DoD's $47.5M contract for machinery manufacturing services awarded to CAE USA INC. with no competition

Contract Overview

Contract Amount: $47,553,916 ($47.6M)

Contractor: CAE USA Inc.

Awarding Agency: Department of Defense

Start Date: 2018-09-06

End Date: 2023-11-15

Contract Duration: 1,896 days

Daily Burn Rate: $25.1K/day

Competition Type: NOT COMPETED

Pricing Type: COST PLUS FIXED FEE

Sector: Other

Official Description: NSF-2

Place of Performance

Location: ARLINGTON, TARRANT County, TEXAS, 76011

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $47.6 million to CAE USA INC. for work described as: NSF-2 Key points: 1. The contract's value of $47.5 million over its period of performance suggests a significant investment in specialized machinery manufacturing services. 2. The sole-source nature of this award raises questions about potential price inflation and the absence of market-driven cost efficiencies. 3. A lack of competition increases the risk of contractor lock-in and potentially limits opportunities for innovation from other market players. 4. The contract's duration of 1896 days indicates a long-term need for these services, requiring sustained oversight. 5. The award to CAE USA INC. positions them as a key supplier for specific DoD machinery needs. 6. The absence of small business set-aside flags suggests this contract was not specifically targeted to boost small business participation.

Value Assessment

Rating: questionable

Benchmarking the value of this $47.5 million contract is challenging without specific details on the machinery manufactured or services rendered. However, the lack of competition inherently limits the ability to assess if the pricing reflects fair market value. Compared to similar sole-source awards, the price could be higher than if multiple bids were solicited. The cost-plus-fixed-fee structure means the government bears the risk of cost overruns, making rigorous oversight crucial to ensure value.

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. This typically occurs when only one responsible source is available or when a compelling justification for other than full and open competition exists. The absence of multiple bidders means there was no direct price comparison or negotiation driven by market forces, potentially leading to a less favorable price for the government.

Taxpayer Impact: Taxpayers may have paid a premium due to the lack of competitive bidding. Without competition, there's less pressure on the contractor to offer the lowest possible price, potentially resulting in higher overall expenditure for the government.

Public Impact

The primary beneficiaries are the Department of Defense, which receives specialized machinery manufacturing services essential for its operations. The contract supports the production or maintenance of critical machinery, likely for defense applications. The geographic impact is centered in Texas, where the contractor is located, potentially creating local economic benefits and employment. Workforce implications include the employment of skilled labor in manufacturing and engineering roles at CAE USA INC.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to higher costs for taxpayers.
Sole-source awards can reduce innovation by limiting market entry.
Cost-plus-fixed-fee contracts can incentivize cost overruns if not closely monitored.
The long duration of the contract increases the risk of scope creep or evolving needs not being met efficiently.

Positive Signals

Award to an established contractor like CAE USA INC. suggests a level of trust and proven capability.
The contract addresses a specific, likely critical, need within the Department of Defense.
The fixed-fee component provides some cost certainty compared to pure cost-reimbursement contracts.

Sector Analysis

This contract falls within the 'Other Commercial and Service Industry Machinery Manufacturing' sector, which is a broad category encompassing the production of various types of machinery not elsewhere classified. The defense industry relies heavily on specialized manufacturing capabilities for everything from operational equipment to maintenance and repair. Spending in this sector for defense purposes can fluctuate based on modernization efforts and operational demands. Comparable spending benchmarks would require detailed analysis of specific machinery types and their market values.

Small Business Impact

The data indicates this contract was not set aside for small businesses (ss: false, sb: false). This suggests that the nature of the requirement or the capabilities of the prime contractor led to it being awarded without specific small business participation goals. Consequently, there are no direct subcontracting implications for small businesses mandated by this award, and its impact on the small business ecosystem is likely minimal unless CAE USA INC. voluntarily engages them.

Oversight & Accountability

Oversight for this contract would primarily reside with the Department of the Navy, a component of the Department of Defense. Accountability measures would be embedded in the contract terms, including performance metrics and reporting requirements. Transparency might be limited due to the sole-source nature and potential national security considerations. Inspector General jurisdiction would apply to investigate any allegations of fraud, waste, or abuse related to the contract.

Related Government Programs

Department of Defense Machinery Procurement
Naval Operations Support Contracts
Commercial and Service Industry Machinery Manufacturing
Sole-Source Defense Contracts
Cost-Plus-Fixed-Fee Contracts

Risk Flags

Sole-source award lacks competitive justification.
Potential for cost overruns due to CPFF structure.
Long contract duration increases risk of obsolescence or scope creep.
Lack of small business participation noted.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $47.6 million to CAE USA INC.. NSF-2

Who is the contractor on this award?

The obligated recipient is CAE USA 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 $47.6 million.

What is the period of performance?

Start: 2018-09-06. End: 2023-11-15.

What specific types of machinery or services are being procured under this contract, and why was CAE USA INC. the only viable source?

The provided data classifies the contract under 'Other Commercial and Service Industry Machinery Manufacturing' (na: 333318) but does not specify the exact machinery or services. The reason for a sole-source award typically stems from unique capabilities, proprietary technology, or urgent needs where only one contractor can fulfill the requirement. Without further documentation, the specific justification for CAE USA INC. being the sole source remains unclear. This could involve specialized engineering, unique manufacturing processes, or integration with existing defense systems that only CAE USA INC. possesses.

How does the $47.5 million contract value compare to similar machinery manufacturing contracts awarded by the DoD or other federal agencies?

Direct comparison of the $47.5 million contract value is difficult without knowing the precise nature of the machinery or services. However, for large-scale defense manufacturing contracts, this amount represents a significant investment. If the machinery is highly specialized or involves complex integration, the cost could be justified. Conversely, if it pertains to more standard manufacturing, the value might be on the higher end, especially considering the lack of competition. Benchmarking would require identifying contracts for comparable equipment or services, factoring in quantity, complexity, and the competitive environment in which they were awarded.

What are the primary risks associated with a sole-source, cost-plus-fixed-fee contract of this magnitude and duration?

The primary risks associated with this contract are multifaceted. Firstly, the sole-source nature eliminates competitive pressure, potentially leading to inflated pricing and reduced value for money. Secondly, the cost-plus-fixed-fee (CPFF) structure shifts the financial risk of cost overruns to the government; while the contractor has a fixed fee, the total cost can escalate. Thirdly, the long duration (1896 days) increases the potential for scope creep, inefficient execution, and the risk that the procured machinery may become outdated or less relevant by the end of the contract term. Effective oversight is critical to mitigate these risks.

What is CAE USA INC.'s track record with the Department of Defense, particularly concerning contracts of similar size and complexity?

While the provided data confirms CAE USA INC. as the contractor, it does not detail their specific track record with the DoD. Generally, a contractor awarded a $47.5 million sole-source contract is expected to have a history of successful performance, relevant expertise, and potentially prior relationships with the agency. Further investigation into CAE USA INC.'s contract history, past performance reviews, and any prior sole-source awards would be necessary to fully assess their reliability and capability for this specific requirement.

Given the contract's duration, what mechanisms are in place to ensure the machinery remains relevant and meets evolving defense needs?

Mechanisms to ensure relevance typically involve contract clauses that allow for modifications, technical reviews, and performance-based metrics. For a long-duration contract, the Department of the Navy would likely have provisions for periodic reviews of the machinery's performance and alignment with current operational requirements. If significant technological shifts occur, contract modifications might be negotiated, or the contract could be terminated if the machinery becomes obsolete. The effectiveness of these mechanisms depends on proactive program management and clear communication channels between the DoD and CAE USA INC.

How has federal spending in the 'Other Commercial and Service Industry Machinery Manufacturing' sector, particularly for defense, trended over the past five years?

Analyzing spending trends in this specific sub-sector for defense requires access to detailed historical federal procurement data. Generally, defense spending on machinery manufacturing can be cyclical, influenced by geopolitical events, military modernization programs, and budget allocations. Periods of increased global tension or significant upgrades to military hardware often correlate with higher spending in this area. Without specific data for this NAICS code (333318) and defense agencies, it's difficult to provide a precise trend, but overall defense budgets and strategic priorities would be the primary drivers.

Industry Classification

NAICS: Manufacturing › Commercial and Service Industry Machinery Manufacturing › Other Commercial and Service Industry Machinery Manufacturing

Product/Service Code: TRAINING AIDS AND DEVICES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N6134018R0006

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: L3harris Technologies, Inc

Address: 2200 ARLINGTON DOWNS RD, ARLINGTON, TX, 76011

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

Financial Breakdown

Contract Ceiling: $47,553,916

Exercised Options: $47,553,916

Current Obligation: $47,553,916

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: N6134018D0004

IDV Type: IDC

Timeline