DoD's $42M Logistics Engineering Contract Awarded to BAE Systems Raises Value Questions

Contract Overview

Contract Amount: $41,990,005 ($42.0M)

Contractor: BAE Systems Technology Solutions & Services Inc.

Awarding Agency: Department of Defense

Start Date: 2011-10-05

End Date: 2014-09-30

Contract Duration: 1,091 days

Daily Burn Rate: $38.5K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: LOGISTICS ENGINEERING AND INTEGRATION

Place of Performance

Location: ROCKVILLE, MONTGOMERY County, MARYLAND, 20850

State: Maryland Government Spending

Plain-Language Summary

Department of Defense obligated $42.0 million to BAE SYSTEMS TECHNOLOGY SOLUTIONS & SERVICES INC. for work described as: LOGISTICS ENGINEERING AND INTEGRATION Key points: 1. Contract awarded on a cost-plus-fixed-fee basis, potentially leading to cost overruns. 2. Limited competition due to sole-source award, impacting price discovery. 3. Long contract duration of nearly three years suggests significant ongoing need. 4. Focus on logistics engineering and integration points to critical defense support functions. 5. Contractor's extensive experience in defense technology likely influenced award. 6. Geographic concentration in Maryland may indicate specific operational requirements.

Value Assessment

Rating: questionable

The $42 million contract awarded to BAE Systems for logistics engineering and integration services warrants scrutiny regarding its value for money. The cost-plus-fixed-fee (CPFF) pricing structure, while common for complex services, carries inherent risks of cost escalation if not meticulously managed. Without a competitive bidding process, it is difficult to benchmark the pricing against market rates or alternative providers. The absence of a competitive environment means taxpayers may not have received the most advantageous pricing. Further analysis would require access to detailed cost breakdowns and performance metrics to truly assess value.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning BAE Systems was the only vendor considered. This approach bypasses the typical competitive procurement process where multiple vendors submit bids. While sole-source awards can be justified in specific circumstances, such as when only one vendor possesses the required unique capabilities or when urgency precludes a full competition, they significantly limit price discovery and potentially lead to higher costs for the government. The lack of competition here means the government did not benefit from the potential cost savings that a competitive bidding process could have generated.

Taxpayer Impact: Sole-source awards mean taxpayers may be paying a premium, as the government did not leverage competition to drive down costs. This limits the opportunity to secure the best possible price for essential services.

Public Impact

The Department of Defense benefits from specialized logistics engineering and integration support. Services delivered are critical for maintaining operational readiness and efficiency of military logistics. The primary geographic impact is in Maryland, suggesting a concentration of defense operations or command centers. The contract supports a workforce skilled in engineering, logistics, and defense systems integration.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost-plus-fixed-fee structure increases risk of cost overruns.
Sole-source award limits price competition and potentially inflates costs.
Lack of transparency in sole-source justification requires further review.
Long contract duration without clear performance benchmarks raises concerns about sustained value.

Positive Signals

BAE Systems is a well-established defense contractor with significant experience.
Contract addresses critical logistics and integration needs for the Department of Defense.
Fixed fee component provides some cost predictability compared to pure cost-plus contracts.

Sector Analysis

This contract falls within the Engineering Services sector, specifically focusing on logistics engineering and integration for defense applications. The market for defense engineering services is substantial, driven by the continuous need for technological advancement, operational support, and system integration within military branches. Companies like BAE Systems are key players in this sector, often securing large, complex contracts due to their specialized expertise and established relationships with government agencies. Benchmarking this contract's value is challenging without competitive data, but its scale suggests a significant investment in critical defense infrastructure support.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb: false'. BAE Systems is a large prime contractor, and while they may engage small businesses as subcontractors, the primary award is not directed towards small business participation. The absence of a specific set-aside means that opportunities for small businesses to directly compete for this prime contract were limited. Further investigation into subcontracting plans would be needed to assess the indirect impact on the small business ecosystem.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Defense's contract management and oversight bodies, potentially including the Defense Contract Management Agency (DCMA) given the contract's nature. The specific oversight mechanisms for a sole-source, cost-plus-fixed-fee contract would involve rigorous monitoring of costs, performance, and adherence to the contract terms. Transparency is often reduced in sole-source procurements, making detailed public reporting and Inspector General reviews crucial for accountability. The effectiveness of oversight depends heavily on the diligence of the contracting officer and the agency's internal controls.

Related Government Programs

Defense Logistics Agency Support Contracts
Military Engineering Services
Aerospace and Defense Systems Integration
Department of Defense IT and Support Services

Risk Flags

Sole-source award limits competition.
Cost-plus-fixed-fee structure carries inherent cost overrun risk.
Lack of publicly available performance data hinders value assessment.
Long contract duration without clear performance benchmarks.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $42.0 million to BAE SYSTEMS TECHNOLOGY SOLUTIONS & SERVICES INC.. LOGISTICS ENGINEERING AND INTEGRATION

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 $42.0 million.

What is the period of performance?

Start: 2011-10-05. End: 2014-09-30.

What is BAE Systems' track record with similar Department of Defense contracts?

BAE Systems has a long and extensive history of contracting with the Department of Defense, encompassing a wide range of services including engineering, technology development, and defense systems integration. They are a major defense contractor globally, frequently awarded large-value contracts for complex projects. Their track record includes numerous successful deliveries, but also instances of scrutiny regarding contract costs and performance, which is common for companies of their size and scope in the defense sector. Specific to logistics engineering, BAE Systems has demonstrated capabilities in areas such as supply chain management, systems engineering, and operational support for military platforms. Analyzing their past performance on similar CPFF contracts would provide context for how effectively they manage costs and deliver results under such arrangements.

How does the $42 million value compare to similar logistics engineering contracts within the DoD?

Comparing the $42 million value of this contract requires access to a broader dataset of similar logistics engineering and integration contracts awarded by the DoD, ideally on a competitive basis. Without such comparative data, it's challenging to definitively state whether this amount represents a fair market value. However, given the sole-source nature and the CPFF structure, there's a potential for the cost to be higher than if it had been competitively bid. Contracts for complex engineering services, especially those involving integration of sophisticated systems for defense applications, can range significantly in price. Factors like the specific technologies involved, the duration of the contract, and the level of expertise required heavily influence the overall cost. A comprehensive benchmark analysis would involve identifying comparable contracts, adjusting for differences in scope, duration, and economic conditions.

What are the primary risks associated with a sole-source, cost-plus-fixed-fee contract for logistics engineering?

The primary risks associated with a sole-source, cost-plus-fixed-fee (CPFF) contract for logistics engineering are multifaceted. Firstly, the sole-source nature eliminates competition, which is a key mechanism for ensuring the government receives the best possible price and value. This can lead to inflated costs as the contractor faces less pressure to be efficient. Secondly, the CPFF structure, while providing flexibility for evolving requirements, inherently shifts cost risk to the government. If the contractor's costs exceed initial estimates, the government is obligated to pay these higher costs, plus the fixed fee. This necessitates robust government oversight to monitor expenditures and prevent cost overruns. Without strong controls and detailed performance metrics, there's a significant risk of the contract exceeding its budget without a commensurate increase in delivered value.

How effective is the CPFF contract type in ensuring performance for complex engineering services?

The Cost-Plus-Fixed-Fee (CPFF) contract type is often employed for complex engineering services where the scope of work is not fully defined at the outset, or where innovation and research are significant components. Its effectiveness hinges on the balance between flexibility and control. The 'cost-plus' element allows the contractor to incur necessary costs, which are then reimbursed by the government, while the 'fixed-fee' provides the contractor with a predetermined profit margin, incentivizing them to complete the work. However, this structure can be less effective in driving cost efficiency compared to fixed-price contracts, as the contractor's profit is not directly tied to cost savings. Therefore, effective performance under a CPFF contract relies heavily on strong government oversight, clear performance metrics, and diligent cost tracking to ensure the contractor remains focused on delivering the required services within reasonable cost parameters.

What historical spending patterns exist for logistics engineering services within the Department of Defense?

Historical spending patterns for logistics engineering services within the Department of Defense reveal a consistent and substantial investment in maintaining and enhancing the efficiency of military supply chains and operational support systems. The DoD allocates significant portions of its budget to contracts that ensure the seamless flow of goods, services, and information necessary for global military operations. This includes spending on systems integration, supply chain optimization, maintenance engineering, and readiness support. Over the years, spending in this category has often increased in response to evolving geopolitical landscapes, technological advancements, and the need to support complex military platforms. Analyzing historical data shows a trend towards more sophisticated, technology-driven logistics solutions, often involving large, multi-year contracts awarded to major defense contractors.

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: 520 GAITHER ROAD, ROCKVILLE, MD, 20850

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

Financial Breakdown

Contract Ceiling: $50,810,334

Exercised Options: $50,583,450

Current Obligation: $41,990,005

Subaward Activity

Number of Subawards: 9

Total Subaward Amount: $1,025,461

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline