DoD's $18.8M contract for ordnance R&D with BAE Systems shows fair competition but raises value concerns

Contract Overview

Contract Amount: $18,849,631 ($18.8M)

Contractor: BAE Systems Land & Armaments L.P.

Awarding Agency: Department of Defense

Start Date: 2006-03-08

End Date: 2012-12-31

Contract Duration: 2,490 days

Daily Burn Rate: $7.6K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 3

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: 200606!357994!1700!N00178!NAVAL SURFACE WARFARE CENTER !N0017806C1008 !A!N! !N! ! !20060308!20060307!006481543!824825459!217304393!N!B A E SYSTEMS LAND & ARMAMENTS!4800 E RIVER RD !MINNEAPOLIS !MN!55421!43000!053!27!MINNEAPOLIS !HENNEPIN !MINNESOTA !+000000600000!N!N!000000600000!AD21!RDTE/SERVICES-BASIC RESEARCH !A5 !WEAPONS !000 !NOT DISCERNABLE !332995!E! !3!B!S! ! ! !99990909!B! ! !A! !A!N!U!2!003!B! !Z!N!Z! ! !N!C!N! ! ! !A!A!A!A!000!A!C!Y! ! ! ! !1700!N00014!0001! !

Place of Performance

Location: MINNEAPOLIS, ANOKA County, MINNESOTA, 55421

State: Minnesota Government Spending

Plain-Language Summary

Department of Defense obligated $18.8 million to BAE SYSTEMS LAND & ARMAMENTS L.P. for work described as: 200606!357994!1700!N00178!NAVAL SURFACE WARFARE CENTER !N0017806C1008 !A!N! !N! ! !20060308!20060307!006481543!824825459!217304393!N!B A E SYSTEMS LAND & ARMAMENTS!4800 E RIVER RD !MINNEAPOLIS !MN!55421!43000!053!27!MINNEAPOLIS !HENN… Key points: 1. Contract awarded through full and open competition, indicating a competitive bidding process. 2. The contract's cost-plus-fixed-fee structure may incentivize cost overruns. 3. Limited transparency on specific deliverables and performance metrics hinders a full value assessment. 4. The duration of the contract (over 8 years) suggests a long-term research and development effort. 5. The awardee, BAE Systems, is a major defense contractor with a significant presence in the sector. 6. The contract falls under 'Other Ordnance and Accessories Manufacturing,' a niche but critical defense sub-sector.

Value Assessment

Rating: fair

The total award amount of $18.8 million over approximately 8 years for research and development services is difficult to benchmark without specific deliverables. The cost-plus-fixed-fee (CPFF) contract type, while common for R&D, can lead to higher final costs compared to fixed-price contracts if not managed tightly. The fixed fee component is not detailed, making it hard to assess the contractor's profit margin and thus the overall value for money. Further analysis of the specific R&D objectives and achieved milestones would be necessary for a more definitive value assessment.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, suggesting that multiple bidders had the opportunity to submit proposals. The data indicates three bids were received. A competitive process generally leads to better price discovery and potentially lower costs for the government. However, the specific details of the competition, such as the number of proposals evaluated and the basis for award, are not fully detailed here.

Taxpayer Impact: Full and open competition is beneficial for taxpayers as it fosters a competitive environment that can drive down prices and encourage innovation, leading to better use of public funds.

Public Impact

The primary beneficiaries are the Department of Defense and potentially the warfighter, who will receive advancements in ordnance technology. Services delivered include basic research and development related to weapons systems. The geographic impact is primarily within the United States, with BAE Systems' operations in Minnesota. Workforce implications include employment for engineers, scientists, and support staff at BAE Systems and potentially its subcontractors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost-plus-fixed-fee structure may lead to cost overruns.
Long contract duration (over 8 years) requires sustained oversight.
Limited public detail on specific R&D outcomes and performance metrics.
Potential for scope creep in long-term R&D projects.

Positive Signals

Awarded through full and open competition, indicating a robust bidding process.
BAE Systems is an established defense contractor with relevant expertise.
Contract supports critical defense research and development objectives.

Sector Analysis

This contract falls within the 'Other Ordnance and Accessories Manufacturing' sector, a specialized area of the broader defense industrial base. This sector is characterized by high barriers to entry, significant R&D investment, and close ties to government procurement. The market size is difficult to quantify precisely but is integral to national security. Comparable spending benchmarks are challenging to establish due to the specialized nature of ordnance R&D, but overall defense R&D spending is in the tens of billions annually.

Small Business Impact

The provided data does not indicate any specific small business set-aside provisions for this contract. Given the nature of advanced ordnance R&D and the prime contractor being a large entity like BAE Systems, subcontracting opportunities for small businesses may exist, but are not explicitly detailed. Further investigation into BAE Systems' subcontracting plans would be needed to assess the impact on the small business ecosystem.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy and the Naval Surface Warfare Center. As a Cost Plus Fixed Fee contract, rigorous financial oversight and performance monitoring are crucial to ensure funds are used effectively and milestones are met. Transparency is limited by the nature of R&D contracts, but Inspector General (IG) reports and contract performance reviews would be key accountability mechanisms.

Related Government Programs

Department of Defense Research and Development
Naval Surface Warfare Center Contracts
Ordnance and Weapons Systems Procurement
BAE Systems Defense Contracts

Risk Flags

Cost-plus-fixed-fee contract type increases cost overrun risk.
Long contract duration requires sustained oversight.
Limited public detail on specific R&D deliverables and performance metrics.
Potential for contractor to prioritize profit over cost efficiency in CPFF structure.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $18.8 million to BAE SYSTEMS LAND & ARMAMENTS L.P.. 200606!357994!1700!N00178!NAVAL SURFACE WARFARE CENTER !N0017806C1008 !A!N! !N! ! !20060308!20060307!006481543!824825459!217304393!N!B A E SYSTEMS LAND & ARMAMENTS!4800 E RIVER RD !MINNEAPOLIS !MN!55421!43000!053!27!MINNEAPOLIS !HENNEPIN !MINNESOTA !+000000600000!N!N!000000600000!AD21!RDTE/SERVICES-BASIC RESEARCH !A5 !WEAPONS !000 !NOT DISCERNABLE !332995!E! !3!B!S! ! ! !999

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 $18.8 million.

What is the period of performance?

Start: 2006-03-08. End: 2012-12-31.

What specific research and development objectives were outlined in this contract, and what were the key performance indicators for success?

The contract data identifies the Product Service Code (PSC) as 'AD21' (RDTE/SERVICES-BASIC RESEARCH) and the North American Industry Classification System (NAICS) code as '332995' (Other Ordnance and Accessories Manufacturing). While these codes indicate the general area of work, the specific research and development objectives and key performance indicators (KPIs) are not detailed in the provided snippet. Basic research contracts often focus on exploring fundamental principles and technologies rather than immediate product development. Success metrics for such contracts typically involve technical feasibility studies, proof-of-concept demonstrations, and the generation of new knowledge or innovative approaches. Without access to the contract statement of work (SOW), a precise definition of objectives and KPIs remains elusive.

How does the $18.8 million total award value compare to similar ordnance R&D contracts awarded by the Navy or DoD in the same period?

Benchmarking the $18.8 million award value requires comparing it to similar ordnance R&D contracts. The period of performance spans from March 2006 to December 2012, a timeframe where defense R&D spending was substantial. Contracts for basic research in ordnance can vary significantly based on the complexity and scope of the research. For instance, contracts focused on advanced materials, propulsion systems, or novel warhead technologies could range from a few million to tens of millions of dollars. Without specific details on the technological focus of this BAE Systems contract, a direct comparison is difficult. However, $18.8 million over an 8-year period suggests an average annual investment of approximately $2.35 million, which is a moderate level for specialized R&D within a large defense contractor's portfolio.

What is BAE Systems' track record with the Department of the Navy for similar R&D contracts, and have there been any performance issues?

BAE Systems is a major defense contractor with extensive experience and a significant number of contracts awarded by the Department of the Navy and the broader Department of Defense. Their track record typically includes a wide range of R&D, manufacturing, and support services. While specific performance issues related to this particular contract (N0017806C1008) are not detailed in the provided data, large contractors can sometimes face challenges related to cost overruns, schedule delays, or technical performance on complex projects. A comprehensive assessment would require reviewing contract performance reports, past performance evaluations, and any documented disputes or corrective actions associated with BAE Systems' prior dealings with the Navy, particularly in the ordnance R&D domain.

Given the Cost Plus Fixed Fee (CPFF) structure, what are the primary risks associated with this contract type for taxpayers?

The primary risk for taxpayers with a Cost Plus Fixed Fee (CPFF) contract is the potential for cost overruns. In a CPFF structure, the contractor is reimbursed for all allowable costs incurred, plus a predetermined fixed fee representing profit. While the fee is fixed, the total cost is not. This can incentivize contractors to incur higher costs, as their profit margin (the fixed fee) remains constant regardless of the final cost. Effective government oversight is crucial to ensure that costs are reasonable and allowable. Without stringent cost controls and monitoring, taxpayers may end up paying significantly more than initially anticipated, especially on long-term R&D projects where costs can be less predictable.

What is the historical spending trend for 'Other Ordnance and Accessories Manufacturing' (NAICS 332995) by the Department of Defense?

Historical spending trends for NAICS code 332995 ('Other Ordnance and Accessories Manufacturing') by the Department of Defense (DoD) reflect the ongoing need for specialized munitions, weapon components, and related accessories. While specific aggregate spending figures for this NAICS code over extended periods are not readily available in this data snippet, it is understood that the DoD consistently invests in this sector to maintain and modernize its arsenal. Spending in this area can fluctuate based on geopolitical events, strategic priorities, and the lifecycle of existing weapon systems. The presence of major defense contractors like BAE Systems in this sector indicates significant, albeit specialized, government investment over many years.

Industry Classification

NAICS: Manufacturing › Other Fabricated Metal Product Manufacturing › Other Ordnance and Accessories Manufacturing

Product/Service Code: RESEARCH AND DEVELOPMENT › DEFENSE (OTHER) R&D

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Offers Received: 3

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: BAE Systems Land & Armaments, L.P. (UEI: 876861790)

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

Business Categories: Category Business, Not Designated a Small Business

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline