DoD's $17M research contract with Penn State awarded without competition, raising value questions

Contract Overview

Contract Amount: $17,077,998 ($17.1M)

Contractor: THE Pennsylvania State University

Awarding Agency: Department of Defense

Start Date: 2023-08-22

End Date: 2026-08-21

Contract Duration: 1,095 days

Daily Burn Rate: $15.6K/day

Competition Type: NOT COMPETED

Pricing Type: COST PLUS FIXED FEE

Sector: R&D

Official Description: SPEARPOINT

Place of Performance

Location: UNIVERSITY PARK, CENTRE County, PENNSYLVANIA, 16802

State: Pennsylvania Government Spending

Plain-Language Summary

Department of Defense obligated $17.1 million to THE PENNSYLVANIA STATE UNIVERSITY for work described as: SPEARPOINT Key points: 1. Contract awarded on a cost-plus-fixed-fee basis, which can incentivize cost overruns. 2. Lack of competition suggests potential for suboptimal pricing and reduced innovation. 3. Research and Development in Physical, Engineering, and Life Sciences is a broad category with many potential providers. 4. Contract duration of 1095 days (3 years) allows for significant project development. 5. The specific NAICS code (541715) covers a wide range of scientific research, making direct comparisons challenging. 6. No small business set-aside was applied, potentially limiting opportunities for smaller innovative firms.

Value Assessment

Rating: questionable

The contract's value is difficult to assess without a competitive bidding process. Cost-plus-fixed-fee contracts, while sometimes necessary for research, carry inherent risks of cost escalation. Benchmarking against similar R&D contracts in physical, engineering, and life sciences is challenging due to the specificity of research topics and the lack of publicly available cost data for non-competed awards. The absence of competition means there's no market-driven validation of the pricing structure.

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. The Department of the Navy did not solicit bids from multiple offerors. This approach is typically justified when only one source is capable of meeting the requirement, or in specific circumstances like urgent needs or when a particular entity possesses unique expertise. The lack of competition limits the government's ability to explore a wider range of technical solutions and potentially more cost-effective approaches.

Taxpayer Impact: Sole-source awards mean taxpayers do not benefit from the price discovery and cost efficiencies that typically arise from a competitive bidding environment. This can lead to higher overall costs for government programs.

Public Impact

The primary beneficiary is The Pennsylvania State University, which will receive funding for research activities. The contract supports research and development in physical, engineering, and life sciences, potentially leading to advancements in defense technology. The geographic impact is concentrated in Pennsylvania, where the university is located. The contract may support academic researchers and potentially graduate students, contributing to the scientific workforce.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to higher costs for taxpayers.
Cost-plus-fixed-fee structure can incentivize increased spending without guaranteed performance improvements.
Limited transparency due to sole-source award makes it difficult to assess true value for money.
The broad nature of the R&D category could mask inefficiencies or scope creep.

Positive Signals

The Pennsylvania State University is a reputable research institution with a strong track record.
The contract supports critical research and development activities for the Department of Defense.
A fixed fee component provides some level of cost certainty for the contractor's effort.
The multi-year duration allows for sustained research focus and potential for significant breakthroughs.

Sector Analysis

The contract falls under the Research and Development in the Physical, Engineering, and Life Sciences sector, excluding nanotechnology and biotechnology. This is a broad and critical area for defense innovation, encompassing fundamental and applied research. The market for such services is diverse, including universities, private research institutions, and specialized R&D firms. Government spending in this sector is substantial, driven by the need for technological superiority. Comparable spending benchmarks are difficult to establish for sole-source awards due to the unique nature of each research project and the absence of competitive pricing.

Small Business Impact

This contract does not appear to have a small business set-aside. Given the sole-source nature of the award, there were no opportunities for small businesses to compete for this specific contract. The implications for the small business ecosystem are neutral in this instance, as the award was not intended for small business participation. However, the lack of competition overall means fewer opportunities for innovative small businesses to engage with the Department of the Navy.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy's contracting and program management offices. The Inspector General's office for the Department of Defense may conduct audits or investigations if concerns arise regarding the contract's execution, cost management, or adherence to terms. Transparency is limited due to the sole-source nature, making public oversight more challenging. Accountability relies heavily on the internal review processes of the awarding agency.

Related Government Programs

Department of Defense Research and Development Contracts
University Research Partnerships
Cost-Plus-Fixed-Fee Contracts
Navy Science and Technology Programs

Risk Flags

Sole-source award lacks competitive justification.
Cost-plus-fixed-fee structure carries inherent cost overrun risk.
Extended contract duration without competition may reduce efficiency incentives.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $17.1 million to THE PENNSYLVANIA STATE UNIVERSITY. SPEARPOINT

Who is the contractor on this award?

The obligated recipient is THE PENNSYLVANIA STATE UNIVERSITY.

Which agency awarded this contract?

Awarding agency: Department of Defense (Department of the Navy).

What is the total obligated amount?

The obligated amount is $17.1 million.

What is the period of performance?

Start: 2023-08-22. End: 2026-08-21.

What is the specific research focus of this contract, and how does it align with current DoD priorities?

The contract, NAICS code 541715, covers 'Research and Development in the Physical, Engineering, and Life Sciences (except Nanotechnology and Biotechnology).' While the broad category is known, the specific research focus within this contract awarded to The Pennsylvania State University is not detailed in the provided data. To understand its alignment with DoD priorities, one would need to examine the Statement of Work (SOW) or contract line item numbers (CLINs) associated with this Delivery Order. Typically, such R&D supports advancements in areas like materials science, advanced manufacturing, sensor technology, or other fields critical to national security. Without the SOW, assessing the precise alignment and potential impact remains speculative.

What are the typical profit margins or fixed fees for Cost Plus Fixed Fee (CPFF) contracts in this R&D sector?

For Cost Plus Fixed Fee (CPFF) contracts, the fixed fee is negotiated upfront and represents the contractor's profit. This fee is typically a percentage of the estimated cost of the contract. In the R&D sector, particularly for complex or high-risk research, these fees can vary significantly. Historically, fixed fees for CPFF contracts have ranged from around 5% to 15% of the estimated cost, but this can be influenced by factors such as the perceived risk, the uniqueness of the technology or expertise required, and the competitive landscape (even if this specific award was sole-source, the general market conditions matter). For a contract valued at approximately $17 million, a 10% fixed fee would equate to $1.7 million. However, without the specific negotiated fee percentage for this contract, it's impossible to determine the exact profit margin.

Are there any documented instances of Penn State failing to meet research objectives in previous DoD contracts?

Assessing Penn State's historical performance on previous DoD contracts requires access to contract performance databases and potentially Inspector General reports. Publicly available data often lacks granular detail on contractor performance, especially for research-oriented contracts where outcomes can be qualitative or long-term. While Penn State is a major research university with extensive experience in securing and executing federal grants and contracts, specific instances of underperformance or failure to meet objectives would need to be researched through specialized government contract databases (like the Contractor Performance Assessment Reporting System - CPARS, if accessible) or through Freedom of Information Act (FOIA) requests for relevant reports. Without such specific data, it's not possible to definitively state whether they have failed to meet objectives.

How does the $17 million spending on this contract compare to overall DoD spending on R&D in physical, engineering, and life sciences?

The $17.08 million awarded to The Pennsylvania State University represents a small fraction of the Department of Defense's overall Research, Development, Test, and Evaluation (RDT&E) budget. For fiscal year 2023, the DoD requested over $130 billion for RDT&E. Within that, specific budget lines for areas like 'Physical Sciences and Engineering' or 'Engineering and Research Services' constitute billions of dollars annually. Therefore, while $17 million is a significant sum for a single contract, it is a relatively minor component when viewed against the totality of DoD's R&D investments in these broad scientific and technical domains. This contract likely funds a specific, targeted research effort rather than a broad program area.

What are the potential risks associated with a 3-year duration for a sole-source R&D contract?

A 3-year duration for a sole-source R&D contract presents several potential risks. Firstly, the extended timeline increases the exposure to cost fluctuations (materials, labor) which, under a CPFF structure, could lead to higher final costs than initially estimated. Secondly, without periodic re-competition or market checks, there's a risk that the contractor's approach or technology might become outdated, or that more innovative or cost-effective solutions could emerge elsewhere during the contract period. Thirdly, the lack of competitive pressure over three years might reduce the contractor's incentive to aggressively pursue efficiencies or novel solutions. Finally, if the research direction proves unfruitful or misaligned with evolving needs, significant funds could be expended with limited return on investment over this extended period.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Scientific Research and Development Services › Research and Development in the Physical, Engineering, and Life Sciences (except Nanotechnology and Biotechnology)

Product/Service Code: RESEARCH AND DEVELOPMENT › C – National Defense R&D Services

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Address: 201 OLD MAIN, UNIVERSITY PARK, PA, 16802

Business Categories: Category Business, Corporate Entity Tax Exempt, Educational Institution, Higher Education, Nonprofit Organization, Not Designated a Small Business, Higher Education (Public), Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $29,999,971

Exercised Options: $29,999,971

Current Obligation: $17,077,998

Actual Outlays: $1,144,240

Subaward Activity

Number of Subawards: 1

Total Subaward Amount: $153,251

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: N0002418D6401

IDV Type: IDC

Timeline