DoD awards $306M for sonobuoys, with no competition and a firm-fixed-price structure

Contract Overview

Contract Amount: $305,907,210 ($305.9M)

Contractor: Erapsco

Awarding Agency: Department of Defense

Start Date: 2023-03-29

End Date: 2026-03-31

Contract Duration: 1,098 days

Daily Burn Rate: $278.6K/day

Competition Type: NOT COMPETED

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: FY23 ORDER FOR AN/SSQ-53G (UK), AN/SSQ-53G (ROK), AN/SSQ-53G (BAHRAIN), AN/SSQ-62F (UK), AN/SSQ-62F(ROK), & AN/SSQ-101B (UK)

Place of Performance

Location: COLUMBIA CITY, WHITLEY County, INDIANA, 46725

State: Indiana Government Spending

Plain-Language Summary

Department of Defense obligated $305.9 million to ERAPSCO for work described as: FY23 ORDER FOR AN/SSQ-53G (UK), AN/SSQ-53G (ROK), AN/SSQ-53G (BAHRAIN), AN/SSQ-62F (UK), AN/SSQ-62F(ROK), & AN/SSQ-101B (UK) Key points: 1. This award represents a significant investment in naval warfare capabilities, specifically for acoustic detection systems. 2. The lack of competition raises questions about potential price efficiencies and the government's leverage in negotiations. 3. The firm-fixed-price contract type shifts cost risk to the contractor, but may include higher initial pricing. 4. The contract duration of nearly three years suggests a sustained need for these critical components. 5. The primary beneficiaries are allied nations receiving advanced naval technology, enhancing interoperability and regional security. 6. The manufacturing sector for specialized electronic instruments is directly supported by this substantial order.

Value Assessment

Rating: fair

The contract value of $306 million for sonobuoys over approximately three years is substantial. Without comparable contract data or detailed cost breakdowns, a precise value-for-money assessment is challenging. The firm-fixed-price structure suggests the government has accepted the contractor's proposed price, which may not reflect the lowest possible cost if competition were present. Benchmarking against similar procurements for advanced sonobuoy systems would be necessary for a more definitive evaluation of pricing and value.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was not competed, indicating a sole-source award. The specific reasons for the lack of competition are not detailed in the provided data, but it could be due to the specialized nature of the technology, existing sole-source agreements, or urgent requirements where only one source could meet the need. The absence of multiple bidders limits the government's ability to explore a range of pricing options and potentially drive down costs through competitive bidding.

Taxpayer Impact: The lack of competition means taxpayers may not be receiving the most cost-effective price for these essential naval systems. Without competitive pressure, there is a risk of paying a premium for the equipment.

Public Impact

Allied nations, including the United Kingdom, South Korea, and Bahrain, will receive advanced sonobuoy systems, enhancing their maritime surveillance and anti-submarine warfare capabilities. The contract supports the production and delivery of AN/SSQ-53G, AN/SSQ-62F, and AN/SSQ-101B sonobuoy variants, crucial for naval operations. The geographic impact is global, supporting U.S. allies in key maritime regions. The contract sustains jobs within the defense manufacturing sector, particularly in the specialized area of electronic instrument manufacturing.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to higher prices than a competed award.
Firm-fixed-price contract shifts cost overrun risk to the government if contractor's initial estimates are low.
Limited transparency into the sole-source justification and negotiation process.

Positive Signals

Firm-fixed-price contract provides cost certainty for the government once awarded.
Delivery of critical naval technology to key U.S. allies enhances interoperability and national security.
Contract supports a specialized defense manufacturing capability.

Sector Analysis

This contract falls within the Defense sector, specifically the manufacturing of specialized electronic systems for naval applications. The market for sonobuoys is highly specialized, often dominated by a few key manufacturers capable of meeting stringent military specifications. Spending in this niche area is driven by ongoing naval modernization efforts, intelligence requirements, and the need to maintain a technological edge in undersea warfare. Comparable spending benchmarks would likely be found within other advanced sensor and electronic warfare system procurements.

Small Business Impact

The data indicates that small business participation (sb: false) and set-asides (ss: false) were not factors in this specific award. This suggests the contract was awarded to a large prime contractor, and there is no explicit information regarding subcontracting opportunities for small businesses within this order. The impact on the small business ecosystem is likely minimal unless the prime contractor has existing subcontracting relationships not detailed here.

Oversight & Accountability

Oversight for this contract would primarily reside with the Department of the Navy, which awarded the order. Accountability measures are inherent in the firm-fixed-price contract structure, requiring the contractor to deliver specified goods by a certain date. Transparency is limited due to the sole-source nature of the award, with public details often restricted for national security or proprietary reasons. Inspector General jurisdiction would apply to any allegations of fraud, waste, or abuse related to the contract's execution.

Related Government Programs

Naval Warfare Systems
Acoustic Sensors
Maritime Surveillance Equipment
Defense Electronics Manufacturing
Foreign Military Sales (implied by allied nation recipients)

Risk Flags

Sole-source award lacks competitive pricing.
Limited public information on justification for sole-sourcing.
Firm-fixed-price shifts cost risk, but initial pricing may be higher without competition.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $305.9 million to ERAPSCO. FY23 ORDER FOR AN/SSQ-53G (UK), AN/SSQ-53G (ROK), AN/SSQ-53G (BAHRAIN), AN/SSQ-62F (UK), AN/SSQ-62F(ROK), & AN/SSQ-101B (UK)

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 $305.9 million.

What is the period of performance?

Start: 2023-03-29. End: 2026-03-31.

What is the historical spending pattern for sonobuoy procurements by the Department of the Navy?

Historical spending on sonobuoys by the Department of the Navy typically involves multiple awards over fiscal years, often through competitive processes for standard variants and sole-source or limited competition for specialized or upgraded systems. Annual spending can fluctuate significantly based on fleet readiness requirements, technological advancements, and the needs of allied nations. Analyzing past contracts reveals trends in pricing, the number of bidders, and the types of sonobuoys procured. For instance, prior to this $306 million order, the Navy likely awarded contracts in the tens to low hundreds of millions of dollars annually for various sonobuoy systems, sometimes including R&D components. Understanding these patterns helps contextualize the current award's scale and frequency.

What are the specific technical capabilities of the AN/SSQ-53G, AN/SSQ-62F, and AN/SSQ-101B sonobuoys?

The AN/SSQ-53G is a standard passive acoustic sensor sonobuoy used for detecting and classifying underwater sounds, primarily for anti-submarine warfare (ASW). The AN/SSQ-62F is an active acoustic sonobuoy, capable of transmitting sonar pings to detect submarines. The AN/SSQ-101B is a directional command-activated sonobuoy, offering more advanced control and targeting capabilities. These systems are critical components of naval ASW suites, enabling ships and aircraft to detect, track, and engage underwater threats. Their specific technical parameters, such as depth rating, acoustic sensitivity, frequency range, and battery life, are classified but represent state-of-the-art technology in underwater acoustics.

Why was this contract awarded on a sole-source basis instead of being competed?

The provided data indicates the contract was 'NOT COMPETED,' signifying a sole-source award. Specific justifications for sole-sourcing are not detailed but commonly include factors such as the unique capabilities of a single supplier, the need for compatibility with existing systems, urgent and compelling requirements where only one source can fulfill the need in the timeframe, or if the government determines that only one responsible source is capable of making the supply. For specialized defense equipment like advanced sonobuoys, it's possible that only one manufacturer possesses the necessary proprietary technology, manufacturing infrastructure, or security clearances to produce these specific variants, especially when tailored for international partners.

What is the typical profit margin for defense contractors on firm-fixed-price contracts for specialized electronic systems?

Profit margins on firm-fixed-price (FFP) contracts for specialized defense electronics can vary widely, influenced by factors such as contract complexity, program risk, market competition (even if limited for the specific item), and the contractor's established overhead and profit rates. While specific margins are proprietary, industry benchmarks suggest that for FFP contracts, contractors aim for margins that adequately compensate for the risks they assume. For complex, high-technology defense systems, profit margins might range from 7% to 15% or potentially higher, depending on the perceived risk and uniqueness of the product. The government's negotiation strategy and the contractor's cost structure play crucial roles in determining the final profit allowance within the fixed price.

How does the inclusion of international partners (UK, ROK, Bahrain) affect the contract's structure and pricing?

The inclusion of international partners, as indicated by the order for UK, ROK, and Bahrain, often means the contract is structured to facilitate Foreign Military Sales (FMS) or similar cooperative agreements. This can involve additional administrative overhead for the U.S. government to manage the FMS process, including case management, training, and logistics coordination. Pricing for FMS cases may incorporate specific markups or fees mandated by FMS regulations, potentially increasing the overall cost compared to a purely domestic procurement. Furthermore, international requirements might necessitate specific configurations, certifications, or packaging, adding complexity and cost. However, larger order volumes from multiple nations can sometimes lead to economies of scale, potentially offsetting some of these additional 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: 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: $305,907,210

Exercised Options: $305,907,210

Current Obligation: $305,907,210

Subaward Activity

Number of Subawards: 179

Total Subaward Amount: $62,586,125

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: N0001919D0032

IDV Type: IDC

Timeline