million award for APX-123 IFF Transponders lacks a clear benchmark against similar procurements. The firm-fixed-price structure provides some predictability, but the absence of competition means the government may not have secured the lowest possible price. Further analysis would require comparing this award to other IFF transponder contracts or similar defense electronics procurements.

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 solicited. This approach bypasses the standard competitive bidding process, which typically involves multiple vendors vying for the contract. The lack of competition limits the government's ability to leverage market forces to achieve the best possible pricing and terms.

Taxpayer Impact: Sole-source awards mean taxpayers do not benefit from the cost savings that can arise from a competitive bidding environment. This can lead to higher overall spending for essential defense equipment.

Public Impact

The primary beneficiaries are the U.S. Air Force and other Department of Defense branches relying on secure and reliable aircraft identification. The contract delivers critical APX-123 IFF Transponders, essential for air traffic control, collision avoidance, and combat identification. The geographic impact is primarily within military aviation operations across various bases and theaters of operation. The contract supports specialized manufacturing and integration roles within the defense electronics sector.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure on pricing.
Long contract duration without clear performance incentives could reduce urgency for cost optimization.
Lack of transparency in the sole-source justification process.
Potential for vendor lock-in with specialized equipment.

Positive Signals

Firm-fixed-price contract provides cost certainty for the government.
BAE Systems is a known entity in defense electronics, suggesting a degree of reliability.
The IFF transponder is a critical safety and operational component for military aircraft.

Sector Analysis

The contract falls within the Defense Electronics sector, specifically focusing on navigation, guidance, and identification systems. This market is characterized by high technological barriers to entry, significant R&D investment, and often long product lifecycles. Spending in this area is driven by military modernization efforts and the need for advanced situational awareness. Comparable spending benchmarks would involve analyzing other procurements for similar avionics and electronic warfare systems within the DoD.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. There is no explicit information regarding subcontracting plans for small businesses. The sole-source nature of the award further reduces the likelihood of significant subcontracting opportunities for small businesses within this specific procurement.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Defense's contract management agencies, such as the Defense Contract Management Agency (DCMA). Accountability measures are inherent in the firm-fixed-price contract type, which obligates the contractor to deliver the specified goods at the agreed-upon price. Transparency is limited due to the sole-source nature of the award, with justifications for this approach usually being internal to the agency.

Related Government Programs

DoD Avionics Procurement
Military Identification Friend or Foe (IFF) Systems
Defense Navigation and Guidance Systems
BAE Systems Defense Contracts

Risk Flags

Sole-source award
Lack of competitive bidding
Potential for inflated pricing
Limited transparency in procurement justification

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $20.4 million to BAE SYSTEMS INFORMATION AND ELECTRONIC SYSTEMS INTEGRATION INC.. APX-123 IFF TRANSPONDER

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 (Defense Contract Management Agency).

What is the total obligated amount?

The obligated amount is $20.4 million.

What is the period of performance?

Start: 2013-12-27. End: 2019-12-29.

What is the track record of BAE Systems in delivering similar IFF transponder systems to the DoD?

BAE Systems is a major defense contractor with extensive experience in electronic systems, including Identification Friend or Foe (IFF) technology. They have a history of supplying various avionics and communication systems to the U.S. military and allied nations. While specific performance data for the APX-123 transponder under this contract is not detailed here, BAE Systems' general track record in this domain is established. However, the absence of competition for this specific award means that performance comparisons are limited to internal metrics or previous contracts, rather than market-driven benchmarks. Further investigation into past performance reviews and delivery timelines for similar BAE Systems contracts would provide a more comprehensive understanding of their reliability in this area.

How does the $20.4 million award compare to market rates for similar IFF transponders?

Directly comparing the $20.4 million award to market rates for similar IFF transponders is challenging due to the sole-source nature of this contract and the proprietary nature of specific system costs. Typically, competitive bidding allows for price discovery and benchmarking against multiple vendors. Without this, it's difficult to ascertain if the price secured by BAE Systems is optimal. Industry reports or analyses of other government contracts for comparable, though not identical, IFF systems could offer some insight. However, the unique specifications of the APX-123 and the specific requirements of the DoD may justify a particular price point. A thorough value-for-money assessment would necessitate access to cost breakdowns or comparative data from competitive solicitations.

What are the primary risks associated with a sole-source award for critical defense components like IFF transponders?

The primary risk associated with a sole-source award for critical defense components like IFF transponders is the potential for inflated pricing due to the lack of competitive pressure. Without multiple bidders, the government loses the opportunity to negotiate based on market competition, potentially leading to overpayment. Another risk is reduced innovation, as the sole provider may have less incentive to invest in cost-saving technologies or product improvements. Furthermore, sole-source contracts can create vendor lock-in, making it difficult and costly to switch providers in the future if performance issues arise or better alternatives become available. This lack of competition also raises concerns about transparency in the procurement process.

What is the historical spending pattern for APX-123 IFF Transponders or similar systems by the Department of Defense?

Analyzing historical spending patterns for APX-123 IFF Transponders specifically is difficult without access to detailed contract databases beyond this single award. However, the Department of Defense consistently invests significant funds in avionics and communication systems, including IFF technology, which is crucial for air safety and operational effectiveness. Spending in this category is influenced by aircraft fleet size, modernization programs, and technological obsolescence. The $20.4 million awarded here for a multi-year period suggests a sustained need. Broader historical data on the procurement of navigation, detection, and guidance systems (NAICS code 334511) would show a consistent and substantial expenditure by the DoD over many years, reflecting the ongoing requirement for such critical components.

How does the firm-fixed-price contract type mitigate or exacerbate risks in this sole-source scenario?

The firm-fixed-price (FFP) contract type in this sole-source scenario offers a degree of cost certainty for the government, as the price is set and generally not subject to adjustment based on the contractor's cost experience. This mitigates the risk of cost overruns for the government if the contractor's actual expenses are higher than anticipated. However, it can exacerbate the risk of overpayment if the initial fixed price was not competitively determined and is therefore higher than it would have been in a competitive environment. In a sole-source situation, the FFP structure places the entire cost risk on the contractor, which might lead them to build in higher contingency margins to protect against unforeseen issues, potentially inflating the price further. Thus, while it provides budget predictability, it doesn't guarantee the best possible price without competition.

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: N0001913R0072

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, Manufacturer of Goods, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $21,624,490

Exercised Options: $20,355,746

Current Obligation: $20,355,746

Subaward Activity

Number of Subawards: 32

Total Subaward Amount: $5,714,052

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline