DoD awards $14.2M for MK38 SPMR, a sole-source contract with BAE Systems

Contract Overview

Contract Amount: $14,242,425 ($14.2M)

Contractor: BAE Systems Land & Armaments L.P.

Awarding Agency: Department of Defense

Start Date: 2019-08-01

End Date: 2019-08-01

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: MK38 SPMR

Place of Performance

Location: LOUISVILLE, JEFFERSON County, KENTUCKY, 40214

State: Kentucky Government Spending

Plain-Language Summary

Department of Defense obligated $14.2 million to BAE SYSTEMS LAND & ARMAMENTS L.P. for work described as: MK38 SPMR Key points: 1. The contract value of $14.2 million for MK38 SPMR represents a significant investment in ordnance and accessories. 2. Sole-source procurement raises questions about potential price inflation and limited market engagement. 3. The contract's duration and delivery order structure suggest a need for ongoing support or phased delivery. 4. Focus on Small Arms, Ordnance, and Ordnance Accessories Manufacturing indicates a specialized niche within defense procurement. 5. The absence of small business involvement warrants further investigation into subcontracting opportunities.

Value Assessment

Rating: questionable

Benchmarking the value of this $14.2 million contract is challenging due to its sole-source nature and the specific nature of the MK38 SPMR system. Without competitive bids, it's difficult to ascertain if the pricing reflects fair market value. Comparisons to similar ordnance systems or upgrades would be necessary to provide a more robust assessment of value for money. The Cost Plus Fixed Fee (CPFF) contract type can sometimes lead to higher costs if not closely managed, as contractor expenses are reimbursed.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning BAE SYSTEMS LAND & ARMAMENTS L.P. was the only vendor considered. This approach bypasses the competitive bidding process, which typically involves multiple companies vying for the contract. While sole-source awards can be justified for unique capabilities or urgent needs, they limit price discovery and potentially reduce the incentive for contractors to offer the most competitive pricing.

Taxpayer Impact: Taxpayers may be paying a premium due to the lack of competition, as the government did not benefit from the downward price pressure that typically occurs in a competitive environment.

Public Impact

The primary beneficiaries are the Department of Defense, which receives critical ordnance and accessories for its operations. The contract supports the production and delivery of Small Arms, Ordnance, and Ordnance Accessories Manufacturing (MK38 SPMR). The geographic impact is primarily centered in Kentucky, where BAE SYSTEMS LAND & ARMAMENTS L.P. is located, potentially supporting local jobs. Workforce implications include the employment of skilled labor in manufacturing and defense-related industries at the contractor's facility.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing and potentially increases costs for taxpayers.
Lack of transparency in the procurement process due to the absence of multiple bidders.
Cost Plus Fixed Fee contract type may incentivize cost overruns if not rigorously monitored.
No indication of small business participation or subcontracting goals.

Positive Signals

Award to an established defense contractor (BAE Systems) suggests a level of trust and proven capability.
The contract addresses a specific need within the Department of Defense for ordnance systems.
The contract is for a defined product (MK38 SPMR), indicating a clear scope of work.

Sector Analysis

The defense manufacturing sector is characterized by high barriers to entry, specialized technologies, and significant government investment. Contracts for ordnance and related accessories are crucial for maintaining military readiness. The market is often dominated by a few large prime contractors, with BAE Systems being a prominent player. Spending in this sub-sector is driven by modernization efforts, operational demands, and geopolitical factors. Comparable spending benchmarks would involve analyzing other contracts for similar weapon systems or ammunition production.

Small Business Impact

This contract does not appear to have a small business set-aside, as indicated by 'sb': false. Furthermore, the 'ss' (small business) flag is also false. This suggests that small businesses were not specifically targeted for this procurement. There is no information provided regarding subcontracting plans, which means the extent to which small businesses might benefit indirectly through subcontracts is unknown. This lack of direct or indirect small business engagement could be a missed opportunity to foster growth within the small business defense industrial base.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Defense's contract management agencies, such as the Defense Contract Management Agency (DCMA), which is listed as the 'sa'. DCMA is responsible for ensuring contractor performance, compliance with contract terms, and proper cost accounting. Accountability measures would be embedded in the contract's reporting requirements and performance metrics. Transparency is limited due to the sole-source nature of the award, but contract award details are generally made public. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Department of Defense Ordnance Procurement
Small Arms Manufacturing Contracts
BAE Systems Defense Contracts
Cost Plus Fixed Fee Contracts
Sole-Source Defense Procurements

Risk Flags

Sole-source award
Lack of competition
Potential for cost overruns (CPFF)

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $14.2 million to BAE SYSTEMS LAND & ARMAMENTS L.P.. MK38 SPMR

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 (Defense Contract Management Agency).

What is the total obligated amount?

The obligated amount is $14.2 million.

What is the period of performance?

Start: 2019-08-01. End: 2019-08-01.

What is the historical spending pattern for the MK38 SPMR system or similar ordnance from BAE Systems?

Analyzing historical spending for the MK38 SPMR system or comparable ordnance from BAE Systems is crucial for understanding value trends. Without specific historical data for this exact system, we can look at broader trends in BAE Systems' defense contracts. The company is a major supplier of military hardware, and its contract values can fluctuate based on defense budgets, modernization programs, and geopolitical events. A review of past contracts for similar weapon systems or ammunition would reveal if the current $14.2 million award is consistent with previous investments, or if it represents an increase or decrease. Factors such as inflation, technological upgrades, and changes in production volume significantly influence historical spending. A detailed analysis would require access to historical contract databases to identify trends in pricing, quantities, and contract types awarded to BAE Systems for similar defense articles.

How does the pricing of this MK38 SPMR contract compare to other similar ordnance systems procured by the DoD?

Direct price comparison for the MK38 SPMR is difficult without knowing the exact specifications and quantities procured under this $14.2 million sole-source contract. However, we can infer potential value by comparing it to publicly available data on similar ordnance systems. The DoD procures a wide range of weapon systems, from small arms to larger caliber guns and associated ammunition. If the MK38 SPMR is a specific type of naval gun system, comparisons would be made to other naval armament contracts. If it's a component or accessory, comparisons would be to similar components. The sole-source nature of this award suggests that a competitive benchmark might not be readily available, potentially leading to higher unit costs than if the contract had been competed. Further analysis would involve identifying comparable systems, their contract values, quantities, and procurement methods to establish a relative value assessment.

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

Sole-source procurements, like the $14.2 million award for the MK38 SPMR to BAE Systems, carry inherent risks. The primary risk is the lack of price competition, which can lead to inflated costs for taxpayers. Without competing bids, the government has less leverage to negotiate favorable pricing. Another risk is reduced innovation; contractors may have less incentive to invest in improving efficiency or developing cost-saving measures when they are the only option. There's also a potential for vendor lock-in, where the government becomes dependent on a single supplier, making future procurements or transitions more difficult and costly. Furthermore, sole-source awards can sometimes be perceived as less transparent, potentially raising concerns about fairness and the best use of public funds. Robust oversight and justification are critical to mitigate these risks.

What is BAE Systems' track record with the Department of Defense, particularly concerning Cost Plus Fixed Fee contracts?

BAE Systems is a major defense contractor with a long-standing relationship with the Department of Defense, having secured numerous contracts across various defense platforms and systems. Their track record is generally characterized by the delivery of complex military hardware and services. Regarding Cost Plus Fixed Fee (CPFF) contracts, these are common in defense procurement, especially for research, development, or services where the final cost is uncertain. While CPFF contracts allow for cost reimbursement plus a fixed fee, they require diligent oversight from the government to manage costs effectively and prevent potential overruns. BAE Systems has experience managing such contracts, but their performance can vary. A thorough assessment would involve reviewing specific past CPFF contracts with the DoD to evaluate their cost control, performance metrics, and any instances of cost overruns or disputes.

What are the potential performance implications of awarding this contract as a delivery order rather than a standalone contract?

Awarding the MK38 SPMR as a delivery order under a larger contract (though the base contract details are not provided here) implies that this is part of an existing framework agreement or indefinite-delivery/indefinite-quantity (IDIQ) contract. This structure can offer flexibility and potentially faster procurement for follow-on needs. For the government, it allows for phased acquisition and better management of evolving requirements. For the contractor, it provides a degree of certainty for future work. However, the performance implications depend heavily on the terms of the base contract. If the base contract was competitively awarded, the delivery order benefits from that initial competition. If the base contract was also sole-source, then the delivery order inherits those limitations. Performance monitoring by the Defense Contract Management Agency (DCMA) remains critical to ensure timely delivery and quality standards are met for this specific order.

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: N0017418R0000

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Ball Corporation

Address: 4800 E RIVER RD, MINNEAPOLIS, MN, 55421

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: $14,360,870

Exercised Options: $14,360,870

Current Obligation: $14,242,425

Actual Outlays: $737,079

Subaward Activity

Number of Subawards: 14

Total Subaward Amount: $1,486,396

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: N0017418G0001

IDV Type: BOA

Timeline