Navy awards $19.8M contract for MK 45 Waterfront Support to BAE Systems, a sole-source procurement

Contract Overview

Contract Amount: $19,852,777 ($19.9M)

Contractor: BAE Systems Land & Armaments L.P.

Awarding Agency: Department of Defense

Start Date: 2023-05-01

End Date: 2028-04-30

Contract Duration: 1,826 days

Daily Burn Rate: $10.9K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: MK 45 WATERFRONT SUPPORT

Place of Performance

Location: OSSEO, HENNEPIN County, MINNESOTA, 55369

State: Minnesota Government Spending

Plain-Language Summary

Department of Defense obligated $19.9 million to BAE SYSTEMS LAND & ARMAMENTS L.P. for work described as: MK 45 WATERFRONT SUPPORT Key points: 1. Contract awarded on a cost-plus-fixed-fee basis, which can lead to cost overruns if not managed carefully. 2. Sole-source procurement limits competitive pressure, potentially impacting price efficiency. 3. The contract duration of five years suggests a long-term need for these support services. 4. The specific nature of 'waterfront support' for MK 45 systems indicates specialized technical expertise is required. 5. The award to BAE Systems, a large defense contractor, suggests established capabilities but also potential for higher pricing. 6. The lack of competition raises questions about whether alternative solutions or providers were considered.

Value Assessment

Rating: fair

Benchmarking the value of this $19.8 million contract is challenging without more specific details on the 'waterfront support' services provided. However, the cost-plus-fixed-fee structure, combined with a sole-source award, suggests a higher risk of the final cost exceeding initial estimates compared to fixed-price contracts with robust competition. The contract's value appears substantial for specialized support, but a direct comparison to similar services is difficult without further data on the scope of work and market rates for such niche technical assistance.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning the Department of the Navy did not conduct a competitive bidding process. This typically occurs when only one responsible source is available or when a compelling justification for other than full and open competition exists. The lack of multiple bidders means there was no direct price competition to drive down costs or encourage innovative solutions from a wider range of potential suppliers.

Taxpayer Impact: Taxpayers may not be receiving the best possible price due to the absence of competitive bidding. The government relies on the contractor's proposed costs and the negotiated fee, which may be higher than if multiple companies vied for the contract.

Public Impact

The primary beneficiaries are the U.S. Navy's operations requiring support for MK 45 naval gun systems. Services delivered likely include maintenance, repair, technical assistance, and potentially training related to waterfront operations of the MK 45 system. The geographic impact is likely concentrated at naval bases and shipyards where MK 45 systems are maintained and deployed. Workforce implications may involve specialized technicians and engineers employed by BAE Systems, contributing to skilled labor in the defense sector.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price discovery and potentially leads to higher costs for taxpayers.
Cost-plus-fixed-fee contract type carries inherent risk of cost escalation if not closely monitored.
Lack of competition may stifle innovation and prevent the government from accessing potentially more cost-effective solutions.
Limited transparency on the specific 'waterfront support' services makes independent value assessment difficult.

Positive Signals

Award to an established contractor like BAE Systems suggests a high likelihood of technical capability and successful execution of specialized support.
The five-year duration indicates a stable, long-term requirement, providing predictability for essential support services.
The contract addresses a specific, critical defense system (MK 45), ensuring operational readiness.

Sector Analysis

The defense industrial base, specifically the sector focused on naval ordnance and weapon systems support, is characterized by high technical barriers to entry and a limited number of specialized contractors. Companies like BAE Systems are major players, often holding significant portions of the market for specific platforms. Spending in this area is driven by military readiness requirements and the lifecycle management of complex defense assets. Comparable spending benchmarks would typically involve other long-term sustainment contracts for major naval weapon systems.

Small Business Impact

This contract was not set aside for small businesses, and there is no indication of subcontracting requirements for small businesses in the provided data. The award to a large prime contractor like BAE Systems suggests that the primary focus is on the prime contractor's capabilities. This may limit opportunities for small businesses to participate directly in this specific contract, although they might be involved further down the supply chain if BAE Systems utilizes them for certain components or services.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy's contracting and program management offices. Accountability measures are typically embedded within the cost-plus-fixed-fee structure through defined milestones, reporting requirements, and the fixed fee component, which incentivizes efficient performance. Transparency may be limited due to the sole-source nature and the proprietary details of specialized support services. Inspector General jurisdiction would apply if any fraud, waste, or abuse is suspected.

Related Government Programs

Naval Gun Systems Support
Ordnance Maintenance Contracts
Defense Logistics Agency Support Services
Ship Maintenance and Repair Contracts
Weapon System Sustainment Programs

Risk Flags

Sole-source procurement
Cost-plus-fixed-fee contract type
Lack of competition
Potential for cost overruns

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $19.9 million to BAE SYSTEMS LAND & ARMAMENTS L.P.. MK 45 WATERFRONT SUPPORT

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 $19.9 million.

What is the period of performance?

Start: 2023-05-01. End: 2028-04-30.

What is the specific scope of 'MK 45 Waterfront Support' covered by this contract?

The provided data does not detail the specific scope of 'MK 45 Waterfront Support.' However, based on the contract title and the nature of defense contracts, it likely encompasses a range of services essential for the operational readiness and maintenance of the MK 45 naval gun system. This could include scheduled and unscheduled maintenance, repair of components, technical assistance during shipboard operations or at shore facilities, diagnostics, troubleshooting, engineering support, and potentially training for Navy personnel. Waterfront support implies services provided at naval bases, shipyards, or aboard vessels, focusing on the system's integration and functionality within the maritime environment. The cost-plus-fixed-fee structure suggests that the exact hours and resources needed may vary, requiring ongoing monitoring by the Navy.

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 cost of performance, such as in research and development or complex services. In this case, the Navy is paying BAE Systems its actual allowable costs plus a predetermined fixed fee, representing profit. Compared to fixed-price contracts (like Firm-Fixed-Price or Fixed-Price Incentive Fee), CPFF offers less cost certainty for the buyer, as the government bears the risk of cost overruns. However, it can be advantageous when innovation or flexibility is paramount, or when the contractor cannot reasonably estimate costs in advance. For routine, well-defined support services, fixed-price contracts are generally preferred by the government to incentivize contractor efficiency and provide better cost control.

What are the potential risks associated with a sole-source award for this type of defense support?

A sole-source award, like the one for MK 45 Waterfront Support, carries several potential risks for the government and taxpayers. The most significant risk is the lack of price competition, which can lead to inflated costs as the contractor faces no pressure to offer the most competitive pricing. Without competing bids, the government may pay more than it would in a fully competitive environment. Furthermore, sole-source procurements can limit the government's access to innovative solutions or alternative technologies that might be offered by other qualified vendors. There's also a risk that the contractor may have less incentive to control costs diligently, knowing that the government will cover allowable expenses plus a fixed fee, potentially leading to scope creep or inefficient resource allocation if oversight is not rigorous.

What is BAE Systems' track record with the Department of the Navy and similar contracts?

BAE Systems is a major global defense contractor with a substantial and long-standing relationship with the Department of the Navy and other military branches. They are known for their expertise in naval systems, including ordnance, ship repair, and combat systems integration. While specific performance metrics for this exact contract are not yet available as it is newly awarded, BAE Systems has a broad portfolio of contracts with the Navy, covering a wide range of services and products. Their track record generally includes the capability to deliver complex defense solutions. However, like any large contractor, they may have faced past performance issues on specific contracts, which would typically be assessed during the source selection process (though less rigorously in sole-source situations). A review of historical contract data and performance evaluations would be necessary for a comprehensive assessment.

How does this $19.8 million contract compare to historical spending on MK 45 support or similar naval systems?

Without access to detailed historical spending data specifically for MK 45 waterfront support, a direct comparison is difficult. However, $19.8 million over five years (approximately $3.96 million per year) for specialized technical support of a major naval weapon system appears to be within a reasonable range for such services, especially considering the complexity and critical nature of naval ordnance. For context, major naval platforms often have sustainment and support contracts in the tens or hundreds of millions of dollars annually, depending on the system's size, age, and operational tempo. This contract's value suggests it covers a specific, albeit important, aspect of MK 45 sustainment rather than the entire lifecycle support. It is crucial to benchmark this against other contracts for similar weapon system support, considering factors like system complexity, number of units supported, and the specific services rendered.

Industry Classification

NAICS: Manufacturing › Other Fabricated Metal Product Manufacturing › Small Arms, Ordnance, and Ordnance Accessories Manufacturing

Product/Service Code: MAINT, REPAIR, REBUILD EQUIPMENT › MAINT, REPAIR, REBUILD OF EQUIPMENT

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0002423R5300

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, Manufacturer of Goods, Not Designated a Small Business, Partnership or Limited Liability Partnership, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $53,234,366

Exercised Options: $30,763,290

Current Obligation: $19,852,777

Actual Outlays: $189,626

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline