Naval Systems Inc. awarded $23M for logistic support, exceeding initial estimates by $11M

Contract Overview

Contract Amount: $23,009,564 ($23.0M)

Contractor: Naval Systems, Inc.

Awarding Agency: Department of Defense

Start Date: 2017-12-27

End Date: 2023-09-12

Contract Duration: 2,085 days

Daily Burn Rate: $11.0K/day

Competition Type: FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES

Number of Offers Received: 5

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: IGF::OT::IGF AIR 6.6 LOGISTIC SUPPORT SERVICES UNDER THE MAC AWARD FOR PMA-261

Place of Performance

Location: LEXINGTON PARK, SAINT MARYS County, MARYLAND, 20653

State: Maryland Government Spending

Plain-Language Summary

Department of Defense obligated $23.0 million to NAVAL SYSTEMS, INC. for work described as: IGF::OT::IGF AIR 6.6 LOGISTIC SUPPORT SERVICES UNDER THE MAC AWARD FOR PMA-261 Key points: 1. Value for money appears questionable given the significant cost overrun. 2. Competition dynamics were limited, suggesting potential price inflation. 3. Risk indicators include cost overruns and a non-standard contract type. 4. Performance context shows a long duration with a substantial budget increase. 5. Sector positioning is within defense logistics, a critical but often costly area.

Value Assessment

Rating: questionable

The contract's final cost of $23,009,564.46 significantly exceeded the initial estimated value of $11,036,000. This represents a substantial overrun, raising concerns about initial cost estimation and contractor pricing. Benchmarking against similar logistic support contracts is difficult without more detailed service breakdowns, but the magnitude of the overrun suggests a potential lack of value for money.

Cost Per Unit: N/A

Competition Analysis

Competition Level: limited

The contract was awarded under 'FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES,' which is an unusual designation. While it implies some level of competition, the exclusion of specific sources limits the scope. With 5 bidders initially, the competition level might have been sufficient, but the specific exclusion raises questions about whether the most competitive offers were truly considered.

Taxpayer Impact: The limited competition, despite multiple bidders, may have resulted in taxpayers paying a higher price than if a truly open and unrestricted competition had been conducted.

Public Impact

The primary beneficiaries are the Department of the Navy and its aviation programs requiring logistic support. Services delivered include essential logistic support for PMA-261, ensuring operational readiness. Geographic impact is likely concentrated around naval air stations and facilities where PMA-261 operates. Workforce implications include employment for personnel at Naval Systems, Inc. and potentially indirectly supporting naval personnel.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Significant cost overrun indicates potential issues with initial budgeting or contractor performance.
The contract type (Cost Plus Fixed Fee) can incentivize cost increases.
Limited competition after exclusion of sources raises concerns about optimal pricing.
Long contract duration (2085 days) increases exposure to cost fluctuations and performance risks.

Positive Signals

Awarded to a single contractor, potentially allowing for specialized expertise.
The contract was awarded under a MAC (Multiple Award Contract) vehicle, suggesting pre-qualification of contractors.
The contract was ultimately delivered, fulfilling the logistic support requirement.

Sector Analysis

This contract falls within the defense logistics and engineering services sector. The defense logistics market is substantial, driven by the need to maintain readiness and operational capabilities for military branches. Engineering services are crucial for complex systems like aircraft, encompassing maintenance, repair, and overhaul support. Comparable spending benchmarks in this sector vary widely based on the specific systems supported and the scope of services, but large contracts are common.

Small Business Impact

The data indicates this contract was not set aside for small businesses (ss: false, sb: false). Therefore, there are no direct subcontracting implications for small businesses arising from a set-aside provision. The primary contractor, Naval Systems, Inc., is likely a large business, and its subcontracting practices would determine any indirect impact on the small business ecosystem.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of the Navy's contracting and program management offices. Accountability measures are usually tied to contract milestones, performance metrics, and financial reporting. Transparency is generally facilitated through contract databases like FPDS, though detailed performance reports may be internal. Inspector General jurisdiction would apply if fraud, waste, or abuse were suspected.

Related Government Programs

Naval Air Systems Command (NAVAIR) Contracts
Logistics and Maintenance Support Services
Defense Engineering Services
Cost Plus Fixed Fee Contracts
Multiple Award Contracts (MAC)

Risk Flags

Significant Cost Overrun
Limited Competition
Contract Type Risk (CPFF)
Long Contract Duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $23.0 million to NAVAL SYSTEMS, INC.. IGF::OT::IGF AIR 6.6 LOGISTIC SUPPORT SERVICES UNDER THE MAC AWARD FOR PMA-261

Who is the contractor on this award?

The obligated recipient is NAVAL SYSTEMS, 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 $23.0 million.

What is the period of performance?

Start: 2017-12-27. End: 2023-09-12.

What is the specific nature of the 'logistic support services' provided under this contract?

The contract, IGF::OT::IGF AIR 6.6 LOGISTIC SUPPORT SERVICES UNDER THE MAC AWARD FOR PMA-261, indicates that the services provided are related to logistic support for Program Management Office (PMO) Air 6.6, which falls under the Naval Air Systems Command (NAVAIR). While the specific details are not fully elaborated in the provided data, logistic support in a defense context typically encompasses a wide range of activities. These can include supply chain management, inventory control, maintenance planning, repair and overhaul coordination, transportation, warehousing, and technical documentation. For PMA-261, which is responsible for various naval aircraft programs, these services are critical for ensuring the operational readiness and sustainment of the aircraft fleet. The 'engineering services' classification (ND: Engineering Services) suggests that the support may involve technical expertise, system analysis, and potentially modifications or upgrades related to the logistics of the supported systems.

How does the final cost of $23M compare to the initial estimated value of $11M for this contract?

The final awarded cost for this contract reached $23,009,564.46, which is a significant increase compared to the initial estimated value of $11,036,000. This represents an overrun of approximately $12 million, or about 110% above the initial estimate. Such a substantial difference raises concerns about the accuracy of the initial cost projections, the effectiveness of cost controls throughout the contract performance period, or potentially unforeseen scope changes that were not adequately captured in the initial estimate. While Cost Plus Fixed Fee (CPFF) contracts can sometimes see cost growth, a doubling of the estimated cost warrants a closer examination of the factors contributing to this variance and whether the final price represents fair and reasonable value.

What does 'FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES' imply about the competition for this contract?

The contract type 'FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES' is somewhat contradictory and requires careful interpretation. Typically, 'full and open competition' means all responsible sources are permitted to submit offers. However, the addition of 'after exclusion of sources' indicates that certain potential offerors were deliberately excluded from the competition, even though the competition itself was intended to be open to others. This suggests that while multiple bidders (5 in this case) were involved, the pool of potential competitors was intentionally narrowed. The reasons for such exclusions are usually documented and can relate to specific capabilities, security requirements, or prior performance issues. This limited form of competition might reduce the number of viable bids, potentially impacting the final price and the government's ability to secure the most advantageous offer compared to a truly unrestricted competition.

What are the potential risks associated with a Cost Plus Fixed Fee (CPFF) contract type for logistic support?

Cost Plus Fixed Fee (CPFF) contracts, like the one awarded to Naval Systems, Inc., present specific risks for the government. In a CPFF structure, the contractor is reimbursed for allowable costs plus a fixed fee representing profit. The primary risk for the government is that the contractor has less incentive to control costs compared to fixed-price contracts, as their profit (the fixed fee) remains constant regardless of the actual costs incurred. If costs escalate, the government pays more. This can lead to cost overruns, as seen in this contract's significant increase from its estimated value. While the fixed fee provides some predictability for the contractor's profit, it shifts the cost risk more towards the government. Effective oversight and robust cost accounting standards are crucial to mitigate these risks and ensure the government is not overpaying for services.

How does the duration of the contract (2085 days) impact its overall risk profile?

A contract duration of 2085 days, which is approximately 5.7 years, significantly increases the overall risk profile for this logistic support services contract. Longer contract durations expose the government to greater uncertainty regarding cost fluctuations due to inflation, changes in market rates for labor and materials, and potential technological obsolescence of the supported systems. Furthermore, extended periods increase the likelihood of unforeseen challenges in performance, contractor stability, or evolving mission requirements. Managing such a long-term contract requires continuous oversight, regular performance reviews, and potentially contract modifications to adapt to changing circumstances. The substantial cost overrun observed in this contract, despite its long duration, highlights the challenges in accurately forecasting and controlling costs over extended periods.

Industry Classification

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

Product/Service Code: SUPPORT SVCS (PROF, ADMIN, MGMT) › MANAGEMENT SUPPORT SERVICES

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES

Solicitation Procedures: SUBJECT TO MULTIPLE AWARD FAIR OPPORTUNITY

Solicitation ID: N0042115R0092

Offers Received: 5

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Address: 21491 GREAT MILLS RD STE 100, LEXINGTON PARK, MD, 20653

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Service Disabled Veteran Owned Business, Small Business, Special Designations, Subchapter S Corporation, U.S.-Owned Business, Veteran Owned Business

Financial Breakdown

Contract Ceiling: $24,833,723

Exercised Options: $24,728,997

Current Obligation: $23,009,564

Actual Outlays: $2,032,555

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: N0042117D0027

IDV Type: IDC

Timeline