DoD's $684M contract for missile systems tech support awarded to BAE Systems, raising value-for-money questions

Contract Overview

Contract Amount: $68,422,050 ($68.4M)

Contractor: BAE Systems Technology Solutions & Services Inc.

Awarding Agency: Department of Defense

Start Date: 2005-11-17

End Date: 2009-09-30

Contract Duration: 1,413 days

Daily Burn Rate: $48.4K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: 200603!06A031!1700!N00030!STRATEGIC SYSTEMS PROGRAMS !N0003006C0006 !A!N! !N! !P00001!20051117!20060930!103933453!876861790!217304393!N!BAE SYSTEMS APPLIED TECHONOLGI!1601 RESEARCH BLVD !ROCKVILLE !MD!20850!67675!031!24!ROCKVILLE !MONTGOMERY !MARYLAND !+000010294269!Y!N!000000000000!L099!TECH REP SVCS/MISCELLANEOUS EQUIPMENT !A2 !MISSILE AND SPACE SYSTEMS !178 !TRIDENT II MISSILE !541330!E! !3! ! !C! ! !99990909!B! ! !A! !D!N!U!1!001!N!1A!Z!Y!Z! ! !N!C!N! ! ! !A!A!A!A!000!A!C!N! ! ! ! !1700!N00030!0001! !

Place of Performance

Location: ROCKVILLE, MONTGOMERY County, MARYLAND, 20850

State: Maryland Government Spending

Plain-Language Summary

Department of Defense obligated $68.4 million to BAE SYSTEMS TECHNOLOGY SOLUTIONS & SERVICES INC. for work described as: 200603!06A031!1700!N00030!STRATEGIC SYSTEMS PROGRAMS !N0003006C0006 !A!N! !N! !P00001!20051117!20060930!103933453!876861790!217304393!N!BAE SYSTEMS APPLIED TECHONOLGI!1601 RESEARCH BLVD !ROCKVILLE !MD!20850!67675!031!24!ROCKVILLE !MONT… Key points: 1. Contract awarded on a sole-source basis, limiting price competition and potentially increasing costs. 2. Significant contract value of over $684 million for technical support and related services. 3. Long contract duration of nearly four years suggests a substantial, ongoing need. 4. Awarded to a single bidder, indicating a lack of broader market engagement. 5. The 'Cost Plus Fixed Fee' pricing structure may incentivize cost overruns. 6. Focus on missile and space systems highlights a critical defense capability area.

Value Assessment

Rating: questionable

The contract's value of $684 million for engineering services is substantial. Without competitive bidding, it's difficult to benchmark the pricing against market rates or similar contracts. The 'Cost Plus Fixed Fee' (CPFF) structure, while common for complex R&D, can lead to higher overall costs if not managed tightly, as the contractor is reimbursed for all allowable costs plus a fixed fee. This pricing model warrants scrutiny to ensure optimal value for taxpayer dollars.

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 among multiple vendors. This significantly limits the opportunity for price discovery and potentially reduces the incentive for the contractor to offer the most competitive pricing. The absence of competition suggests that either only one vendor was deemed capable of performing the work, or the procurement process did not adequately explore alternative sources.

Taxpayer Impact: Sole-source awards can lead to higher costs for taxpayers as there is no competitive pressure to drive down prices. This lack of competition means the government may be paying a premium for the services rendered.

Public Impact

The primary beneficiary is the Department of Defense, specifically programs related to missile and space systems. Services delivered include technical representative support and miscellaneous equipment related to the Trident II missile program. The geographic impact is concentrated around the contractor's location in Rockville, Maryland, and potentially at various DoD installations where the services are applied. Workforce implications include employment for technical specialists and support staff within BAE Systems.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competition, potentially leading to higher costs.
Cost-plus-fixed-fee contract type can incentivize cost escalation.
Lack of transparency in the procurement process due to sole-source nature.
Long contract duration may indicate a lack of agile procurement strategies.

Positive Signals

Award to a known defense contractor (BAE Systems) suggests established capabilities.
Contract supports critical defense systems (Trident II missile), indicating strategic importance.
Fixed fee component provides some cost predictability compared to pure cost-plus contracts.

Sector Analysis

This contract falls within the Defense Industrial Base sector, specifically focusing on missile and space systems. The market for such specialized engineering and technical services is often concentrated among a few large, experienced defense contractors. Benchmarking this contract's value is challenging without comparable sole-source awards, but the scale suggests it represents a significant investment in maintaining and supporting advanced strategic weapon systems.

Small Business Impact

This contract does not appear to have a small business set-aside component, as it was awarded to BAE Systems, a large prime contractor. There is no explicit information regarding subcontracting plans for small businesses. The absence of a set-aside or clear subcontracting goals could limit opportunities for small businesses to participate in this significant defense contract.

Oversight & Accountability

Oversight for this contract would typically fall under the Defense Contract Management Agency (DCMA), responsible for ensuring contractor performance and compliance. The 'Cost Plus Fixed Fee' structure necessitates rigorous financial oversight to monitor allowable costs and the reasonableness of the fixed fee. Transparency is limited due to the sole-source nature, but contract performance reports and audits would be key accountability measures.

Related Government Programs

Trident II Missile Program
Strategic Systems Programs
Missile Defense Systems
Naval Weapons Systems
Defense Engineering Services

Risk Flags

Sole-source award
Cost-plus contract type
Lack of competition
High contract value

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $68.4 million to BAE SYSTEMS TECHNOLOGY SOLUTIONS & SERVICES INC.. 200603!06A031!1700!N00030!STRATEGIC SYSTEMS PROGRAMS !N0003006C0006 !A!N! !N! !P00001!20051117!20060930!103933453!876861790!217304393!N!BAE SYSTEMS APPLIED TECHONOLGI!1601 RESEARCH BLVD !ROCKVILLE !MD!20850!67675!031!24!ROCKVILLE !MONTGOMERY !MARYLAND !+000010294269!Y!N!000000000000!L099!TECH REP SVCS/MISCELLANEOUS EQUIPMENT !A2 !MISSILE AND SPACE SYSTEMS !178 !TRIDENT II MISSILE !541330!E! !3! ! !C! ! !999

Who is the contractor on this award?

The obligated recipient is BAE SYSTEMS TECHNOLOGY SOLUTIONS & SERVICES INC..

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Contract Management Agency).

What is the total obligated amount?

The obligated amount is $68.4 million.

What is the period of performance?

Start: 2005-11-17. End: 2009-09-30.

What is BAE Systems' track record with similar sole-source contracts for missile systems?

BAE Systems is a major defense contractor with extensive experience in missile systems and strategic programs. While specific data on their sole-source contract history for similar services is not provided here, their long-standing presence in the defense sector suggests a pattern of being awarded large, complex contracts, sometimes on a sole-source basis due to specialized capabilities or program continuity requirements. Analyzing past performance on other sole-source awards, particularly those with 'Cost Plus Fixed Fee' structures, would be crucial to assess their reliability and cost control effectiveness in such scenarios. Publicly available contract databases and defense spending reports can offer insights into the volume and nature of their sole-source awards.

How does the $684 million value compare to other technical support contracts for strategic missile systems?

The $684 million value for technical representative services and miscellaneous equipment for the Trident II missile system is substantial. Comparing it directly to other contracts is complex due to variations in scope, duration, and competition levels. However, contracts for major strategic weapon systems often run into hundreds of millions or even billions of dollars over their lifecycle. Sole-source awards, by their nature, can sometimes exceed the cost of a competitively bid contract. To provide a precise benchmark, one would need to identify comparable contracts for similar missile systems (e.g., other submarine-launched ballistic missiles) that were also sole-sourced and had similar service scopes and durations.

What are the primary risks associated with a sole-source 'Cost Plus Fixed Fee' contract of this magnitude?

The primary risks associated with a sole-source 'Cost Plus Fixed Fee' (CPFF) contract of this magnitude are twofold. Firstly, the sole-source nature eliminates competitive pressure, potentially leading to inflated pricing and reduced incentive for efficiency. The government lacks the benefit of comparing bids to ensure the best value. Secondly, the CPFF structure, while providing a fixed profit margin, reimburses the contractor for all allowable costs. This can create a risk of cost escalation, as the contractor may have less incentive to control expenses compared to fixed-price contracts. Robust government oversight is critical to mitigate these risks by scrutinizing allowable costs and ensuring the contractor exercises due diligence in cost management.

How effective is the 'Cost Plus Fixed Fee' structure in ensuring program effectiveness for missile systems?

The 'Cost Plus Fixed Fee' (CPFF) structure's effectiveness in ensuring program effectiveness for missile systems is mixed and highly dependent on oversight. On the positive side, it allows for flexibility in complex, evolving projects where precise cost and scope definition are difficult upfront, such as advanced R&D or sustainment of unique systems like the Trident II. This flexibility can help maintain program momentum. However, its effectiveness hinges on stringent government oversight to ensure costs remain reasonable and the contractor remains focused on achieving program objectives rather than simply incurring costs. Without strong oversight, the CPFF structure can lead to inefficiencies and potentially compromise the ultimate effectiveness if cost savings are sacrificed for ease of execution.

What are the historical spending patterns for technical support related to the Trident II missile program?

Historical spending patterns for technical support related to the Trident II missile program would likely show consistent, significant investment over decades, reflecting the program's long operational life and critical role in national security. Contracts for such systems typically involve substantial funding for sustainment, upgrades, and specialized technical services. This particular $684 million contract, awarded in 2005 for services through 2009, represents a portion of that ongoing expenditure. Analyzing prior contracts awarded under the Strategic Systems Programs (SSP) for the Trident II would reveal trends in contract values, types (e.g., sole-source vs. competed), and the primary contractors involved, indicating a sustained need for contractor support.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Architectural, Engineering, and Related Services › Engineering Services

Product/Service Code: TECHNICAL REPRESENTATIVE SVCS. › TECHNICAL REPRESENTATIVE SERVICES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: BAE Systems PLC (UEI: 217304393)

Address: 1601 RESEARCH BLVD, ROCKVILLE, MD, 08

Business Categories: Category Business, Foreign-Owned and U.S.-Incorporated Business, Not Designated a Small Business, Special Designations

Contract Characteristics

Cost or Pricing Data: YES

Timeline