DoD awards BAE Systems $589M contract for missile vehicle parts, raising value-for-money questions

Contract Overview

Contract Amount: $589,010,821 ($589.0M)

Contractor: BAE Systems Land & Armaments L.P.

Awarding Agency: Department of Defense

Start Date: 2020-02-11

End Date: 2025-12-12

Contract Duration: 2,131 days

Daily Burn Rate: $276.4K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: FY19-23 CANISTER PRODUCTION REQUIREMENTS

Place of Performance

Location: MINNEAPOLIS, ANOKA County, MINNESOTA, 55421

State: Minnesota Government Spending

Plain-Language Summary

Department of Defense obligated $589.0 million to BAE SYSTEMS LAND & ARMAMENTS L.P. for work described as: FY19-23 CANISTER PRODUCTION REQUIREMENTS Key points: 1. Contract value of nearly $590 million over five years suggests significant investment in defense manufacturing. 2. Sole awardee, BAE Systems, indicates potential for limited competition or a strong incumbent advantage. 3. The firm fixed-price contract type aims to control costs, but requires careful monitoring of performance. 4. Long contract duration of 2131 days necessitates robust oversight to ensure continued value. 5. The 'Other Guided Missile and Space Vehicle Parts' NAICS code points to a specialized segment of the defense industrial base. 6. Focus on production requirements highlights the ongoing need for critical defense components.

Value Assessment

Rating: fair

Benchmarking the value-for-money for this contract is challenging without specific performance metrics or comparable contract data. The nearly $590 million award over five years represents a substantial commitment. While a firm fixed-price contract is generally favorable for cost control, the lack of detailed cost breakdowns or comparisons to similar production runs makes it difficult to definitively assess if the pricing is competitive. Further analysis would require understanding the specific components being produced and their market value.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, suggesting that multiple bidders had the opportunity to submit proposals. However, the fact that only one award was made to BAE Systems Land & Armaments L.P. could imply that they were the only responsive bidder, possessed unique capabilities, or offered the most advantageous proposal according to the solicitation criteria. The level of competition, even if formally open, might have been limited in practice.

Taxpayer Impact: A full and open competition, even with a single awardee, generally provides a baseline for price discovery. Taxpayers benefit from the assurance that the government sought multiple solutions, though the ultimate price is determined by the winning bid.

Public Impact

The primary beneficiaries are the Department of Defense, specifically the Department of the Navy, which will receive essential components for guided missile and space vehicles. This contract supports the production of critical parts necessary for national defense capabilities. The contract is likely to have a significant impact on the workforce at BAE Systems facilities, particularly in Minnesota, supporting skilled manufacturing jobs. The geographic impact is concentrated in Minnesota, where BAE Systems has manufacturing operations, contributing to the local economy.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost overruns if production complexities are underestimated within the fixed-price structure.
Risk of supply chain disruptions impacting timely delivery of critical components.
Dependence on a single contractor for a significant duration could lead to reduced leverage in future negotiations.
Ensuring consistent quality control over a long production run requires diligent oversight.

Positive Signals

Firm fixed-price contract structure provides cost certainty for the government.
Long-term award signals sustained demand and potential for economies of scale in production.
BAE Systems is a well-established defense contractor with a track record in complex manufacturing.
Full and open competition, even with a single award, suggests an effort to solicit broad market interest.

Sector Analysis

This contract falls within the 'Other Guided Missile and Space Vehicle Parts and Auxiliary Equipment Manufacturing' sector, a highly specialized niche within the broader aerospace and defense industry. This segment is characterized by high technological barriers to entry, stringent quality requirements, and significant government procurement. The market size is directly tied to defense spending priorities and the lifecycle of various missile and space vehicle programs. Comparable spending benchmarks would typically involve analyzing other contracts for similar components or sub-assemblies within the DoD.

Small Business Impact

The data indicates that small business participation was not a primary focus for this specific contract, as indicated by 'sb': false. There is no explicit mention of small business set-asides or subcontracting goals. This suggests that the prime contractor, BAE Systems, is expected to fulfill the majority of the contract requirements directly. The impact on the small business ecosystem would be minimal unless BAE Systems voluntarily engages small businesses for specialized support or components not covered by this award.

Oversight & Accountability

Oversight for this contract will likely be managed by the Department of the Navy's contracting and program management offices. Accountability measures are embedded in the firm fixed-price contract terms, requiring delivery of specified parts. Transparency is generally maintained through contract award databases, though detailed performance data may be restricted. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Guided Missile Production
Space Vehicle Manufacturing
Defense Industrial Base
Naval Aviation Support
Aerospace Component Manufacturing

Risk Flags

Long-term contract duration increases risk of obsolescence or changing requirements.
Sole awardee raises questions about the extent of actual competition.
Firm fixed-price contracts can shift significant cost risk to the contractor.
Specialized nature of components may limit the pool of qualified suppliers.
Dependence on a single supplier for critical parts.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $589.0 million to BAE SYSTEMS LAND & ARMAMENTS L.P.. FY19-23 CANISTER PRODUCTION REQUIREMENTS

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 (Department of the Navy).

What is the total obligated amount?

The obligated amount is $589.0 million.

What is the period of performance?

Start: 2020-02-11. End: 2025-12-12.

What is BAE Systems' track record with similar DoD contracts, particularly for missile and space vehicle components?

BAE Systems Land & Armaments L.P. is a major defense contractor with extensive experience in producing complex military hardware, including armored vehicles, naval systems, and munitions. They have a long history of securing and executing large-scale contracts with the Department of Defense. While specific details on past performance for 'Other Guided Missile and Space Vehicle Parts' are not provided in this data, their overall profile suggests a capacity to handle such requirements. A deeper dive into their contract history, including past performance reviews and any reported issues on similar programs, would be necessary for a comprehensive assessment. Their established position within the defense industrial base implies a significant level of trust and proven capability from the DoD's perspective.

How does the per-unit cost of these missile vehicle parts compare to market rates or similar government procurements?

The provided data does not include specific per-unit cost information, making a direct comparison to market rates or similar government procurements impossible. The total award of $589,010,821.02 is for 'CANISTER PRODUCTION REQUIREMENTS' over a duration of 2131 days (approximately 5.8 years). Without knowing the exact quantity and specifications of the 'canister production requirements,' calculating an average per-unit cost is not feasible. To benchmark this, one would need to identify the specific parts being manufactured, their technical specifications, and then research industry pricing for comparable items or review historical data from other DoD contracts for similar components. The firm fixed-price nature of the contract suggests the price was determined upfront, but its competitiveness requires external validation.

What are the primary risks associated with this long-term, firm fixed-price contract for missile vehicle parts?

The primary risks associated with this contract include potential cost escalation if the fixed price does not adequately account for unforeseen production challenges or material cost increases over the 5.8-year period. While firm fixed-price contracts aim to cap costs for the government, they shift cost risk to the contractor. If BAE Systems encounters significant production inefficiencies or quality control issues, they may absorb losses, potentially impacting their long-term viability or willingness to bid on future contracts. Another risk is the potential for obsolescence of the technology or requirements changing mid-contract, necessitating costly modifications or contract renegotiations. Ensuring consistent quality and timely delivery over such a long duration also presents inherent risks that require robust government oversight.

What is the expected program effectiveness and impact on the Navy's missile capabilities?

The effectiveness and impact of this contract on the Navy's missile capabilities are directly tied to the successful and timely production of the specified 'CANISTER PRODUCTION REQUIREMENTS.' These components are crucial for the operational readiness and deployment of guided missile systems. Assuming BAE Systems delivers high-quality parts as per the contract specifications, this award will ensure the continued availability of essential elements for these weapon systems, thereby supporting the Navy's strategic objectives and combat readiness. The long-term nature of the contract suggests these components are critical for ongoing or future missile programs, indicating a sustained need for these capabilities within the fleet.

How does this contract's value compare to historical spending on similar defense components?

The $589 million contract value for 'CANISTER PRODUCTION REQUIREMENTS' over nearly six years represents a substantial investment. To compare this to historical spending, one would need to analyze past DoD procurements for similar missile and space vehicle parts. This would involve searching databases for contracts with comparable NAICS codes (like 336419) or PSC codes related to missile components. Factors such as inflation, technological advancements, and changes in defense strategy over time would need to be considered for a meaningful comparison. Without access to detailed historical spending data for these specific types of components, it's difficult to definitively state whether this contract represents an increase or decrease in spending relative to historical trends.

Industry Classification

NAICS: Manufacturing › Aerospace Product and Parts Manufacturing › Other Guided Missile and Space Vehicle Parts and Auxiliary Equipment Manufacturing

Product/Service Code: GUIDED MISSLES

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: N0002419R5380

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Ball Corporation

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

Business Categories: Category Business, Foreign-Owned and U.S.-Incorporated Business, Manufacturer of Goods, Not Designated a Small Business, Partnership or Limited Liability Partnership, Special Designations

Financial Breakdown

Contract Ceiling: $835,747,443

Exercised Options: $589,010,821

Current Obligation: $589,010,821

Actual Outlays: $40,935,375

Subaward Activity

Number of Subawards: 918

Total Subaward Amount: $295,552,665

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline