Department of the Navy awards $36.5M for MK 38 MOD 2 Machine Gun Systems, a sole-source contract

Contract Overview

Contract Amount: $36,473,638 ($36.5M)

Contractor: BAE Systems Land & Armaments L.P.

Awarding Agency: Department of Defense

Start Date: 2013-09-25

End Date: 2015-06-06

Contract Duration: 619 days

Daily Burn Rate: $58.9K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: MK 38 MOD 2 MACHINE GUN SYSTEM(MGS) ORDALT

Plain-Language Summary

Department of Defense obligated $36.5 million to BAE SYSTEMS LAND & ARMAMENTS L.P. for work described as: MK 38 MOD 2 MACHINE GUN SYSTEM(MGS) ORDALT Key points: 1. Contract awarded to BAE Systems Land & Armaments L.P. for ordnance manufacturing. 2. The contract value is $36,473,638 over a period of 619 days. 3. This is a sole-source award, indicating limited competition. 4. The contract type is Firm Fixed Price, which shifts risk to the contractor. 5. The award falls under the Small Arms, Ordnance, and Ordnance Accessories Manufacturing sector. 6. The Department of the Navy is the primary agency involved. 7. No small business set-aside was indicated for this contract.

Value Assessment

Rating: fair

Benchmarking the value of this specific contract is challenging due to its sole-source nature and the specialized equipment involved. Without competitive bids, it's difficult to definitively assess if the $36.5 million represents optimal value for money. However, the firm fixed-price structure suggests a defined cost ceiling, which can provide some predictability. Further analysis would require comparing pricing for similar ordnance systems or previous procurements of the MK 38 MOD 2.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one vendor, BAE Systems Land & Armaments L.P., was solicited. This approach is typically used when a unique product or service is required, or when only one source possesses the necessary capabilities. The lack of competition means that price discovery through market forces was not utilized, potentially leading to higher costs than if multiple vendors had bid.

Taxpayer Impact: Taxpayers may not benefit from the cost savings typically achieved through competitive bidding. The absence of competition limits the government's ability to negotiate the best possible price for these machine gun systems.

Public Impact

The primary beneficiaries are the Department of the Navy and its operational forces, who will receive advanced machine gun systems. The contract ensures the continued supply and potential upgrades of the MK 38 MOD 2 Machine Gun System. The geographic impact is primarily within the defense supply chain and naval operations. Workforce implications are likely within BAE Systems' manufacturing facilities and related defense industry sectors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing advantages for taxpayers.
Lack of competition may reduce incentives for cost efficiency by the sole contractor.
Specialized nature of ordnance may limit the pool of potential competitors.
Firm Fixed Price contract, while managing cost certainty, does not inherently guarantee best value without competition.

Positive Signals

Firm Fixed Price contract provides cost certainty for the government.
Award to an established defense contractor like BAE Systems suggests a focus on proven capabilities.
Ensures availability of critical ordnance systems for naval operations.

Sector Analysis

The defense ordnance manufacturing sector is characterized by high barriers to entry, significant R&D investment, and stringent quality control requirements. Contracts for such specialized systems are often awarded to a limited number of established prime contractors. The market size for military-grade ordnance is substantial, driven by global defense spending. This contract for the MK 38 MOD 2 fits within the broader category of small arms and ordnance manufacturing, a critical component of the defense industrial base.

Small Business Impact

This contract was not awarded as a small business set-aside, nor does it appear to have specific subcontracting requirements for small businesses mentioned in the provided data. The award to a large prime contractor like BAE Systems suggests that the primary manufacturing and assembly will be handled by the prime, with potential for subcontracting to other large or specialized firms rather than a broad outreach to the small business ecosystem for this specific procurement.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of the Navy's contracting and program management offices. Accountability measures are inherent in the Firm Fixed Price contract type, which obligates the contractor to deliver the specified goods within the agreed-upon price. Transparency is generally maintained through contract award databases, though detailed cost breakdowns are often proprietary. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Naval Surface Warfare Center
Department of Defense Ordnance Procurement
Small Arms Manufacturing Contracts
BAE Systems Defense Contracts

Risk Flags

Sole-source award
Lack of competition
Potential for higher costs due to no competition

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $36.5 million to BAE SYSTEMS LAND & ARMAMENTS L.P.. MK 38 MOD 2 MACHINE GUN SYSTEM(MGS) ORDALT

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 $36.5 million.

What is the period of performance?

Start: 2013-09-25. End: 2015-06-06.

What is the historical spending pattern for the MK 38 MOD 2 Machine Gun System by the Department of the Navy?

Analyzing historical spending for the MK 38 MOD 2 Machine Gun System requires accessing detailed procurement data over multiple fiscal years. Typically, such systems involve initial development and procurement contracts, followed by sustainment, modernization, and potential upgrade orders. Without specific historical data, it's difficult to provide exact figures. However, the award of $36.5 million in 2013 suggests a significant investment in these systems. Past awards might indicate trends in quantity, unit price, and the frequency of contract actions. A comprehensive review would involve querying databases like FPDS-NG or USAspending for all contracts related to 'MK 38 MOD 2' or similar ordnance systems awarded by the Navy to identify total lifecycle costs and spending patterns.

How does the unit cost of the MK 38 MOD 2 compare to similar machine gun systems procured by other military branches or allied nations?

Direct unit cost comparisons for specialized military hardware like the MK 38 MOD 2 are complex due to variations in contract scope, included support (training, spares, maintenance), and the specific configuration. This contract, valued at $36.5 million for an unspecified quantity over approximately two years, doesn't provide a clear per-unit cost. However, the MK 38 MOD 2 is a remotely operated 25mm cannon system, significantly more advanced and costly than standard infantry machine guns. Benchmarking against similar naval gun systems or remotely operated weapon stations procured by other navies or defense forces would be necessary. Such comparisons would need to account for differences in caliber, operational range, targeting capabilities, and integration requirements. Given its specialized nature and sole-source award, the unit cost is likely higher than more common, competitively procured systems.

What are the specific risks associated with a sole-source award for critical defense equipment like the MK 38 MOD 2?

Sole-source awards for critical defense equipment present several risks. Primarily, the lack of competition can lead to inflated pricing, as the government does not benefit from the cost-reduction pressures inherent in a competitive bidding process. This can result in taxpayers paying more than necessary. Secondly, it can foster complacency in the contractor, potentially reducing incentives for innovation, efficiency, and proactive problem-solving, as there is no immediate threat of losing future business to competitors. Furthermore, reliance on a single source can create supply chain vulnerabilities; if the sole contractor experiences production issues, financial instability, or geopolitical disruptions, the availability of critical equipment can be severely jeopardized, impacting military readiness. Finally, it limits the government's ability to explore alternative technologies or solutions that might be offered by other potential suppliers.

What is BAE Systems Land & Armaments L.P.'s track record with the Department of the Navy and similar ordnance contracts?

BAE Systems Land & Armaments L.P. is a major defense contractor with a substantial and long-standing relationship with the Department of the Navy and other military branches. They have a proven track record in manufacturing a wide array of armored vehicles, artillery systems, naval guns, and ordnance. Their involvement with the MK 38 MOD 2 system itself suggests a history of supplying and potentially supporting this specific weapon platform. Historically, BAE Systems has been a consistent recipient of large defense contracts, indicating their capacity to meet stringent military requirements. While specific performance metrics for every contract are not publicly detailed, their continued success in securing significant awards from the Navy points to a generally reliable performance history in delivering complex defense systems and ordnance.

What are the potential performance implications of relying on a single supplier for the MK 38 MOD 2 system over its lifecycle?

Relying on a single supplier like BAE Systems for the MK 38 MOD 2 system over its lifecycle carries implications for both performance and sustainment. On the positive side, a single supplier can ensure consistency in product quality, facilitate streamlined logistics for spare parts and maintenance, and potentially offer integrated lifecycle support services. This can simplify program management for the Navy. However, the risks are significant. The contractor may have less incentive to innovate or improve the system if they face no competitive pressure. Furthermore, the Navy's negotiating power for future upgrades, repairs, or spare parts could be diminished, potentially leading to higher long-term costs. Dependence on one supplier also increases vulnerability to supply chain disruptions, production delays, or the contractor's strategic business decisions, which could impact the operational readiness and availability of the weapon system.

Industry Classification

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

Product/Service Code: WEAPONS

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0017413R0033

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: BAE Systems PLC (UEI: 217304393)

Address: 163 ROCHESTER DR STE 1, LOUISVILLE, KY, 40214

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: $36,473,638

Exercised Options: $36,473,638

Current Obligation: $36,473,638

Subaward Activity

Number of Subawards: 80

Total Subaward Amount: $23,490,695

Contract Characteristics

Cost or Pricing Data: NO

Timeline