DoD awards $34.2M contract for MK45 LOE, raising questions about competition and value

Contract Overview

Contract Amount: $34,191,684 ($34.2M)

Contractor: BAE Systems Land & Armaments L.P.

Awarding Agency: Department of Defense

Start Date: 2014-05-30

End Date: 2019-07-31

Contract Duration: 1,888 days

Daily Burn Rate: $18.1K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: MK45 LOE

Place of Performance

Location: MINNEAPOLIS, ANOKA County, MINNESOTA, 55421

State: Minnesota Government Spending

Plain-Language Summary

Department of Defense obligated $34.2 million to BAE SYSTEMS LAND & ARMAMENTS L.P. for work described as: MK45 LOE Key points: 1. Contract awarded on a sole-source basis, limiting price discovery and potentially increasing costs. 2. The contract type (Cost Plus Fixed Fee) can incentivize cost overruns. 3. Limited competition raises concerns about whether the government secured the best possible value. 4. The duration of the contract (over 5 years) suggests a long-term need for these services. 5. The specific product code (332993) indicates a focus on ammunition manufacturing, a critical defense component. 6. The contract was managed by the Defense Contract Management Agency, suggesting robust oversight is intended.

Value Assessment

Rating: questionable

Without competitive bidding, it is difficult to benchmark the pricing for this MK45 LOE contract. The Cost Plus Fixed Fee (CPFF) contract type, while allowing for flexibility, can lead to higher costs compared to fixed-price contracts if not managed diligently. The total award value of $34.2 million over nearly five years suggests a significant investment. Further analysis would be needed to compare the per-unit cost or total cost against similar procurements or industry benchmarks to definitively assess value for money.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning it was not competed. This typically occurs when only one responsible source can provide the required goods or services. The lack of competition means that BAE SYSTEMS LAND & ARMAMENTS L.P. was the only bidder. This limits the government's ability to leverage market forces to achieve the lowest possible price and may reduce the incentive for the contractor to offer the most competitive terms.

Taxpayer Impact: Sole-source awards mean taxpayers may not be getting the best possible price, as there was no opportunity for multiple companies to bid and drive down costs through competition.

Public Impact

The primary beneficiaries are the Department of Defense, which receives critical ammunition components. The services delivered involve the manufacturing of components for the MK45 naval gun system. The contract is likely to support naval operations and readiness. Workforce implications may include skilled labor in manufacturing and defense production within BAE SYSTEMS.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure on pricing.
Cost Plus Fixed Fee contract type can lead to cost escalation if not closely monitored.
Long contract duration (over 5 years) increases exposure to potential cost increases over time.
Lack of transparency in pricing due to sole-source nature.

Positive Signals

Award to an established defense contractor (BAE SYSTEMS) suggests a known entity with relevant expertise.
Contract managed by DCMA indicates a level of oversight for performance and compliance.
The specific nature of the product (ammunition components) points to a critical defense requirement.

Sector Analysis

This contract falls within the Defense Industrial Base, specifically focusing on the manufacturing of ordnance and ammunition. The market for defense manufacturing is characterized by long-term relationships, high barriers to entry due to specialized knowledge and facilities, and significant government oversight. Spending in this sector is driven by national security requirements and geopolitical factors. Comparable spending benchmarks would typically be found within other large-scale defense manufacturing contracts for similar weapon systems or ammunition types.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. There is no explicit mention of subcontracting plans for small businesses within the provided data. Therefore, the direct impact on the small business ecosystem is likely minimal unless BAE SYSTEMS voluntarily engages small businesses in its supply chain for this specific contract.

Oversight & Accountability

The contract is managed by the Defense Contract Management Agency (DCMA), which is responsible for overseeing contract performance, ensuring compliance, and verifying costs. The contract type (CPFF) necessitates close financial oversight to manage costs effectively. Transparency is limited due to the sole-source nature, but reporting requirements inherent in defense contracts would provide some level of accountability. Inspector General jurisdiction would apply for investigations into fraud, waste, or abuse.

Related Government Programs

Department of Defense Ammunition Procurement
Naval Weapon Systems Manufacturing
BAE Systems Defense Contracts
Cost Plus Fixed Fee Contracts
Sole Source Defense Procurements

Risk Flags

Sole Source Award
Cost Plus Fixed Fee Contract Type
Potential for Cost Overruns
Limited Price Competition

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $34.2 million to BAE SYSTEMS LAND & ARMAMENTS L.P.. MK45 LOE

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 $34.2 million.

What is the period of performance?

Start: 2014-05-30. End: 2019-07-31.

What is the track record of BAE SYSTEMS LAND & ARMAMENTS L.P. with the Department of Defense, particularly on similar sole-source contracts?

BAE SYSTEMS LAND & ARMAMENTS L.P. is a major defense contractor with a long history of supplying various systems and components to the Department of Defense. While specific data on their sole-source contract performance for MK45 LOE components is not detailed here, their extensive experience suggests a capacity to fulfill such requirements. However, sole-source awards, by definition, bypass the competitive process, making direct comparisons of their pricing and value proposition against alternatives challenging. Past performance reviews and contract close-out data from the DoD would be necessary to fully assess their track record on similar sole-source engagements, focusing on adherence to cost, schedule, and quality requirements.

How does the $34.2 million award compare to historical spending on MK45 LOE components or similar ammunition manufacturing contracts?

Without specific historical spending data for MK45 LOE components or directly comparable ammunition manufacturing contracts, a precise comparison is difficult. The $34.2 million figure represents the total value over the contract's duration (approximately 1888 days or over 5 years). To assess if this is reasonable, one would need to analyze the annual spending rate, the quantity of components procured, and the unit costs. Benchmarking against other large-scale, sole-source defense manufacturing contracts, especially those involving specialized ordnance, could provide some context. However, the unique nature of defense procurement and the specific requirements for MK45 LOE components mean that direct comparisons might be limited, and a thorough analysis would require access to detailed historical contract databases and cost breakdowns.

What are the primary risks associated with a sole-source, Cost Plus Fixed Fee (CPFF) contract for ammunition manufacturing?

The primary risks associated with this contract structure are twofold. Firstly, the sole-source nature eliminates competitive pressure, potentially leading to higher prices than might be achieved in a competitive bidding environment. Taxpayers may not receive the best value for their money. Secondly, the Cost Plus Fixed Fee (CPFF) contract type carries inherent risks of cost escalation. While the contractor receives a fixed fee, the 'cost plus' element means the government bears the risk of increased direct costs. If not managed rigorously, this can incentivize the contractor to incur higher costs, as their profit (the fixed fee) remains constant regardless of the actual costs incurred. This necessitates robust government oversight to scrutinize costs and prevent inefficiencies.

What are the implications of this contract for the readiness and sustainment of naval platforms equipped with the MK45 gun system?

This contract is crucial for ensuring the continued operational readiness and sustainment of naval platforms equipped with the MK45 gun system. The MK45 is a primary naval surface warfare weapon, and the 'LOE' (likely 'Life of Type Extension' or similar sustainment-related designation) suggests components are vital for maintaining the system's functionality over its extended service life. By awarding this contract, the Department of Defense is securing the necessary supply chain for critical parts, thereby mitigating risks of system downtime, obsolescence, or degraded performance due to lack of available components. This directly supports naval power projection and operational effectiveness.

Given the contract's duration and value, what level of oversight is typically expected from the Defense Contract Management Agency (DCMA)?

For a contract of this magnitude ($34.2 million over nearly five years) and type (CPFF), the DCMA's oversight is expected to be comprehensive. This typically includes monitoring contractor performance against the contract's technical requirements, schedule, and quality standards. Crucially, for CPFF contracts, DCMA would conduct detailed audits and reviews of the contractor's incurred costs to ensure they are allowable, allocable, and reasonable. They would also oversee compliance with contract terms, manage any contract modifications, and ensure timely delivery of goods or services. The goal is to protect the government's financial interests and ensure the contractor fulfills its obligations effectively.

Industry Classification

NAICS: Manufacturing › Other Fabricated Metal Product Manufacturing › Ammunition (except Small Arms) Manufacturing

Product/Service Code: WEAPONS

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0002412R5324

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Ball Corporation

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

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Manufacturer of Goods, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $43,706,949

Exercised Options: $43,706,949

Current Obligation: $34,191,684

Actual Outlays: $35

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline