DoD's $458M M88A2 Hercules production contract awarded to BAE Systems without competition

Contract Overview

Contract Amount: $458,227,986 ($458.2M)

Contractor: BAE Systems Land & Armaments L.P.

Awarding Agency: Department of Defense

Start Date: 2009-03-31

End Date: 2014-12-31

Contract Duration: 2,101 days

Daily Burn Rate: $218.1K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: FY 09 M88A2 HERCULES PRODUCTION

Place of Performance

Location: YORK, YORK County, PENNSYLVANIA, 17408

State: Pennsylvania Government Spending

Plain-Language Summary

Department of Defense obligated $458.2 million to BAE SYSTEMS LAND & ARMAMENTS L.P. for work described as: FY 09 M88A2 HERCULES PRODUCTION Key points: 1. The contract awarded to BAE Systems for M88A2 Hercules production represents a significant investment in armored vehicle sustainment. 2. The sole-source nature of this award raises questions about potential price inflation and limited market exploration. 3. A long contract duration of 2101 days suggests a substantial, ongoing need for these specialized vehicles. 4. The firm fixed-price contract type offers some cost certainty but relies heavily on accurate initial pricing. 5. The absence of small business involvement as a prime contractor or set-aside is noted. 6. This procurement falls within the broader category of military armored vehicle manufacturing, a critical defense sector.

Value Assessment

Rating: questionable

Benchmarking the value of this $458 million contract is challenging due to its sole-source nature and the specialized equipment involved. Without competitive bids, it's difficult to ascertain if the pricing reflects fair market value or if taxpayers received the best possible deal. The long duration and the nature of the equipment suggest high production costs, but the lack of competition prevents a robust comparison to alternative offerings or pricing structures.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning BAE Systems was the only bidder considered. This approach bypasses the typical competitive bidding process, which usually involves multiple companies vying for the contract. The lack of competition limits price discovery and may result in higher costs for the government compared to a fully competed award.

Taxpayer Impact: Taxpayers may have paid a premium for the M88A2 Hercules production due to the absence of competitive pressure. This could mean less funding is available for other critical defense needs or government programs.

Public Impact

The primary beneficiaries are the U.S. Army, which receives critical armored recovery vehicles essential for battlefield operations. The contract ensures the continued production and availability of the M88A2 Hercules, a vital component of armored formations. This contract supports specialized manufacturing jobs within BAE Systems' facilities, primarily in Pennsylvania. The availability of these vehicles enhances the operational readiness and survivability of U.S. armored units.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition, potentially leading to higher costs for taxpayers.
Lack of transparency in the procurement process due to non-competitive nature.
Long contract duration could mask inefficiencies or scope creep if not closely monitored.
No explicit small business participation noted, potentially limiting broader economic impact.

Positive Signals

Firm fixed-price contract provides cost certainty for the government.
Ensures continued production of a critical military asset.
BAE Systems is an established provider with experience in this equipment.

Sector Analysis

The defense sector, specifically military vehicle manufacturing, is characterized by high barriers to entry, specialized technology, and significant government investment. Contracts for armored vehicles like the M88A2 Hercules are often awarded to a limited number of prime contractors due to the complexity and security requirements. The market size for such specialized equipment is directly tied to defense budgets and strategic needs, with spending often concentrated among a few key players.

Small Business Impact

This contract does not appear to include any small business set-asides or prime contracting opportunities for small businesses. The award to a large defense contractor like BAE Systems suggests that subcontracting opportunities may exist, but the extent and nature of these are not detailed in the provided data. The absence of direct small business involvement could limit the broader economic benefits and opportunities within the small business defense industrial base.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Defense's contract management agencies, such as the Defense Contract Management Agency (DCMA). Accountability measures are inherent in the firm fixed-price structure, but the sole-source nature necessitates rigorous performance monitoring to ensure BAE Systems meets all contractual obligations. Transparency is limited due to the non-competitive award, making independent assessment of value more challenging.

Related Government Programs

M88A1 Hercules
Armored Vehicle Production
Defense Logistics Agency
U.S. Army Vehicle Procurement

Risk Flags

Sole-source award
Lack of competition
Long contract duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $458.2 million to BAE SYSTEMS LAND & ARMAMENTS L.P.. FY 09 M88A2 HERCULES PRODUCTION

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 (Defense Contract Management Agency).

What is the total obligated amount?

The obligated amount is $458.2 million.

What is the period of performance?

Start: 2009-03-31. End: 2014-12-31.

What is the historical spending trend for the M88A2 Hercules program?

Historical spending data for the M88A2 Hercules program, prior to this specific $458 million award, would reveal the cumulative investment in this armored recovery vehicle. Analyzing past contract awards, including their values, durations, and competitive nature, would provide context for the current procurement. For instance, understanding if previous awards were also sole-source or if there were periods of competition could indicate shifts in procurement strategy or market dynamics. Examining the total lifecycle cost and production volume over time would also shed light on the program's long-term significance and financial commitment from the Department of Defense. Without specific historical data points, it's difficult to definitively state trends, but the current large, sole-source award suggests a sustained and potentially increasing need for these vehicles.

How does the unit cost of the M88A2 Hercules compare to similar armored vehicles?

Comparing the unit cost of the M88A2 Hercules to similar armored vehicles is crucial for assessing value for money. However, direct comparisons can be complex due to variations in vehicle capabilities, age, technology, and production volumes. The M88A2 is a specialized armored recovery vehicle, distinct from main battle tanks or infantry fighting vehicles. Its role involves heavy lifting, towing, and maintenance support on the battlefield. If data were available on the per-unit cost of comparable recovery vehicles from other nations or previous generations, it would provide a benchmark. Given this is a sole-source award, external benchmarking against market prices for similar, albeit not identical, heavy-duty military engineering vehicles would be the most feasible approach to gauge cost-effectiveness. Without such comparative data, assessing if $458 million for a production run represents a fair price per unit is speculative.

What are the specific risks associated with a sole-source contract for military hardware?

Sole-source contracts for military hardware, like the M88A2 Hercules production, carry several inherent risks. The primary risk is the potential for inflated pricing, as the absence of competition removes the incentive for the contractor to offer the lowest possible cost. This can lead to reduced value for taxpayer money. Another risk is a potential decline in innovation; without competitive pressure, the contractor may have less motivation to invest in improving efficiency or developing next-generation capabilities. Furthermore, sole-source awards can create vendor lock-in, making it difficult and costly to switch suppliers in the future. There's also a risk of complacency, where the contractor might become less responsive to government needs or quality demands due to a guaranteed contract. Finally, the lack of transparency in the procurement process can raise concerns about fairness and potential impropriety.

What is BAE Systems' track record with producing military vehicles of this type?

BAE Systems has a significant and established track record in the defense industry, including the production of armored vehicles. They are a major global defense contractor with extensive experience in designing, manufacturing, and supporting a wide range of military platforms. Specifically, BAE Systems has been involved with the M88 family of vehicles, including upgrades and production, for many years. Their expertise in armored vehicle manufacturing encompasses complex systems integration, survivability features, and mobility solutions. This long-standing involvement suggests a deep understanding of the M88A2 Hercules' technical requirements and operational context. While this specific contract is sole-source, BAE's history indicates they possess the necessary capabilities and infrastructure to fulfill such a large-scale production requirement.

What are the implications of the 'PA' (Pennsylvania) state code for this contract?

The 'PA' state code associated with this contract likely indicates that the primary performance location or the manufacturing facility for BAE Systems Land & Armaments L.P. is situated in Pennsylvania. This has several implications. Firstly, it signifies that a substantial portion of the contract's value will be spent within Pennsylvania, contributing to the state's economy through job creation, wages, and local supply chain engagement. Secondly, it may suggest that the specific manufacturing capabilities or specialized workforce required for the M88A2 Hercules production are concentrated in that region. For oversight purposes, it means that federal agencies, potentially including the Defense Contract Management Agency (DCMA), will have a physical presence or oversight responsibilities within Pennsylvania related to this contract's execution. It also highlights the geographic concentration of defense manufacturing within the U.S.

Industry Classification

NAICS: Manufacturing › Other Transportation Equipment Manufacturing › Military Armored Vehicle, Tank, and Tank Component Manufacturing

Product/Service Code: MOTOR VEHICLES, CYCLES, TRAILERS

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: W56HZV09R0266

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: BAE Systems PLC

Address: 1100 BAIRS RD, YORK, PA, 17408

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

Financial Breakdown

Contract Ceiling: $480,954,528

Exercised Options: $458,354,868

Current Obligation: $458,227,986

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline