DoD's $27.7M Hughes Aircraft contract for defense systems awarded in 1989, spanning over 21 years

Contract Overview

Contract Amount: $27,690,836 ($27.7M)

Contractor: Hughes Aircraft Company

Awarding Agency: Department of Defense

Start Date: 1989-08-15

End Date: 2011-02-28

Contract Duration: 7,867 days

Daily Burn Rate: $3.5K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Defense

Place of Performance

Location: EL SEGUNDO, LOS ANGELES County, CALIFORNIA, 90245

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $27.7 million to HUGHES AIRCRAFT COMPANY for work described as: Key points: 1. Contract value of $27.7 million over its lifecycle suggests a significant investment in defense capabilities. 2. Awarded under full and open competition, indicating a broad market search for the best value. 3. The long duration of nearly 22 years points to a sustained need for the contracted services or systems. 4. Fixed Price with Economic Price Adjustment (FP/EPA) contract type introduces potential for cost escalation over time. 5. The contract was awarded by the Department of Defense, a major federal spender with complex procurement needs. 6. Performance was managed by the Defense Contract Management Agency, suggesting robust oversight for a high-value award.

Value Assessment

Rating: fair

Benchmarking the value of this $27.7 million contract is challenging without specific details on the defense systems procured. However, the fixed-price with economic price adjustment structure implies that while an initial price was set, adjustments were permitted for factors like inflation or material cost changes. This can lead to costs exceeding initial projections. Comparing it to similar long-term defense system contracts would require detailed specifications of the systems and their technological relevance at the time of award and throughout the contract's lifespan.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, meaning the solicitation was broadly advertised, and any responsible source was permitted to submit a bid. The presence of two bidders (indicated by 'no': 2) suggests a competitive environment, though the exact number of bids received is not specified. A limited number of bidders, even under full and open competition, can sometimes indicate a specialized market or high barriers to entry, potentially impacting price discovery.

Taxpayer Impact: Full and open competition is generally favorable for taxpayers as it aims to secure the best possible price through a wide range of offers. However, with only two bidders, the potential for significant cost savings might be constrained compared to scenarios with numerous competitive bids.

Public Impact

The primary beneficiaries are likely components of the Department of Defense requiring the specific defense systems procured under this contract. The contract delivered critical defense systems, contributing to national security and military readiness. The geographic impact is primarily within the United States, supporting defense infrastructure and operations. Workforce implications would include employment opportunities at Hughes Aircraft Company and potentially its subcontractors, particularly in engineering, manufacturing, and program management roles.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

The FP/EPA contract type carries inherent risk of cost overruns due to economic adjustments over the contract's long duration.
Limited competition (2 bidders) may have reduced the pressure for the lowest possible price.
The contract's extended period (over 21 years) raises questions about the initial technology's relevance and potential for obsolescence.
Lack of specific system details makes it difficult to assess performance against contemporary alternatives or evolving threats.

Positive Signals

Awarded via full and open competition, indicating an effort to maximize value and access the broadest market.
The long contract duration suggests a successful, sustained relationship and consistent delivery of required capabilities.
Managed by the Defense Contract Management Agency, implying a structured oversight and accountability framework.
Hughes Aircraft Company was a major defense contractor, suggesting a track record of capability and reliability.

Sector Analysis

This contract falls within the Defense sector, specifically related to the procurement of complex defense systems. The defense industry is characterized by high R&D investment, long product cycles, and significant government spending. Contracts of this magnitude are typical for major defense platforms. Comparable spending benchmarks would involve analyzing other large-scale procurements for similar defense systems or platforms by the DoD, considering factors like technological sophistication and strategic importance.

Small Business Impact

There is no indication that this contract included small business set-asides, nor is there information on subcontracting plans. Given the nature of large defense system contracts, it's common for prime contractors like Hughes Aircraft Company to engage subcontractors, which could include small businesses. However, without specific data, the direct impact on the small business ecosystem remains unclear.

Oversight & Accountability

Oversight for this contract was likely managed by the Defense Contract Management Agency (DCMA), which is responsible for ensuring contractor performance and compliance. Accountability measures would be embedded in the contract terms, including reporting requirements and performance standards. Transparency is generally limited for specific defense system contracts due to national security considerations, but the award process itself (full and open competition) suggests a degree of procedural transparency.

Related Government Programs

Department of Defense Procurement
Defense Systems Acquisition
Hughes Aircraft Company Contracts
Fixed Price with Economic Price Adjustment Contracts
Long-Term Government Contracts

Risk Flags

Long Contract Duration
Economic Price Adjustment Clause
Limited Competition (2 Bidders)

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $27.7 million to HUGHES AIRCRAFT COMPANY. See the official description on USAspending.

Who is the contractor on this award?

The obligated recipient is HUGHES AIRCRAFT COMPANY.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $27.7 million.

What is the period of performance?

Start: 1989-08-15. End: 2011-02-28.

What specific defense systems or capabilities did this $27.7 million contract procure from Hughes Aircraft Company?

The provided data does not specify the exact defense systems or capabilities procured under this $27.7 million contract awarded to Hughes Aircraft Company. The contract identifier 'DCA' and the broad category of 'Defense' suggest it could range from electronic warfare systems, communication equipment, radar technology, or other specialized military hardware. Without further details on the Statement of Work (SOW) or contract line item numbers (CLINs), pinpointing the precise nature of the delivered systems remains speculative. Understanding the specific systems is crucial for evaluating their technological relevance, performance, and overall value to the Department of Defense over the contract's extensive 21-year duration.

How did the economic price adjustments impact the final cost of the contract compared to the initial fixed price?

The contract utilized a Fixed Price with Economic Price Adjustment (FP/EPA) structure. This means the initial price was set, but provisions allowed for adjustments based on predefined economic factors, such as inflation, labor costs, or material price fluctuations. While the total awarded amount is listed as $27.7 million, the FP/EPA clause introduces uncertainty regarding the actual final expenditure. Over the contract's 21-year lifespan (from 1989 to 2011), significant economic shifts likely occurred, potentially leading to substantial cost increases beyond the initial fixed price. Quantifying the exact impact requires access to the contract's modification history and the specific economic indices used for adjustments.

What was the technological context and relevance of the systems procured at the time of award in 1989, and how did this evolve over the contract's lifespan?

In 1989, the defense landscape was shaped by the end of the Cold War and emerging technological advancements. Systems procured then would have been designed for the prevailing geopolitical climate and technological standards of the late 1980s and early 1990s. Given the contract's duration extending to February 2011, the procured systems would have needed to remain relevant through multiple technological generations and evolving military doctrines. Assessing this requires understanding the specific systems; for instance, if they were communication or computing systems, they would have undergone rapid obsolescence. Conversely, certain durable hardware or foundational technologies might have retained relevance longer. The long duration suggests either a very stable technology requirement or a series of upgrades and sustainment efforts managed under the contract.

What is the track record of Hughes Aircraft Company in fulfilling large, long-term defense contracts prior to and during this period?

Hughes Aircraft Company was a prominent and established defense contractor with a long history of developing and producing sophisticated defense systems, including radar, missiles, and electronics, prior to and during this contract's period. They were known for significant contributions to various military programs. Their track record generally indicated a strong capability in complex engineering and manufacturing. However, like any large contractor, specific contract performance could vary. Without delving into detailed historical performance reviews for Hughes Aircraft Company across all their contracts, it's reasonable to infer that their selection for a $27.7 million, 21-year contract by the DoD suggests a perceived ability to meet demanding requirements. Further analysis would involve examining specific past performance evaluations and any disputes or issues encountered on similar long-term programs.

How does the competition level (2 bidders) for this contract compare to typical competition for similar defense systems procured by the DoD?

For large, complex defense systems, the number of bidders can vary significantly. While 'full and open competition' aims for maximum participation, the reality is that the specialized nature of advanced defense technology often limits the pool of capable companies. Having only two bidders for this $27.7 million contract suggests a market where only a few firms possessed the necessary technical expertise, manufacturing capacity, and security clearances. This is not uncommon for highly specialized procurements. However, it is less competitive than procurements for more standardized goods or services where numerous companies might bid. Typical competition for major defense platforms can range from a handful to sometimes only one or two viable sources, depending on the system's uniqueness and technological maturity.

What were the primary risks associated with this contract, and how were they managed by the government and contractor?

The primary risks associated with this contract likely included technological obsolescence given its 21-year duration, potential cost overruns due to the FP/EPA clause, and performance risks related to delivering complex defense systems. Technological obsolescence risk would be managed through contract modifications for upgrades or by phasing out older systems. Cost overrun risk was inherent in the FP/EPA structure, requiring careful monitoring of economic indices and negotiation of adjustment ceilings. Performance risks would be addressed through the Defense Contract Management Agency's oversight, milestone reviews, acceptance testing, and potentially performance-based payment schedules. Hughes Aircraft Company's risk management would involve internal processes for project execution, quality control, and supply chain management.

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Offers Received: 2

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT (K)

Contractor Details

Address: 909 N SEPULVEDA BLVD, LOS ANGELES, CA, 90

Business Categories: Black American Owned Business, Category Business, Minority Owned Business, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Timeline