DoD's $15.6M contract for ALE-55 Retrofit awarded to BAE Systems, raising value-for-money questions

Contract Overview

Contract Amount: $15,596,282 ($15.6M)

Contractor: BAE Systems Information and Electronic Systems Integration Inc.

Awarding Agency: Department of Defense

Start Date: 2021-12-30

End Date: 2026-02-28

Contract Duration: 1,521 days

Daily Burn Rate: $10.3K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: ALE-55 RETROFIT

Place of Performance

Location: NASHUA, HILLSBOROUGH County, NEW HAMPSHIRE, 03060

State: New Hampshire Government Spending

Plain-Language Summary

Department of Defense obligated $15.6 million to BAE SYSTEMS INFORMATION AND ELECTRONIC SYSTEMS INTEGRATION INC. for work described as: ALE-55 RETROFIT Key points: 1. The contract's cost-plus-fixed-fee structure may incentivize higher spending without strict cost controls. 2. Sole-source award limits competitive pressure, potentially leading to inflated pricing. 3. The duration of the contract (1521 days) suggests a long-term need, but requires ongoing scrutiny. 4. Performance context is limited, making it difficult to assess the value delivered for the investment. 5. The contract falls within the defense sector's navigation and guidance systems manufacturing, a critical but often high-cost area. 6. Lack of competition raises concerns about price discovery and potential overpayment by taxpayers.

Value Assessment

Rating: questionable

The $15.6 million contract awarded to BAE Systems for the ALE-55 Retrofit lacks sufficient comparative data to definitively assess value. As a sole-source award, it bypasses competitive bidding, making direct price benchmarking against similar contracts challenging. The cost-plus-fixed-fee (CPFF) pricing structure, while common in complex defense procurements, can lead to higher overall costs if not managed rigorously, as the contractor is reimbursed for allowable costs plus a fixed fee. Without detailed cost breakdowns and performance metrics, it's difficult to ascertain if the fixed fee adequately reflects the effort and risk involved or if the total cost represents a fair market price.

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. This approach is typically used when only one responsible source can provide the required supplies or services. The lack of competition means that the Navy did not benefit from the price discovery and innovation that typically arises from multiple bids. This can limit the government's ability to negotiate the best possible price and terms.

Taxpayer Impact: Sole-source awards limit taxpayer savings by eliminating the competitive pressure that drives down prices. Without competing bids, there's a higher risk that the awarded price may not be the most economical option available.

Public Impact

The primary beneficiaries are the Department of the Navy, which receives critical system upgrades for its fleet. The contract delivers essential retrofitting services for the ALE-55 system, crucial for naval aviation safety and effectiveness. The geographic impact is primarily within New Hampshire, where BAE Systems' facility is located, potentially supporting local jobs. Workforce implications include the employment of skilled technicians and engineers at BAE Systems involved in the retrofit process.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing, potentially increasing costs for taxpayers.
Cost-plus-fixed-fee structure may not provide sufficient incentive for cost control.
Lack of transparency in pricing due to sole-source nature.
Long contract duration requires sustained oversight to ensure value.

Positive Signals

Awarded to an established contractor with experience in defense systems.
Addresses a critical need for naval aviation system upgrades.
Contract specifies a fixed fee, providing some level of cost predictability for the contractor's profit.

Sector Analysis

This contract falls within the broader defense industrial base, specifically the 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' sector. This industry is characterized by high technological complexity, significant R&D investment, and long product lifecycles. Spending in this sector is heavily influenced by government defense budgets and geopolitical factors. Comparable spending benchmarks are difficult to establish due to the specialized nature of the ALE-55 system and the sole-source award.

Small Business Impact

This contract does not appear to involve small business set-asides, as indicated by 'ss': false and 'sb': false. The prime contractor is BAE Systems, a large defense corporation. There is no explicit information regarding subcontracting plans for small businesses within this specific award notice. Therefore, the direct impact on the small business ecosystem from this particular contract is likely minimal, unless BAE Systems voluntarily engages small businesses in its supply chain.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy's contracting and program management offices. As a sole-source award, scrutiny on the justification for this procurement method is crucial. The cost-plus-fixed-fee structure necessitates robust auditing of allowable costs to ensure the government is not overpaying. Transparency regarding performance metrics and cost expenditures would be key accountability measures. The Inspector General's office for the Department of Defense may also conduct audits or investigations into contract performance and financial management.

Related Government Programs

Naval Aviation Systems
Electronic Warfare Systems
Defense Procurement
Sole-Source Contracts
Cost-Plus-Fixed-Fee Contracts

Risk Flags

Sole-source award
Cost-plus contract type
Lack of competition
Long contract duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $15.6 million to BAE SYSTEMS INFORMATION AND ELECTRONIC SYSTEMS INTEGRATION INC.. ALE-55 RETROFIT

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 $15.6 million.

What is the period of performance?

Start: 2021-12-30. End: 2026-02-28.

What is the specific justification for awarding this contract on a sole-source basis?

The provided data indicates the contract was 'NOT COMPETED' and awarded on a 'sole-source' basis. Typically, sole-source awards are justified under specific circumstances outlined in federal acquisition regulations, such as when only one responsible source can provide the required supplies or services, or in cases of urgent and compelling need. Without further documentation from the Department of the Navy, the precise justification remains unclear. However, it is common for highly specialized or proprietary defense systems, where a single contractor possesses unique capabilities or intellectual property, to be procured through sole-source channels. This avoids the need for extensive technology transfer or the development of competing systems, which can be time-consuming and costly.

How does the Cost Plus Fixed Fee (CPFF) structure compare to other contract types in terms of risk and potential cost?

The Cost Plus Fixed Fee (CPFF) contract type is designed for situations where the scope of work is well-defined but the exact costs are uncertain, often involving research and development or complex services. Under CPFF, the contractor is reimbursed for all allowable costs incurred, plus a predetermined fixed fee representing profit. This structure shifts much of the cost risk to the government, as the final price is not fixed upfront. Compared to Firm-Fixed-Price (FFP) contracts, where the contractor bears most of the cost risk and the government has price certainty, CPFF can lead to higher overall costs if not managed diligently. However, it can be advantageous when innovation or flexibility is paramount and FFP would stifle contractor initiative or be impractical due to cost uncertainties. The fixed fee provides the contractor with a defined profit margin, incentivizing them to complete the work efficiently to maximize their return on investment.

What are the potential risks associated with a long-duration contract like this (1521 days)?

A contract duration of 1521 days (approximately 4.17 years) presents several potential risks. Firstly, the cost of materials, labor, and overhead can fluctuate significantly over such a long period, potentially impacting the 'fixed' aspects of the fee or leading to requests for equitable adjustments if not properly accounted for. Secondly, technological advancements could render the system or the retrofit less relevant or efficient by the time the contract concludes, diminishing its long-term value. Thirdly, maintaining consistent oversight and program management focus over an extended period can be challenging, potentially leading to complacency or a drift from original objectives. Finally, the longer the contract, the greater the cumulative financial exposure for the government, making rigorous performance monitoring and milestone achievement critical to ensure continued value realization.

What is the historical spending pattern for the ALE-55 Retrofit program or similar systems?

The provided data does not include historical spending patterns for the ALE-55 Retrofit program or similar systems. To assess historical spending, one would need access to previous contract awards for this specific system or comparable electronic warfare/navigation systems. Analyzing past contract values, durations, and pricing structures (e.g., FFP vs. CPFF) would provide context for the current $15.6 million award. Without this historical data, it is difficult to determine if this contract represents an increase, decrease, or stable level of investment compared to previous periods. Such analysis is crucial for identifying trends, potential cost escalations, and the overall fiscal commitment to this technology.

What are the performance metrics or deliverables expected under this contract?

The provided data does not specify the performance metrics or deliverables expected under this contract. For a Cost Plus Fixed Fee (CPFF) contract, especially one involving retrofitting, key deliverables would typically include the successful installation and integration of the ALE-55 system modifications onto designated naval platforms, adherence to technical specifications, and potentially performance testing to validate functionality. Performance metrics might involve factors like on-time delivery of retrofitted units, meeting specified system performance standards post-retrofit, and minimizing downtime during the modification process. Robust oversight would require clear, measurable metrics defined in the contract's Statement of Work (SOW) to ensure BAE Systems meets its obligations and the government receives the intended value.

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

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Ball Corporation

Address: 65 SPIT BROOK RD, NASHUA, NH, 03060

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: $15,596,282

Exercised Options: $15,596,282

Current Obligation: $15,596,282

Subaward Activity

Number of Subawards: 8

Total Subaward Amount: $2,684,519

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: N0001917G0013

IDV Type: BOA

Timeline