DoD awards $19.7M contract for electronic components, raising questions about competition and value

Contract Overview

Contract Amount: $19,684,507 ($19.7M)

Contractor: BAE Systems Land & Armaments L.P.

Awarding Agency: Department of Defense

Start Date: 2022-09-27

End Date: 2027-06-30

Contract Duration: 1,737 days

Daily Burn Rate: $11.3K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: ELECTRONIC COMPONENT

Place of Performance

Location: YORK, YORK County, PENNSYLVANIA, 17408

State: Pennsylvania Government Spending

Plain-Language Summary

Department of Defense obligated $19.7 million to BAE SYSTEMS LAND & ARMAMENTS L.P. for work described as: ELECTRONIC COMPONENT Key points: 1. Contract awarded on a sole-source basis, limiting price discovery and potentially increasing costs. 2. The contract duration of nearly five years suggests a long-term need for these components. 3. The firm-fixed-price structure shifts risk to the contractor, but the lack of competition hinders benchmarking. 4. Performance is rated as satisfactory, but without competitive data, true value-for-money is difficult to ascertain. 5. The contract falls under the 'Other Electronic Component Manufacturing' NAICS code, indicating a specific niche. 6. No small business set-aside was utilized, potentially limiting opportunities for smaller firms in this sector.

Value Assessment

Rating: questionable

Benchmarking the value of this $19.7 million contract is challenging due to the sole-source award. Without competitive bids, it's difficult to determine if the pricing is fair or if taxpayers received the best possible value. While the firm-fixed-price contract shifts some risk to BAE Systems, the lack of competition means there's no market-based validation of the price. Further analysis would require access to historical pricing data for similar components or internal cost estimates.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning BAE SYSTEMS LAND & ARMAMENTS L.P. was the only bidder. This approach bypasses the standard competitive procurement process, which typically involves soliciting bids from multiple vendors. While sole-source awards can be justified in specific circumstances (e.g., unique capabilities, urgent needs), they inherently limit price discovery and can lead to higher costs for the government.

Taxpayer Impact: The lack of competition means taxpayers may not be benefiting from the most cost-effective pricing available in the market. Without competing offers, the government has less leverage to negotiate favorable terms and prices.

Public Impact

The Department of Defense is the primary beneficiary, receiving essential electronic components for its operations. The contract supports the sustainment and readiness of military equipment requiring these specific components. The geographic impact is primarily centered around the contractor's operations in Pennsylvania. The contract supports jobs within BAE Systems, contributing to the defense industrial workforce.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing and value assessment.
Lack of transparency in pricing due to absence of competitive bids.
Potential for inflated costs without market-based price validation.

Positive Signals

Firm-fixed-price contract shifts performance risk to the contractor.
Contractor has a track record with the Department of Defense.
Satisfactory performance rating indicates meeting basic contract requirements.

Sector Analysis

This contract falls within the broader electronic components manufacturing sector, a critical part of the defense industrial base. The NAICS code 334419, 'Other Electronic Component Manufacturing,' suggests specialized components not covered by more common categories. The defense sector relies heavily on a robust supply chain for these parts, and spending in this area is often driven by specific weapon system requirements and sustainment needs. Benchmarking is difficult without comparable sole-source awards or detailed cost breakdowns.

Small Business Impact

The contract data indicates that this was not a small business set-aside, nor does it appear to involve significant subcontracting opportunities for small businesses based on the information provided. The award to a large prime contractor like BAE Systems suggests that the focus was on fulfilling a specific requirement rather than promoting small business participation. Further investigation into subcontracting plans would be needed to fully assess the impact on the small business ecosystem.

Oversight & Accountability

Oversight for this contract would typically fall under the Defense Contract Management Agency (DCMA) and the Defense Contract Audit Agency (DCAA), responsible for ensuring compliance with contract terms and financial accountability. The Department of Defense's Inspector General may also conduct audits or investigations into specific aspects of the contract if concerns arise. Transparency is limited by the sole-source nature of the award, making public oversight more challenging.

Related Government Programs

Department of Defense Procurement
Electronic Component Procurement
BAE Systems Contracts
Sole-Source Defense Contracts
Defense Logistics Agency Contracts

Risk Flags

Sole-source award
Lack of competitive bidding
Potential for uncompetitive pricing
Long contract duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $19.7 million to BAE SYSTEMS LAND & ARMAMENTS L.P.. ELECTRONIC COMPONENT

Who is the contractor on this award?

The obligated recipient is BAE SYSTEMS LAND & ARMAMENTS L.P..

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Logistics Agency).

What is the total obligated amount?

The obligated amount is $19.7 million.

What is the period of performance?

Start: 2022-09-27. End: 2027-06-30.

What is BAE Systems' track record with the Department of Defense for similar electronic components?

BAE Systems Land & Armaments L.P. is a significant defense contractor with a substantial history of awards from the Department of Defense across various platforms and systems. While this specific contract is for 'Other Electronic Component Manufacturing' (NAICS 334419), BAE Systems' broader portfolio includes complex electronic systems, munitions, and armored vehicles. Analyzing their past performance on similar component supply contracts, especially those awarded non-competitively, would be crucial. Publicly available data often shows a mix of performance ratings, with some contracts meeting expectations and others facing challenges. Without specific details on past component awards, it's difficult to definitively assess their track record for this particular item, but their overall size and scope suggest extensive experience.

How does the $19.7 million value compare to similar electronic component contracts awarded by the DoD?

Direct comparison of the $19.7 million value is difficult without knowing the exact specifications and quantity of the electronic components. However, contracts for specialized electronic components within the defense sector can range widely, from a few thousand dollars for off-the-shelf items to tens or hundreds of millions for highly customized or integrated systems. Given this contract's sole-source nature and its duration (nearly five years), the $19.7 million figure suggests a significant, long-term supply of specialized components rather than a small, one-time purchase. Benchmarking against other sole-source awards for similar component types, if available, would be the most relevant comparison, but such data is often proprietary or not publicly disclosed in detail.

What are the primary risks associated with this sole-source contract for electronic components?

The primary risk associated with this sole-source contract is the potential for inflated pricing due to the lack of competition. Without competing bids, BAE Systems may not have had the same incentive to offer the lowest possible price. Another risk is the potential for vendor lock-in, where the government becomes dependent on a single supplier for critical components, limiting future flexibility and negotiation power. Furthermore, if BAE Systems faces production issues or supply chain disruptions, the government has limited alternative sources, potentially impacting program timelines and readiness. The long contract duration also increases the risk of price increases over time if not adequately managed through contract clauses.

How effective is the firm-fixed-price (FFP) contract type in managing costs for these electronic components?

The firm-fixed-price (FFP) contract type is generally considered effective in managing costs by shifting the risk of cost overruns to the contractor, BAE Systems. Under an FFP contract, the contractor agrees to a set price for the work or supplies, and any costs incurred above that price are absorbed by the contractor. This incentivizes the contractor to control costs and perform efficiently. However, the effectiveness of FFP in this specific sole-source scenario is diminished. While the government knows its maximum liability, the absence of competition means the initial fixed price might be higher than it would be in a competitive environment. Therefore, while FFP provides cost certainty, it doesn't guarantee cost efficiency in the absence of market pressure.

What are the historical spending patterns for electronic components by the Defense Logistics Agency (DLA) under NAICS code 334419?

Analyzing historical spending patterns for electronic components by the Defense Logistics Agency (DLA) under NAICS code 334419 requires access to detailed procurement databases. Generally, the DLA is responsible for providing logistics support, including procuring a wide range of equipment and components, to all branches of the military. Spending in this category would fluctuate based on military readiness requirements, modernization programs, and the lifecycle of various weapon systems. Sole-source awards within this category, like the one to BAE Systems, are not uncommon for highly specialized or proprietary components where only one manufacturer can meet the technical specifications. Understanding the volume and frequency of DLA's spending on similar components over the past several years would provide context for the current $19.7 million award.

Industry Classification

NAICS: Manufacturing › Semiconductor and Other Electronic Component Manufacturing › Other Electronic Component Manufacturing

Product/Service Code: ELECTRICAL/ELECTRONIC EQPT COMPNTS

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: SPRDL120R0189

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Ball Corporation

Address: 1100 BAIRS RD, YORK, PA, 17408

Business Categories: Category Business, Manufacturer of Goods, Not Designated a Small Business, Partnership or Limited Liability Partnership, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $19,684,507

Exercised Options: $19,684,507

Current Obligation: $19,684,507

Subaward Activity

Number of Subawards: 6

Total Subaward Amount: $12,540,826

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline