DoD awards $48.7M for weapon systems, raising questions about competition and value

Contract Overview

Contract Amount: $48,704,488 ($48.7M)

Contractor: Kongsberg Defence & Aerospace AS

Awarding Agency: Department of Defense

Start Date: 2019-09-13

End Date: 2020-12-23

Contract Duration: 467 days

Daily Burn Rate: $104.3K/day

Competition Type: NOT COMPETED

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: DELIVERY ORDER FOR NON-RECURRING ENGINEERING (NRE) AND COMMON REMOTELY OPERATED WEAPON STATION (CROWS) SYSTEMS

Place of Performance

Location: JOHNSTOWN, CAMBRIA County, PENNSYLVANIA, 15904

State: Pennsylvania Government Spending

Plain-Language Summary

Department of Defense obligated $48.7 million to KONGSBERG DEFENCE & AEROSPACE AS for work described as: DELIVERY ORDER FOR NON-RECURRING ENGINEERING (NRE) AND COMMON REMOTELY OPERATED WEAPON STATION (CROWS) SYSTEMS Key points: 1. Contract awarded on a sole-source basis, limiting price discovery and potentially increasing costs. 2. Focus on non-recurring engineering and weapon systems suggests a need for specialized capabilities. 3. The contract duration of over a year indicates a significant project timeline. 4. Limited public information on performance metrics makes it difficult to assess value for money. 5. The award falls within the 'Small Arms, Ordnance, and Ordnance Accessories Manufacturing' sector. 6. No small business set-aside was applied, potentially impacting small business participation.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to its sole-source nature and the specific technical requirements for non-recurring engineering and remotely operated weapon stations. Without competitive bids, it's difficult to ascertain if the $48.7 million price represents a fair market value. Comparisons to similar sole-source awards for specialized defense systems might offer some context, but a lack of transparency in the pricing structure limits a definitive value assessment. The fixed-price nature provides some cost certainty, but the absence of competition is a primary concern.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one vendor, Kongsberg Defence & Aerospace AS, was solicited. This approach bypasses the standard competitive bidding process, which typically involves multiple vendors submitting proposals. While sole-source awards can be justified for unique capabilities or urgent needs, they inherently reduce competition. This limits the government's ability to explore alternative solutions and potentially secure more favorable pricing through a bidding war.

Taxpayer Impact: The lack of competition means taxpayers may not be receiving the best possible price for these weapon systems, as there was no market pressure to drive down costs. This could lead to higher overall expenditure for the Department of Defense.

Public Impact

The Department of the Army benefits from the acquisition of specialized weapon systems and engineering services. This contract supports the development and delivery of Common Remotely Operated Weapon Stations (CROWS). The geographic impact is primarily within the defense sector, with potential implications for military readiness. Workforce implications may include specialized engineering roles and manufacturing positions within the contractor's organization.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing and value assessment.
Lack of transparency in pricing structure hinders detailed value analysis.
Potential for higher costs due to absence of competitive bidding.
Limited public data on performance makes it hard to gauge effectiveness.
No small business set-aside may reduce opportunities for smaller firms.

Positive Signals

Award addresses specific, potentially critical, defense system needs.
Firm Fixed Price contract provides cost certainty for the government.
Contractor is likely specialized in this niche area of defense technology.

Sector Analysis

The defense industry, particularly the segment focused on ordnance and weapon systems manufacturing, is characterized by high barriers to entry, significant R&D investment, and long procurement cycles. This contract falls within the 'Small Arms, Ordnance, and Ordnance Accessories Manufacturing' sector, which is a critical component of national defense. Spending in this area is often driven by modernization efforts, technological advancements, and geopolitical demands. Comparable spending benchmarks are difficult to establish precisely due to the specialized nature of remotely operated weapon stations and the non-recurring engineering involved, but overall defense procurement for weapon systems represents billions of dollars annually.

Small Business Impact

This contract did not include a small business set-aside, nor is there information indicating significant subcontracting opportunities for small businesses. The sole-source nature of the award further limits the potential for small business involvement, as the primary contract is directly awarded to a single, likely large, defense contractor. This approach may not foster the growth or participation of small businesses within this specific defense technology niche.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Army's contracting and program management offices. Accountability measures are inherent in the firm-fixed-price structure, which aims to cap costs. Transparency is limited due to the sole-source nature and the proprietary aspects of defense technology. The Inspector General's office for the Department of Defense may conduct audits or investigations if specific concerns regarding waste, fraud, or abuse arise.

Related Government Programs

Department of Defense Procurement
Ordnance and Small Arms Manufacturing
Weapon Systems Development
Remotely Operated Weapon Systems (ROWS)
Non-Recurring Engineering (NRE)

Risk Flags

Sole-source award raises concerns about competition and potential overpricing.
Lack of transparency in pricing and performance metrics hinders full value assessment.
Potential for limited small business participation due to contract type and awardee.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $48.7 million to KONGSBERG DEFENCE & AEROSPACE AS. DELIVERY ORDER FOR NON-RECURRING ENGINEERING (NRE) AND COMMON REMOTELY OPERATED WEAPON STATION (CROWS) SYSTEMS

Who is the contractor on this award?

The obligated recipient is KONGSBERG DEFENCE & AEROSPACE AS.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $48.7 million.

What is the period of performance?

Start: 2019-09-13. End: 2020-12-23.

What is the track record of Kongsberg Defence & Aerospace AS with similar sole-source contracts for weapon systems?

Kongsberg Defence & Aerospace AS has a history of supplying advanced defense systems, including remotely operated weapon stations, to various military forces globally. While specific details on their sole-source contract history with the U.S. Department of Defense for similar systems are not readily available in the public domain, the company is recognized for its expertise in this field. Sole-source awards are typically granted when a contractor possesses unique technology, critical capabilities, or is the sole approved provider of a specific system. Further investigation into past performance reviews and any publicly available contract awards could provide more insight into their track record, but such information is often sensitive within the defense sector.

How does the $48.7 million cost compare to similar weapon system procurements, especially those competed?

Directly comparing the $48.7 million cost of this sole-source contract to similar weapon system procurements is challenging due to the lack of competitive bidding and the specific nature of 'non-recurring engineering' (NRE) and 'Common Remotely Operated Weapon Station' (CROWS) systems. Competitively procured systems often yield lower prices due to market forces. NRE costs, in particular, can vary significantly based on the complexity of development and initial setup. Without access to detailed cost breakdowns or data from comparable competed contracts for CROWS or similar advanced weapon platforms, it's difficult to definitively benchmark this award. However, sole-source awards generally carry a higher risk of inflated pricing compared to those secured through open competition.

What are the primary risks associated with awarding a contract of this magnitude on a sole-source basis?

The primary risks associated with awarding a $48.7 million contract on a sole-source basis include: 1. **Lack of Price Competition:** The government may pay a higher price than if the contract were competed, as there is no incentive for the sole provider to offer the lowest possible cost. 2. **Limited Innovation:** Without exposure to multiple vendors, the government might miss out on innovative solutions or alternative technologies that could be more effective or cost-efficient. 3. **Vendor Lock-in:** Relying on a single source can create dependency, making future procurements or upgrades potentially more expensive and less flexible. 4. **Reduced Transparency:** Sole-source justifications can sometimes obscure the true cost drivers and value proposition of the acquisition. 5. **Potential for Complacency:** The awarded contractor may face less pressure to maintain high performance standards or efficiency compared to operating in a competitive environment.

What specific performance metrics or deliverables are expected under this contract, and how is their achievement monitored?

The provided data indicates this is a Delivery Order for Non-Recurring Engineering (NRE) and Common Remotely Operated Weapon Station (CROWS) Systems. Specific performance metrics and deliverables are not detailed in the summary data. Typically, for NRE contracts, deliverables would include design documents, prototypes, testing reports, and technical data packages. For the CROWS systems, deliverables would likely involve the production and delivery of the weapon stations themselves, along with associated training and support documentation. Monitoring achievement would be the responsibility of the Department of the Army's contracting officer and technical representatives, who would review progress reports, conduct inspections, and verify that the delivered goods and services meet the contract specifications. The firm-fixed-price nature suggests that the contractor is obligated to deliver the specified items within the agreed-upon budget.

How does this contract align with the Army's broader strategy for modernizing its weapon systems and adopting remote technologies?

This contract aligns with the U.S. Army's ongoing efforts to modernize its combat platforms and integrate advanced technologies, including remote and semi-autonomous systems. The Common Remotely Operated Weapon Station (CROWS) program aims to provide soldiers with enhanced situational awareness and the ability to engage targets from protected positions, thereby increasing survivability and combat effectiveness. The inclusion of Non-Recurring Engineering (NRE) suggests that this award may be contributing to the development, refinement, or adaptation of these systems to meet specific Army requirements or to integrate them with existing platforms. Such investments are crucial for maintaining a technological edge and adapting to evolving battlefield dynamics, reflecting a broader strategic push towards networked and technologically superior forces.

What is the historical spending trend for similar weapon systems or ordnance manufacturing by the Department of Defense?

Historical spending by the Department of Defense (DoD) on weapon systems and ordnance manufacturing is substantial and fluctuates based on geopolitical events, modernization cycles, and strategic priorities. The DoD consistently allocates billions of dollars annually towards the procurement and development of various weapon platforms, including small arms, artillery, armored vehicles, and advanced systems like remotely operated weapon stations. Spending in the 'Small Arms, Ordnance, and Ordnance Accessories Manufacturing' NAICS code (332994) has seen significant investment over the years, particularly during periods of active conflict or heightened global security concerns. While specific year-over-year trends for CROWS or similar niche systems are not detailed here, the overall trend indicates a sustained commitment to maintaining and advancing the nation's arsenal through significant procurement and R&D investments.

Industry Classification

NAICS: Manufacturing › Other Fabricated Metal Product Manufacturing › Small Arms, Ordnance, and Ordnance Accessories Manufacturing

Product/Service Code: WEAPONS

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Kongsberg Gruppen ASA (UEI: 518910914)

Address: KIRKEGARDSVEIEN 45, KONGSBERG

Business Categories: Category Business, Foreign Owned, Foreign-Owned and U.S.-Incorporated Business, Manufacturer of Goods, Not Designated a Small Business, Special Designations

Financial Breakdown

Contract Ceiling: $48,704,488

Exercised Options: $48,704,488

Current Obligation: $48,704,488

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: W15QKN18D0135

IDV Type: IDC

Timeline