DoD awards $2.88B contract for M109A7/M992A3 vehicle production materials, with a long performance period

Contract Overview

Contract Amount: $2,875,130,483 ($2.9B)

Contractor: BAE Systems Land & Armaments L.P.

Awarding Agency: Department of Defense

Start Date: 2017-03-31

End Date: 2030-09-30

Contract Duration: 4,931 days

Daily Burn Rate: $583.1K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: LETTER CONTRACT FOR EARLY PROCUREMENT MATERIAL TO SUPPORT THE M109A7/M992A3 VEHICLE PRODUCTION.

Place of Performance

Location: YORK, YORK County, PENNSYLVANIA, 17408

State: Pennsylvania Government Spending

Plain-Language Summary

Department of Defense obligated $2.88 billion to BAE SYSTEMS LAND & ARMAMENTS L.P. for work described as: LETTER CONTRACT FOR EARLY PROCUREMENT MATERIAL TO SUPPORT THE M109A7/M992A3 VEHICLE PRODUCTION. Key points: 1. Contract awarded for long-lead time materials, indicating a focus on future production needs. 2. The contract's duration spans over 12 years, suggesting a sustained requirement for these components. 3. Awarded to a single contractor, raising questions about competition and potential cost efficiencies. 4. The firm-fixed-price structure aims to provide cost certainty for the government. 5. This procurement supports the modernization of armored vehicle platforms for the U.S. Army. 6. The contract value is substantial, reflecting the scale of the vehicle production program.

Value Assessment

Rating: fair

The contract value of $2.88 billion over a 12-year period represents a significant investment. Benchmarking the value for 'early procurement material' is challenging without specific component details. However, the extended duration and sole-source nature suggest potential for negotiated efficiencies over time, though initial pricing may not reflect competitive market pressures. The firm-fixed-price type provides budget predictability.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning it was not competed among multiple vendors. This approach is typically used when only one source can fulfill the requirement, often due to proprietary technology, unique capabilities, or urgent needs. The lack of competition means the government did not benefit from price discovery through a bidding process, potentially leading to higher costs than if multiple offers were considered.

Taxpayer Impact: Taxpayers may face higher costs due to the absence of competitive bidding. Without market comparison, it's difficult to ascertain if the price reflects true value for money.

Public Impact

The primary beneficiaries are the U.S. Army, which will receive modernized armored vehicles. This contract ensures the availability of critical components for the M109A7/M992A3 self-propelled howitzer and armored personnel carrier. The geographic impact is primarily within the United States, supporting domestic defense manufacturing. Workforce implications include sustained employment for skilled labor in defense manufacturing facilities.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure, potentially impacting cost-effectiveness.
Long contract duration increases exposure to potential cost overruns or scope creep if not managed tightly.
Reliance on a single supplier could create supply chain vulnerabilities.

Positive Signals

Firm-fixed-price contract provides cost certainty for the government.
Focus on early procurement ensures material availability for future production runs.
Supports the modernization of critical Army equipment.

Sector Analysis

This contract falls within the defense manufacturing sector, specifically focusing on armored vehicle components. The North American Industry Classification System (NAICS) code 336211, 'Motor Vehicle Body Manufacturing,' indicates the nature of the production. The market for such specialized defense components is often characterized by limited suppliers and significant barriers to entry, making sole-source or limited competition awards more common. Comparable spending benchmarks are difficult to establish without detailed specifications of the materials procured.

Small Business Impact

This contract does not appear to have a small business set-aside (SB=false). The prime contractor, BAE Systems, is a large defense manufacturer. There is no explicit information on subcontracting plans for small businesses within this award notice. The lack of a set-aside or clear subcontracting goals may limit opportunities for small businesses to participate in this significant defense procurement.

Oversight & Accountability

Oversight for this contract would typically be managed by the Department of the Army contracting and program management offices. As a large, sole-source award, it may be subject to enhanced oversight reviews. Transparency is facilitated through contract databases like FPDS, but detailed performance metrics and cost breakdowns are often proprietary. The Inspector General for the Department of Defense would have jurisdiction to investigate any allegations of fraud, waste, or abuse.

Related Government Programs

M109 Paladin Self-Propelled Howitzer
M992A3 Field Artillery Ammunition Support Vehicle
U.S. Army Armored Vehicle Modernization Programs
Defense Production Act Title III Programs

Risk Flags

Sole-source award
Long contract duration
Lack of explicit small business subcontracting goals

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $2.88 billion to BAE SYSTEMS LAND & ARMAMENTS L.P.. LETTER CONTRACT FOR EARLY PROCUREMENT MATERIAL TO SUPPORT THE M109A7/M992A3 VEHICLE 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 (Department of the Army).

What is the total obligated amount?

The obligated amount is $2.88 billion.

What is the period of performance?

Start: 2017-03-31. End: 2030-09-30.

What is the historical spending pattern for M109A7/M992A3 vehicle production materials with BAE Systems?

Historical spending data for M109A7/M992A3 vehicle production materials with BAE Systems prior to this $2.88 billion award is not explicitly detailed in the provided data. This contract, awarded in March 2017 with an end date of September 2030, appears to be a significant, long-term commitment for early procurement. To understand historical patterns, one would need to analyze prior contracts related to the development, testing, and initial production phases of these specific vehicle variants. It's possible that previous awards were smaller, focused on research and development, or covered different phases of the production lifecycle. Without access to a comprehensive contract history database for this specific program, a detailed analysis of past spending trends is not feasible based solely on the information provided.

How does the pricing of this contract compare to similar sole-source defense material procurements?

Directly comparing the pricing of this $2.88 billion sole-source contract for M109A7/M992A3 vehicle production materials to similar procurements is challenging without specific details on the materials, quantities, and the specific defense platforms involved. Sole-source contracts inherently lack the price discovery mechanism of competitive bidding, which can lead to higher prices. However, the U.S. Department of Defense often employs mechanisms like Cost Plus Incentive Fee (CPIF) or Firm Fixed Price Incentive Fee (FPIF) contracts, or conducts extensive should-cost analyses, to manage costs even in sole-source situations. The firm-fixed-price (FFP) nature of this award suggests that the price was negotiated upfront. Benchmarking would require access to detailed cost breakdowns and comparisons with other long-lead material procurements for comparable armored vehicle systems, considering factors like technological complexity, production volume, and supplier market dynamics.

What are the key performance indicators (KPIs) for this contract, and how is performance being measured?

The provided data does not explicitly list the Key Performance Indicators (KPIs) for this contract. However, for a firm-fixed-price contract focused on 'early procurement material,' typical KPIs would likely revolve around schedule adherence (delivery dates for materials), quality of materials (meeting technical specifications and defect rates), and potentially cost control within the negotiated fixed price. Performance measurement would be conducted by the Department of the Army's contracting officer and program management team through regular reviews, inspections of delivered materials, and monitoring of the contractor's progress against the contract milestones. The contract's long duration suggests that performance will be assessed incrementally over its lifespan.

What is the contractor's track record with the Department of Defense, particularly on similar large-scale production contracts?

BAE Systems Land & Armaments L.P. is a major defense contractor with a substantial track record of delivering complex systems to the Department of Defense. They are known for producing a wide range of armored vehicles, artillery systems, and other military equipment. While specific performance details on past contracts are not provided here, BAE Systems has been a key player in numerous large-scale defense programs, including the ongoing modernization efforts for the U.S. Army. Their experience with programs like the M109 family of vehicles suggests a familiarity with the requirements and challenges associated with such procurements. However, like any large contractor, their performance can vary across different contracts and programs, and a comprehensive assessment would require reviewing specific contract performance reports and past performance evaluations.

What are the potential risks associated with the sole-source nature of this procurement, and how are they being mitigated?

The primary risk of a sole-source procurement is the potential for inflated costs due to the lack of competitive pressure. Without competing bids, there is less incentive for the contractor to offer the lowest possible price. Additionally, there's a risk of complacency or reduced innovation from the sole supplier. Mitigation strategies employed by the government in sole-source situations often include rigorous negotiation, detailed 'should-cost' analyses to estimate a fair price, extensive market research to ensure no other viable sources exist, and potentially incorporating performance-based incentives or strict oversight mechanisms. For this contract, the firm-fixed-price structure provides some cost certainty, but the government's negotiation and oversight teams play a critical role in ensuring value for money.

Industry Classification

NAICS: Manufacturing › Motor Vehicle Body and Trailer Manufacturing › Motor Vehicle Body Manufacturing

Product/Service Code: MOTOR VEHICLES, CYCLES, TRAILERS

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: W56HZV16R0006

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

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: $2,889,525,125

Exercised Options: $2,875,130,483

Current Obligation: $2,875,130,483

Subaward Activity

Number of Subawards: 2747

Total Subaward Amount: $991,938,133

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline