DoD's $31.4M Engineering Services Contract Awarded to BAE Systems Lacks Competition, Raises Value Concerns

Contract Overview

Contract Amount: $31,428,053 ($31.4M)

Contractor: BAE Systems Land and Armaments L.P.

Awarding Agency: Department of Defense

Start Date: 2015-05-29

End Date: 2018-12-31

Contract Duration: 1,312 days

Daily Burn Rate: $24.0K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: IGF::OT::IGF

Place of Performance

Location: STERLING HEIGHTS, MACOMB County, MICHIGAN, 48312

State: Michigan Government Spending

Plain-Language Summary

Department of Defense obligated $31.4 million to BAE SYSTEMS LAND AND ARMAMENTS L.P. for work described as: IGF::OT::IGF Key points: 1. Contract awarded on a sole-source basis, limiting price discovery and potentially increasing costs. 2. The 'NOT COMPETED' status indicates a lack of market engagement, which can reduce value for money. 3. Performance period of over three years suggests a significant, long-term engagement. 4. The Cost Plus Fixed Fee (CPFF) contract type carries inherent risk of cost overruns. 5. Engineering services are critical for defense readiness, but the procurement method warrants scrutiny. 6. The contract's value, while substantial, needs benchmarking against similar services to assess fairness.

Value Assessment

Rating: questionable

The contract's value of $31.4 million for engineering services is difficult to assess without specific deliverables and market benchmarks. Awarded on a sole-source basis, it bypasses competitive pressures that typically drive down costs. The CPFF structure, while allowing for flexibility, can incentivize higher spending compared to fixed-price contracts. Without comparable sole-source awards for similar engineering scopes, it's challenging to definitively state if the pricing is fair, but the lack of competition is a significant red flag for value.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded under a 'NOT COMPETED' procurement strategy, indicating that BAE SYSTEMS LAND AND ARMAMENTS L.P. was the only source considered. This approach bypasses the standard competitive bidding process, which typically involves multiple vendors submitting proposals. The absence of competition means there was no direct price comparison or market validation, potentially leading to a less favorable outcome for the government in terms of cost and innovation.

Taxpayer Impact: The lack of competition means taxpayers did not benefit from the potential cost savings and improved service offerings that a competitive bidding process could have generated. This sole-source award limits the government's ability to ensure it is receiving the best possible value for taxpayer dollars.

Public Impact

The Department of the Army benefits from specialized engineering services crucial for its operations. This contract supports the development and maintenance of military systems and infrastructure. The services are likely concentrated in Michigan, where BAE Systems has a significant presence. The contract supports a skilled workforce in the engineering and defense manufacturing sectors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing and value for money.
Cost Plus Fixed Fee contract type can lead to cost overruns.
Lack of transparency in the procurement process due to 'NOT COMPETED' status.
Potential for reduced innovation without market competition.

Positive Signals

BAE Systems is a known entity in defense contracting, suggesting some level of established capability.
Engineering services are vital for maintaining and advancing military capabilities.

Sector Analysis

This contract falls within the Engineering Services sector (NAICS 541330), a critical component of the broader defense industrial base. The defense sector relies heavily on specialized engineering firms for design, development, testing, and sustainment of complex military platforms and systems. The market for defense engineering services is substantial, with significant government spending allocated annually. This contract represents a portion of that spending, supporting BAE Systems' role as a key contractor within this specialized niche.

Small Business Impact

The contract details do not indicate any small business set-aside provisions, nor is there information suggesting subcontracting opportunities for small businesses. As a sole-source award to a large prime contractor, the direct impact on the small business ecosystem is likely minimal unless BAE Systems voluntarily engages small businesses for subcontracting. Further investigation into BAE's subcontracting plans would be needed to assess any indirect benefits.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of the Army's contracting and program management offices. The Inspector General (IG) for the Department of Defense may also conduct audits or investigations into contract performance and spending, particularly given the sole-source nature and CPFF structure. Transparency is limited by the non-competitive award, but contract performance reports and financial reviews would be key accountability measures.

Related Government Programs

Department of Defense Engineering Services
BAE Systems Defense Contracts
Army Weapon Systems Development
Sole-Source Defense Procurements

Risk Flags

Sole-source award
Cost-reimbursement contract type
Lack of competition
Long contract duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $31.4 million to BAE SYSTEMS LAND AND ARMAMENTS L.P.. IGF::OT::IGF

Who is the contractor on this award?

The obligated recipient is BAE SYSTEMS LAND AND 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 $31.4 million.

What is the period of performance?

Start: 2015-05-29. End: 2018-12-31.

What specific engineering services were provided under this contract?

The provided data indicates the contract was for 'Engineering Services' under NAICS code 541330. However, the specific nature of these services is not detailed. Typically, engineering services in the defense sector can encompass a wide range of activities, including research and development, design, systems integration, testing, evaluation, and technical support for military equipment, platforms, or infrastructure. Without further documentation, it's impossible to ascertain the precise scope, such as whether it involved conceptual design, detailed engineering, prototyping, or sustainment engineering for specific weapon systems or platforms.

Why was this contract awarded on a sole-source basis instead of being competed?

The data explicitly states the contract was 'NOT COMPETED,' classifying it as a sole-source award. The specific justification for this determination is not provided in the abbreviated data. Common reasons for sole-source awards include situations where only one responsible source can provide the required supplies or services (e.g., unique capabilities, proprietary technology, urgent and compelling needs), or when a follow-on contract is necessary and it's deemed impractical or uneconomical to compete. A detailed review of the contract file and justification for other than full and open competition (JOFOC) would be required to understand the official rationale.

How does the Cost Plus Fixed Fee (CPFF) contract type compare to other contract types in terms of risk and value?

The Cost Plus Fixed Fee (CPFF) contract type is a cost-reimbursement contract where the contractor is reimbursed for all allowable costs plus a fixed fee representing profit. This structure is often used when the scope of work is not well-defined or involves significant uncertainty, such as in research and development. For the government, the primary risk is that costs can exceed initial estimates, as the contractor is incentivized to incur costs to achieve the project goals, with their profit (the fixed fee) remaining constant. While it allows for flexibility and can be suitable for innovative projects, it generally offers less price certainty and potentially lower value for money compared to fixed-price contracts, where the contractor bears more risk for cost overruns.

What is the track record of BAE SYSTEMS LAND AND ARMAMENTS L.P. with the Department of Defense?

BAE SYSTEMS LAND AND ARMAMENTS L.P. is a major defense contractor with a long history of providing a wide array of products and services to the Department of Defense (DoD). They are known for their work in areas such as armored vehicles, naval systems, munitions, and electronic systems. While specific performance metrics for this particular $31.4 million engineering services contract are not detailed in the provided data, BAE Systems generally holds numerous large contracts with the DoD across various branches. Their track record involves extensive experience in complex defense programs, though like any large contractor, they may have faced scrutiny or performance issues on specific contracts over time. A comprehensive review would involve examining past performance evaluations and contract histories.

Are there any comparable engineering services contracts awarded by the Department of the Army to benchmark this contract's value?

Benchmarking this $31.4 million engineering services contract is challenging without knowing the specific technical scope and deliverables. However, the Department of the Army procures a vast range of engineering services, from basic R&D to highly specialized systems engineering. Comparable contracts would ideally involve similar service types, complexity, duration, and geographic location. Given this contract was sole-sourced, direct price comparisons are difficult. However, one could look at other large engineering services contracts awarded competitively within the Army or DoD to gauge typical hourly rates, overhead application, and fee structures for similar skill sets, adjusting for differences in project scope and risk.

What are the potential risks associated with a long-duration contract (over 3 years) for engineering services?

Long-duration contracts for engineering services, like this one spanning over three years (1312 days), carry several potential risks. Firstly, the cost of services can escalate significantly over time due to inflation, changes in labor rates, and evolving project requirements. Secondly, the initial technical assumptions or requirements may become outdated, necessitating costly modifications or rework. Thirdly, maintaining consistent oversight and performance management over an extended period can be challenging for the government. Finally, if the contract is sole-sourced, the government is locked into a single provider for an extended duration, potentially missing out on innovations or better value from competitors that emerge during the contract's life.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Architectural, Engineering, and Related Services › Engineering Services

Product/Service Code: RESEARCH AND DEVELOPMENT › C – National Defense R&D Services

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: W56HZV14R0381

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: BAE Systems PLC

Address: 34201 VAN DYKE AVE, STERLING HEIGHTS, MI, 48312

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

Financial Breakdown

Contract Ceiling: $31,428,053

Exercised Options: $31,428,053

Current Obligation: $31,428,053

Subaward Activity

Number of Subawards: 7

Total Subaward Amount: $4,282,843

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline