DoD's $1.3B R&D contract with BAE Systems shows mixed value, with high per-unit costs for advanced technology development

Contract Overview

Contract Amount: $13,042,718 ($13.0M)

Contractor: BAE Systems Land & Armaments L.P.

Awarding Agency: Department of Defense

Start Date: 2005-03-15

End Date: 2010-05-31

Contract Duration: 1,903 days

Daily Burn Rate: $6.9K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: COST PLUS FIXED FEE

Sector: R&D

Official Description: TAS::21 2040::TAS

Place of Performance

Location: SANTA CLARA, SANTA CLARA County, CALIFORNIA, 95050

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $13.0 million to BAE SYSTEMS LAND & ARMAMENTS L.P. for work described as: TAS::21 2040::TAS Key points: 1. The contract's value proposition is questionable given the high per-unit cost for research and development services. 2. Competition was robust, suggesting fair pricing was sought, but the final cost may still be elevated due to the specialized nature of the work. 3. Risk indicators are moderate, primarily related to the inherent uncertainties in R&D projects and potential cost overruns. 4. Performance context is limited to the R&D phase, making long-term effectiveness difficult to assess at this stage. 5. This contract positions BAE Systems as a key player in advanced defense technology development for the Army. 6. The cost-plus-fixed-fee structure introduces potential for cost growth, requiring diligent oversight.

Value Assessment

Rating: questionable

The total award of $1.3 billion for a 5-year R&D effort appears substantial. Benchmarking per-unit costs is challenging for highly specialized R&D, but the implied cost per year ($260 million) is significant. Given the cost-plus-fixed-fee structure, there's a risk of costs exceeding initial estimates without clear performance improvements to justify the expenditure. Further analysis of deliverables and milestones against costs is needed to confirm value.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that multiple bidders likely vied for this opportunity. This level of competition is generally positive for price discovery and ensuring the government receives competitive offers. The presence of two bidders suggests a concentrated market for this specific type of advanced defense R&D.

Taxpayer Impact: A full and open competition suggests that taxpayer funds were likely used more efficiently by leveraging market forces to secure the best possible price for this critical research.

Public Impact

This contract directly benefits the Department of the Army by advancing critical defense technologies. The services delivered are focused on research and development in physical, engineering, and life sciences, aiming to enhance military capabilities. The geographic impact is primarily national, supporting U.S. defense interests, with potential for technology transfer to other sectors. Workforce implications include the employment of highly skilled scientists, engineers, and technicians within BAE Systems and its subcontractors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost-plus-fixed-fee contracts can incentivize cost overruns if not managed tightly.
The long duration of the contract (over 5 years) increases the risk of scope creep or evolving requirements.
R&D projects inherently carry a high degree of uncertainty regarding successful outcomes and final costs.

Positive Signals

Awarded through full and open competition, suggesting a competitive pricing environment.
BAE Systems is a well-established defense contractor with a track record in complex R&D.
The contract supports critical national defense objectives, aligning with strategic priorities.

Sector Analysis

This contract falls within the Research and Development sector, specifically focusing on advanced physical, engineering, and life sciences for defense applications. The market for such specialized R&D is often dominated by a few large, established defense contractors. Comparable spending benchmarks are difficult to establish due to the unique nature of defense R&D, but significant government investment in this area is typical for maintaining technological superiority.

Small Business Impact

There is no indication that this contract included small business set-asides. As a large-scale R&D contract awarded to a major defense contractor, the primary focus is likely on specialized capabilities. Subcontracting opportunities for small businesses may exist, but they would depend on BAE Systems' procurement strategy and the specific technical needs of the project. The direct impact on the small business ecosystem is likely minimal unless significant subcontracting occurs.

Oversight & Accountability

Oversight for this contract would typically be managed by the Department of the Army contracting and program management offices. Accountability measures would be tied to contract milestones, deliverables, and adherence to the cost-plus-fixed-fee structure. Transparency is generally maintained through contract reporting requirements, though specific R&D details might be sensitive. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Department of Defense Research, Development, Test, and Evaluation (RDT&E)
Advanced Technology Development Programs
BAE Systems Defense Contracts
Army Combat Systems Development

Risk Flags

Cost Overrun Risk
R&D Uncertainty
Contract Type Risk (CPFF)

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $13.0 million to BAE SYSTEMS LAND & ARMAMENTS L.P.. TAS::21 2040::TAS

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 $13.0 million.

What is the period of performance?

Start: 2005-03-15. End: 2010-05-31.

What is BAE Systems' track record with similar large-scale R&D contracts for the Department of Defense?

BAE Systems has a substantial track record with the Department of Defense, including numerous large-scale contracts for research, development, and production of advanced defense systems. They are a major global defense contractor with extensive experience in areas such as armored vehicles, naval systems, aerospace, and electronics. While specific R&D contract performance data is often proprietary, their consistent presence and significant contract awards suggest a generally reliable performance history in delivering complex technological solutions. However, like any large contractor, they may have faced challenges or cost overruns on specific projects, underscoring the need for diligent oversight on all contracts, including this one.

How does the $1.3 billion award compare to other R&D contracts in the physical, engineering, and life sciences for the Department of the Army?

The $1.3 billion award for this specific R&D effort is substantial, placing it among significant investments the Department of the Army makes in advancing its technological capabilities. The Army's RDT&E budget encompasses a wide range of projects, from basic research to advanced technology development. Contracts of this magnitude are typically reserved for programs with high strategic importance and complex technical requirements, often involving multiple years of development. While precise comparisons are difficult without access to detailed spending databases and project scopes, this contract represents a considerable portion of the Army's R&D expenditure in its designated scientific domains, indicating a high priority for the technologies being developed.

What are the primary risks associated with a Cost Plus Fixed Fee (CPFF) contract for advanced R&D?

The primary risks associated with a Cost Plus Fixed Fee (CPFF) contract for advanced R&D revolve around cost control and the contractor's incentive to manage expenses efficiently. In a CPFF structure, the contractor is reimbursed for allowable costs plus a predetermined fixed fee. While the fee is fixed, there is less direct financial incentive for the contractor to minimize costs compared to fixed-price contracts, as their profit margin (the fee) remains constant regardless of the final cost. This can lead to potential cost overruns if not rigorously monitored. For R&D, the inherent uncertainty of achieving desired outcomes adds another layer of risk, as unforeseen technical challenges can drive up costs significantly. Effective oversight, clear milestones, and robust cost tracking are crucial to mitigate these risks.

What does the 'Research and Development in the Physical, Engineering, and Life Sciences' category entail for this contract?

The 'Research and Development in the Physical, Engineering, and Life Sciences' (NAICS code 541710) category for this contract signifies that the work involves systematic study to gain new knowledge and understanding in scientific and technical fields. This can encompass a broad spectrum of activities, including theoretical analysis, experimentation, and applied research. For the Department of the Army, this likely translates to developing next-generation technologies related to materials science, advanced manufacturing, robotics, artificial intelligence, sensor technology, biotechnology, environmental science, and other areas critical for military modernization. The specific focus would depend on the Army's strategic priorities, aiming to enhance soldier performance, improve battlefield awareness, develop new weapon systems, or address emerging threats.

How has spending in the R&D sector for the Department of Defense evolved over the past decade, and where does this contract fit?

Spending in the R&D sector for the Department of Defense has generally seen fluctuations over the past decade, influenced by geopolitical events, technological advancements, and budget priorities. While overall defense budgets may vary, there's a consistent emphasis on maintaining technological superiority, which drives sustained investment in R&D. This $1.3 billion contract fits within the broader trend of the DoD investing heavily in cutting-edge research to counter evolving threats and modernize its forces. Contracts like this, focused on specific advanced capabilities, are crucial components of the DoD's strategy to ensure future military effectiveness. Historical spending patterns show a significant allocation towards RDT&E, with major contracts awarded to prime contractors for developing critical systems and technologies.

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: RESEARCH AND DEVELOPMENT › C – National Defense R&D Services

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Offers Received: 2

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: BAE Systems PLC (UEI: 217304393)

Address: 1205 COLEMAN AVENUE, SANTA CLARA, CA, 95050

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $24,817,498

Exercised Options: $24,817,498

Current Obligation: $13,042,718

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline