M109 Vehicle Support Contract Exceeds $150M, Awarded Sole-Source to BAE Systems

Contract Overview

Contract Amount: $150,194,018 ($150.2M)

Contractor: BAE Systems Land & Armaments L.P.

Awarding Agency: Department of Defense

Start Date: 2016-09-16

End Date: 2022-01-28

Contract Duration: 1,960 days

Daily Burn Rate: $76.6K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: IGF::OT::IGF CONTRACT W56HZV-16-C-0167 IS FOR THE SYSTEM TECHNICAL SUPPORT AND SUSTAINMENT SYSTEM TECHNICAL SUPPORT OF THE M109 FAMILY OF VEHICLES.

Place of Performance

Location: YORK, YORK County, PENNSYLVANIA, 17408

State: Pennsylvania Government Spending

Plain-Language Summary

Department of Defense obligated $150.2 million to BAE SYSTEMS LAND & ARMAMENTS L.P. for work described as: IGF::OT::IGF CONTRACT W56HZV-16-C-0167 IS FOR THE SYSTEM TECHNICAL SUPPORT AND SUSTAINMENT SYSTEM TECHNICAL SUPPORT OF THE M109 FAMILY OF VEHICLES. Key points: 1. Contract focuses on sustainment and technical support for the M109 family of vehicles. 2. Sole-source award raises questions about potential lack of competitive pricing. 3. Long contract duration (nearly 2000 days) suggests a critical, ongoing need. 4. Awarded by the Department of the Army, indicating a significant defense procurement. 5. The contract's value places it among substantial defense sustainment agreements. 6. Performance-based contract type (PA) suggests a focus on achieving specific outcomes.

Value Assessment

Rating: fair

The contract value of over $150 million for system technical support and sustainment of the M109 family of vehicles is substantial. Without comparable sole-source contracts for similar sustainment services, a precise value-for-money assessment is difficult. However, the lack of competition inherently limits the government's ability to secure the lowest possible price. Benchmarking against other sustainment contracts for armored vehicles would be necessary for a more definitive value assessment.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning the Department of the Army did not solicit bids from multiple contractors. This approach is typically used when only one responsible source is available or when a compelling justification exists for avoiding full and open competition. The lack of competition means that price discovery through market forces was bypassed, potentially leading to higher costs than if multiple bids had been received.

Taxpayer Impact: Taxpayers may have paid a premium due to the absence of competitive bidding. The government did not leverage market competition to drive down costs for essential sustainment services.

Public Impact

The primary beneficiaries are the U.S. Army units operating the M109 family of vehicles, ensuring their operational readiness. Services delivered include crucial technical support and sustainment, maintaining the functionality of aging but vital armored platforms. The geographic impact is primarily within Army operational theaters and maintenance facilities. Workforce implications include the need for specialized technical personnel to support these complex military systems.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition, potentially increasing costs for taxpayers.
Long contract duration could mask inefficiencies if not closely monitored.
Reliance on a single contractor for critical sustainment may pose supply chain risks.
Lack of transparency in sole-source justification requires careful review.

Positive Signals

Focus on sustainment ensures continued operational capability of essential military equipment.
Performance-based contract type incentivizes contractor to meet specific support objectives.
Award to an established contractor (BAE Systems) may indicate specialized expertise.

Sector Analysis

This contract falls within the defense industrial base, specifically focusing on the sustainment of armored vehicle systems. The market for military vehicle sustainment is often characterized by long-term relationships and specialized knowledge, which can sometimes lead to sole-source procurements. Comparable spending benchmarks would involve analyzing other sustainment contracts for major defense platforms, which can range from tens to hundreds of millions of dollars depending on the system's complexity and fleet size.

Small Business Impact

The data indicates this contract was not set aside for small businesses (ss: false, sb: false). As a sole-source award to a large prime contractor, BAE Systems, the opportunities for small business subcontracting are not explicitly detailed in this summary. However, large defense contractors typically engage small businesses for specialized components and services, though the extent of this contract's subcontracting to small businesses remains unknown without further data.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of the Army's contracting and program management offices. Inspector General (IG) jurisdiction would apply to investigations of fraud, waste, or abuse. Transparency is limited due to the sole-source nature, but contract performance metrics and financial reporting would be subject to government review and oversight mechanisms.

Related Government Programs

M109 Howitzer Sustainment
BAE Systems Land & Armaments Contracts
Department of the Army Logistics Support
Armored Vehicle Maintenance and Repair
Defense Contract Sustainment

Risk Flags

Sole-source award
Lack of competitive bidding
Cost risk due to contract type (CPFF)

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $150.2 million to BAE SYSTEMS LAND & ARMAMENTS L.P.. IGF::OT::IGF CONTRACT W56HZV-16-C-0167 IS FOR THE SYSTEM TECHNICAL SUPPORT AND SUSTAINMENT SYSTEM TECHNICAL SUPPORT OF THE M109 FAMILY OF VEHICLES.

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 $150.2 million.

What is the period of performance?

Start: 2016-09-16. End: 2022-01-28.

What is the track record of BAE Systems Land & Armaments L.P. in fulfilling similar defense sustainment contracts?

BAE Systems Land & Armaments L.P. is a major defense contractor with extensive experience in producing and sustaining armored vehicles. They have a long history of supporting various U.S. military platforms, including the M109 family of vehicles. Their track record typically involves complex manufacturing, integration, and long-term sustainment services. While specific performance metrics for this particular contract (W56HZV-16-C-0167) are not detailed here, BAE Systems generally holds numerous large-scale contracts across different defense branches. Assessing their past performance on similar sustainment programs, including on-time delivery, quality of service, and cost control, would provide further context on their reliability for this sole-source award.

How does the cost of this contract compare to market rates for similar vehicle sustainment services?

Directly comparing the cost of this sole-source contract to market rates is challenging without access to competitive bidding data or publicly available benchmarks for identical services. Sole-source awards inherently bypass the price discovery mechanism inherent in competitive procurement, which typically drives costs down. To assess value, one would need to identify comparable sustainment contracts for similar armored vehicle platforms (e.g., other self-propelled howitzers or heavy armored vehicles) that were awarded competitively. Analyzing the cost per vehicle, cost per service hour, or cost as a percentage of the vehicle's acquisition value from those competitive contracts could provide a benchmark. Given the lack of competition here, it is plausible that the cost is higher than it might be under a fully competed scenario.

What are the primary risks associated with a sole-source award for critical military vehicle sustainment?

The primary risks associated with a sole-source award for critical military vehicle sustainment include potential overpricing due to the absence of competitive pressure, reduced incentive for the contractor to innovate or improve efficiency, and a lack of market validation for the services provided. There's also a risk of vendor lock-in, where the government becomes heavily reliant on a single provider, making it difficult and costly to switch contractors in the future. Furthermore, without competitive scrutiny, there's a heightened need for robust government oversight to ensure fair pricing and adequate performance. The government must ensure the justification for the sole-source award remains valid throughout the contract's life.

What is the historical spending pattern for the sustainment of the M109 family of vehicles?

Historical spending on the sustainment of the M109 family of vehicles likely reflects the platform's long service life and ongoing modernization efforts. Prior to this $150M+ contract (2016-2022), there would have been previous contracts covering sustainment, upgrades, and repairs. The M109 has undergone various upgrades (e.g., M109A6, M109A7), each requiring specific sustainment strategies and associated funding. Analyzing spending across different fiscal years and contract vehicles would reveal trends in maintenance costs, parts procurement, and technical support requirements. This contract represents a significant portion of sustainment spending during its performance period, indicating the continued reliance on and investment in this vehicle platform by the U.S. Army.

How does the contract type (Cost Plus Fixed Fee) influence risk and cost for this sustainment effort?

A Cost Plus Fixed Fee (CPFF) contract type, indicated as 'PT: COST PLUS FIXED FEE', means the contractor is reimbursed for allowable costs plus a fixed fee representing profit. This structure shifts a significant portion of the cost risk to the government, as the final cost is not fixed upfront. While it can be effective for research and development or complex services where costs are difficult to estimate, it provides less incentive for the contractor to control costs compared to fixed-price contracts. The fixed fee, however, provides the contractor with a predictable profit margin. For sustainment, this type might be chosen if the scope of work is expected to evolve or if unforeseen technical challenges are anticipated. Robust government oversight is crucial to manage costs effectively under a CPFF arrangement.

Industry Classification

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

Product/Service Code: TECHNICAL REPRESENTATIVE SVCS. › TECHNICAL REPRESENTATIVE SERVICES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: W56HZV15R0032

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Ball Corporation

Address: 1100 BAIRS RD, YORK, PA, 17408

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: $152,513,598

Exercised Options: $150,194,018

Current Obligation: $150,194,018

Actual Outlays: $2,812

Subaward Activity

Number of Subawards: 45

Total Subaward Amount: $26,881,974

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline