DoD awards $36.2M for digital receivers, with BAE Systems sole-source contract raising value concerns

Contract Overview

Contract Amount: $36,229,246 ($36.2M)

Contractor: BAE Systems Australia Limited

Awarding Agency: Department of Defense

Start Date: 2022-09-26

End Date: 2027-09-15

Contract Duration: 1,815 days

Daily Burn Rate: $20.0K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: DEPLOYED DIGITAL RECEIVERS FOR VIRGINIA

Place of Performance

Location: PREMONT, JIM WELLS County, TEXAS, 78375

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $36.2 million to BAE SYSTEMS AUSTRALIA LIMITED for work described as: DEPLOYED DIGITAL RECEIVERS FOR VIRGINIA Key points: 1. Contract awarded on a sole-source basis, limiting price competition and potentially increasing costs. 2. The firm-fixed-price structure shifts some risk to the contractor, but the lack of competition is a primary concern. 3. Performance period of nearly five years suggests a long-term need for these specialized receivers. 4. The contract falls within the Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing sector. 5. No small business set-aside was indicated, suggesting a focus on large prime contractors.

Value Assessment

Rating: questionable

The contract's value of $36.2 million for digital receivers requires careful benchmarking against similar procurements. Without competitive bidding, it is difficult to ascertain if the pricing reflects fair market value. The firm-fixed-price nature provides some cost certainty, but the lack of competition is a significant indicator that the government may not have achieved optimal value for its investment. Further analysis of the specific technical requirements and the contractor's cost structure would be needed for a more definitive assessment.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one bidder, BAE Systems Australia Limited, was solicited. This significantly limits the opportunity for price discovery and competitive negotiation. While sole-source awards can be justified for unique capabilities or urgent needs, the absence of a competitive process raises questions about whether alternative solutions or more favorable pricing could have been obtained through open competition.

Taxpayer Impact: The lack of competition means taxpayers may have paid a premium for these digital receivers, as there was no market pressure to drive down costs.

Public Impact

The Department of the Navy benefits from the acquisition of critical digital receivers for its operations. These receivers are essential for search, detection, navigation, guidance, and related systems, likely supporting naval platforms. The contract's geographic impact is primarily linked to the contractor's operations in Texas, where the award was made. The workforce implications are likely concentrated within BAE Systems' engineering and manufacturing divisions.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure on pricing.
Lack of transparency in the justification for sole-source procurement.
Potential for cost overruns if market prices fluctuate significantly during the contract term.

Positive Signals

Firm-fixed-price contract shifts some performance risk to the contractor.
Long-term contract provides stability for critical system sustainment.
Award to an established defense contractor with a track record in similar systems.

Sector Analysis

The defense electronics sector is characterized by high research and development costs, complex supply chains, and significant government procurement. This contract for digital receivers fits within the broader market for specialized electronic systems used in defense applications. The North American Industry Classification System (NAICS) code 334511, 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing,' represents a segment of this market focused on sophisticated instrumentation. Spending in this area is often driven by technological advancements and the need for superior performance in military operations.

Small Business Impact

The contract was not set aside for small businesses, and there is no indication of subcontracting requirements for small businesses in the provided data. This suggests that the primary focus was on securing the specialized capabilities of a large defense contractor. The absence of small business involvement in this specific award may limit opportunities for smaller firms to participate in this segment of the defense supply chain.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of the Navy's contracting and program management offices. The firm-fixed-price nature of the award implies that the contractor bears responsibility for cost control. Transparency regarding the justification for the sole-source award and ongoing performance monitoring would be key oversight mechanisms. The Inspector General's office for the Department of Defense may conduct audits or investigations if concerns regarding waste, fraud, or abuse arise.

Related Government Programs

Naval radar systems
Electronic warfare systems
Avionics manufacturing
Defense instrumentation

Risk Flags

Sole-source award raises concerns about price competition and value for money.
Lack of transparency regarding the justification for sole-source procurement.
Potential for contractor lock-in due to specialized nature of the equipment.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $36.2 million to BAE SYSTEMS AUSTRALIA LIMITED. DEPLOYED DIGITAL RECEIVERS FOR VIRGINIA

Who is the contractor on this award?

The obligated recipient is BAE SYSTEMS AUSTRALIA LIMITED.

Which agency awarded this contract?

Awarding agency: Department of Defense (Department of the Navy).

What is the total obligated amount?

The obligated amount is $36.2 million.

What is the period of performance?

Start: 2022-09-26. End: 2027-09-15.

What is the specific justification for awarding this contract on a sole-source basis to BAE Systems Australia Limited?

The provided data indicates the contract was 'NOT COMPETED,' implying a sole-source award. A formal justification for sole-source procurement is typically required by federal acquisition regulations. Common reasons include the existence of only one responsible source capable of providing the required supplies or services, a public exigency requiring immediate award, or a treaty or international agreement. Without access to the specific justification document (e.g., a Justification and Approval - J&A), it is impossible to definitively state the reason. However, it suggests that the Department of the Navy determined that BAE Systems possessed unique capabilities, proprietary technology, or was the only viable option to meet the requirement within the necessary timeframe or specifications.

How does the $36.2 million contract value compare to historical spending on similar digital receiver systems by the Department of the Navy?

To accurately compare the $36.2 million contract value, one would need to analyze historical procurement data for similar digital receiver systems by the Department of the Navy. This would involve identifying contracts with comparable North American Industry Classification System (NAICS) codes (e.g., 334511) and service descriptions. Benchmarking would require looking at the quantity, technical specifications, and contract type (e.g., firm-fixed-price) of past awards. Given this is a sole-source award, a direct comparison to competitively bid contracts could reveal a price premium. Without access to a comprehensive federal procurement database and specific search parameters, a precise historical comparison is not feasible based solely on the provided data.

What are the primary risks associated with a sole-source contract of this magnitude and duration?

The primary risks associated with a sole-source contract of this magnitude ($36.2 million) and duration (nearly five years) include potential overpricing due to the lack of competitive pressure, reduced incentive for the contractor to innovate or improve efficiency, and a potential lack of transparency in the procurement process. Taxpayers may not be receiving the best possible value for their money. Furthermore, the government becomes heavily reliant on a single supplier, which can create risks related to supply chain disruptions, contractor performance issues, or future price increases if the contractor gains significant leverage. The long duration also means that market conditions or technological advancements could render the procured systems less optimal over time without the benefit of competitive re-evaluation.

What is BAE Systems Australia Limited's track record with the Department of the Navy for similar systems?

BAE Systems Australia Limited is a subsidiary of BAE Systems, a major global defense contractor with a significant presence in the United States. The parent company has a long history of supplying complex electronic systems, including radar, navigation, and communication equipment, to various branches of the U.S. military, including the Department of the Navy. While specific details of their past performance on digital receiver contracts are not provided here, their established position in the defense industry suggests they possess the technical expertise and manufacturing capabilities required for such systems. A deeper dive into contract databases would reveal the extent and nature of their prior awards and performance history with the Navy.

What are the potential performance implications of a firm-fixed-price contract for these digital receivers?

A firm-fixed-price (FFP) contract structure for these digital receivers means that the contractor, BAE Systems Australia Limited, is obligated to complete the work for a predetermined price. This shifts the primary risk of cost overruns from the government to the contractor. If BAE Systems incurs higher-than-expected costs due to material price increases, labor issues, or unforeseen technical challenges, their profit margin will decrease. Conversely, if they can deliver the receivers for less than anticipated, their profit will increase. This contract type incentivizes the contractor to manage costs efficiently and perform the work within the agreed-upon budget. However, the lack of competition in this sole-source award might mean the initial fixed price was set at a higher baseline than it might have been in a competitive scenario.

Industry Classification

NAICS: Manufacturing › Navigational, Measuring, Electromedical, and Control Instruments Manufacturing › Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing

Product/Service Code: COMM/DETECT/COHERENT RADIATION

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0018921RZ087

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Compagnie DE Developpement DE L'eau S.A.

Address: EVANS BUILDING, TARANAKI ROAD, EDINBURGH

Business Categories: Category Business, Foreign Owned, International Organization, Not Designated a Small Business, Special Designations

Financial Breakdown

Contract Ceiling: $36,229,246

Exercised Options: $36,229,246

Current Obligation: $36,229,246

Subaward Activity

Number of Subawards: 28

Total Subaward Amount: $16,114,585

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline