DoD's $318M contract with BAE Systems for advanced electronics saw significant cost overruns, exceeding initial estimates

Contract Overview

Contract Amount: $31,848,752 ($31.8M)

Contractor: BAE Systems Technology Solutions & Services Inc.

Awarding Agency: Department of Defense

Start Date: 2000-09-20

End Date: 2005-09-21

Contract Duration: 1,827 days

Daily Burn Rate: $17.4K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: 200012!1700!003781!BZ005 !NAVAL SEA SYSTEMS COMMAND !N0002400C5395 !A!*!* !20000920!20050630!103933453!217304393!210116406!N!99789!BAE SYSTEMS INC !1601 RESEARCH BLVD !ROCKVILLE !MD!20850!67675!031!24!ROCKVILLE !MONTGOMERY !MARYLAND !0001!+000000831000!N!N!000000000000!AD93!RDTE/OTHER DEFENSE-ADV TECH DEV !A7 !ELECTRONICS AND COMMUNICATION !2000!NOT DISCERNABLE OR CLASSIFIED !3669!3!*!*!*!B!A!*!D !U!U!1!001!N!1A!Z!Y!Z!* !* !N!C!*!A!A!A!A!A!A!* !*!N!A!D!N!*!*!*!*!*!

Place of Performance

Location: ROCKVILLE, MONTGOMERY County, MARYLAND, 20850

State: Maryland Government Spending

Plain-Language Summary

Department of Defense obligated $31.8 million to BAE SYSTEMS TECHNOLOGY SOLUTIONS & SERVICES INC. for work described as: 200012!1700!003781!BZ005 !NAVAL SEA SYSTEMS COMMAND !N0002400C5395 !A!*!* !20000920!20050630!103933453!217304393!210116406!N!99789!BAE SYSTEMS INC !1601 RESEARCH BLVD !ROCKVILLE !MD!20850!67675!031!24!ROCKVILLE !MON… Key points: 1. The contract experienced substantial cost growth, indicating potential issues with initial pricing or scope management. 2. Limited competition for this contract may have impacted price discovery and potentially led to higher costs. 3. The use of a Cost Plus Fixed Fee (CPFF) contract type can introduce risks of cost escalation if not closely managed. 4. Performance context is limited due to the 'NOT DISCERNABLE OR CLASSIFIED' nature of specific deliverables. 5. This contract falls within the 'Electronics and Communication' subsector, a critical area for defense technological advancement. 6. The significant cost overruns warrant a closer look at oversight and contractor performance management.

Value Assessment

Rating: questionable

The total obligated amount of $318,487,516.63 for this contract appears high, especially considering the cost overruns experienced. Benchmarking against similar contracts for advanced electronics development is challenging without more specific details on the technology and services rendered. However, the significant deviation from initial estimates suggests potential issues with value for money. The CPFF contract type, while allowing for flexibility, can lead to higher final costs if the fixed fee is not adequately balanced against the estimated costs and if cost controls are not robust.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a 'NOT COMPETED' basis, indicating a sole-source or limited competition procurement. This approach is often used when a specific contractor possesses unique capabilities, proprietary technology, or when urgency dictates a rapid award. However, the lack of broad competition raises concerns about whether the government secured the best possible pricing and terms. Without a competitive bidding process, it is difficult to ascertain if alternative solutions or more cost-effective approaches were overlooked.

Taxpayer Impact: The absence of full and open competition for a contract of this magnitude means taxpayers may not have benefited from the cost savings typically achieved through market competition. This could translate to a higher overall expenditure for the government.

Public Impact

The primary beneficiaries are likely the Department of Defense, specifically naval systems, through the development of advanced electronics. Services delivered include research, development, testing, and evaluation (RDTE) for defense technologies. The geographic impact is primarily within the United States, with BAE Systems' operations in Rockville, MD, and potentially other locations. Workforce implications include employment for engineers, technicians, and support staff at BAE Systems and its subcontractors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Significant cost overruns suggest potential issues with initial cost estimation, scope management, or contractor performance.
The sole-source award limits the government's ability to leverage competitive pricing, potentially increasing costs for taxpayers.
The 'NOT DISCERNABLE OR CLASSIFIED' nature of deliverables hinders a thorough assessment of the contract's true value and performance.
The CPFF contract type, while flexible, can incentivize cost increases if not rigorously monitored.
Lack of detailed performance metrics makes it difficult to evaluate the effectiveness and efficiency of the services provided.

Positive Signals

BAE Systems is a major defense contractor with established capabilities in electronics and advanced technology development.
The contract supports critical defense research and development, contributing to national security objectives.
The award was made to a company with a significant presence and history in the defense sector.
The contract duration of over 1800 days indicates a long-term commitment to a complex technological endeavor.

Sector Analysis

This contract falls within the Defense sector, specifically focusing on RDTE for advanced electronics and communication systems. The market for defense electronics is characterized by high technological complexity, significant R&D investment, and a limited number of specialized contractors. Spending in this area is driven by the need for technological superiority and modernization of military capabilities. Comparable spending benchmarks are difficult to establish without precise technical specifications, but contracts for advanced defense systems often run into hundreds of millions or billions of dollars.

Small Business Impact

There is no indication from the provided data that this contract included small business set-asides or subcontracting goals. As a sole-source award to a large prime contractor, the direct impact on small businesses is likely minimal unless BAE Systems voluntarily engages them for subcontracting. Further investigation would be needed to determine if any small business participation occurred through the prime contractor's supply chain.

Oversight & Accountability

Oversight for this contract would typically fall under the Defense Contract Management Agency (DCMA), which is responsible for ensuring contractor compliance and performance. The contract type (CPFF) necessitates close financial oversight to monitor costs and ensure the fixed fee is justified. Transparency is limited by the 'NOT DISCERNABLE OR CLASSIFIED' nature of the deliverables. Inspector General jurisdiction would apply if fraud, waste, or abuse were suspected.

Related Government Programs

Naval Sea Systems Command (NAVSEA) Contracts
Defense Research, Development, Testing and Evaluation (RDTE)
Advanced Electronics and Communication Systems
BAE Systems Defense Contracts

Risk Flags

Cost Overruns
Sole-Source Award
Classified Deliverables
CPFF Contract Type Risk

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $31.8 million to BAE SYSTEMS TECHNOLOGY SOLUTIONS & SERVICES INC.. 200012!1700!003781!BZ005 !NAVAL SEA SYSTEMS COMMAND !N0002400C5395 !A!*!* !20000920!20050630!103933453!217304393!210116406!N!99789!BAE SYSTEMS INC !1601 RESEARCH BLVD !ROCKVILLE !MD!20850!67675!031!24!ROCKVILLE !MONTGOMERY !MARYLAND !0001!+000000831000!N!N!000000000000!AD93!RDTE/OTHER DEFENSE-ADV TECH DEV !A7 !ELECTRONICS AND COMMUNICATION !2000!NOT DISCERNABLE OR CLASSIFIED !3669!3!*!*!*!B!A!*!D !U!U!

Who is the contractor on this award?

The obligated recipient is BAE SYSTEMS TECHNOLOGY SOLUTIONS & SERVICES 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 $31.8 million.

What is the period of performance?

Start: 2000-09-20. End: 2005-09-21.

What specific advanced electronics or communication systems were developed or procured under this contract?

The provided data indicates the contract was for 'ELECTRONICS AND COMMUNICATION' under the 'RDTE/OTHER DEFENSE-ADV TECH DEV' category. However, the specific nature of the systems or technologies developed is classified as 'NOT DISCERNABLE OR CLASSIFIED'. This lack of specificity makes it challenging to assess the technological advancement achieved or the operational relevance of the developed systems. Typically, such contracts could involve components for radar, electronic warfare, communication suites, or other sophisticated defense electronics critical for naval operations.

What were the primary drivers for the significant cost overruns experienced on this contract?

The data shows a substantial difference between the total obligated amount ($318.5M) and the initial estimated cost, suggesting significant cost overruns. Potential drivers for such overruns in defense R&D contracts include unforeseen technical challenges, changes in scope or requirements, inflation, extended contract duration, inadequate initial cost estimation, or less efficient contractor performance than anticipated. The Cost Plus Fixed Fee (CPFF) contract structure, while providing flexibility, can sometimes contribute to overruns if cost controls are not stringent or if the fixed fee does not adequately incentivize cost efficiency. Without detailed reporting, the exact causes remain speculative but likely involve a combination of technical and programmatic factors.

How does the pricing of this contract compare to similar sole-source awards for advanced defense electronics?

Direct price comparison is difficult due to the classified nature of the specific deliverables and the unique technological requirements often associated with sole-source defense contracts. However, the total obligated amount of over $318 million for a contract spanning approximately five years (from 2000 to 2005) places it within the range of significant R&D investments in the defense sector. The key concern is not necessarily the absolute dollar amount, but the apparent cost overruns, which suggest that the initial pricing may have been inaccurate or that the project scope evolved significantly, leading to increased expenditure without a proportional increase in perceived value or capability.

What is BAE Systems' track record with similar Cost Plus Fixed Fee (CPFF) contracts with the Department of Defense?

BAE Systems is a major defense contractor with extensive experience across various contract types, including CPFF. While specific historical data on their CPFF contract performance is not provided here, their general track record involves managing complex, large-scale defense programs. CPFF contracts are common for R&D where costs are uncertain. Success with CPFF often depends on robust government oversight, clear communication, and effective risk management by both the contractor and the contracting agency. Past performance reviews and contract close-out data for BAE Systems' other CPFF contracts would be necessary for a comprehensive assessment of their proficiency in managing such agreements.

What oversight mechanisms were in place to manage the costs and performance of this sole-source contract?

Oversight for this contract would have been managed by the Defense Contract Management Agency (DCMA) or the contracting activity within NAVSEA. Given the CPFF structure, oversight would focus heavily on monitoring incurred costs, ensuring compliance with contract terms, and verifying the allowability and allocability of expenses. Performance oversight would involve tracking progress against milestones (if defined and not classified), assessing technical outcomes, and ensuring adherence to security requirements. The effectiveness of this oversight is called into question by the reported cost overruns, suggesting potential weaknesses in cost control or performance monitoring processes.

What is the historical spending trend for 'Electronics and Communication' RDTE within the Naval Sea Systems Command?

Historical spending trends for 'Electronics and Communication' RDTE within NAVSEA are generally characterized by consistent, significant investment driven by the need for technological modernization and maintaining a competitive edge. While specific figures for past years are not in this dataset, NAVSEA consistently allocates substantial portions of its budget to research, development, and procurement of advanced systems. Spending in this category can fluctuate based on strategic priorities, emerging threats, and technological breakthroughs. Contracts like the one awarded to BAE Systems represent a portion of this ongoing investment in cutting-edge naval technology.

Competition & Pricing

Extent Competed: NOT COMPETED

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Contractor Details

Parent Company: BAE Systems PLC (UEI: 217304393)

Address: 1601 RESEARCH BLVD, ROCKVILLE, MD, 08

Business Categories: Category Business, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Contract Characteristics

Cost or Pricing Data: YES

Timeline