DoD awards $55.5M contract for howitzer repairs and upgrades to BAE Systems, raising value-for-money questions

Contract Overview

Contract Amount: $55,454,926 ($55.5M)

Contractor: BAE Systems Land & Armaments L.P.

Awarding Agency: Department of Defense

Start Date: 2016-09-14

End Date: 2021-11-30

Contract Duration: 1,903 days

Daily Burn Rate: $29.1K/day

Competition Type: NOT AVAILABLE FOR COMPETITION

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: IGF::OT::IGF: THIS ACTION IS TO REPAIR AND UPGRADE 32 HOWITZERS FOR THE GOVERNMENT OF BRAZIL.

Place of Performance

Location: YORK, YORK County, PENNSYLVANIA, 17408

State: Pennsylvania Government Spending

Plain-Language Summary

Department of Defense obligated $55.5 million to BAE SYSTEMS LAND & ARMAMENTS L.P. for work described as: IGF::OT::IGF: THIS ACTION IS TO REPAIR AND UPGRADE 32 HOWITZERS FOR THE GOVERNMENT OF BRAZIL. Key points: 1. Contract awarded to a single, established defense contractor, potentially limiting competitive pricing. 2. Fixed-price contract structure shifts some risk to the contractor, but scope creep could increase costs. 3. Long contract duration (over 5 years) may not reflect current market efficiencies. 4. Focus on repairs and upgrades suggests a need for sustainment, but details on performance metrics are absent. 5. Limited competition raises concerns about achieving optimal value for taxpayer funds. 6. Contract is for foreign military sales, impacting domestic taxpayer benefit directly.

Value Assessment

Rating: questionable

The contract value of $55.5 million for the repair and upgrade of 32 howitzers appears substantial. Without specific details on the scope of work for each howitzer, it is difficult to benchmark the per-unit cost effectively. However, given the lack of competition and the nature of the work (repairs and upgrades), there is a risk that the pricing may not reflect the most cost-effective solution available in the market. Further analysis would require understanding the specific components being upgraded and the labor hours involved.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was not competed and was awarded directly to BAE Systems Land & Armaments L.P. The data indicates it was 'NOT AVAILABLE FOR COMPETITION.' This sole-source award means there was no opportunity for other qualified vendors to bid on the work, which can lead to higher prices and reduced innovation. The lack of a competitive process prevents a clear understanding of market-driven pricing.

Taxpayer Impact: Sole-source awards mean taxpayers do not benefit from the price reductions and efficiencies that typically arise from a competitive bidding process. This can result in overpayment for goods and services.

Public Impact

The primary beneficiaries are the government of Brazil, receiving upgraded military equipment. The services delivered include the repair and modernization of 32 howitzers. The geographic impact is primarily on military readiness for Brazil, with indirect implications for U.S. defense industrial base stability. Workforce implications are likely within BAE Systems' manufacturing and repair facilities, supporting skilled labor in the defense sector.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to inflated costs for taxpayers.
Sole-source award limits transparency in pricing and value assessment.
Long contract duration could mean outdated technology or inefficient processes by completion.
Details on performance metrics and success criteria are not readily available.
Foreign military sale context means direct taxpayer benefit is secondary to partner nation's needs.

Positive Signals

Contract awarded to an established defense contractor with known capabilities.
Fixed-price contract provides some cost certainty, assuming scope is well-defined.
Upgrades aim to enhance the operational effectiveness of military equipment.
Contract supports the U.S. defense industrial base through work with a major contractor.

Sector Analysis

This contract falls within the defense industrial sector, specifically focusing on military vehicle manufacturing and maintenance. The market for armored vehicle upgrades and repairs is dominated by a few large defense contractors. Spending in this area is driven by military modernization needs and sustainment requirements. Comparable spending benchmarks would typically involve analyzing other foreign military sales or domestic upgrades for similar platforms, which are often sole-sourced or limited competition due to specialized nature.

Small Business Impact

There is no indication that this contract included small business set-asides. As a sole-source award to a large prime contractor, it is unlikely that significant subcontracting opportunities for small businesses were mandated or actively pursued through a competitive process. The impact on the small business ecosystem is likely minimal, as the primary contract is not designed to foster small business participation.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Army and the Department of Defense. Accountability measures would be tied to the terms of the firm-fixed-price contract, including delivery schedules and technical specifications. Transparency is limited due to the sole-source nature of the award. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Foreign Military Sales Program
Department of Defense Major Defense Equipment
Artillery Systems Sustainment
Military Vehicle Modernization

Risk Flags

Sole-source award
Lack of competitive bidding
Limited transparency on pricing
Potential for cost overruns if scope is not well-defined
Long contract duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $55.5 million to BAE SYSTEMS LAND & ARMAMENTS L.P.. IGF::OT::IGF: THIS ACTION IS TO REPAIR AND UPGRADE 32 HOWITZERS FOR THE GOVERNMENT OF BRAZIL.

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 $55.5 million.

What is the period of performance?

Start: 2016-09-14. End: 2021-11-30.

What is the specific scope of work included in the repair and upgrade of the 32 howitzers?

The provided data indicates the action is to 'REPAIR AND UPGRADE 32 HOWITZERS FOR THE GOVERNMENT OF BRAZIL.' However, the specific technical details of the repairs and the nature of the upgrades are not detailed in the summary. This would typically include tasks such as component replacement, system refurbishment, integration of new technologies or improved functionalities, and potentially software updates. Without a detailed statement of work, it is impossible to assess the complexity, cost-drivers, or the specific value proposition of the upgrades.

How does the per-howitzer cost compare to similar upgrade contracts, domestically or internationally?

Benchmarking the per-howitzer cost is challenging without a detailed scope of work and a competitive bidding process. The total contract value is approximately $55.5 million for 32 howitzers, equating to roughly $1.73 million per howitzer. This figure represents the total cost for repairs and upgrades. To provide a meaningful comparison, one would need to identify contracts for similar platforms (e.g., M777 or similar artillery systems) that involved comparable levels of repair and modernization. Such comparisons are often difficult due to proprietary information, varying scopes, and the sole-source nature of many defense contracts, especially those involving foreign military sales.

What are the potential risks associated with a sole-source award for military equipment upgrades?

The primary risk of a sole-source award is the potential for inflated pricing due to the absence of competition. Without competing bids, the contractor has less incentive to offer the most cost-effective solution. Other risks include a lack of innovation, as alternative approaches from other vendors are not considered, and potential delays if the sole provider faces production or supply chain issues. Furthermore, it can be more difficult to ensure the government is receiving the best possible value and technological advancements when only one supplier is involved.

What is BAE Systems' track record with similar howitzer repair and upgrade contracts?

BAE Systems is a major defense contractor with extensive experience in producing and servicing military vehicles, including artillery systems like the M777 howitzer, which they manufacture. They have a long history of fulfilling contracts for the U.S. Department of Defense and international partners. While specific details on past contracts for repairing and upgrading 32 howitzers for Brazil are not provided here, BAE Systems' established presence in the defense sector suggests they possess the technical capabilities and manufacturing capacity required for such work. However, past performance does not negate the concerns related to the lack of competition for this specific contract.

What is the historical spending trend for howitzer repair and upgrades by the Department of Defense?

Historical spending on howitzer repair and upgrades by the Department of Defense can fluctuate significantly based on military modernization cycles, operational tempo, and specific platform sustainment needs. The DoD invests billions annually in maintaining and upgrading its vast inventory of weapon systems. Contracts for artillery systems, including howitzers, are common and can range from depot-level maintenance to complete overhauls and technology insertions. Analyzing specific historical spending requires access to detailed contract databases and budget allocations for artillery programs, looking at trends in contract values, number of awards, and average contract durations over several fiscal years.

How does the firm-fixed-price contract type impact the risk and cost for this howitzer upgrade?

A firm-fixed-price (FFP) contract is generally preferred by the government as it shifts the majority of the cost risk to the contractor. This means the contractor is obligated to complete the work for the agreed-upon price, regardless of their actual costs. For this howitzer upgrade, the FFP structure provides cost certainty to the government. However, if the scope of work is not precisely defined or if unforeseen technical challenges arise during the repair and upgrade process, the contractor may incur losses, or conversely, seek to minimize costs in ways that could impact quality. The long duration of this contract (over 1900 days) increases the potential for scope creep or unforeseen issues, which could strain the FFP structure if not managed carefully.

Industry Classification

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

Product/Service Code: MAINT, REPAIR, REBUILD EQUIPMENT › MAINT, REPAIR, REBUILD OF EQUIPMENT

Competition & Pricing

Extent Competed: NOT AVAILABLE FOR COMPETITION

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: W56HZV15R0109

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Compagnie DE Developpement DE L'eau S.A.

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: $55,555,021

Exercised Options: $55,454,926

Current Obligation: $55,454,926

Subaward Activity

Number of Subawards: 54

Total Subaward Amount: $19,578,969

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline