BAE Systems awarded $34.4M for M109 Howitzer refurbishment, a sole-source contract with a 1082-day duration

Contract Overview

Contract Amount: $34,402,008 ($34.4M)

Contractor: BAE Systems Land & Armaments L.P.

Awarding Agency: Department of Defense

Start Date: 2007-06-14

End Date: 2010-05-31

Contract Duration: 1,082 days

Daily Burn Rate: $31.8K/day

Competition Type: NOT AVAILABLE FOR COMPETITION

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: REFURBISHMENT OF M109 HOWITZERS

Place of Performance

Location: YORK, YORK County, PENNSYLVANIA, 17408

State: Pennsylvania Government Spending

Plain-Language Summary

Department of Defense obligated $34.4 million to BAE SYSTEMS LAND & ARMAMENTS L.P. for work described as: REFURBISHMENT OF M109 HOWITZERS Key points: 1. The contract's value of $34.4 million for refurbishing M109 Howitzers represents a significant investment in maintaining legacy military hardware. 2. As a sole-source award, the absence of competitive bidding raises questions about potential price efficiencies and the best use of taxpayer funds. 3. The extended duration of 1082 days suggests a complex refurbishment process or a long-term sustainment strategy for the howitzers. 4. The contract falls under the 'Other Ordnance and Accessories Manufacturing' NAICS code, indicating a specialized industrial capability. 5. The award to BAE Systems, a major defense contractor, aligns with industry trends of large firms handling complex military equipment sustainment.

Value Assessment

Rating: fair

Benchmarking the value of this contract is challenging due to its sole-source nature and the specific nature of howitzer refurbishment. Without competitive bids, it's difficult to ascertain if the $34.4 million represents optimal value for money. The price per howitzer, if calculable, would need to be compared against historical refurbishment costs for similar systems or against the cost of new procurements to assess its economic efficiency. The firm fixed-price contract type offers some cost certainty to the government, but the absence of competition limits the ability to drive down costs through market forces.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning it was not openly competed. This typically occurs when only one responsible source is available or when urgency or specific technical requirements preclude full and open competition. The lack of multiple bidders means the government did not benefit from price discovery through a competitive bidding process, potentially leading to higher costs than if multiple firms had vied for the contract.

Taxpayer Impact: Taxpayers may have paid a premium for this refurbishment due to the lack of competitive pressure. The government's ability to negotiate the best possible price was limited without alternative offers.

Public Impact

The primary beneficiaries are the U.S. Army units that will receive refurbished M109 Howitzers, enhancing their artillery capabilities. The services delivered include the refurbishment and modernization of existing M109 self-propelled howitzer systems. The geographic impact is primarily within the United States, where the refurbishment work is likely conducted, and subsequently to Army operational theaters. This contract supports specialized manufacturing jobs within the defense industrial base, particularly in ordnance manufacturing.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition, potentially increasing costs for taxpayers.
Long contract duration (1082 days) could indicate potential for cost overruns or schedule delays if not managed effectively.
Reliance on a single contractor for critical equipment refurbishment may create dependency and reduce future sourcing flexibility.

Positive Signals

Firm fixed-price contract provides cost certainty to the government.
Award to an established defense contractor like BAE Systems suggests access to specialized expertise for complex military hardware.
Refurbishment of existing platforms extends their service life, potentially offering a more cost-effective solution than new procurement.

Sector Analysis

The defense sector, specifically the ordnance and armored vehicle manufacturing segment, is characterized by high barriers to entry and significant government investment. This contract for M109 Howitzer refurbishment fits within the broader sustainment and modernization efforts for legacy military platforms. The market for such services is dominated by a few large, specialized defense contractors. Spending benchmarks for similar refurbishment programs can vary widely based on the extent of modernization required and the specific platform's complexity.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. The prime contractor, BAE Systems, is a large defense corporation. There is no explicit information regarding subcontracting plans for small businesses within this award notice. The focus on a sole-source award to a major prime contractor typically means less direct opportunity for small businesses to participate as prime contractors on this specific contract.

Oversight & Accountability

Oversight for this Department of the Army contract would typically fall under the purview of the Army Contracting Command and the Defense Contract Management Agency (DCMA). The firm fixed-price nature of the contract provides a degree of cost control, but oversight would focus on ensuring the contractor meets technical specifications and delivery schedules. Transparency is generally limited for sole-source awards, with details often restricted due to proprietary or national security concerns. Inspector General involvement would be triggered by allegations of fraud, waste, or abuse.

Related Government Programs

M109 Howitzer Sustainment Programs
Army Artillery Modernization Initiatives
Defense Ordnance Manufacturing Contracts
BAE Systems Land Systems Portfolio

Risk Flags

Sole-source award
Lack of competitive bidding
Long contract duration
Potential for cost overruns
Limited transparency

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $34.4 million to BAE SYSTEMS LAND & ARMAMENTS L.P.. REFURBISHMENT OF M109 HOWITZERS

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 (Department of the Army).

What is the total obligated amount?

The obligated amount is $34.4 million.

What is the period of performance?

Start: 2007-06-14. End: 2010-05-31.

What is the historical track record of BAE Systems Land & Armaments L.P. in fulfilling similar sole-source defense contracts, particularly those involving vehicle refurbishment?

BAE Systems Land & Armaments L.P. has a long and extensive history of performing complex defense manufacturing and sustainment contracts for the U.S. Department of Defense and allied nations. They are a primary contractor for numerous armored vehicle programs, including upgrades and sustainment for platforms like the Bradley Fighting Vehicle and various artillery systems. While specific data on their performance for sole-source refurbishment contracts of M109 Howitzers is not publicly detailed in this award notice, their overall track record suggests a capability to handle such specialized work. However, the success of any sole-source contract is heavily reliant on the government's ability to define clear requirements and monitor performance effectively, as the competitive pressure to optimize is absent. Historical performance reviews and contract close-out data, if available through government databases like FPDS, would provide a more granular assessment.

How does the $34.4 million contract value compare to the cost of new M109 Howitzers or comparable artillery systems?

Direct comparison of the $34.4 million refurbishment contract value to the cost of new artillery systems is complex, as refurbishment aims to extend the life of existing platforms rather than procure entirely new ones. The cost of a new, modern self-propelled howitzer can range from several million to tens of millions of dollars, depending on its capabilities and technology. Refurbishing existing M109s, even at $34.4 million, is often pursued as a more cost-effective strategy than fielding an entirely new fleet, especially if the refurbished systems meet the required operational capabilities for a significant period. However, without knowing the number of howitzers being refurbished under this contract, a precise per-unit cost comparison is impossible. The value proposition hinges on the extended service life and retained capability achieved relative to the investment, compared to the much higher cost of procuring new systems.

What are the primary risks associated with a sole-source contract for refurbishing critical military equipment like the M109 Howitzer?

The primary risks associated with a sole-source contract for refurbishing critical military equipment like the M109 Howitzer revolve around cost and performance. Without competition, there is a reduced incentive for the contractor to offer the lowest possible price, potentially leading to higher costs for the government and taxpayers. There's also a risk of scope creep or less rigorous adherence to timelines and specifications, as the government lacks the leverage that multiple competing bidders would provide. Furthermore, reliance on a single source can create a dependency, making future procurements or sustainment efforts potentially more expensive or difficult if the original contractor is unwilling or unable to continue. Ensuring robust government oversight, clear performance metrics, and well-defined contract terms are crucial to mitigate these risks.

What is the expected impact of this refurbishment contract on the operational readiness and capabilities of the U.S. Army's artillery units?

This refurbishment contract is expected to significantly enhance the operational readiness and capabilities of the U.S. Army's artillery units by extending the service life and potentially upgrading the performance of the M109 Howitzer fleet. The M109 is a key component of the Army's indirect fire support. Refurbishment implies bringing these systems back to a high standard of operational condition, addressing wear and tear, and potentially incorporating reliability improvements or minor modernization features. This ensures that units equipped with these howitzers have dependable and effective platforms for engaging targets at range, supporting ground maneuver forces. By maintaining and improving existing assets, the Army can sustain its artillery capabilities without the immediate, substantial cost and logistical challenges of procuring entirely new systems.

How does this contract fit into the broader context of U.S. Army modernization efforts, particularly concerning artillery platforms?

This contract for M109 Howitzer refurbishment fits into the U.S. Army's broader strategy of balancing modernization with the sustainment of its existing equipment. While the Army is pursuing next-generation artillery systems (like the Extended Range Cannon Artillery - ERCA), many legacy platforms like the M109 remain critical to current force structure and operational needs. Refurbishment programs allow the Army to maintain a robust artillery capability by ensuring the reliability and effectiveness of its current howitzers, thereby bridging the gap until newer systems are fully fielded and integrated. This approach acknowledges the significant costs and long timelines associated with developing and deploying entirely new weapon systems, making the sustainment and upgrade of proven platforms a pragmatic and often more budget-conscious strategy in the interim.

Industry Classification

NAICS: Manufacturing › Other Fabricated Metal Product Manufacturing › Other Ordnance and Accessories Manufacturing

Product/Service Code: MAINT, REPAIR, REBUILD EQUIPMENT › MAINT, REPAIR, REBUILD OF EQUIPMENT

Competition & Pricing

Extent Competed: NOT AVAILABLE FOR COMPETITION

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: W52H0907R0138

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: BAE Systems PLC (UEI: 217304393)

Address: 1100 BAIRS RD, YORK, PA, 10

Business Categories: Category Business, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $34,402,008

Exercised Options: $34,402,008

Current Obligation: $34,402,008

Contract Characteristics

Cost or Pricing Data: YES

Timeline