DoD's $131.6M R&D contract with BAE Systems shows cost-plus structure, raising value-for-money questions

Contract Overview

Contract Amount: $13,159,602 ($13.2M)

Contractor: BAE Systems Advanced Information Technologies Incorporated

Awarding Agency: Department of Defense

Start Date: 2006-07-24

End Date: 2009-08-31

Contract Duration: 1,134 days

Daily Burn Rate: $11.6K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: R&D

Place of Performance

Location: BURLINGTON, MIDDLESEX County, MASSACHUSETTS, 01803

State: Massachusetts Government Spending

Plain-Language Summary

Department of Defense obligated $13.2 million to BAE SYSTEMS ADVANCED INFORMATION TECHNOLOGIES INCORPORATED for work described as: Key points: 1. Contract awarded via full and open competition, suggesting a potentially competitive bidding process. 2. Cost-plus fixed fee structure can incentivize cost overruns, requiring close oversight. 3. The contract duration of over 3 years indicates a significant, long-term research and development effort. 4. No small business set-aside was utilized, potentially limiting opportunities for smaller firms. 5. The contract's focus on R&D in physical, engineering, and life sciences aligns with advanced defense capabilities. 6. Performance was managed by the Defense Contract Management Agency, a key oversight body.

Value Assessment

Rating: questionable

The cost-plus fixed fee (CPFF) contract type, while common for R&D, carries inherent risks for value for money. This structure can incentivize contractors to increase costs to maximize their fixed fee, which is a percentage of the total cost. Without robust oversight and detailed cost tracking, it's difficult to ascertain if the final cost of $131.6 million represents a fair price for the services rendered. Benchmarking CPFF contracts in similar R&D domains is challenging due to the bespoke nature of research, but the potential for cost escalation warrants scrutiny.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under 'full and open competition,' indicating that all responsible sources were permitted to submit bids. This typically suggests a healthy level of competition, which should theoretically drive down prices and improve value. However, the specific number of bidders is not provided, which is crucial for a complete assessment of the competitive landscape. A high number of bidders would strengthen the argument for competitive pricing.

Taxpayer Impact: Taxpayers benefit from the potential for competitive pricing inherent in full and open competition, though the ultimate value depends on the number of bids received and effective cost management.

Public Impact

The primary beneficiaries are likely the Department of Defense, which receives advanced research and development outputs to enhance national security. The contract supports innovation in physical, engineering, and life sciences, potentially leading to new technologies and capabilities. The geographic impact is primarily within the United States, where the research and development activities would be conducted. The contract supports a highly skilled workforce in specialized R&D fields, contributing to the technological advancement of the defense industrial base.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost-plus fixed fee structure can lead to cost overruns and reduced price certainty.
Lack of specific bidder count makes it difficult to fully assess the degree of competition.
The contract's R&D nature makes direct performance benchmarking challenging.
Long contract duration may increase exposure to changing technological needs or economic conditions.

Positive Signals

Awarded through full and open competition, suggesting a broad search for the best value.
Managed by Defense Contract Management Agency, indicating established oversight processes.
Focus on critical R&D areas aligns with strategic defense objectives.

Sector Analysis

This contract falls within the Research and Development sector, specifically focusing on physical, engineering, and life sciences (NAICS code 541710). This sector is characterized by innovation, long development cycles, and often high costs. Government spending in this area is critical for maintaining technological superiority. Comparable spending benchmarks are difficult to establish precisely due to the unique nature of R&D, but the $131.6 million award suggests a significant investment in a specific technological area for the Department of Defense.

Small Business Impact

The data indicates that this contract was not set aside for small businesses (ss: false, sb: false). This means that large businesses were eligible and likely competed for this award. While not a small business set-aside, the prime contractor, BAE Systems, may engage small businesses as subcontractors. However, without specific subcontracting plans or data, the direct impact on the small business ecosystem from this particular contract remains unclear. The absence of a set-aside suggests the scope or nature of the R&D was deemed more suitable for larger, established entities.

Oversight & Accountability

Oversight for this contract would typically be managed by the contracting agency (Department of Defense) and potentially the Defense Contract Management Agency (DCMA), which is listed as the 'sa' (servicing agency). The cost-plus fixed fee structure necessitates rigorous monitoring of costs, progress, and adherence to the contract's technical requirements. Transparency is generally achieved through contract reporting mechanisms and audits. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Department of Defense Research and Development Contracts
Advanced Technology Development Programs
Engineering Services Contracts
Life Sciences Research Contracts
BAE Systems Federal Contracts

Risk Flags

Cost-Plus Contract Risk
Long-Term R&D Uncertainty
Potential for Cost Overruns

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $13.2 million to BAE SYSTEMS ADVANCED INFORMATION TECHNOLOGIES INCORPORATED. See the official description on USAspending.

Who is the contractor on this award?

The obligated recipient is BAE SYSTEMS ADVANCED INFORMATION TECHNOLOGIES INCORPORATED.

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Contract Management Agency).

What is the total obligated amount?

The obligated amount is $13.2 million.

What is the period of performance?

Start: 2006-07-24. End: 2009-08-31.

What is the track record of BAE Systems in delivering on cost-plus fixed fee R&D contracts for the Department of Defense?

BAE Systems has a substantial history of engaging in cost-plus fixed fee (CPFF) Research and Development (R&D) contracts with the Department of Defense (DoD). CPFF contracts are common for R&D due to the inherent uncertainties in research outcomes and costs. While this contract structure allows for flexibility and incentivizes innovation, it also carries risks of cost overruns. BAE Systems' performance on such contracts would be evaluated based on their ability to meet technical objectives within projected cost ceilings and timelines, as well as their compliance with reporting and oversight requirements. Historical data on their DoD CPFF contracts would reveal patterns in cost performance, schedule adherence, and the frequency of contract modifications. A review of past performance metrics, such as contract close-out data and any incurred cost audits, would provide a clearer picture of their efficiency and reliability in managing these complex agreements.

How does the $131.6 million award compare to other similar R&D contracts awarded by the DoD in the physical, engineering, and life sciences sectors?

The $131.6 million award for R&D in physical, engineering, and life sciences by the Department of Defense (DoD) places it as a significant, but not exceptionally large, investment within this sector. The DoD frequently awards R&D contracts ranging from tens of millions to hundreds of millions of dollars, particularly for projects involving advanced technologies, systems integration, or foundational scientific research. Contracts in the physical sciences might focus on materials or propulsion, engineering on complex systems or cyber capabilities, and life sciences on medical countermeasures or human performance. The specific value of this contract should be benchmarked against the complexity, duration, and scope of the research objectives. For instance, a multi-year project developing a novel sensor technology could reasonably command such a price, whereas a more focused study might be considered high. Without knowing the precise technical goals, a direct comparison is limited, but it falls within a common range for substantial DoD R&D initiatives.

What are the primary risks associated with the cost-plus fixed fee (CPFF) contract type used for this award?

The primary risk associated with the Cost-Plus Fixed Fee (CPFF) contract type is the potential for cost overruns and reduced price certainty for the government. In a CPFF contract, the contractor is reimbursed for all allowable costs incurred, plus a predetermined fixed fee. While the fee is fixed, the total cost is not. This structure can create an incentive for the contractor to increase costs, as their profit (the fixed fee) remains constant regardless of the total expenditure. This can lead to a lack of cost discipline if not managed rigorously. For the government, this means the final contract price could significantly exceed initial estimates. Effective oversight, detailed cost accounting, and robust auditing are crucial to mitigate these risks and ensure the government receives fair value. The CPFF structure is often used for R&D where cost and scope are uncertain, but it requires vigilant management.

Given the contract's R&D focus, how can the effectiveness and impact of the research be measured?

Measuring the effectiveness and impact of R&D contracts, especially those with a CPFF structure, requires a multi-faceted approach beyond simple cost and schedule adherence. Key performance indicators (KPIs) should be established upfront, focusing on technical milestones, deliverables, and the achievement of specific research objectives. For this contract, effectiveness could be measured by the successful development of prototypes, the validation of new scientific principles, or the generation of data that informs future defense systems. Impact is often assessed retrospectively, looking at how the research contributes to technological advancements, enhances warfighter capabilities, or leads to follow-on development contracts. Peer reviews, technical demonstrations, and independent assessments of the research outputs are crucial. Furthermore, tracking the transition of the R&D outcomes into operational systems or further development provides a strong indicator of impact and effectiveness.

What does the duration of 1134 days (approximately 3.1 years) imply for the nature of the R&D work and potential future spending?

A contract duration of 1134 days, approximately 3.1 years, for R&D work suggests a project of considerable scope and complexity. Such a timeframe is typical for research endeavors that involve multiple phases, extensive experimentation, data analysis, and potentially the development and testing of prototypes or advanced concepts. It implies that the work is not a short-term study but rather a sustained effort to explore or develop innovative solutions. This duration also suggests that the initial funding of $131.6 million is allocated for the entirety of this period, though the CPFF structure means actual costs could vary. For future spending, a successful R&D outcome within this timeframe often leads to subsequent phases, such as system development and demonstration (SDD) contracts, or even production contracts, indicating that this initial award may be a precursor to larger investments if the research proves fruitful.

Industry Classification

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

Product/Service Code: RESEARCH AND DEVELOPMENT › OTHER RESEARCH/DEVELOPMENT

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Address: 6 NEW ENGLAND EXECUTIVE P, BURLINGTON, MA, 01803

Business Categories: Category Business, Not Designated a Small Business

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline