DoD awards $24.3M for F/A-18 C/D obsolescence image generators, with limited competition

Contract Overview

Contract Amount: $24,334,638 ($24.3M)

Contractor: CAE USA Inc.

Awarding Agency: Department of Defense

Start Date: 2020-06-11

End Date: 2026-05-29

Contract Duration: 2,178 days

Daily Burn Rate: $11.2K/day

Competition Type: NOT COMPETED

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: F/A-18 C/D USMC OBSOLESCENCE IMAGE GENERATORS

Place of Performance

Location: ARLINGTON, TARRANT County, TEXAS, 76011

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $24.3 million to CAE USA INC. for work described as: F/A-18 C/D USMC OBSOLESCENCE IMAGE GENERATORS Key points: 1. Contract awarded on a sole-source basis, raising concerns about price discovery and potential overpayment. 2. The contract duration of nearly 6 years suggests a long-term need for these specialized image generators. 3. Limited competition may indicate a lack of market alternatives or a strategic decision by the agency. 4. The fixed-price contract type shifts some risk to the contractor, but oversight is crucial given the sole-source nature. 5. Performance context is limited without specific details on the image generators' capabilities and intended use. 6. Sector positioning within 'Other Commercial and Service Industry Machinery Manufacturing' is broad; specific application is key.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to its sole-source nature and specialized product. Without competitive bids, it's difficult to ascertain if the $24.3 million represents a fair market price. The long duration (2178 days) suggests significant investment, and the lack of transparency inherent in non-competed contracts necessitates careful scrutiny of cost justifications and performance metrics to ensure value for money. Comparisons to similar sole-source procurements for specialized defense equipment would be necessary for a more robust assessment.

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 among multiple vendors. This approach is typically used when only one vendor can provide the required goods or services, often due to proprietary technology, unique capabilities, or urgent needs. The lack of competition limits the agency's ability to leverage market forces to drive down prices and potentially restricts innovation from other potential suppliers.

Taxpayer Impact: Sole-source awards can lead to higher costs for taxpayers as there is no competitive pressure to ensure the lowest possible price. This necessitates strong justification and oversight to ensure the price paid is reasonable.

Public Impact

The primary beneficiaries are the U.S. Marine Corps, which will receive the image generators for F/A-18 C/D aircraft. The services delivered involve the provision of specialized image generation equipment crucial for maintaining the operational readiness of aging aircraft. The geographic impact is primarily within the Department of Defense's operational theaters, supporting naval aviation readiness. Workforce implications may include specialized technical support and maintenance personnel required for the image generators.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition and may result in higher costs.
Lack of transparency in the procurement process makes value assessment difficult.
Obsolescence mitigation for legacy aircraft can be a costly endeavor.
Long contract duration requires sustained oversight to ensure performance and cost control.

Positive Signals

Addresses critical obsolescence issues for a key military platform.
Fixed-price contract type provides some cost certainty.
Contract awarded to a known entity within the defense industrial base.

Sector Analysis

This contract falls within the broader 'Other Commercial and Service Industry Machinery Manufacturing' sector, but its specific application is highly specialized for defense aviation. The market for such niche equipment is likely limited, potentially justifying a sole-source award if unique capabilities are required. Comparable spending benchmarks would be difficult to establish without more information on the specific technology and its alternatives within the defense aerospace industry.

Small Business Impact

There is no indication that this contract involved small business set-asides or subcontracting opportunities. The sole-source nature and specialized requirements suggest it was likely awarded to a large, established contractor. Further investigation would be needed to determine if any small business participation was mandated or occurred voluntarily.

Oversight & Accountability

Oversight mechanisms for this contract would primarily reside within the Department of the Navy and the Department of Defense. Given the sole-source award, rigorous justification and approval processes are expected. Transparency may be limited, but contract performance reviews, payment audits, and potentially Inspector General investigations could be employed to ensure accountability and assess value.

Related Government Programs

F/A-18 Super Hornet Sustainment Programs
Defense Aviation Logistics Support
Military Aircraft Component Manufacturing
Obsolescence Management Programs

Risk Flags

Sole-source award
Potential for price escalation
Limited transparency
Long-term sustainment dependency

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $24.3 million to CAE USA INC.. F/A-18 C/D USMC OBSOLESCENCE IMAGE GENERATORS

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 $24.3 million.

What is the period of performance?

Start: 2020-06-11. End: 2026-05-29.

What specific capabilities do these 'image generators' provide for the F/A-18 C/D, and why are they critical for obsolescence mitigation?

The term 'image generators' in this context likely refers to specialized equipment used for simulating or creating visual data critical for training, maintenance, or operational planning related to the F/A-18 C/D aircraft. For obsolescence mitigation, these generators might be used to create digital twins, virtual models, or training simulations that replicate the functionality or appearance of components or systems that are no longer manufactured or supported. This allows maintenance crews and pilots to train and troubleshoot using realistic visual aids without relying on increasingly scarce physical parts or outdated documentation. The criticality stems from the F/A-18 C/D being a legacy platform, meaning many of its original components are out of production, making maintenance and training increasingly challenging and expensive. These image generators help bridge that gap, ensuring the continued readiness and operational effectiveness of the fleet.

What is the typical cost range for similar specialized defense equipment procured on a sole-source basis?

Determining a typical cost range for specialized defense equipment procured sole-source is highly variable and depends heavily on the specific technology, its complexity, the level of customization required, and the contractor's proprietary position. Sole-source procurements inherently lack the price discovery mechanism of competition, meaning costs are often negotiated directly between the agency and the contractor. Historical data from the Government Accountability Office (GAO) and defense budget analyses show that sole-source contracts can sometimes be significantly more expensive than if the item were competed. For niche defense systems, costs can range from hundreds of thousands to tens or even hundreds of millions of dollars, depending on the scope. Without specific details on the 'image generators,' a precise benchmark is impossible, but the $24.3 million award suggests a substantial, complex system.

What are the potential risks associated with a sole-source award for critical defense systems like these image generators?

The primary risk associated with a sole-source award for critical defense systems is the potential for inflated pricing due to the absence of competitive pressure. The government may end up paying more than necessary if the contractor does not face market alternatives. Another significant risk is vendor lock-in, where the agency becomes dependent on a single supplier, potentially limiting future flexibility and increasing long-term sustainment costs. Furthermore, sole-source awards can reduce transparency in the procurement process, making it harder to scrutinize cost justifications and ensure fair value. There's also a risk that innovation may be stifled, as potential competitors are excluded from the outset. Finally, if the sole-source provider experiences financial difficulties or decides to exit the market, the agency could face significant disruption in acquiring or maintaining these critical systems.

How does the fixed-price contract type mitigate risks for the government in this sole-source scenario?

The Firm Fixed Price (FFP) contract type shifts the majority of the cost risk from the government to the contractor. Under an FFP agreement, the contractor is obligated to complete the work for a predetermined price, regardless of their actual costs. This provides the government with cost certainty, as the total expenditure is known upfront. If the contractor's costs exceed the agreed-upon price, they absorb the loss. Conversely, if their costs are lower, they retain the profit. While FFP is generally preferred for its cost control benefits, its effectiveness in a sole-source situation is somewhat diminished. The government still needs to ensure the initial fixed price negotiated is reasonable and reflects fair market value, which is more challenging without competitive benchmarking. However, it does protect against cost overruns during performance.

What historical spending patterns exist for F/A-18 C/D sustainment and obsolescence management within the Department of the Navy?

The Department of the Navy has consistently allocated significant funding towards the sustainment and modernization of its F/A-18 fleet, including the C/D variants. Historical spending patterns reveal a long-term commitment to maintaining these aircraft, which form a crucial part of naval aviation capabilities. As the F/A-18 C/D airframes age and their original components become obsolete, the Navy has increasingly invested in obsolescence management programs, upgrades, and specialized support services. This includes contracts for parts manufacturing, repair services, avionics modernization, and simulation/training equipment, such as the image generators in question. Annual spending on F/A-18 sustainment can run into hundreds of millions, if not billions, of dollars across various contracts. The trend indicates a growing need for solutions to extend the life of these legacy platforms, often involving complex and costly technological interventions.

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: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: CAE 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: $24,334,638

Exercised Options: $24,334,638

Current Obligation: $24,334,638

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