DoD's $425.6M Engineering Services Contract Awarded to PAE Applied Technologies LLC

Contract Overview

Contract Amount: $425,649,599 ($425.6M)

Contractor: PAE Applied Technologies LLC

Awarding Agency: Department of Defense

Start Date: 2014-09-10

End Date: 2020-12-12

Contract Duration: 2,285 days

Daily Burn Rate: $186.3K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: COST PLUS FIXED FEE

Sector: Other

Official Description: AWARDING AND ADDING FUNDING TO THE CONTRACT

Place of Performance

Location: PATUXENT RIVER, SAINT MARYS County, MARYLAND, 20670

State: Maryland Government Spending

Plain-Language Summary

Department of Defense obligated $425.6 million to PAE APPLIED TECHNOLOGIES LLC for work described as: AWARDING AND ADDING FUNDING TO THE CONTRACT Key points: 1. Contract awarded for engineering services, indicating a need for specialized technical expertise. 2. The contract was competed fully and openly, suggesting a competitive bidding process. 3. A definitive contract type was used, typically for well-defined requirements. 4. The contract duration is substantial, spanning over 2285 days, implying long-term service needs. 5. The awardee, PAE Applied Technologies LLC, has a significant contract history with the government. 6. The contract is categorized under Engineering Services, a critical support function for defense operations. 7. The contract was awarded by the Department of the Navy, a major component of the DoD. 8. The contract is located in Maryland, a hub for government contracting and defense activities.

Value Assessment

Rating: fair

Benchmarking the value of this $425.6 million contract is challenging without specific deliverables and performance metrics. However, the cost-plus-fixed-fee (CPFF) structure suggests that while direct costs are reimbursed, the contractor's profit is fixed. This can incentivize efficiency but also carries risks if initial cost estimates are inaccurate. Comparing this to similar large-scale engineering services contracts within the Department of Defense would provide a clearer picture of its value proposition. The relatively high number of contract modifications (implied by the funding increase) could indicate scope creep or evolving requirements, which may impact the overall value.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, meaning all responsible sources were permitted to submit bids. The presence of two bids suggests a moderate level of competition for this significant engineering services requirement. While two bidders indicate some level of market interest, a higher number of bids would typically lead to more robust price discovery and potentially lower costs for the government. The specific details of the bidding process and the evaluation criteria would further illuminate the effectiveness of the competition.

Taxpayer Impact: Full and open competition is generally favorable for taxpayers as it aims to secure the best value through a wide range of potential providers. However, with only two bids, the potential for cost savings might have been limited compared to a more crowded field.

Public Impact

The Department of the Navy benefits from specialized engineering expertise to support its operations and infrastructure. This contract likely supports a range of engineering services, potentially including design, analysis, testing, and technical support. The geographic impact is concentrated in Maryland, a key area for defense activities and federal contracting. The contract supports a workforce skilled in various engineering disciplines, contributing to the technical capabilities within the defense sector.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost overruns due to the Cost Plus Fixed Fee (CPFF) contract type if initial estimates are not well-managed.
Risk of scope creep given the contract's long duration and potential for modifications.
Dependence on a single contractor for critical engineering services could pose a risk if performance issues arise.
Limited competition (2 bidders) may have reduced the government's leverage in price negotiation.

Positive Signals

Awarded through full and open competition, indicating a broad search for qualified contractors.
The contractor, PAE Applied Technologies LLC, likely possesses established expertise in engineering services.
The definitive contract type suggests a clear understanding of the required services.
The substantial funding indicates a significant and ongoing need for these services by the Department of the Navy.

Sector Analysis

Engineering services represent a broad category within the professional, scientific, and technical services sector. This sector is crucial for supporting government operations, particularly in defense, where complex systems and infrastructure require specialized technical knowledge. The market for government engineering services is substantial, with significant spending allocated annually. This contract fits within the broader landscape of defense support services, where contractors provide essential expertise that government agencies may not possess in-house or need to augment their existing capabilities. Comparable spending benchmarks would typically look at the average cost of similar engineering support contracts awarded by the DoD or other federal agencies over a defined period.

Small Business Impact

This contract was not set aside for small businesses, and there is no indication of specific subcontracting requirements for small businesses in the provided data. The award to a large prime contractor suggests that the primary focus was on securing specialized engineering capabilities, potentially from a large, established firm. This could mean limited direct opportunities for small businesses to participate as prime contractors on this specific award. However, the prime contractor may engage small businesses for subcontracting opportunities depending on the nature of the engineering services required.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy's contracting and program management offices. As a definitive contract, it is subject to standard federal procurement regulations and oversight. The Cost Plus Fixed Fee (CPFF) structure necessitates close monitoring of costs and performance to ensure the fixed fee remains appropriate and that the government receives the intended value. Inspector General (IG) jurisdiction would apply if any allegations of fraud, waste, or abuse arise during the contract's lifecycle. Transparency is generally maintained through contract databases and reporting requirements, though specific performance details may be sensitive.

Related Government Programs

Department of Defense Engineering Services Contracts
Naval Sea Systems Command (NAVSEA) Support Contracts
Professional, Scientific, and Technical Services Contracts
Cost Plus Fixed Fee Contracts
Engineering and Technical Support Services

Risk Flags

Potential for cost overruns due to CPFF structure.
Risk of scope creep given long contract duration.
Limited competition (2 bidders) may impact price discovery.
Contract modifications could increase total cost.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $425.6 million to PAE APPLIED TECHNOLOGIES LLC. AWARDING AND ADDING FUNDING TO THE CONTRACT

Who is the contractor on this award?

The obligated recipient is PAE APPLIED TECHNOLOGIES LLC.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $425.6 million.

What is the period of performance?

Start: 2014-09-10. End: 2020-12-12.

What is the track record of PAE Applied Technologies LLC with the Department of Defense?

PAE Applied Technologies LLC, now part of PAE Inc. (which was acquired by Amentum), has a substantial history of contracting with the Department of Defense across various service areas. Their portfolio often includes base operations support, logistics, technical services, and engineering solutions. For the Department of the Navy specifically, PAE has historically secured numerous contracts, ranging in value and scope, often related to maintaining naval facilities, providing operational support, and delivering specialized technical expertise. Analyzing their past performance on similar large-scale engineering contracts would provide insight into their reliability, cost management, and ability to meet complex requirements within the DoD.

How does the $425.6 million value compare to similar engineering services contracts awarded by the DoD?

The $425.6 million total award value for engineering services places this contract in the upper tier of significant federal procurements. Many large-scale engineering support contracts within the DoD can reach hundreds of millions, or even billions, of dollars over their lifecycle, especially those involving extensive research, development, testing, evaluation, or long-term infrastructure support. For instance, contracts for major weapon system development, base operations, or complex IT infrastructure modernization often fall into this spending bracket. To provide a precise comparison, one would need to benchmark against contracts with similar North American Industry Classification System (NAICS) codes (like 541330 for Engineering Services) awarded by the DoD or specific branches like the Navy within a comparable timeframe, considering contract duration and scope.

What are the primary risks associated with a Cost Plus Fixed Fee (CPFF) contract of this magnitude?

The primary risks associated with a CPFF contract of this magnitude ($425.6 million) revolve around cost control and potential for scope creep. While the fixed fee incentivizes the contractor to manage costs efficiently to protect their profit margin, the government bears the risk of cost overruns if the initial estimates are inaccurate or if unforeseen complexities arise. For the contractor, the risk lies in underestimating costs, which could erode their fixed profit. For the government, the risk is paying more than anticipated for the services. Given the contract's long duration (2285 days), there's also a heightened risk of scope creep, where the requirements may evolve, leading to contract modifications and potentially increased overall costs beyond the initial projections, necessitating robust oversight.

How effective is 'full and open competition' when only two bids are received?

Full and open competition is designed to maximize the pool of potential bidders to foster the most competitive pricing and best value for the government. When only two bids are received for a contract of this size and scope, the effectiveness of the competition is reduced compared to scenarios with numerous bidders. While it still represents a competitive process, the government may have less leverage to negotiate favorable terms or prices than if there were, for example, five or more competing proposals. The limited number of bidders could indicate high barriers to entry (e.g., specialized expertise, bonding requirements), a niche market, or perhaps that the solicitation was highly specific, inadvertently limiting the number of interested parties. Further analysis would involve understanding why only two bids were submitted.

What are the implications of the contract's long duration (2285 days) for service delivery and cost?

A contract duration of 2285 days (approximately 6.25 years) signifies a long-term commitment for essential engineering services. This extended period allows for stability in service delivery, enabling the contractor to build institutional knowledge and potentially achieve economies of scale. For the government, it ensures continuity of critical functions without the frequent need for re-competition, which can be costly and time-consuming. However, a long duration also increases the risk of requirements becoming outdated, technology evolving beyond the contract's scope, or the contractor's performance degrading over time. It necessitates robust contract management and periodic reviews to ensure the services remain relevant and cost-effective throughout the contract's life.

What does the NAICS code 541330 (Engineering Services) typically encompass in a defense context?

The North American Industry Classification System (NAICS) code 541330, 'Engineering Services,' in a defense context typically covers a wide array of specialized technical and consulting services. This includes activities such as designing, developing, and testing military systems, equipment, and infrastructure; providing technical analysis and consultation; conducting feasibility studies; performing systems engineering and integration; and offering project management for complex defense projects. For the Department of the Navy, this could involve everything from naval architecture and marine engineering to aerospace engineering, civil engineering for bases, and specialized electronic or mechanical engineering for platforms and weaponry. It represents the core technical expertise required to support the design, acquisition, and sustainment of defense capabilities.

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: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: N0042111R0066

Offers Received: 2

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Pae-Parsons Global Logistics Services, LLC

Address: 1320 N COURTHOUSE RD STE 700, ARLINGTON, VA, 22201

Business Categories: Category Business, Limited Liability Corporation, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $452,097,315

Exercised Options: $452,097,315

Current Obligation: $425,649,599

Actual Outlays: $2,420,050

Subaward Activity

Number of Subawards: 669

Total Subaward Amount: $180,238,530

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline