DoD's $49.5M Engineering Services Contract Awarded to BAE Systems, Raising Value-for-Money Questions

Contract Overview

Contract Amount: $49,536,827 ($49.5M)

Contractor: BAE Systems Technology Solutions & Services Inc.

Awarding Agency: Department of Defense

Start Date: 2011-09-14

End Date: 2019-04-30

Contract Duration: 2,785 days

Daily Burn Rate: $17.8K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: COMMUNICATION SYSTEMS ENGINEERING

Place of Performance

Location: ROCKVILLE, MONTGOMERY County, MARYLAND, 20850

State: Maryland Government Spending

Plain-Language Summary

Department of Defense obligated $49.5 million to BAE SYSTEMS TECHNOLOGY SOLUTIONS & SERVICES INC. for work described as: COMMUNICATION SYSTEMS ENGINEERING Key points: 1. Contract awarded on a sole-source basis, limiting price discovery and potentially increasing costs. 2. The contract's duration of 2785 days (over 7 years) suggests a long-term need for these engineering services. 3. Performance was managed by the Department of the Navy, indicating a specific defense-related requirement. 4. The 'Engineering Services' category (NAICS 541330) is broad and could encompass various specialized technical support functions. 5. Lack of competition raises concerns about whether the government secured the best possible price and value. 6. The cost-plus-fixed-fee (CPFF) contract type can incentivize cost overruns if not closely monitored.

Value Assessment

Rating: questionable

Benchmarking the value of this $49.5 million contract is challenging due to its sole-source nature and the broad scope of 'Engineering Services'. Without competitive bids, it's difficult to ascertain if the pricing reflects market rates or if alternative, more cost-effective solutions were overlooked. The CPFF structure, while allowing flexibility, requires rigorous oversight to ensure costs remain reasonable and aligned with the fixed fee. Comparing this to similar sole-source engineering contracts within the DoD would be necessary for a more precise value assessment.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning it was not competed among multiple vendors. This approach is typically used when only one vendor possesses the necessary unique capabilities, or in urgent situations. The lack of competition means there was no direct price comparison from multiple bidders, potentially leading to a higher price than if it had been open to a bidding process. This limits the government's ability to leverage market forces for cost savings.

Taxpayer Impact: Taxpayers may have paid a premium for these services due to the absence of competitive bidding. Without a competitive process, there's less assurance that the selected contractor offered the most cost-effective solution available in the market.

Public Impact

The Department of the Navy benefits from specialized engineering services crucial for its operations. This contract supports critical defense infrastructure and technological development within the Navy. The services likely impact the readiness and operational capabilities of naval forces. Work performed in Maryland (ST: MD) suggests a concentration of technical expertise and potential job creation in that region.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure, potentially impacting cost-effectiveness.
Cost-plus-fixed-fee contract type can lead to cost overruns if not managed diligently.
Long contract duration (over 7 years) increases exposure to potential scope creep or evolving requirements.
Lack of transparency in the procurement process due to sole-source award.

Positive Signals

BAE Systems is a major defense contractor with established expertise in engineering services.
The contract addresses a specific, long-term need identified by the Department of the Navy.
The fixed fee component provides some level of cost predictability within the contract.

Sector Analysis

The engineering services sector is a critical component of the defense industrial base, providing specialized technical expertise for complex systems. This contract falls within the broader professional, scientific, and technical services market, which is substantial within the federal government. The Department of Defense is a major consumer of these services, often requiring highly specialized knowledge for research, development, and sustainment of advanced military platforms. Benchmarking requires comparing to similar sole-source engineering support contracts within defense agencies.

Small Business Impact

This contract was not set aside for small businesses, and there is no indication of subcontracting requirements for small businesses. The award to a large prime contractor like BAE Systems suggests that the primary focus was on specialized capabilities rather than small business participation. This means the direct economic impact on the small business ecosystem for this specific contract is likely minimal, unless BAE Systems voluntarily engages small businesses as subcontractors.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy's contracting and program management offices. Accountability measures would be tied to the contract's performance metrics and deliverables, as well as the fixed fee structure. Transparency is limited due to the sole-source nature of the award. The Inspector General's office for the Department of Defense would have jurisdiction to investigate any potential fraud, waste, or abuse related to this contract.

Related Government Programs

Department of the Navy Research, Development, Test, and Evaluation
Defense Engineering Support Services
Naval Systems Engineering
BAE Systems Defense Contracts

Risk Flags

Sole-source award
Lack of competition
Cost-plus contract type
Long contract duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $49.5 million to BAE SYSTEMS TECHNOLOGY SOLUTIONS & SERVICES INC.. COMMUNICATION SYSTEMS ENGINEERING

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 $49.5 million.

What is the period of performance?

Start: 2011-09-14. End: 2019-04-30.

What specific engineering services were provided under this contract?

The contract falls under NAICS code 541330, 'Engineering Services,' which is a broad category. Given the awarding agency is the Department of the Navy, these services likely encompassed a range of specialized technical support. This could include systems engineering, design, integration, testing, and lifecycle support for naval platforms, communication systems, or other defense-related technologies. Without more specific contract line item details or statements of work, the precise nature of the engineering tasks remains generalized. However, the significant value and long duration suggest complex, ongoing technical support critical to naval operations.

Why was this contract awarded on a sole-source basis?

Sole-source awards are typically justified when only one responsible source is available or capable of meeting the agency's needs. For a large defense contractor like BAE Systems, this could be due to possessing unique intellectual property, highly specialized expertise, or proprietary technology essential for the specific engineering services required by the Department of the Navy. Alternatively, urgent and compelling circumstances might have necessitated an immediate award without the time for a full competitive process. The justification documentation for this sole-source award would provide the definitive reasons, but it implies a lack of readily available alternatives in the market for the specific requirements.

How does the Cost Plus Fixed Fee (CPFF) contract type impact cost control?

A Cost Plus Fixed Fee (CPFF) contract structure involves the government reimbursing the contractor for all allowable costs incurred, plus a predetermined fixed fee representing profit. While the fixed fee provides some cost certainty regarding the contractor's profit margin, the 'cost-plus' element means the government bears the risk of cost overruns. Effective cost control hinges on robust government oversight, including detailed audits of incurred costs and strict adherence to the contract's scope of work. Without diligent monitoring, CPFF contracts can incentivize contractors to incur higher costs, as their fee remains constant regardless of the total project expenditure.

What is the historical spending trend for similar engineering services within the Department of the Navy?

Historical spending on engineering services by the Department of the Navy is substantial, reflecting the complexity and scale of naval operations and systems. While specific figures for comparable sole-source contracts are difficult to isolate without detailed searches, the Navy consistently awards billions of dollars annually for R&D, systems integration, and technical support. Trends often show an increasing reliance on specialized contractors for advanced technologies and lifecycle management. Analyzing past sole-source awards within the 'Engineering Services' NAICS code for the Navy could reveal patterns in pricing and contractor selection, though direct comparisons are often limited by unique contract specifics.

What are the potential risks associated with a 7+ year sole-source contract?

A sole-source contract spanning over seven years carries several risks. Firstly, the lack of competition throughout its duration means the government is continuously exposed to potentially non-competitive pricing without market checks. Secondly, the extended period increases the risk of scope creep, where contract requirements may expand beyond the original intent, leading to cost increases. Thirdly, technological advancements or changes in mission requirements could render the contracted services less relevant or efficient over time, yet the government remains obligated. Finally, long-term sole-source relationships can foster complacency and reduce incentives for innovation or efficiency improvements by the contractor.

Industry Classification

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

Product/Service Code: RESEARCH AND DEVELOPMENT › C – National Defense R&D Services

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0042111R0029

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

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

Address: 1601 RESEARCH BLVD, ROCKVILLE, MD, 20850

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Foreign Owned, Foreign-Owned and U.S.-Incorporated Business, Not Designated a Small Business, Special Designations

Financial Breakdown

Contract Ceiling: $50,821,560

Exercised Options: $50,821,560

Current Obligation: $49,536,827

Subaward Activity

Number of Subawards: 53

Total Subaward Amount: $5,827,648

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline