DoD's $175M Sonobuoy Production Contract Awarded to ERAPSCO Raises Value Concerns

Contract Overview

Contract Amount: $175,321,943 ($175.3M)

Contractor: Erapsco

Awarding Agency: Department of Defense

Start Date: 2019-07-18

End Date: 2021-10-15

Contract Duration: 820 days

Daily Burn Rate: $213.8K/day

Competition Type: NOT COMPETED

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: (FY19) PRODUCTION SONOBUOYS

Place of Performance

Location: COLUMBIA CITY, WHITLEY County, INDIANA, 46725

State: Indiana Government Spending

Plain-Language Summary

Department of Defense obligated $175.3 million to ERAPSCO for work described as: (FY19) PRODUCTION SONOBUOYS Key points: 1. The contract's value, while substantial, warrants scrutiny given the lack of competitive bidding. 2. ERAPSCO, the sole awardee, suggests potential limitations in market competition for these specific sonobuoys. 3. The firm fixed-price contract type offers some cost certainty but doesn't inherently guarantee optimal value without competition. 4. The duration of the contract (820 days) indicates a significant, ongoing need for these critical defense components. 5. The absence of small business set-asides or subcontracting plans warrants further investigation into broader economic impacts. 6. The contract falls under the 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' NAICS code, highlighting its specialized nature.

Value Assessment

Rating: questionable

Benchmarking the value of this $175 million contract is challenging without comparable competitive bids. The firm fixed-price structure provides cost predictability for the government, but the lack of competition means there's no market-driven validation of whether this price represents the best value. Without alternative offers or historical competitive pricing data for this specific sonobuoy model, it's difficult to definitively assess if the government secured optimal pricing or if a more competitive environment could have yielded savings. The award amount itself is significant, underscoring the importance of ensuring robust price discovery mechanisms are in place for future procurements.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning ERAPSCO was the only vendor considered. The data indicates it was 'NOT COMPETED,' suggesting that either only one source was available or the government determined competition was not feasible or advantageous. This lack of competition limits the government's ability to leverage market forces to drive down prices and ensure the most innovative solutions are considered. The absence of multiple bidders means potential cost savings and technological advancements that might arise from a competitive process were not realized.

Taxpayer Impact: Sole-source awards can lead to higher costs for taxpayers as there is no competitive pressure to ensure the lowest possible price. This limits the government's purchasing power and potentially reduces the funds available for other critical defense needs.

Public Impact

The primary beneficiaries are the Department of the Navy and potentially other Department of Defense branches requiring advanced sonobuoy technology for naval operations. The contract delivers essential components for naval surveillance, anti-submarine warfare, and maritime domain awareness. The geographic impact is primarily national, supporting U.S. naval readiness, though the manufacturing location in Indiana has local economic implications. The contract supports a specialized segment of the defense manufacturing workforce involved in the production of advanced acoustic and electronic systems.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to higher prices than a competitive award.
Sole-source awards can stifle innovation by not exposing the government to alternative solutions.
Limited transparency into the justification for sole-source award could obscure potential inefficiencies.
No indication of small business participation raises concerns about equitable distribution of federal contracting dollars.

Positive Signals

Firm fixed-price contract provides cost certainty for the government.
Awarding to a known entity (ERAPSCO) may ensure continuity of supply for critical defense items.
The contract duration suggests a stable, long-term need, allowing for potential production efficiencies.

Sector Analysis

The defense industry segment for sonar and acoustic equipment, including sonobuoys, is highly specialized and often characterized by a limited number of key manufacturers. Companies like ERAPSCO operate within this niche, supplying critical components for naval warfare and surveillance. The market size for such specialized defense electronics can be substantial, driven by government procurement needs for advanced military capabilities. This contract represents a significant portion of spending within this specific sub-sector, highlighting the reliance on a few established suppliers for technologically complex systems.

Small Business Impact

The provided data indicates that this contract was not set aside for small businesses (ss: false, sb: false). There is no information regarding subcontracting plans. This suggests that the prime contract was awarded directly to ERAPSCO without specific provisions to involve small businesses. Consequently, the direct economic benefit to the small business ecosystem from this particular award appears limited, and opportunities for small business subcontracting may not have been prioritized.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of the Navy's contracting and program management offices. As a firm fixed-price contract, the primary oversight focus would be on delivery schedules, quality control, and compliance with contract terms. Transparency regarding the justification for the sole-source award would be crucial for accountability. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected during the contract's performance or award process.

Related Government Programs

Naval Sonar Systems
Anti-Submarine Warfare Equipment
Defense Electronics Manufacturing
Naval Surveillance Technology
Acoustic Sensor Production

Risk Flags

Sole-source award lacks competitive justification.
Potential for inflated pricing due to lack of competition.
Limited visibility into alternative technological solutions.
Dependency on a single supplier for critical defense materiel.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $175.3 million to ERAPSCO. (FY19) PRODUCTION SONOBUOYS

Who is the contractor on this award?

The obligated recipient is ERAPSCO.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $175.3 million.

What is the period of performance?

Start: 2019-07-18. End: 2021-10-15.

What is ERAPSCO's track record with similar sole-source contracts for sonobuoys?

Analyzing ERAPSCO's historical contract data would reveal the frequency and value of previous sole-source awards for sonobuoys or related acoustic systems. A pattern of sole-source awards, particularly for substantial amounts, could indicate a lack of market competition or a strategic decision by the government to rely on a specific supplier. Without this context, it's difficult to determine if this $175 million award is an anomaly or part of a broader trend. Further investigation into past justifications for sole-source awards to ERAPSCO would provide insight into the government's rationale and potential alternatives considered.

How does the pricing of this contract compare to market rates for similar sonobuoys, if available?

Directly comparing the pricing of this $175 million contract to market rates is challenging due to the sole-source nature of the award and the specialized technology involved. Publicly available data on per-unit costs for advanced military sonobuoys is often classified or not disclosed. However, if comparable commercial sonar systems or earlier generation military sonobuoys procured competitively exist, a rough benchmark could be established. The absence of competitive bids means there is no direct market validation of the price. Analysis would require access to internal government cost estimates, should-cost analyses, or data from similar, albeit not identical, competitive procurements to assess value for money.

What are the specific risks associated with relying on a sole-source provider for critical defense components like sonobuoys?

Relying on a sole-source provider like ERAPSCO for critical defense components introduces several risks. Firstly, it eliminates the potential for cost savings through competition, potentially leading to higher prices for taxpayers. Secondly, it can stifle innovation, as the government lacks exposure to alternative technologies or improved designs from other manufacturers. Thirdly, it creates a dependency on a single supplier, increasing vulnerability to supply chain disruptions, production issues, or price increases dictated by the sole provider. Finally, without competitive pressure, there may be less incentive for the supplier to maintain optimal efficiency or quality over the long term.

What is the historical spending trend for sonobuoys by the Department of the Navy over the last five fiscal years?

Examining the Department of the Navy's spending on sonobuoys over the past five fiscal years would provide crucial context for the $175 million award. This analysis would reveal whether this contract represents a significant increase, decrease, or stable level of investment in sonobuoy technology. Understanding historical spending patterns can help identify trends in procurement strategies, such as shifts towards sole-source awards or increased reliance on specific contractors. It can also highlight the overall budget allocation for this critical capability and inform future budget planning and resource allocation decisions.

What is the justification provided by the Department of the Navy for awarding this contract on a sole-source basis?

The justification for awarding this contract on a sole-source basis is critical for understanding the rationale behind bypassing the competitive process. Typically, such justifications are rooted in factors like the existence of only one responsible source, urgent and compelling needs that preclude competition, or specific technological requirements that only one contractor can meet. Without access to the official justification document (e.g., a Justification and Approval or J&A), it is impossible to definitively assess the validity of the sole-source determination. This information is key to evaluating whether the government acted appropriately and in the best interest of the taxpayer.

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: N0001919R0001

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 4868 EAST PARK 30 DR, COLUMBIA CITY, IN, 46725

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: $175,321,943

Exercised Options: $175,321,943

Current Obligation: $175,321,943

Subaward Activity

Number of Subawards: 307

Total Subaward Amount: $105,222,881

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: N0001919D0032

IDV Type: IDC

Timeline