DoD's $48M contract for missile propulsion parts awarded to Kratos, a sole-source acquisition

Contract Overview

Contract Amount: $48,060,500 ($48.1M)

Contractor: Kratos Space & Missile Defense Systems, Inc.

Awarding Agency: Department of Defense

Start Date: 2015-12-22

End Date: 2023-04-29

Contract Duration: 2,685 days

Daily Burn Rate: $17.9K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: ORIOLE MOTORS AND HARDWARE

Place of Performance

Location: SAN DIEGO, SAN DIEGO County, CALIFORNIA, 92121

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $48.1 million to KRATOS SPACE & MISSILE DEFENSE SYSTEMS, INC. for work described as: ORIOLE MOTORS AND HARDWARE Key points: 1. The contract's value of $48 million over nearly 7 years suggests a significant investment in specialized defense manufacturing. 2. Sole-source awards can indicate a lack of market competition or unique capabilities required, potentially impacting price. 3. The definitive contract type with a firm fixed price suggests cost certainty for the government, but the lack of competition is a risk indicator. 4. Performance is tied to guided missile and space vehicle propulsion, a critical but niche area within the defense sector. 5. The contract's duration of over 2600 days points to a long-term need for these specialized components. 6. California is the state of performance, indicating a concentration of this specific defense manufacturing capability.

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 assess if the $48 million represents a fair market price. The firm fixed-price structure offers cost predictability, but the absence of competition raises concerns about potential overpayment. Further analysis would require understanding the specific technological requirements and the available suppliers in this niche market.

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 lack of multiple bidders means there was no opportunity for price discovery through a competitive bidding process, which can lead to higher costs for the government.

Taxpayer Impact: Taxpayers may be paying a premium for this contract due to the absence of competitive pressure to drive down prices. The government did not benefit from the cost-saving mechanisms inherent in a competitive procurement.

Public Impact

The primary beneficiaries are the Department of the Navy and potentially broader Department of Defense operations requiring advanced missile propulsion systems. The contract delivers critical components for guided missile and space vehicle propulsion units, essential for national defense capabilities. Geographic impact is concentrated in California, where the contractor, Kratos Space & Missile Defense Systems, Inc., is located and where the work is performed. Workforce implications include the employment of skilled engineers, technicians, and manufacturing personnel within the specialized aerospace and defense industry in California.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition, potentially increasing costs for taxpayers.
Lack of transparency in the justification for sole-source procurement.
Long contract duration could mask inefficiencies or price escalations if not closely monitored.
Concentration of critical defense manufacturing in a single state could pose supply chain risks.

Positive Signals

Firm fixed-price contract provides cost certainty for the government.
Award to an established defense contractor (Kratos) suggests potential for reliable delivery of specialized components.
Contract supports critical national defense capabilities, aligning with agency mission objectives.

Sector Analysis

This contract falls within the aerospace and defense manufacturing sector, specifically focusing on propulsion systems for missiles and space vehicles. This is a highly specialized and technologically intensive segment of the defense industrial base. The market is characterized by high barriers to entry due to R&D costs, stringent quality requirements, and long development cycles. Comparable spending benchmarks are difficult to establish without detailed knowledge of the specific propulsion technology and market dynamics, but significant government investment in such capabilities is typical for national security.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. Furthermore, the contractor, Kratos Space & Missile Defense Systems, Inc., is a large business. There is no explicit information provided regarding subcontracting plans to small businesses. This suggests that the primary contract value will flow to a large prime contractor, with potential downstream impacts on the small business ecosystem depending on Kratos's subcontracting strategy.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy and the Department of Defense's contracting and program management offices. Accountability measures are embedded in the contract terms, including performance requirements and the firm fixed-price structure. Transparency is limited due to the sole-source nature of the award, making public scrutiny of the procurement process challenging. Inspector General jurisdiction would apply to investigations of fraud, waste, or abuse related to the contract.

Related Government Programs

Guided Missile Manufacturing
Space Vehicle Manufacturing
Defense Propulsion Systems
Aerospace Component Manufacturing
Department of Defense Contracts
Naval Weapons Systems

Risk Flags

Sole Source Award
Lack of Competition
Potential for Overpricing
Long Contract Duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $48.1 million to KRATOS SPACE & MISSILE DEFENSE SYSTEMS, INC.. ORIOLE MOTORS AND HARDWARE

Who is the contractor on this award?

The obligated recipient is KRATOS SPACE & MISSILE DEFENSE 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 $48.1 million.

What is the period of performance?

Start: 2015-12-22. End: 2023-04-29.

What is the specific justification for awarding this contract on a sole-source basis to Kratos Space & Missile Defense Systems, Inc.?

The provided data indicates the contract was 'NOT COMPETED' and is 'sole-source'. While the specific justification is not detailed in the abbreviated data, sole-source awards are typically granted when only one responsible source is capable of providing the required goods or services, or when there is a compelling urgency that precludes full and open competition. For specialized defense components like missile propulsion units, this could be due to unique proprietary technology, highly specialized manufacturing capabilities, or a lack of alternative qualified suppliers. A thorough review of the contract file and associated documentation would be necessary to ascertain the precise justification used by the Department of the Navy.

How does the $48 million contract value compare to similar procurements for missile propulsion units?

Direct comparison of the $48 million contract value for missile propulsion units is difficult without more specific details on the type of propulsion system, quantity, and technological sophistication. However, given the duration of nearly seven years (2685 days) and the specialized nature of defense manufacturing, $48 million represents a substantial investment. Sole-source awards, by their nature, lack a competitive benchmark, making it challenging to determine if this price is optimal. Industry reports and government spending databases for similar, competitively procured missile components might offer a broader context, but the unique aspects of this contract likely limit direct comparability.

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

The primary risks associated with a sole-source contract of this magnitude ($48 million) and duration (nearly 7 years) include potential overpricing due to the lack of competitive pressure, reduced incentive for the contractor to innovate or improve efficiency, and a lack of market transparency. Taxpayers may bear a higher cost than if the contract had been competed. Additionally, reliance on a single supplier can create supply chain vulnerabilities. The long duration increases the risk of the technology becoming obsolete or the contractor facing financial instability without adequate government oversight.

What is the track record of Kratos Space & Missile Defense Systems, Inc. in fulfilling similar defense contracts?

Kratos Space & Missile Defense Systems, Inc. is a known entity in the defense sector, specializing in areas such as target drones, tactical missiles, and propulsion systems. Their track record typically involves developing and manufacturing complex aerospace and defense hardware. While specific performance metrics for this particular contract are not detailed in the provided data, Kratos generally has experience with government contracts. A comprehensive assessment would require reviewing their past performance evaluations (e.g., Contractor Performance Assessment Reporting System - CPARS), any past disputes or contract terminations, and their success in delivering on previous missile and propulsion-related programs.

How does this contract align with the Department of the Navy's strategic objectives for missile defense and space capabilities?

This contract directly supports the Department of the Navy's strategic objectives by providing essential components for guided missile and space vehicle propulsion units. These components are critical for maintaining and enhancing the Navy's offensive and defensive missile capabilities, as well as its role in space-based defense systems. Ensuring a reliable supply of advanced propulsion technology is fundamental to naval readiness and the execution of its missions. The investment signifies the Navy's commitment to modernizing its arsenal and maintaining technological superiority in these critical areas.

What are the potential implications of this contract on the broader defense industrial base, particularly regarding competition?

The sole-source nature of this $48 million contract for missile propulsion units has limited implications for fostering broader competition within the defense industrial base. By not being competed, it bypasses the opportunity to encourage new entrants or existing competitors to develop and offer similar capabilities. This can reinforce the dominance of incumbent suppliers in niche markets. While Kratos is a significant player, the lack of competition means other potential manufacturers do not have a direct pathway to secure this specific government business, potentially hindering the growth of a more diverse and competitive supplier base for these critical components.

Industry Classification

NAICS: Manufacturing › Aerospace Product and Parts Manufacturing › Guided Missile and Space Vehicle Propulsion Unit and Propulsion Unit Parts Manufacturing

Product/Service Code: GUIDED MISSLES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N6339415R0019

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Kratos Defense & Security Solutions, Inc.

Address: 10680 TREENA ST 6TH FL, SAN DIEGO, CA, 92131

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

Financial Breakdown

Contract Ceiling: $48,932,637

Exercised Options: $48,060,500

Current Obligation: $48,060,500

Subaward Activity

Number of Subawards: 1

Total Subaward Amount: $37,297

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline