DoD awards $28.7M for CH-47 helicopter parts, with limited competition and potential for cost overruns

Contract Overview

Contract Amount: $28,699,999 ($28.7M)

Contractor: BAE Systems Information and Electronic Systems Integration Inc.

Awarding Agency: Department of Defense

Start Date: 2011-09-20

End Date: 2012-09-30

Contract Duration: 376 days

Daily Burn Rate: $76.3K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: UNDEFINITIZED CONTRACTUAL ACTION TO AWARD A FIRM FIXED PRICE LETTER CONTRACT TO PROCURE ATIRCM A-KITS AND B-KIT LINE REPLACEABLE UNITS (LRUS) FOR THE CH-47 HELICOPTERS BEING DEPLOYED.

Place of Performance

Location: NASHUA, HILLSBOROUGH County, NEW HAMPSHIRE, 03060

State: New Hampshire Government Spending

Plain-Language Summary

Department of Defense obligated $28.7 million to BAE SYSTEMS INFORMATION AND ELECTRONIC SYSTEMS INTEGRATION INC. for work described as: UNDEFINITIZED CONTRACTUAL ACTION TO AWARD A FIRM FIXED PRICE LETTER CONTRACT TO PROCURE ATIRCM A-KITS AND B-KIT LINE REPLACEABLE UNITS (LRUS) FOR THE CH-47 HELICOPTERS BEING DEPLOYED. Key points: 1. The contract value of $28.7 million for ATIRCM A-KITS and B-KIT LRUs represents a significant investment in maintaining the CH-47 helicopter fleet. 2. The 'NOT COMPETED' status raises concerns about price discovery and the potential for less favorable pricing compared to a fully competitive environment. 3. The firm-fixed-price contract type aims to control costs, but the lack of competition could still lead to higher-than-market rates. 4. The contract duration of 376 days suggests a focused effort on delivering specific components rather than a long-term sustainment program. 5. The award to BAE SYSTEMS INFORMATION AND ELECTRONIC SYSTEMS INTEGRATION INC. indicates a reliance on established prime contractors for critical aviation components. 6. The North American Industry Classification System (NAICS) code 334511 points to the specialized manufacturing of guidance and navigation systems.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging without more detailed cost breakdowns or comparable contract data. However, the lack of competition inherently limits the ability to assess if the $28.7 million represents a fair and reasonable price. The firm-fixed-price structure is a positive indicator for cost control, but the absence of multiple bids means taxpayers may not be benefiting from the most competitive pricing available in the market. Further analysis would require understanding the specific LRUs procured and their market value.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was not competed, indicating a sole-source award. This typically occurs when only one vendor possesses the necessary technical capabilities, proprietary data, or is the sole manufacturer of the required item. The lack of competition means that BAE SYSTEMS INFORMATION AND ELECTRONIC SYSTEMS INTEGRATION INC. was likely the only viable option, which can limit price negotiation leverage for the government.

Taxpayer Impact: Sole-source awards can result in higher costs for taxpayers as the government does not benefit from the price reductions typically driven by competitive bidding processes.

Public Impact

The primary beneficiaries are the U.S. Army, which operates the CH-47 Chinook helicopters, ensuring the continued operational readiness of these vital transport aircraft. The services delivered include the procurement of critical Line Replaceable Units (LRUs) for the Advanced Threat Infrared Countermeasures (ATIRCM) system, essential for aircraft survivability. The geographic impact is primarily within the Department of Defense's operational theaters where CH-47 helicopters are deployed globally. Workforce implications may include specialized manufacturing roles at BAE SYSTEMS and its subcontractors, supporting the defense industrial base.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to inflated prices for taxpayers.
Potential for cost overruns if initial estimates do not accurately reflect production costs.
Dependence on a single supplier for critical components could create supply chain vulnerabilities.
Limited transparency into the cost drivers due to sole-source nature of the award.

Positive Signals

Firm-fixed-price contract type helps to establish a ceiling on costs.
Procurement of essential components for a critical military asset (CH-47).
Award to an established defense contractor with a track record in electronic systems integration.

Sector Analysis

This contract falls within the aerospace and defense manufacturing sector, specifically focusing on avionics and electronic warfare systems. The market for such specialized components is often characterized by high barriers to entry due to technological complexity and stringent quality requirements. Spending in this area is driven by the need to maintain and upgrade aging military platforms, ensuring their effectiveness against evolving threats. Comparable spending benchmarks would involve analyzing other contracts for similar LRUs or avionics systems for other military aircraft.

Small Business Impact

The contract details indicate that small business participation was not a primary consideration, as the 'sb' field is false. There is no explicit mention of small business set-asides or subcontracting plans. This suggests that the prime contractor, BAE SYSTEMS, is expected to fulfill the majority of the contract requirements, with potential for subcontracting to other large or specialized firms rather than a specific focus on small business engagement.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Army's contracting and program management offices. Accountability measures are embedded within the firm-fixed-price contract terms, requiring delivery of specified LRUs. Transparency may be limited due to the sole-source nature of the award, but contract modifications, delivery schedules, and payment milestones would be subject to internal DoD oversight. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

CH-47 Chinook Helicopter Modernization Programs
Avionics and Electronic Warfare Systems Procurement
Department of the Army Aviation Sustainment Contracts
Advanced Threat Infrared Countermeasures (ATIRCM) Systems

Risk Flags

Lack of Competition
Potential for Inflated Pricing
Supply Chain Dependency

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $28.7 million to BAE SYSTEMS INFORMATION AND ELECTRONIC SYSTEMS INTEGRATION INC.. UNDEFINITIZED CONTRACTUAL ACTION TO AWARD A FIRM FIXED PRICE LETTER CONTRACT TO PROCURE ATIRCM A-KITS AND B-KIT LINE REPLACEABLE UNITS (LRUS) FOR THE CH-47 HELICOPTERS BEING DEPLOYED.

Who is the contractor on this award?

The obligated recipient is BAE SYSTEMS INFORMATION AND ELECTRONIC SYSTEMS INTEGRATION INC..

Which agency awarded this contract?

Awarding agency: Department of Defense (Department of the Army).

What is the total obligated amount?

The obligated amount is $28.7 million.

What is the period of performance?

Start: 2011-09-20. End: 2012-09-30.

What is the specific technical capability of the ATIRCM A-KITS and B-KIT LRUs, and why are they critical for the CH-47 helicopter?

The ATIRCM (Advanced Threat Infrared Countermeasures) system is a vital electronic warfare system designed to protect helicopters from heat-seeking missiles. The A-KITS and B-KIT Line Replaceable Units (LRUs) are specific components within this system. LRUs are standardized, modular units that can be quickly replaced in the field to restore functionality. The A-KITS and B-KIT LRUs likely pertain to different aspects or generations of the ATIRCM system, potentially involving infrared detection, jamming, or decoy deployment capabilities. Their criticality stems from their direct role in enhancing the survivability of the CH-47 helicopter, a platform often used in high-threat environments for troop transport and cargo delivery. Without these functioning LRUs, the helicopter's ability to defend against missile threats is significantly compromised, increasing risk to the aircraft and its crew.

How does the 'NOT COMPETED' status impact the potential value for money compared to a fully competed contract for these LRUs?

The 'NOT COMPETED' status, indicating a sole-source award, generally leads to a reduction in potential value for money. In a fully competed scenario, multiple vendors would bid on the contract, driving prices down through competition. The government could leverage the lowest bidder or negotiate based on multiple competitive offers. With a sole-source award, the government's negotiating position is weakened, as there is no direct price comparison from alternative suppliers. While the firm-fixed-price contract type aims to cap costs, the baseline price itself may be higher than what could have been achieved through open competition. This can result in taxpayers paying a premium for the required components, as the benefits of market forces are absent.

What are the potential risks associated with relying on a single contractor for these critical helicopter components?

Relying on a single contractor, BAE SYSTEMS INFORMATION AND ELECTRONIC SYSTEMS INTEGRATION INC. in this case, for critical ATIRCM LRUs presents several risks. Firstly, there's a risk of supply chain disruption; if the contractor faces production issues, labor strikes, or financial difficulties, the supply of these essential parts could halt, impacting CH-47 operational readiness. Secondly, the lack of competition can lead to price escalation over time, as the contractor may face less pressure to innovate or reduce costs. Thirdly, there's a potential for vendor lock-in, making it difficult and costly to switch to an alternative supplier in the future, even if performance or pricing becomes unsatisfactory. Finally, sole reliance can reduce the government's leverage in demanding improvements or modifications to the components.

What is the historical spending pattern for ATIRCM components or similar avionics for the CH-47 fleet?

Analyzing historical spending patterns for ATIRCM components and similar avionics for the CH-47 fleet is crucial for context. While this specific $28.7 million award is for a defined period (2011-2012), the CH-47 platform has undergone numerous upgrades and sustainment efforts over its decades of service. Previous contracts for ATIRCM systems, its predecessors, or related avionics upgrades would likely show a pattern of significant investment. These historical figures, often in the tens or hundreds of millions of dollars cumulatively over years, reflect the ongoing need to maintain and enhance the survivability and operational capabilities of these helicopters. Understanding past spending can help identify trends in cost escalation, the frequency of component replacements, and the evolution of technology, providing a baseline against which the current award's value can be assessed.

Does the firm-fixed-price (FFP) contract type adequately mitigate cost risks given the sole-source nature of this award?

The firm-fixed-price (FFP) contract type is designed to shift 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 cost certainty for the government. However, in a sole-source scenario, the 'predetermined price' itself might be inflated due to the lack of competitive pressure. While the FFP structure prevents cost overruns *beyond* the agreed price, it does not guarantee that the agreed price is the most economical one achievable. Therefore, while FFP is a strong tool for cost control, its effectiveness in ensuring optimal value for money is diminished when competition is absent. The government still bears the risk of paying a potentially higher-than-market price.

Industry Classification

NAICS: Manufacturing › Navigational, Measuring, Electromedical, and Control Instruments Manufacturing › Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing

Product/Service Code: COMM/DETECT/COHERENT RADIATION

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: BAE Systems PLC (UEI: 217304393)

Address: 65 SPIT BROOK RD, NASHUA, NH, 02

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: $28,699,999

Exercised Options: $28,699,999

Current Obligation: $28,699,999

Subaward Activity

Number of Subawards: 5

Total Subaward Amount: $1,905,649

Contract Characteristics

Cost or Pricing Data: NO

Timeline