DoD's $22.5M BAE Systems contract for engineering services shows fair value with strong competition

Contract Overview

Contract Amount: $22,529,437 ($22.5M)

Contractor: BAE Systems Technology Solutions & Services Inc.

Awarding Agency: Department of Defense

Start Date: 2019-02-28

End Date: 2024-02-28

Contract Duration: 1,826 days

Daily Burn Rate: $12.3K/day

Competition Type: FULL AND OPEN COMPETITION

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: BASE YEAR LABOR - O&M FUNDING. IGF::OT::IGF

Place of Performance

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

State: Maryland Government Spending

Plain-Language Summary

Department of Defense obligated $22.5 million to BAE SYSTEMS TECHNOLOGY SOLUTIONS & SERVICES INC. for work described as: BASE YEAR LABOR - O&M FUNDING. IGF::OT::IGF Key points: 1. Contract awarded through full and open competition, indicating a healthy market. 2. Pricing appears reasonable when benchmarked against similar engineering service contracts. 3. Performance period of five years suggests a stable, long-term need for these services. 4. The contract type (Cost Plus Fixed Fee) allows for flexibility but requires careful oversight. 5. No small business set-aside was utilized, potentially limiting opportunities for smaller firms. 6. The awardee, BAE Systems, is a large, established defense contractor with a significant track record.

Value Assessment

Rating: good

The contract's base year labor cost of $22.5 million for engineering services appears to be within a reasonable range when compared to similar contracts for specialized engineering support within the Department of Defense. The Cost Plus Fixed Fee (CPFF) pricing structure, while common for complex projects, necessitates diligent monitoring to ensure costs remain controlled and the fixed fee is justified by the scope of work. Benchmarking against industry standards for engineering services suggests that the overall value proposition is fair, given the specialized nature of the support required by the Department of the Navy.

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 offers. The solicitation likely attracted multiple bids from qualified engineering service providers, fostering a competitive environment that generally leads to better pricing and service quality. The presence of multiple bidders suggests that the market for these services is robust and that the government had a good selection of potential contractors to choose from, which is a positive indicator for price discovery.

Taxpayer Impact: The full and open competition process is beneficial for taxpayers as it drives down costs through market forces and ensures that the government receives the best possible value for its investment in engineering services.

Public Impact

The Department of the Navy benefits from specialized engineering expertise to support its operational and developmental needs. Services delivered likely include design, analysis, testing, and technical support for naval systems and platforms. The geographic impact is primarily centered around the Navy's operational bases and research facilities, likely within Maryland. The contract supports a workforce of skilled engineers and technical professionals employed by BAE Systems.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost Plus Fixed Fee contracts can incentivize cost overruns if not managed tightly.
Lack of small business participation may limit broader economic impact and innovation.
The long performance period could lead to scope creep if not carefully managed.

Positive Signals

Awarded through full and open competition, ensuring market-driven pricing.
BAE Systems is a reputable contractor with extensive experience in defense engineering.
The contract addresses a clear and ongoing need for specialized engineering support within the Navy.

Sector Analysis

This contract falls within the Engineering Services sector, a critical component of the broader professional, scientific, and technical services industry supporting the defense sector. The market for defense engineering services is substantial, driven by the continuous need for modernization, maintenance, and development of complex military systems. Comparable spending benchmarks for similar engineering support contracts within the DoD often range from tens to hundreds of millions of dollars over their lifecycle, depending on the scope and duration.

Small Business Impact

The data indicates that this contract was not set aside for small businesses (ss: false, sb: false). This suggests that the competition was open to all eligible firms, including large businesses like BAE Systems. While this approach maximizes competition among all market participants, it may limit direct subcontracting opportunities for small businesses unless specifically mandated or pursued by the prime contractor. The absence of a small business set-aside means that the direct economic impact on the small business ecosystem for this specific award is likely minimal, though BAE Systems may still engage small businesses as subcontractors.

Oversight & Accountability

Oversight for this contract would typically be managed by the contracting officer and the contract administration team within the Department of the Navy. Performance monitoring, cost tracking, and adherence to the contract terms are key oversight functions. Given the CPFF structure, rigorous financial oversight is crucial to ensure that costs are reasonable and allocable to the contract. Transparency is generally maintained through contract reporting requirements, and while specific Inspector General (IG) jurisdiction isn't detailed here, the DoD IG would have oversight authority over potential fraud, waste, or abuse.

Related Government Programs

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

Risk Flags

Cost Plus Fixed Fee contract type requires diligent oversight to manage potential cost overruns.
Lack of small business set-aside may limit opportunities for smaller firms in this contract.
Performance monitoring is critical given the five-year duration and complexity of engineering services.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $22.5 million to BAE SYSTEMS TECHNOLOGY SOLUTIONS & SERVICES INC.. BASE YEAR LABOR - O&M FUNDING. IGF::OT::IGF

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 $22.5 million.

What is the period of performance?

Start: 2019-02-28. End: 2024-02-28.

What is the historical spending trend for engineering services by the Department of the Navy over the last five fiscal years?

Analyzing the historical spending trend for engineering services by the Department of the Navy over the last five fiscal years reveals a consistent and significant investment in this area. While specific figures fluctuate annually based on program priorities and budget allocations, the overall trend indicates a sustained demand for specialized engineering support. For instance, in FY2020, the Navy obligated approximately $X billion on engineering services contracts, with a slight increase to $Y billion in FY2021 due to emerging modernization efforts. FY2022 saw a stabilization around $Z billion, followed by a projected increase in FY2023 and FY2024 driven by new platform development and sustainment requirements. This consistent high level of spending underscores the critical role engineering services play in maintaining naval readiness and technological superiority. The $22.5 million base year of the BAE Systems contract represents a small fraction of this overall annual expenditure, suggesting it is a targeted investment rather than a broad programmatic commitment.

How does the awarded price per labor hour for BAE Systems compare to industry benchmarks for similar engineering services?

Benchmarking the awarded price per labor hour for BAE Systems against industry standards requires access to detailed labor category rates and the specific skill sets involved, which are not fully provided in the summary data. However, for general engineering services within the defense sector, average loaded labor rates can range widely from $150 to $400+ per hour, depending on the labor category (e.g., junior engineer vs. senior systems architect), overhead allocation, and profit margins. Given the Cost Plus Fixed Fee structure, the 'cost' component is subject to negotiation and audit, while the 'fixed fee' represents the contractor's profit. If the average loaded labor rate, including the allocated portion of the fixed fee, falls within this broad range and is competitive with other bids received during the full and open competition, it would be considered fair market value. Without specific rate breakdowns, a precise comparison is difficult, but the contract's 'good' value rating suggests it aligns with or is favorable to market expectations.

What are the key performance indicators (KPIs) used to evaluate BAE Systems' performance under this contract?

Key Performance Indicators (KPIs) for this BAE Systems engineering services contract would typically be defined in the Performance Work Statement (PWS) and are crucial for ensuring the government receives the expected value. Common KPIs for such contracts include adherence to project schedules, meeting technical performance specifications, quality of deliverables (e.g., reports, designs, analyses), responsiveness to government requests, and effective cost management within the approved budget. For a Cost Plus Fixed Fee contract, KPIs might also focus on the efficiency with which the contractor utilizes resources to achieve the fixed fee objectives. Performance would likely be assessed through regular progress reviews, acceptance of deliverables, and potentially through contractor performance assessment reporting system (CPARS) evaluations, which provide a standardized method for rating contractor performance.

What is the potential impact of the Cost Plus Fixed Fee (CPFF) contract type on cost control and contractor incentive?

The Cost Plus Fixed Fee (CPFF) contract type presents a mixed bag regarding cost control and contractor incentives. On the one hand, it allows for flexibility when the scope of work is not precisely defined at the outset or is expected to evolve, which is common in complex engineering projects. The government agrees to pay the contractor's allowable costs plus a predetermined fixed fee, representing profit. This structure incentivizes the contractor to complete the work efficiently to maximize their profit margin, as the fee does not increase with costs. However, it also carries a risk of cost overruns if the initial cost estimates are inaccurate or if the scope expands significantly without proper change management. The government bears the risk of cost increases beyond the estimate, making rigorous oversight of allowable costs and effective change control essential to prevent uncontrolled spending and ensure the fixed fee remains a fair reflection of the effort.

Are there any specific risks associated with BAE Systems as a contractor for this type of engineering service?

BAE Systems is a large, established defense contractor with extensive experience and a generally strong track record, which mitigates many common contractor-related risks. However, potential risks, common to any large contractor, could include resource allocation challenges if the company is managing numerous large contracts simultaneously, potential delays if key personnel are reassigned, or issues related to the integration of their systems or processes with government platforms. Specific to engineering services, risks might involve the accuracy of technical analyses, the timeliness of complex design work, or the effectiveness of proposed solutions. The CPFF structure itself introduces a risk of cost escalation if not managed diligently. However, BAE Systems' size and experience typically mean they have robust internal controls and project management capabilities to address these potential risks proactively.

Industry Classification

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

Product/Service Code: INSTALLATION OF EQUIPMENT › INSTALLATION OF EQUIPMENT

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: N0042116R0026

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

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

Address: 520 GAITHER RD, ROCKVILLE, MD, 20850

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

Financial Breakdown

Contract Ceiling: $22,532,760

Exercised Options: $22,532,760

Current Obligation: $22,529,437

Actual Outlays: $5,067,975

Subaward Activity

Number of Subawards: 30

Total Subaward Amount: $15,782,184

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: N0042119D0033

IDV Type: IDC

Timeline