DoD's $30.6M BAE Systems contract for MK38 machine gun systems lacked competition, raising value concerns

Contract Overview

Contract Amount: $30,556,246 ($30.6M)

Contractor: BAE Systems Land & Armaments L.P.

Awarding Agency: Department of Defense

Start Date: 2015-10-30

End Date: 2017-08-04

Contract Duration: 644 days

Daily Burn Rate: $47.4K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: MK38 MOD 3 25MM MACHINE GUN SYSTEM

Place of Performance

Location: LOUISVILLE, JEFFERSON County, KENTUCKY, 40201

State: Kentucky Government Spending

Plain-Language Summary

Department of Defense obligated $30.6 million to BAE SYSTEMS LAND & ARMAMENTS L.P. for work described as: MK38 MOD 3 25MM MACHINE GUN SYSTEM Key points: 1. The contract was awarded on a non-competitive basis, limiting price discovery and potentially increasing costs. 2. The firm-fixed-price structure shifts risk to the government, especially if unforeseen issues arise during performance. 3. Performance duration of 644 days suggests a substantial project requiring careful oversight. 4. The absence of small business participation raises questions about broader economic impact. 5. This procurement falls within the ordnance manufacturing sector, a critical area for defense readiness.

Value Assessment

Rating: questionable

The total award of $30.6 million for MK38 MOD 3 25MM MACHINE GUN SYSTEMs is difficult to benchmark due to the sole-source nature of the award. Without competitive bids, it's challenging to determine if the price reflects fair market value. The firm-fixed-price contract type, while providing cost certainty, means the government bears the risk of cost overruns if BAE Systems encounters unexpected expenses. Further analysis would require comparing this award to historical sole-source procurements of similar systems or to publicly available pricing for comparable defense equipment.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded using a sole-source justification, meaning it was not competed. This approach is typically used when only one responsible source can provide the required goods or services. The lack of competition means that potential alternative suppliers were not considered, and the government did not benefit from the price reductions that can arise from a competitive bidding process. This limits the government's ability to explore different technological solutions or achieve better pricing.

Taxpayer Impact: Taxpayers may have paid a premium for this system due to the absence of competitive pressure. Without multiple bids, there is less incentive for the contractor to offer the lowest possible price, potentially leading to less efficient use of public funds.

Public Impact

The primary beneficiaries are the U.S. Navy and Marine Corps, receiving essential weapon systems for naval platforms. The contract delivers MK38 MOD 3 25MM MACHINE GUN SYSTEMS, crucial for force protection and offensive operations. The contract's geographic impact is primarily centered in Kentucky, where BAE Systems Land & Armaments L.P. is located. Workforce implications include employment opportunities at BAE Systems and its potential subcontractors within the defense manufacturing sector.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition and potentially increases costs for taxpayers.
Firm-fixed-price contract shifts cost overrun risk to the government.
Lack of small business participation may limit broader economic benefits.
Absence of competition could stifle innovation from alternative suppliers.

Positive Signals

BAE Systems is a known defense contractor with established capabilities.
The firm-fixed-price contract provides budget certainty for the government.
The system procured is a critical component for naval defense operations.

Sector Analysis

This contract falls within the defense manufacturing sector, specifically focusing on ordnance and weapon systems. The market for such specialized military hardware is often characterized by limited suppliers due to high technological barriers, stringent quality requirements, and government procurement regulations. BAE Systems Land & Armaments L.P. is a significant player in this niche. Comparable spending benchmarks are difficult to establish without competitive data, but the overall defense budget allocates substantial resources to weapon system procurement and sustainment.

Small Business Impact

This contract did not include a small business set-aside, and there is no indication of subcontracting plans specifically targeting small businesses. The sole-source nature of the award further limits opportunities for small business participation. This suggests that the primary economic benefits related to this contract may not extend to the small business ecosystem, potentially missing opportunities for innovation and economic development within that segment of the industry.

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 structure, which obligates BAE Systems to deliver the specified systems. Transparency is limited due to the sole-source nature of the award, with fewer public details available compared to competed contracts. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Naval Weapon Systems Procurement
Ordnance and Ammunition Manufacturing
Defense Contractor Services
Sole-Source Defense Contracts
MK38 Gun System Sustainment

Risk Flags

Sole-source award
Lack of competition
Potential for overpricing
Limited small business participation

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $30.6 million to BAE SYSTEMS LAND & ARMAMENTS L.P.. MK38 MOD 3 25MM MACHINE GUN SYSTEM

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 $30.6 million.

What is the period of performance?

Start: 2015-10-30. End: 2017-08-04.

What is the track record of BAE Systems Land & Armaments L.P. in delivering similar defense systems?

BAE Systems Land & Armaments L.P. has a significant track record in the defense industry, producing a wide range of armored vehicles, artillery systems, and naval weapon stations. They are a major defense contractor with extensive experience in manufacturing and integrating complex military hardware. Their history includes numerous contracts with the Department of Defense and allied nations. While specific performance metrics for past contracts are not detailed here, their continued role as a prime contractor suggests a generally accepted level of capability and reliability in delivering defense materiel. However, the absence of competition for this specific MK38 contract means that performance on this award cannot be directly compared to other bidders' potential outcomes.

How does the $30.6 million award compare to historical spending on MK38 systems?

Direct historical spending comparisons for this specific MK38 MOD 3 25MM MACHINE GUN SYSTEM contract are challenging without access to detailed procurement databases that track unit costs and quantities over time. The total award of $30.6 million represents a significant investment. However, without knowing the number of systems procured under this contract and their unit prices, it's difficult to establish a trend or benchmark against previous awards. The sole-source nature of this award further complicates comparisons, as competitive bids in the past might have yielded different price points. Future analysis could involve examining contract histories for the MK38 system to identify patterns in pricing and quantity.

What are the primary risks associated with a sole-source award for defense systems?

The primary risks associated with a sole-source award for defense systems like the MK38 machine gun system include a lack of price competition, which can lead to higher costs for the government and taxpayers. Without multiple bidders, there is less incentive for the contractor to offer the lowest possible price, potentially resulting in a less favorable value for money. Another risk is the potential for reduced innovation, as alternative solutions or technological advancements from other manufacturers are not explored. Furthermore, sole-source contracts can sometimes indicate a lack of market research or a failure to identify potential competitors, which could be a systemic issue. Finally, there's a risk of contractor lock-in, where the government becomes dependent on a single supplier, potentially limiting future flexibility and negotiation power.

How effective is the firm-fixed-price contract type in managing costs for this type of defense procurement?

The firm-fixed-price (FFP) contract type is generally considered effective in managing costs for well-defined procurements where the scope of work is clear and risks are understood. For the MK38 MOD 3 25MM MACHINE GUN SYSTEM, an FFP contract provides the government with cost certainty, as the contractor agrees to a fixed price regardless of their actual costs. This shifts the risk of cost overruns to the contractor. However, this effectiveness is contingent on the initial price being fair and competitive. In a sole-source situation, the 'fixed' price might be higher than it would be in a competitive environment. While FFP is good for budget predictability, the government must ensure the initial price is justified, especially when competition is absent.

What is the significance of the MK38 MOD 3 25MM MACHINE GUN SYSTEM in the context of naval operations?

The MK38 MOD 3 25MM MACHINE GUN SYSTEM is a crucial component for naval operations, primarily serving as a close-in weapon system (CIWS) for surface vessels. It provides essential defense against small boats, low-flying aircraft, and other asymmetric threats. The MOD 3 variant represents an upgrade, likely incorporating improved targeting, reliability, or integration capabilities. Its deployment enhances the survivability and operational effectiveness of ships by offering a robust and accurate means of self-defense. The procurement of these systems directly supports the Navy's mission readiness and its ability to operate safely in various maritime environments.

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: N0017415R0009

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, Foreign Owned, Foreign-Owned and U.S.-Incorporated Business, Not Designated a Small Business, Partnership or Limited Liability Partnership, Special Designations

Financial Breakdown

Contract Ceiling: $30,556,246

Exercised Options: $30,556,246

Current Obligation: $30,556,246

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline