DoD awards $37.7M in engineering services to BAE Systems, a sole-source contract with cost-plus-fixed-fee terms

Contract Overview

Contract Amount: $37,718,290 ($37.7M)

Contractor: BAE Systems Land & Armaments L.P.

Awarding Agency: Department of Defense

Start Date: 2007-12-14

End Date: 2014-06-30

Contract Duration: 2,390 days

Daily Burn Rate: $15.8K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: MK 45 ENGINEERING SERVICES

Place of Performance

Location: MINNEAPOLIS, ANOKA County, MINNESOTA, 55421

State: Minnesota Government Spending

Plain-Language Summary

Department of Defense obligated $37.7 million to BAE SYSTEMS LAND & ARMAMENTS L.P. for work described as: MK 45 ENGINEERING SERVICES Key points: 1. Contract awarded on a sole-source basis, limiting price competition and potentially increasing costs. 2. Cost-plus-fixed-fee structure incentivizes contractor to incur costs, with potential for cost overruns. 3. Long contract duration of 2390 days (over 6 years) suggests a need for sustained engineering support. 4. The contract falls under engineering services, a broad category with varying market dynamics. 5. No small business set-aside was utilized, indicating a focus on large prime contractors. 6. The contract was awarded by the Defense Contract Management Agency, suggesting a focus on program oversight.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to the lack of competitive bidding and the cost-plus-fixed-fee pricing structure. This structure can lead to higher costs as the contractor is reimbursed for expenses plus a fixed fee, potentially disincentivizing cost control. Without comparison to similar sole-source contracts for engineering services, it's difficult to definitively assess if the pricing is fair. The extended duration also means that the total cost could escalate significantly over time.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning there was no open competition. This typically occurs when a specific contractor is deemed uniquely qualified or when circumstances prevent a competitive process. The absence of multiple bidders means that price discovery through market forces was not leveraged, which can lead to less favorable pricing for the government.

Taxpayer Impact: Sole-source awards limit the government's ability to secure the best possible price through competition, potentially resulting in higher expenditures for taxpayers.

Public Impact

The Department of Defense benefits from specialized engineering services to support its programs. The contract delivers essential engineering expertise, likely contributing to the development, maintenance, or improvement of defense systems. The geographic impact is primarily tied to the contractor's operational locations, with potential for work to be performed at various DoD facilities. Workforce implications include the employment of engineers and technical staff by BAE Systems.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing.
Cost-plus-fixed-fee structure may not incentivize cost efficiency.
Long contract duration increases exposure to potential cost escalations.
Lack of transparency in sole-source justification.

Positive Signals

BAE Systems is a major defense contractor with established expertise.
Contract provides sustained engineering support, indicating a critical need.
Awarded by a specialized agency (DCMA) suggests oversight focus.

Sector Analysis

The engineering services sector is a critical component of the defense industrial base, providing specialized technical expertise for complex systems. This contract, valued at over $37 million, falls within this domain. The market for defense engineering services is often characterized by long-term relationships and specialized capabilities, where large, established firms like BAE Systems play a significant role. Comparable spending benchmarks are difficult to establish without more specific details on the services rendered, but significant investments are common for major defense programs.

Small Business Impact

This contract was not awarded as a small business set-aside, nor does it indicate any specific subcontracting requirements for small businesses. The prime contractor, BAE Systems, is a large defense corporation. This suggests that the primary focus was on securing the specialized engineering capabilities of the prime, rather than on fostering small business participation through this specific award. Opportunities for small businesses would likely arise through subcontracting tiers, if at all.

Oversight & Accountability

Oversight for this contract would typically be managed by the Defense Contract Management Agency (DCMA), which is responsible for ensuring contractor performance and compliance. The cost-plus-fixed-fee structure necessitates close monitoring of incurred costs and the contractor's progress towards milestones to manage expenditures effectively. Transparency is limited due to the sole-source nature of the award, but contract modifications and performance reports would be subject to internal DoD review.

Related Government Programs

Defense Engineering Services
BAE Systems Contracts
Department of Defense Procurement

Risk Flags

Sole Source Award
Cost-Plus-Fixed-Fee Pricing
Long Contract Duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $37.7 million to BAE SYSTEMS LAND & ARMAMENTS L.P.. MK 45 ENGINEERING SERVICES

Who is the contractor on this award?

The obligated recipient is BAE SYSTEMS LAND & ARMAMENTS L.P..

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Contract Management Agency).

What is the total obligated amount?

The obligated amount is $37.7 million.

What is the period of performance?

Start: 2007-12-14. End: 2014-06-30.

What specific engineering services were procured under this contract?

The provided data indicates the contract falls under NAICS code 541330 for Engineering Services. However, the specific nature of these services is not detailed. Typically, engineering services in the defense sector can encompass a wide range, including design, development, testing, analysis, and integration of military systems, platforms, or components. Given the contractor (BAE Systems Land & Armaments L.P.) and the awarding agency (Department of Defense), it is highly probable that these services relate to land-based military platforms, weapon systems, or associated technologies. Further details would be required from the contract's statement of work to ascertain the precise technical disciplines and project objectives.

How does the cost-plus-fixed-fee (CPFF) structure compare to other contract types for similar services?

The Cost-Plus-Fixed-Fee (CPFF) contract type is often used when the scope of work is not precisely defined, or when there is significant uncertainty in the costs associated with performance. In such cases, the contractor is reimbursed for allowable costs incurred, plus a predetermined fixed fee representing profit. Compared to fixed-price contracts, CPFF offers less incentive for the contractor to control costs, as they are guaranteed to cover their expenses. However, it provides more flexibility for the government to adapt to evolving requirements. For well-defined engineering services, fixed-price contracts (like FFP or FP-EPA) are generally preferred as they place cost risk on the contractor and encourage efficiency. The use of CPFF here suggests a high degree of uncertainty or evolving needs in the engineering services required.

What is the track record of BAE Systems Land & Armaments L.P. with the Department of Defense?

BAE Systems Land & Armaments L.P. is a major defense contractor with a substantial history of working with the Department of Defense (DoD). As a subsidiary of BAE Systems plc, it is involved in the design, development, production, and support of a wide range of military vehicles, weapon systems, and munitions. The company has secured numerous contracts across various branches of the U.S. military, often for large-scale programs. While specific performance metrics for individual contracts are not publicly detailed here, BAE Systems is generally considered a key player in the defense industrial base, delivering critical capabilities. However, like many large contractors, they may have faced scrutiny or performance issues on specific programs over their extensive history with the DoD.

What are the potential risks associated with a sole-source award of this magnitude?

Sole-source awards, especially for significant dollar amounts like $37.7 million, carry inherent risks. The primary risk is the lack of price competition, which can lead to the government paying a higher price than if multiple bids were solicited. This reduces the government's leverage in negotiating favorable terms and potentially results in less value for taxpayer money. Another risk is reduced innovation, as there is less pressure on the contractor to find cost-effective or novel solutions when competition is absent. Furthermore, sole-source justifications must be robust; if the justification is weak or flawed, it can raise concerns about fairness and potentially lead to protests or audits. The long duration of the contract exacerbates these risks, as unfavorable terms remain in place for an extended period.

How does the contract's duration (2390 days) impact its overall value and risk profile?

A contract duration of 2390 days, approximately 6.5 years, significantly influences its value and risk profile. For the government, a long duration can ensure continuity of essential services and allow for deep integration of the contractor's expertise into ongoing programs. This can be valuable for complex, multi-year projects. However, it also locks the government into a specific contractor and set of terms for an extended period. This reduces flexibility to adapt to changing technological landscapes or to seek better pricing if market conditions shift. The risk profile is elevated because any inefficiencies or cost escalations within the contractor's operations will persist for the entire duration, potentially leading to substantial cost overruns, especially with a CPFF structure. It also increases the risk of contractor performance degradation over time without the pressure of upcoming competitive re-bids.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Architectural, Engineering, and Related Services › Engineering Services

Product/Service Code: WEAPONS

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: Compagnie DE Developpement DE L'eau S.A.

Address: 4800 E RIVER RD, MINNEAPOLIS, MN, 55421

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $74,408,606

Exercised Options: $74,408,606

Current Obligation: $37,718,290

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline