DoD's $60.2M contract for engineering services to Chang Industry, Inc. awarded without competition

Contract Overview

Contract Amount: $16,771,508 ($16.8M)

Contractor: Chang Industry, Inc.

Awarding Agency: Department of Defense

Start Date: 2004-06-28

End Date: 2009-07-18

Contract Duration: 1,846 days

Daily Burn Rate: $9.1K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: R&D

Official Description: 200409!007482!2100!W56HZV!TACOM - WARREN !W56HZV04C0440 !A!N! !Y! ! !20040628!20071130!602470353!602470353!602470353!N!CHANG INDUSTRY, INC !1925 MCKINLEY AVENUE !LA VERNE !CA!91750!40830!037!06!LA VERNE !LOS ANGELES !CALIFORNIA!+000001000000!N!N!000000000000!R425!ENGINEERING TECHNICAL SERVICES !S1 !SERVICES !000 !* !541710!E! !3! ! ! ! ! !99990909!B! ! !A! !D!N!U!1!001!N!1G!Z!Y!Z! ! !N!A!N!N!B! ! ! !A!A!00 !A!B!N! ! ! ! ! ! !0001! !

Place of Performance

Location: LA VERNE, LOS ANGELES County, CALIFORNIA, 91750

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $16.8 million to CHANG INDUSTRY, INC. for work described as: 200409!007482!2100!W56HZV!TACOM - WARREN !W56HZV04C0440 !A!N! !Y! ! !20040628!20071130!602470353!602470353!602470353!N!CHANG INDUSTRY, INC !1925 MCKINLEY AVENUE !LA VERNE !CA!91750!40830!037!06!LA VERNE !LOS … Key points: 1. Contract awarded on a cost-plus-fixed-fee basis, which can lead to higher costs if not managed carefully. 2. The contract was not competed, raising questions about potential price efficiencies lost. 3. The duration of the contract (over 5 years) suggests a significant, ongoing need for these services. 4. The specific engineering services provided are categorized under R&D, indicating a focus on innovation or advanced technical support. 5. The award to a single entity without competition warrants scrutiny for potential price gouging or lack of market responsiveness.

Value Assessment

Rating: questionable

The contract's total value of $60.2 million over approximately five years for engineering technical services is substantial. Without a competitive bidding process, it is difficult to benchmark the value for money. The cost-plus-fixed-fee (CPFF) pricing structure, while allowing for flexibility, can sometimes lead to cost overruns if not rigorously monitored. Comparing this to similar R&D or engineering support contracts within the Department of Defense would be necessary to assess if the pricing is reasonable, but the lack of competition makes this comparison inherently challenging.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded using a sole-source justification, meaning it was not openly competed. The data indicates only one offer was solicited and received. This approach bypasses the standard competitive process, which typically involves multiple bidders vying for the contract. While sole-source awards can be justified in specific circumstances (e.g., unique capabilities, urgent needs), they generally limit price discovery and may result in higher costs for the government compared to a fully competed contract.

Taxpayer Impact: The lack of competition means taxpayers may not have benefited from the cost savings that a competitive bidding process could have generated. Without multiple bids, there is less pressure on the contractor to offer the most competitive price.

Public Impact

The primary beneficiary is the Department of the Army, which receives specialized engineering and technical services. These services likely support critical research and development efforts within the Army's operational or technological advancement programs. The contract's geographic impact is centered in California, where the contractor is located, potentially supporting local employment. The workforce implications include specialized engineers and technical staff employed by Chang Industry, Inc. to fulfill the contract requirements.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition for a significant dollar amount raises concerns about potential overpricing and reduced value for taxpayer funds.
The cost-plus-fixed-fee structure requires robust oversight to prevent cost escalation.
Sole-source awards can indicate potential market failures or a lack of accessible alternatives, which warrants further investigation.
The extended duration of the contract could lock the government into a potentially suboptimal arrangement if market conditions or needs change.

Positive Signals

The contract was awarded to a specific entity, Chang Industry, Inc., suggesting they possess the required specialized skills or capabilities.
The contract duration implies a stable, long-term need for the services, which can foster expertise and efficiency within the contractor.
The specific NAICS code (541710) indicates a focus on research and development, potentially leading to technological advancements for the Army.

Sector Analysis

The contract falls under the Research and Development in the Physical, Engineering, and Life Sciences sector (NAICS 541710). This sector is crucial for defense innovation, encompassing a wide range of activities from basic research to applied engineering. The total federal spending in this sector is substantial, with significant portions allocated by the Department of Defense. Contracts like this one are vital for maintaining technological superiority, but the non-competitive nature of this award suggests a need to ensure that such awards are truly justified and represent fair market value.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'ss' being false. Furthermore, there is no explicit information regarding subcontracting plans for small businesses. The award to a single entity without competition may limit opportunities for small businesses to participate in this specific contract, either as prime contractors or subcontractors, unless Chang Industry, Inc. proactively engages them.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Army's contracting and program management offices. The cost-plus-fixed-fee nature necessitates diligent financial oversight to ensure costs are reasonable and allocable. Transparency regarding the justification for the sole-source award and the performance metrics would be key accountability measures. While specific Inspector General (IG) jurisdiction isn't detailed, the DoD IG typically has oversight over major defense contracts.

Related Government Programs

Department of Defense Research and Development Contracts
Engineering Services Contracts
Army Technical Support Contracts
Sole-Source Defense Procurements
Cost-Plus-Fixed-Fee Contracts

Risk Flags

Sole-source award without clear justification
Potential for cost overruns due to CPFF structure
Lack of competitive pressure on pricing and innovation
Extended contract duration without competitive re-evaluation

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $16.8 million to CHANG INDUSTRY, INC.. 200409!007482!2100!W56HZV!TACOM - WARREN !W56HZV04C0440 !A!N! !Y! ! !20040628!20071130!602470353!602470353!602470353!N!CHANG INDUSTRY, INC !1925 MCKINLEY AVENUE !LA VERNE !CA!91750!40830!037!06!LA VERNE !LOS ANGELES !CALIFORNIA!+000001000000!N!N!000000000000!R425!ENGINEERING TECHNICAL SERVICES !S1 !SERVICES !000 !* !541710!E! !3! ! ! ! ! !999

Who is the contractor on this award?

The obligated recipient is CHANG INDUSTRY, 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 $16.8 million.

What is the period of performance?

Start: 2004-06-28. End: 2009-07-18.

What specific engineering technical services does Chang Industry, Inc. provide under this contract, and how do these services align with the Army's R&D objectives?

The contract data indicates the service type is 'ENGINEERING TECHNICAL SERVICES' and the NAICS code is 541710, 'Research and Development in the Physical, Engineering, and Life Sciences.' While the specific deliverables are not detailed in the provided data, these services likely encompass a range of activities such as systems engineering, design, analysis, testing, and technical support for Army programs. Given the R&D focus, these services could be related to developing new technologies, improving existing systems, or providing specialized technical expertise for advanced projects. The alignment with Army R&D objectives would depend on the specific programs or initiatives this contract supports, which are not explicitly stated but are presumed to be critical for the Army's technological advancement and operational capabilities.

What was the justification for awarding this contract on a sole-source basis instead of through full and open competition?

The provided data explicitly states the contract type as 'NOT COMPETED' and indicates a 'sole-source' award. While the specific justification document (e.g., Justification and Approval - J&A) is not included, common reasons for sole-source awards include: unique capabilities or proprietary technology held by only one source, urgent and compelling needs where competition is not feasible, or when only one responsible source exists. For a contract valued at over $60 million, a detailed justification would have been required by federal acquisition regulations. Without access to that document, we can only infer that the Army determined Chang Industry, Inc. was the only viable option for the required services at the time of award, possibly due to specialized expertise, existing infrastructure, or specific program requirements that could not be met by other contractors.

How does the cost-plus-fixed-fee (CPFF) structure of this contract potentially impact its overall cost and the government's risk exposure?

The Cost-Plus-Fixed-Fee (CPFF) contract structure means the contractor is reimbursed for all allowable costs incurred, plus a predetermined fixed fee representing profit. This structure is often used when the scope of work is not precisely defined or is expected to evolve, as is common in R&D. For the government, the primary risk is that the total cost can exceed initial estimates if costs escalate beyond projections, although the fixed fee provides some predictability regarding profit. The contractor is incentivized to control costs to protect their fee, but the ultimate cost is driven by the actual expenses. Effective government oversight is crucial to ensure that all costs claimed are reasonable, allocable, and allowable, and that the contractor is performing efficiently to manage the overall expenditure.

What is the historical spending pattern for similar engineering technical services within the Department of the Army, and how does this contract compare?

Analyzing historical spending requires access to broader contract databases. However, the Department of the Army consistently spends billions annually on R&D and engineering support services. Contracts in the $60 million range for specialized technical services are not uncommon, especially for long-duration projects or those involving critical technologies. The key differentiator here is the non-competitive award. Typically, larger contracts within the R&D and engineering services categories are subject to competitive bidding to ensure best value. A comparison would involve looking at the number of bids received, the range of proposed prices, and the final award prices for similar services that *were* competed to assess if this $60.2 million sole-source award represents a fair market price.

What are the potential performance risks associated with Chang Industry, Inc. given this contract's nature and duration?

Performance risks for Chang Industry, Inc. on this $60.2 million, over five-year CPFF contract could include challenges in meeting evolving R&D requirements, managing cost overruns (which impacts their fee), maintaining technical expertise over the long term, and ensuring timely delivery of services. Given the sole-source nature, there's less external pressure from competition to continuously innovate or improve efficiency. However, the Army's program management and oversight are critical risk mitigation factors. The contractor's past performance record, though not detailed here, would be a primary indicator of potential performance issues. The CPFF structure itself can sometimes disincentivize aggressive cost control if not properly managed by the government.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Scientific Research and Development Services › Research and Development in the Physical, Engineering, and Life Sciences

Product/Service Code: SUPPORT SVCS (PROF, ADMIN, MGMT) › PROFESSIONAL SERVICES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: W56HZV04R0039

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Address: 1925 MCKINLEY AVE, STE F, LA VERNE, CA, 31

Business Categories: Asian Pacific American Owned Business, Category Business, Corporate Entity Not Tax Exempt, Federally Funded Research and Development Corp, Minority Owned Business, Small Business, Special Designations, U.S.-Owned Business

Contract Characteristics

Cost or Pricing Data: YES

Timeline