DoD's $58.6M R&D contract for spares awarded to Insitu, Inc. raises value and competition questions

Contract Overview

Contract Amount: $58,609,870 ($58.6M)

Contractor: Insitu, Inc.

Awarding Agency: Department of Defense

Start Date: 2018-03-26

End Date: 2019-04-12

Contract Duration: 382 days

Daily Burn Rate: $153.4K/day

Competition Type: NOT AVAILABLE FOR COMPETITION

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: R&D

Official Description: CLIN 0005 SPARES - LOT 1

Plain-Language Summary

Department of Defense obligated $58.6 million to INSITU, INC. for work described as: CLIN 0005 SPARES - LOT 1 Key points: 1. The contract's value for research and development of physical, engineering, and life sciences appears high given the limited competition. 2. The 'Not Available for Competition' award raises concerns about potential overpayment and lack of market price discovery. 3. Performance duration of 382 days for a fixed-price contract warrants scrutiny of cost controls and efficiency. 4. The absence of small business set-aside or subcontracting plans suggests limited direct benefit to the small business ecosystem. 5. The contract's focus on R&D for spares indicates a specialized need, but the procurement method impacts overall value assessment. 6. Benchmarking against similar R&D contracts for specialized equipment is crucial for a comprehensive value-for-money analysis.

Value Assessment

Rating: questionable

The contract value of $58.6 million for research and development of spares, awarded on a firm-fixed-price basis, is difficult to benchmark without more specific details on the R&D scope. However, the lack of competition is a significant red flag for value for money. Typically, competitive bidding drives down prices and ensures fair market value. Without this, there's a higher risk that the price paid exceeds what would be achieved in a competitive environment. Further analysis would require comparing the deliverables and R&D scope to similar, competitively awarded contracts in the defense sector.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded under a 'Not Available for Competition' basis, indicating a sole-source procurement. This means that only one vendor, Insitu, Inc., was solicited for this requirement. While sole-source awards can be justified for unique capabilities or urgent needs, they inherently limit price discovery and competitive pressure. The lack of multiple bidders means the government did not benefit from a range of proposals and pricing strategies that typically emerge from a full and open competition.

Taxpayer Impact: Taxpayers may have paid a premium for this contract due to the absence of competitive bidding. Without competing offers, there is a reduced incentive for the contractor to offer the lowest possible price, potentially leading to less efficient use of public funds.

Public Impact

The primary beneficiaries are likely the Department of Defense (specifically the Department of the Navy) through the acquisition of specialized R&D for spares. The services delivered involve research and development activities related to physical, engineering, and life sciences, tailored for specific spare parts. The geographic impact is primarily within the defense supply chain and R&D infrastructure, with potential downstream effects on military readiness. Workforce implications may include specialized R&D personnel employed by Insitu, Inc., contributing to the defense technology sector.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition limits price discovery and potentially increases costs for taxpayers.
The 'Not Available for Competition' status requires strong justification to ensure necessity and prevent potential misuse of funds.
Firm-fixed-price contract for R&D can be risky if the scope is not well-defined, potentially leading to cost overruns or unmet objectives.
Absence of small business participation noted, missing opportunities to foster small business growth in the defense sector.

Positive Signals

Firm-fixed-price contract provides cost certainty for the government, assuming scope is well-managed.
Award to a specific contractor suggests they possess unique or critical capabilities required by the Department of the Navy.
Research and Development focus indicates investment in future capabilities and technological advancement for defense.

Sector Analysis

The contract falls within the Research and Development (R&D) sector, specifically focusing on physical, engineering, and life sciences. This sector is critical for defense innovation, enabling the development of advanced technologies and specialized equipment. The market for defense R&D is often characterized by specialized expertise and long development cycles. Comparable spending benchmarks would involve analyzing other R&D contracts awarded by the Department of Defense for similar technological advancements or specialized components, particularly those involving sole-source procurements.

Small Business Impact

This contract does not appear to have included a small business set-aside, nor is there an indication of subcontracting plans for small businesses. The award to Insitu, Inc., a company whose size is not specified here but often operates in specialized defense markets, suggests a focus on specific technical capabilities rather than broad small business engagement. This means the direct economic benefits to the small business ecosystem from this particular contract are likely minimal, missing an opportunity to leverage small businesses for specialized R&D or component supply.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy's contracting and program management offices. Accountability measures are typically embedded within the firm-fixed-price contract terms, requiring delivery of specified R&D outcomes. Transparency is limited due to the sole-source nature of the award, making public scrutiny of the pricing and justification more challenging. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Department of Defense Research and Development Contracts
Navy R&D Procurement
Specialized Equipment Development
Aerospace and Defense Technology R&D
Sole-Source Defense Contracts

Risk Flags

Sole-source award lacks competitive pricing.
R&D scope definition critical for fixed-price value.
Potential for cost overruns if R&D is complex.
Limited transparency due to non-competitive nature.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $58.6 million to INSITU, INC.. CLIN 0005 SPARES - LOT 1

Who is the contractor on this award?

The obligated recipient is INSITU, 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 $58.6 million.

What is the period of performance?

Start: 2018-03-26. End: 2019-04-12.

What specific R&D activities were undertaken for the spares, and how were they justified as 'Not Available for Competition'?

The contract details indicate the award was for 'CLIN 0005 SPARES - LOT 1' under Research and Development in the Physical, Engineering, and Life Sciences. The justification for 'Not Available for Competition' (NAFC) is critical here. Typically, NAFC awards are made when only one responsible source is available due to unique capabilities, proprietary data, or urgent and compelling reasons. For this contract, the Navy would have had to provide a detailed justification outlining why Insitu, Inc. was the sole provider for this specific R&D related to spares. This could involve proprietary technology, specialized testing facilities, or unique expertise essential for developing these particular spares. Without access to the official justification document, it's difficult to ascertain the precise reasons, but it implies a high degree of specificity in the requirement that only Insitu could meet.

How does the $58.6 million contract value compare to similar R&D contracts for specialized spares within the defense sector?

Benchmarking this $58.6 million contract value is challenging without more granular data on the specific R&D scope and deliverables. However, R&D contracts, especially for specialized defense applications, can command significant investment due to the complexity, innovation required, and often lengthy development cycles. If this contract involves cutting-edge technology development for critical spares where Insitu holds unique intellectual property or manufacturing processes, the cost might be justifiable. Conversely, if the R&D is more incremental or the spares are for widely used platforms, this amount could be considered high, particularly given the sole-source nature. A thorough comparison would involve analyzing the contract's technical data package, the number of labor hours estimated, the complexity of the engineering required, and comparing these factors against other competitively or non-competitively awarded R&D contracts for similar defense components or systems.

What are the potential risks associated with a firm-fixed-price R&D contract awarded on a sole-source basis?

A firm-fixed-price (FFP) contract aims to provide cost certainty for the government. However, when applied to Research and Development (R&D) on a sole-source basis, it introduces specific risks. For R&D, the scope and outcomes are inherently uncertain; unforeseen technical challenges can arise, making the fixed price potentially inadequate or, conversely, excessively high if the contractor underestimates the effort. On a sole-source award, the government lacks the benefit of competitive pricing, increasing the risk of paying an inflated price. The contractor, knowing they are the only option, may have less incentive to control costs rigorously or innovate efficiently. The government's oversight becomes critical to ensure the contractor is diligently pursuing the R&D objectives within the agreed-upon price, and that the initial price was indeed fair and reasonable given the limited competition.

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

Insitu, Inc. is a known entity within the Department of Defense, particularly recognized for its unmanned aerial systems (UAS) and related technologies. Their track record with the DoD likely includes numerous contracts, many of which may be for the production or sustainment of their established platforms. For R&D contracts, their history would indicate their capability in innovation and development. A review of their past performance would reveal their success in delivering on R&D objectives, managing complex projects, and adhering to contract terms. Given this contract's sole-source nature, the DoD likely has a positive view of Insitu's specific capabilities relevant to this R&D requirement, possibly based on prior successful engagements or unique technological expertise.

What does the 'Not Available for Competition' designation imply about the market for these specific spares and their R&D?

The 'Not Available for Competition' (NAFC) designation strongly implies that the market for the specific R&D related to these spares is highly concentrated or specialized. It suggests that Insitu, Inc. possesses unique intellectual property, proprietary technology, or essential manufacturing capabilities that are not readily available from other sources. This could be due to patents, trade secrets, or unique expertise developed over time. Consequently, the market is effectively limited to a single provider for this particular requirement. While this ensures the government can acquire the necessary R&D, it removes the competitive dynamic that typically drives down prices and fosters innovation through market forces, placing a greater onus on the government to rigorously justify the necessity and fairness of the sole-source award.

How does the duration of the contract (382 days) impact the assessment of its value and risk?

A contract duration of 382 days (approximately 13 months) for a firm-fixed-price R&D effort provides a defined period for the contractor to achieve specific milestones. For R&D, this duration allows for a reasonable timeframe to conduct research, experimentation, and development. The risk assessment is tied to how well this duration aligns with the complexity of the R&D. If the scope is ambitious, 382 days might be insufficient, leading to potential delays or incomplete deliverables. Conversely, if the R&D is more straightforward, this duration could be ample, potentially allowing the contractor to complete the work efficiently. For the government, a well-defined duration helps in planning and tracking progress, but the fixed-price nature means the contractor bears the risk of cost overruns if the work takes longer than anticipated, provided the scope remains unchanged.

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: AEROSPACE CRAFT AND STRUCTURAL COMPONENTS

Competition & Pricing

Extent Competed: NOT AVAILABLE FOR COMPETITION

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: THE Boeing Company (UEI: 009256819)

Address: 118 E COLUMBIA RIVER WAY, BINGEN, WA, 98605

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: $58,609,870

Exercised Options: $58,609,870

Current Obligation: $58,609,870

Subaward Activity

Number of Subawards: 6

Total Subaward Amount: $2,028,084

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: N6833516G0046

IDV Type: BOA

Timeline