DoD's $25.4M MK38 Machine Gun System contract awarded to BAE Systems without competition

Contract Overview

Contract Amount: $25,427,512 ($25.4M)

Contractor: BAE Systems Land & Armaments L.P.

Awarding Agency: Department of Defense

Start Date: 2016-09-30

End Date: 2018-12-31

Contract Duration: 822 days

Daily Burn Rate: $30.9K/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, 40214

State: Kentucky Government Spending

Plain-Language Summary

Department of Defense obligated $25.4 million to BAE SYSTEMS LAND & ARMAMENTS L.P. for work described as: MK38 MOD 3 25MM MACHINE GUN SYSTEM Key points: 1. The contract value of $25.4 million represents a significant investment in naval armament systems. 2. Awarded as a definitive contract, it suggests a long-term commitment to the MK38 system. 3. The absence of competition raises questions about potential price inflation and limited market exploration. 4. The firm-fixed-price structure aims to control costs, but without competition, its effectiveness is reduced. 5. The contract duration of 822 days indicates a substantial period for system delivery and integration. 6. The system's role in naval defense highlights its strategic importance for the Department of the Navy.

Value Assessment

Rating: questionable

Benchmarking the value of this specific MK38 MOD 3 25MM MACHINE GUN SYSTEM contract is challenging without direct comparisons for this exact configuration and quantity. However, the $25.4 million awarded to BAE Systems for a system that includes small arms and ordnance accessories suggests a substantial procurement. The firm-fixed-price (FFP) contract type is generally favorable for the government in controlling costs, but the lack of competition means there was no direct price discovery against other potential suppliers. Without competitive bids, it's difficult to ascertain if this price represents optimal value for money or if it could have been lower under a competitive bidding process.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded under a 'NOT COMPETED' status, indicating a sole-source or non-competitive procurement. This means that only one bidder, BAE SYSTEMS LAND & ARMAMENTS L.P., was solicited or considered for this award. The reasons for sole-source procurement can vary, including proprietary technology, unique capabilities, or lack of market availability from other sources. The absence of a competitive process limits the government's ability to explore a wider range of pricing and technical solutions.

Taxpayer Impact: The lack of competition means taxpayers may not have benefited from the cost savings typically achieved through a competitive bidding environment. This could potentially lead to higher prices than if multiple vendors had vied for the contract.

Public Impact

Naval forces, particularly the Department of the Navy, will benefit from the acquisition of advanced MK38 machine gun systems. The contract ensures the continued availability and potential upgrades of a critical weapon system for maritime security operations. The geographic impact is primarily centered around the manufacturing and delivery locations associated with BAE Systems, likely within the United States. The contract supports jobs within the defense manufacturing sector, specifically in areas related to ordnance and armament systems.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to higher costs for taxpayers.
Sole-source awards can reduce incentive for contractor innovation and efficiency.
Dependence on a single supplier can create supply chain risks.
Limited transparency in pricing due to non-competitive nature.

Positive Signals

Firm-fixed-price contract type helps to lock in costs.
BAE Systems is an established defense contractor with relevant expertise.
The MK38 system is a proven and critical component of naval defense.

Sector Analysis

The defense industry, specifically the segment focused on armament manufacturing, is characterized by high barriers to entry, significant R&D investment, and long-standing relationships between prime contractors and government agencies. The MK38 MOD 3 25MM MACHINE GUN SYSTEM falls within the 'Small Arms, Ordnance, and Ordnance Accessories Manufacturing' sector. This market is often dominated by a few large, specialized companies like BAE Systems. Spending in this area is driven by military modernization programs and operational readiness requirements. Comparable spending benchmarks would involve other large-scale procurements of naval weapon systems or significant upgrades to existing platforms.

Small Business Impact

This contract was not set aside for small businesses, and there is no indication of subcontracting requirements for small businesses within 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, potentially limiting direct opportunities for small businesses in this specific procurement. Further analysis would be needed to determine if BAE Systems has a broader small business subcontracting plan in place for its overall operations.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Defense's contracting and financial management regulations. The Department of the Navy's contracting officers are responsible for ensuring compliance with contract terms. Transparency is limited due to the non-competitive nature of the award. Inspector General (IG) jurisdiction would apply if any fraud, waste, or abuse were suspected or reported during the contract's lifecycle. Regular reporting and audits are standard oversight mechanisms for such procurements.

Related Government Programs

Naval Surface Warfare
Ordnance and Ammunition Procurement
Shipboard Weapon Systems
Defense Manufacturing Contracts

Risk Flags

Non-competitive award
Potential for cost overruns
Lack of market research evidence

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $25.4 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 $25.4 million.

What is the period of performance?

Start: 2016-09-30. End: 2018-12-31.

What is the historical spending trend for the MK38 Machine Gun System by the Department of Defense?

Analyzing historical spending for the MK38 Machine Gun System requires accessing detailed contract databases over multiple fiscal years. While this specific award is for $25.4 million, understanding the broader trend involves looking at previous awards for the MK38 system, including different modifications and quantities, as well as any sustainment or upgrade contracts. Without access to that comprehensive historical data, it's difficult to establish a precise trend. However, the fact that the Department of the Navy continues to procure and award contracts for this system suggests a sustained need and ongoing investment in its capabilities. The nature of defense procurement often involves cyclical spending based on modernization programs, operational tempo, and budget allocations, which can lead to fluctuations in annual spending rather than a consistent linear trend.

How does the price of this MK38 MOD 3 system compare to similar weapon systems procured by other branches of the military or allied nations?

Direct price comparison for the MK38 MOD 3 25MM MACHINE GUN SYSTEM is challenging due to the proprietary nature of defense contracts and the specific configurations often tailored to individual service requirements. The $25.4 million award to BAE Systems is for a definitive contract, suggesting a comprehensive package. To benchmark effectively, one would need to identify comparable systems (e.g., other 25mm naval gun systems or similar caliber remotely operated weapon stations) procured by other military branches (like the Army or Air Force, though less likely for this specific system) or allied nations. Key factors influencing price include system capabilities (e.g., fire control, sensors, ammunition handling), quantity, integration costs, and the level of competition during procurement. The sole-source nature of this award further complicates direct value-for-money comparisons, as competitive bids often drive prices down.

What are the specific risks associated with a sole-source award for critical defense equipment like the MK38 system?

Sole-source awards for critical defense equipment like the MK38 system present several risks. Firstly, there's the risk of inflated pricing, as the government lacks the leverage of competitive bidding to secure the best possible price. This can lead to inefficient use of taxpayer funds. Secondly, it can stifle innovation; without competition, the incumbent contractor may have less incentive to invest in improving the system's performance or reducing its production costs. Thirdly, there's a potential for vendor lock-in, where the government becomes overly reliant on a single supplier, making it difficult and costly to switch to alternatives in the future. Finally, a sole-source award can reduce transparency in the procurement process, making it harder to justify the expenditure and potentially leading to perceptions of unfairness or favoritism.

What is BAE Systems' track record with the MK38 system and similar defense contracts?

BAE Systems has a well-established track record as a major defense contractor, and they are known for their involvement with the MK38 Machine Gun System. The company has been a primary manufacturer and supplier of this system, including various upgrades and modifications, to the U.S. Navy and other allied navies for many years. Their experience encompasses the design, production, integration, and sustainment of complex weapon systems. Historical data indicates BAE Systems has successfully delivered numerous MK38 systems and related components under various contract types. While specific performance metrics for every contract are not publicly available, their continued selection for significant procurements suggests a generally satisfactory performance history in delivering these critical naval armament systems.

What are the potential performance implications of awarding this contract without competition?

The performance implications of awarding the MK38 MOD 3 contract without competition are multifaceted. On the positive side, awarding to an incumbent like BAE Systems, who has extensive experience with the system, can ensure continuity of supply and potentially faster delivery if they are already tooled and familiar with the requirements. This can maintain operational readiness. However, the lack of competition might mean that the government doesn't benefit from the most advanced technological solutions or process efficiencies that a competitive environment could foster. While the firm-fixed-price contract aims to ensure cost certainty, the absence of bids means there's no external validation that the chosen solution represents the best available performance for the price. The long-term performance could be impacted if the contractor faces less pressure to innovate or improve the system's reliability and maintainability.

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: N0017416R0011

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: $25,427,512

Exercised Options: $25,427,512

Current Obligation: $25,427,512

Subaward Activity

Number of Subawards: 54

Total Subaward Amount: $16,217,499

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline