DoD's $25M R&D contract with Mercury Systems Inc. awarded via sole-source justification

Contract Overview

Contract Amount: $24,968,371 ($25.0M)

Contractor: Mercury Systems Inc

Awarding Agency: Department of Defense

Start Date: 2019-07-31

End Date: 2024-08-30

Contract Duration: 1,857 days

Daily Burn Rate: $13.4K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: R&D

Official Description: LABOR FUNDING

Place of Performance

Location: TAUNTON, BRISTOL County, MASSACHUSETTS, 02780

State: Massachusetts Government Spending

Plain-Language Summary

Department of Defense obligated $25.0 million to MERCURY SYSTEMS INC for work described as: LABOR FUNDING Key points: 1. Contract awarded on a cost-plus-fixed-fee basis, indicating potential for cost overruns. 2. Sole-source award raises questions about price reasonableness and potential for better value through competition. 3. Long contract duration of 1857 days suggests a significant, ongoing need for the services. 4. The contract falls under R&D in Physical, Engineering, and Life Sciences, a critical but often complex sector. 5. Awarded by the Department of the Navy, indicating a specific defense-related research requirement. 6. The contract's value of $24.97M is substantial, warranting close scrutiny of its effectiveness.

Value Assessment

Rating: questionable

The contract's cost-plus-fixed-fee structure, combined with a sole-source award, makes a definitive value assessment challenging without further data on cost drivers and profit margins. Benchmarking against similar R&D contracts for specialized engineering services would be necessary to determine if the pricing is competitive. The lack of competition inherently limits the ability to ensure the government is receiving the best possible value.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded using a sole-source justification, meaning it was not competed. This typically occurs when only one responsible source is available or capable of meeting the requirement. The absence of multiple bidders means there was no competitive pressure to drive down prices or encourage innovative solutions, potentially leading to higher costs for the government.

Taxpayer Impact: Taxpayers may have paid a premium due to the lack of competition. Without a competitive bidding process, there's less assurance that the negotiated price reflects the lowest possible cost for the required research and development services.

Public Impact

The primary beneficiaries are likely the Department of the Navy and its research initiatives, aiming to advance technological capabilities. The contract supports research and development in physical, engineering, and life sciences, potentially leading to advancements in defense technology. The geographic impact is centered around the contractor's operations in Massachusetts, with potential downstream effects on the defense industrial base. Workforce implications include specialized engineering and scientific roles required for complex R&D projects.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price discovery and potentially increases costs.
Cost-plus-fixed-fee contract type can incentivize cost overruns if not managed tightly.
Lack of transparency in the sole-source justification process.
Long contract duration may mask inefficiencies if performance is not rigorously monitored.

Positive Signals

Award to an established contractor (Mercury Systems Inc.) may indicate a track record of capability.
Focus on R&D suggests investment in future technological advancements for national security.
Contract awarded by the Department of the Navy implies alignment with critical defense needs.

Sector Analysis

This contract falls within the Research and Development sector, specifically focusing on physical, engineering, and life sciences. This is a critical area for defense innovation, often characterized by high technical complexity and specialized expertise. The market for such services is competitive, but specific niche capabilities can lead to sole-source awards. Comparable spending benchmarks would typically be found within other DoD R&D contracts for advanced engineering solutions.

Small Business Impact

There is no indication that this contract included a small business set-aside. Given the sole-source nature and the specialized R&D focus, it is unlikely that subcontracting opportunities for small businesses were a primary consideration in the award process, though they may arise during performance.

Oversight & Accountability

Oversight would primarily be conducted by the Department of the Navy's contracting and program management offices. Accountability measures would be tied to the fixed-fee milestones and deliverables outlined in the contract. Transparency is limited due to the sole-source award, but contract modifications and performance reports would be subject to standard government oversight procedures.

Related Government Programs

Department of Defense Research and Development Programs
Navy Advanced Technology Initiatives
Engineering and Scientific Services Contracts
Sole-Source Defense Contracts

Risk Flags

Sole-source award
Cost-plus-fixed-fee contract type
Long contract duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $25.0 million to MERCURY SYSTEMS INC. LABOR FUNDING

Who is the contractor on this award?

The obligated recipient is MERCURY 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 $25.0 million.

What is the period of performance?

Start: 2019-07-31. End: 2024-08-30.

What is Mercury Systems Inc.'s track record with the Department of Defense, particularly on R&D contracts?

Mercury Systems Inc. has a history of working with the Department of Defense on various contracts, often related to advanced electronics, mission systems, and secure processing solutions. Their involvement in R&D is significant, contributing to the development of next-generation technologies. Analyzing their past performance on similar cost-plus-fixed-fee and sole-source R&D contracts would provide insight into their reliability, cost management, and ability to deliver on complex technical requirements. A review of past performance evaluations and any contract disputes or awards would be crucial for a comprehensive assessment.

How does the pricing structure (Cost Plus Fixed Fee) compare to industry standards for similar R&D efforts?

Cost-Plus-Fixed-Fee (CPFF) contracts are common in R&D where the scope of work can be uncertain, and innovation is key. The fixed fee provides the contractor with a guaranteed profit margin, while the government bears the risk of cost overruns. For R&D, this structure can be justified when the technical challenges are high and the final costs are difficult to predict. However, it necessitates robust government oversight to manage costs effectively and ensure the fee remains reasonable relative to the effort and risk involved. Benchmarking the fee against similar CPFF R&D contracts awarded by the DoD or other agencies would help determine if it aligns with market norms.

What specific R&D advancements is this contract intended to achieve, and what is the potential impact?

The contract's NAICS code (541712) indicates Research and Development in the Physical, Engineering, and Life Sciences (except Biotechnology). Without specific details on the project's objectives, it's difficult to pinpoint the exact advancements. However, given the Department of the Navy as the awarding agency, the R&D likely pertains to enhancing naval capabilities, such as advanced sensor systems, communication technologies, electronic warfare capabilities, or resilient computing for maritime environments. The potential impact could range from improved operational effectiveness and survivability for naval assets to the development of entirely new technological paradigms for national defense.

What are the risks associated with a sole-source award for a contract of this magnitude and duration?

The primary risks associated with a sole-source award of this magnitude ($24.97M) and duration (1857 days) include a lack of price competition, potentially leading to inflated costs for the government. There's also a reduced incentive for the contractor to innovate or become highly efficient, as there's no competitive pressure. Furthermore, sole-source awards can raise concerns about fairness and transparency in the procurement process. Without competitive benchmarking, it's harder to ensure the government is obtaining the best value and that the selected contractor is truly the most capable and cost-effective option available.

How does this contract's value and duration compare to other R&D spending by the Department of the Navy in recent years?

The $24.97 million value and 1857-day duration place this contract within the mid-to-large range for R&D efforts within the Department of the Navy. The Navy consistently invests billions annually in R&D across various scientific and engineering disciplines to maintain technological superiority. While this specific contract represents a portion of that investment, its sole-source nature and CPFF structure warrant scrutiny when compared to competitively awarded R&D contracts. Analyzing historical spending patterns for similar R&D categories and contract types would reveal whether this award is an outlier or representative of typical Navy procurement practices for specialized research.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Scientific Research and Development Services › Research and Development in the Physical, Engineering, and Life Sciences (except Biotechnology)

Product/Service Code: INSTRUMENTS AND LABORATORY EQPT

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Address: 50 MINUTEMAN RD, ANDOVER, MA, 01810

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Manufacturer of Goods, Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $26,217,667

Exercised Options: $26,217,667

Current Obligation: $24,968,371

Actual Outlays: $3,307,179

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: N0042117G0001

IDV Type: BOA

Timeline