DoD's $320M contract for satellite systems awarded to BAE Systems without competition

Contract Overview

Contract Amount: $32,011,109 ($32.0M)

Contractor: BAE Systems Space & Mission Systems Inc.

Awarding Agency: Department of Defense

Start Date: 2014-04-30

End Date: 2017-09-29

Contract Duration: 1,248 days

Daily Burn Rate: $25.6K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: SLREOSS DIRECTOR MOUNT (DM) PROD CONFIG

Place of Performance

Location: BOULDER, BOULDER County, COLORADO, 80301

State: Colorado Government Spending

Plain-Language Summary

Department of Defense obligated $32.0 million to BAE SYSTEMS SPACE & MISSION SYSTEMS INC. for work described as: SLREOSS DIRECTOR MOUNT (DM) PROD CONFIG Key points: 1. The contract's value of $320 million represents a significant investment in space and mission systems. 2. Awarded to a single vendor, BAE Systems, raises questions about the extent of market competition. 3. The firm-fixed-price structure aims to control costs, but the lack of competition may have inflated the price. 4. The contract duration of 1248 days suggests a long-term need for these specialized systems. 5. The absence of small business set-asides indicates a focus on large, established contractors for this specific need. 6. The 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' sector is critical for defense operations.

Value Assessment

Rating: questionable

Benchmarking the value of this $320 million contract is challenging due to its sole-source nature. Without competitive bids, it's difficult to ascertain if the price paid to BAE Systems represents fair market value. Comparisons to similar sole-source contracts for satellite systems might offer some insight, but the unique specifications of this award limit direct parallels. The firm-fixed-price type suggests an attempt to cap costs, but the lack of competition could mean taxpayers did not benefit from the most economical pricing.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one vendor, BAE Systems, was solicited. This approach bypasses the standard competitive bidding process, which typically involves multiple companies vying for the contract. The lack of competition means there was no direct price discovery through market forces, potentially leading to higher costs for the government.

Taxpayer Impact: Taxpayers may have paid a premium for these satellite systems due to the absence of competitive pressure to lower prices. The government did not leverage the full potential of the market to secure the best possible deal.

Public Impact

The primary beneficiaries are the Department of Defense, specifically the Department of the Navy, which will receive advanced satellite systems. The services delivered include the production and configuration of satellite systems crucial for search, detection, navigation, and guidance. The geographic impact is likely national, supporting defense operations across various theaters. Workforce implications may include specialized engineering and manufacturing roles within BAE Systems and its supply chain.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may have resulted in a higher price than a competed contract.
Sole-source awards can limit opportunities for innovative solutions from other market participants.
Dependence on a single contractor for critical systems can pose long-term supply chain risks.

Positive Signals

BAE Systems is a known entity in defense contracting, suggesting a degree of reliability.
The firm-fixed-price contract type provides cost certainty for the government.
The contract addresses a specific, likely critical, defense need for advanced satellite technology.

Sector Analysis

The contract falls within the 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' sector, a critical component of the aerospace and defense industry. This sector is characterized by high R&D investment, stringent quality requirements, and significant government procurement. The market size for such specialized defense systems is substantial, driven by national security needs. This contract represents a specific procurement within a broader category of defense electronics and space systems.

Small Business Impact

This contract did not include small business set-asides, as indicated by 'sb': false. The award to a large prime contractor like BAE Systems suggests that subcontracting opportunities may exist for smaller businesses within BAE's supply chain. However, the lack of direct set-asides means small businesses did not have a direct pathway to compete for the prime contract itself, potentially limiting their direct revenue generation from this specific award.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Defense's contracting and acquisition oversight mechanisms. Accountability measures are inherent in the contract terms, particularly the firm-fixed-price structure. Transparency is limited due to the sole-source nature of the award, with less public visibility into the negotiation process. The Inspector General's office within the DoD would have jurisdiction to investigate any potential fraud, waste, or abuse related to this contract.

Related Government Programs

Satellite Manufacturing
Defense Electronics
Navigation Systems
Guidance Systems
Aerospace Systems
Department of the Navy Procurement

Risk Flags

Sole-source award
Lack of competition
Potential for inflated pricing

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $32.0 million to BAE SYSTEMS SPACE & MISSION SYSTEMS INC.. SLREOSS DIRECTOR MOUNT (DM) PROD CONFIG

Who is the contractor on this award?

The obligated recipient is BAE SYSTEMS SPACE & MISSION SYSTEMS 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 $32.0 million.

What is the period of performance?

Start: 2014-04-30. End: 2017-09-29.

What is BAE Systems' track record with similar sole-source defense contracts?

BAE Systems has a long history of securing large defense contracts, including those awarded through sole-source negotiations. Their track record often involves complex systems integration and manufacturing for various military branches. While specific data on their sole-source awards for satellite systems is not detailed here, their established presence in the defense sector suggests they possess the capabilities and security clearances required for such critical programs. However, the frequency and justification for sole-source awards can be a point of scrutiny, as it bypasses competitive processes that could potentially yield better pricing or wider industry participation. Analyzing past sole-source awards to BAE Systems would require a deeper dive into specific contract histories and justifications provided by the contracting agencies.

How does the $320 million value compare to other satellite system contracts awarded by the DoD?

The $320 million value for this satellite system contract is substantial, placing it within the upper tier of individual contract awards for specialized defense equipment. However, without knowing the specific capabilities and scope of the systems procured, direct comparisons are difficult. The Department of Defense procures a wide range of satellite systems, from small, experimental payloads to large, complex constellations, with costs varying significantly. Larger, more comprehensive satellite programs, especially those involving multiple launches and extensive ground support, can easily run into billions of dollars. Conversely, smaller, more niche systems might cost tens of millions. This $320 million figure suggests a significant, but not unprecedented, investment in a critical defense capability.

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

The primary risks associated with a sole-source award of this magnitude include potential overpayment due to the lack of competitive pricing, reduced innovation from market-wide solutions, and increased dependence on a single contractor. Taxpayers may not receive the best value for their money if market competition was not leveraged. Furthermore, a sole-source award can create a barrier to entry for other capable companies, potentially stifling future competition and limiting the government's options in subsequent procurements. There's also a risk that the government becomes overly reliant on the incumbent contractor, making it difficult and costly to switch providers or introduce new technologies later in the program's lifecycle.

What does the 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' NAICS code imply about the contract's purpose?

The NAICS code 334511, 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing,' indicates that this contract is for the development, production, or modification of sophisticated systems and instruments used for locating, tracking, and orienting assets. This includes radar systems, sonar, GPS receivers, inertial navigation units, flight control systems, and related instrumentation. For the Department of Defense, these systems are critical for intelligence, surveillance, reconnaissance (ISR), command and control, and operational effectiveness across air, land, and sea domains. The 'manufacturing' aspect suggests the contract likely involves the production of hardware components or complete systems.

How does the contract duration (1248 days) align with typical defense procurement cycles for complex systems?

A contract duration of 1248 days, approximately 3.4 years, is relatively standard for the development and production of complex defense systems like satellite components or specialized instruments. Such procurements often involve lengthy design, testing, manufacturing, and integration phases. The firm-fixed-price structure, combined with this duration, suggests a defined scope of work with a clear end goal. Shorter durations might be suitable for off-the-shelf procurements or services, while longer durations are common for R&D-intensive or manufacturing-heavy projects where lead times for specialized components and rigorous testing are significant factors. This timeframe indicates a commitment to a specific project lifecycle rather than a short-term need.

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: FIRE CONTROL EQPT.

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0002414R5412

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Ball Corp (UEI: 006419147)

Address: 1600 COMMERCE ST, BOULDER, CO, 80301

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

Financial Breakdown

Contract Ceiling: $32,011,109

Exercised Options: $32,011,109

Current Obligation: $32,011,109

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline