DoD's $109M BAE Systems Contract for Technical Services Faces Scrutiny Over Cost-Plus Structure

Contract Overview

Contract Amount: $109,328,657 ($109.3M)

Contractor: BAE Systems Technology Solutions & Services Inc.

Awarding Agency: Department of Defense

Start Date: 2006-10-01

End Date: 2011-09-12

Contract Duration: 1,807 days

Daily Burn Rate: $60.5K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: TECHNICAL SERVICES/LIFE CYCLE SUPPORT

Place of Performance

Location: SAINT INIGOES, SAINT MARYS County, MARYLAND, 20684

State: Maryland Government Spending

Plain-Language Summary

Department of Defense obligated $109.3 million to BAE SYSTEMS TECHNOLOGY SOLUTIONS & SERVICES INC. for work described as: TECHNICAL SERVICES/LIFE CYCLE SUPPORT Key points: 1. The contract awarded to BAE Systems for technical services represents a significant investment by the Department of the Navy. 2. Competition was full and open, suggesting a potentially competitive bidding process, but the contract type raises questions about cost control. 3. The use of a Cost Plus Fixed Fee (CPFF) structure introduces inherent risk for cost overruns, impacting overall value. 4. Engineering services (NAICS 541330) are critical for defense operations, but the specific sector context for this spending is not detailed.

Value Assessment

Rating: questionable

The CPFF contract type allows for cost reimbursement plus a fixed fee, which can lead to higher final costs compared to fixed-price contracts. Benchmarking against similar engineering services contracts is difficult without detailed cost breakdowns, but CPFF is generally less price-efficient.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, which is a positive sign for price discovery. However, the CPFF structure can diminish the effectiveness of competition in controlling final costs, as the contractor is incentivized to incur costs.

Taxpayer Impact: Taxpayer funds are at risk of being overspent due to the CPFF structure, which prioritizes cost reimbursement over strict cost containment.

Public Impact

The substantial $109 million expenditure on technical and life cycle support services impacts the Navy's budget for critical engineering functions. The long duration of the contract (1807 days) suggests a sustained need for these services, potentially indicating a core operational requirement. The lack of small business participation (ss: false, sb: false) means that opportunities for smaller, specialized firms were not leveraged in this award.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost Plus Fixed Fee contract type
Lack of small business participation
Long contract duration

Positive Signals

Full and open competition

Sector Analysis

The Department of Defense, specifically the Navy, relies heavily on engineering services for technical and life cycle support of complex systems. Spending benchmarks for such services can vary widely based on the specific technologies and systems involved, but large-scale contracts like this are common.

Small Business Impact

This contract did not involve small businesses, as indicated by 'ss: false' and 'sb: false'. This suggests that the prime contractor, BAE Systems, was awarded the entire scope of work, potentially missing opportunities to foster innovation and competition among smaller, specialized firms.

Oversight & Accountability

Oversight of CPFF contracts is crucial to ensure that costs are reasonable and the fixed fee is appropriate. The Department of the Navy would need robust auditing and monitoring mechanisms to hold BAE Systems accountable for expenditures and performance throughout the contract's life cycle.

Related Government Programs

Engineering Services
Department of Defense Contracting
Department of the Navy Programs

Risk Flags

Cost Plus Fixed Fee contract type increases government risk of cost overruns.
Lack of small business participation limits competitive opportunities.
Long contract duration may indicate potential for scope creep or evolving requirements.
Limited transparency on specific services provided and cost justification.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $109.3 million to BAE SYSTEMS TECHNOLOGY SOLUTIONS & SERVICES INC.. TECHNICAL SERVICES/LIFE CYCLE SUPPORT

Who is the contractor on this award?

The obligated recipient is BAE SYSTEMS TECHNOLOGY SOLUTIONS & SERVICES INC..

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $109.3 million.

What is the period of performance?

Start: 2006-10-01. End: 2011-09-12.

What specific engineering services were provided under this contract, and how did their complexity justify the CPFF structure?

The contract was for 'TECHNICAL SERVICES/LIFE CYCLE SUPPORT' under NAICS code 541330 (Engineering Services). The complexity likely involved maintaining, upgrading, or supporting sophisticated naval systems. However, the CPFF structure inherently shifts cost risk to the government, and without detailed service descriptions, it's difficult to definitively justify this structure over alternatives that might offer better cost control.

Given the full and open competition, why did the Navy opt for a CPFF contract, and what measures were in place to mitigate cost overrun risks?

The choice of a CPFF contract suggests that the full scope of work or its costs could not be precisely defined at the outset, a common scenario in complex technical support. To mitigate risks, the Navy would typically implement stringent oversight, require detailed cost reporting, and negotiate the fixed fee carefully. However, the inherent nature of CPFF means the government bears the primary risk of cost escalation.

What was the ultimate value delivered to the Navy for the $109 million spent, considering the CPFF structure and lack of small business involvement?

Assessing the ultimate value is challenging without performance metrics and detailed cost breakdowns. While the contract was competitively awarded, the CPFF structure means the final cost could exceed initial estimates. The absence of small businesses might have limited access to specialized expertise or innovative solutions that could have enhanced value or reduced costs.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Architectural, Engineering, and Related Services › Engineering Services

Product/Service Code: MAINT, REPAIR, REBUILD EQUIPMENT › MAINT, REPAIR, REBUILD OF EQUIPMENT

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: N0042105R0077

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: BAE Systems PLC (UEI: 217304393)

Address: 1601 RESEARCH BLVD, ROCKVILLE, MD, 20850

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $122,288,196

Exercised Options: $122,288,196

Current Obligation: $109,328,657

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline