DoD awards $97.4M contract for armored vehicle manufacturing, raising value-for-money questions due to sole-source nature

Contract Overview

Contract Amount: $97,358,552 ($97.4M)

Contractor: BAE Systems Land & Armaments L.P.

Awarding Agency: Department of Defense

Start Date: 2017-03-31

End Date: 2023-06-30

Contract Duration: 2,282 days

Daily Burn Rate: $42.7K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: IGF::CT::IGF CONTRACT AWARD

Place of Performance

Location: YORK, YORK County, PENNSYLVANIA, 17408

State: Pennsylvania Government Spending

Plain-Language Summary

Department of Defense obligated $97.4 million to BAE SYSTEMS LAND & ARMAMENTS L.P. for work described as: IGF::CT::IGF CONTRACT AWARD Key points: 1. Contract awarded on a sole-source basis, limiting price competition and potentially increasing costs. 2. Significant duration of the contract (2282 days) suggests a long-term need for these components. 3. The contract type (Cost Plus Fixed Fee) can incentivize cost overruns, requiring close oversight. 4. Focus on armored vehicle components indicates a critical defense supply chain requirement. 5. The award value represents a substantial investment in military hardware manufacturing.

Value Assessment

Rating: questionable

Benchmarking the value-for-money for this sole-source contract is challenging without competitive bids. The Cost Plus Fixed Fee structure, while allowing flexibility, can lead to higher final costs compared to fixed-price contracts. The reported value of $97.4 million over approximately six years suggests an average annual spend of around $16 million, which needs to be assessed against the specific capabilities and market rates for specialized armored vehicle components. Without comparable contract data or a competitive process, it's difficult to definitively state if this represents a fair price.

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 typically occurs when only one vendor possesses the necessary capabilities, technology, or security clearances. The lack of competition means that price discovery through market forces was absent, potentially leading to a higher price than if multiple bids had been solicited. The justification for sole-source procurement would need to be thoroughly reviewed to ensure it was appropriate.

Taxpayer Impact: Taxpayers may have paid a premium due to the absence of competitive bidding. The lack of transparency in pricing negotiations inherent in sole-source awards makes it harder to ensure the best use of public funds.

Public Impact

The primary beneficiaries are the Department of Defense and its armored vehicle fleet, ensuring operational readiness. Services delivered include the manufacturing of critical components for military armored vehicles and tanks. The geographic impact is primarily centered in Pennsylvania, where BAE Systems Land & Armaments L.P. operates. Workforce implications include sustained employment for skilled manufacturing and engineering roles within BAE Systems.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure on pricing.
Cost Plus Fixed Fee contract type can lead to cost escalation.
Long contract duration (2282 days) requires sustained oversight to manage performance and costs.
Lack of public detail on the specific components manufactured hinders granular value assessment.

Positive Signals

Award to an established defense contractor (BAE Systems) suggests a degree of reliability in production.
Contract supports critical defense capabilities, aligning with national security objectives.
The fixed fee component of the contract provides some cost certainty for the government.

Sector Analysis

The defense industrial base for armored vehicles is a highly specialized sector characterized by significant barriers to entry, including advanced manufacturing capabilities, stringent quality control, and security clearances. This contract falls within the 'Military Armored Vehicle, Tank, and Tank Component Manufacturing' sub-sector. Spending in this area is driven by modernization programs and readiness requirements. Comparable spending benchmarks are difficult to establish precisely due to the proprietary nature of defense manufacturing and the unique specifications of armored vehicle components, but significant government investment is typical for maintaining and upgrading such fleets.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb: false'. Furthermore, the prime contractor, BAE Systems Land & Armaments L.P., is a large defense corporation. While large prime contractors are often required to subcontract portions of their work to small businesses, the specific subcontracting plan and its impact on the small business ecosystem are not detailed in the provided data. Without this information, it's difficult to assess the extent to which this contract benefits small businesses.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Army and potentially the Department of Defense's Inspector General. The Cost Plus Fixed Fee structure necessitates rigorous financial oversight to monitor expenditures and ensure costs are reasonable and allocable. Performance monitoring would focus on meeting production schedules, quality standards, and delivery requirements. Transparency is limited by the sole-source nature and the classified aspects often associated with defense procurement, but contract modifications and performance reports should be subject to review.

Related Government Programs

Armored Vehicle Production
Defense Manufacturing
Military Hardware Procurement
Cost Plus Fixed Fee Contracts
Sole Source Defense Contracts

Risk Flags

Sole Source Procurement
Cost Plus Fixed Fee Contract Type
Lack of Competition
Potential for Cost Overruns

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $97.4 million to BAE SYSTEMS LAND & ARMAMENTS L.P.. IGF::CT::IGF CONTRACT AWARD

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 $97.4 million.

What is the period of performance?

Start: 2017-03-31. End: 2023-06-30.

What is the specific justification for awarding this contract on a sole-source basis?

The provided data indicates the contract was awarded as 'NOT COMPETED' and is 'sole-source'. Typically, sole-source justifications are required by federal acquisition regulations when only one responsible source is available or capable of meeting the agency's needs. Reasons can include unique capabilities, proprietary technology, urgent and compelling needs where competition is not feasible, or specific security requirements. For this contract, the specific justification would likely relate to BAE Systems' unique position in manufacturing specific components for certain armored vehicles, potentially due to existing designs, tooling, or intellectual property. A formal Justification for Other Than Full and Open Competition (JOFOC) document would contain the detailed rationale.

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

Cost Plus Fixed Fee (CPFF) contracts are used when the extent or nature of the work cannot be precisely defined, or when there's uncertainty in the cost of performance. The government agrees to pay the contractor's actual costs plus a fixed fee representing profit. This structure shifts some cost risk to the government, as the final cost is not capped. Compared to Firm-Fixed-Price (FFP) contracts, CPFF offers more flexibility for the contractor to adapt to unforeseen issues but can lead to higher overall costs if not managed tightly. Cost-reimbursement contracts, in general, require robust government oversight to ensure costs are reasonable and necessary. The fixed fee provides some incentive for the contractor to control costs, as their profit is predetermined.

What are the potential implications of the long contract duration (2282 days) on program management and cost control?

A contract duration of 2282 days (approximately 6.25 years) signifies a long-term commitment for the acquisition of armored vehicle components. This extended period allows for stable production planning and potentially economies of scale for the contractor. However, it also presents challenges for program management and cost control. The government must maintain consistent oversight throughout the contract's life to ensure performance remains on track and costs are managed effectively. Inflationary pressures over such a long period can impact the actual cost of materials and labor, even with a fixed fee. Furthermore, technological advancements or changes in military requirements could render the components obsolete before the contract's end, necessitating contract modifications or termination, which can incur additional costs and complexities.

What is the historical spending pattern for this specific type of armored vehicle component or related contracts with BAE Systems?

The provided data includes a 'br' (base rate or benchmark rate) value of 42664, which might offer a clue, but without further context, it's difficult to interpret definitively as a historical spending benchmark. To assess historical spending patterns, one would need access to contract databases (like FPDS or USASpending) to search for previous awards to BAE Systems Land & Armaments L.P. for similar 'Military Armored Vehicle, Tank, and Tank Component Manufacturing' (NAICS 336992) or related Product Service Codes (PSCs). Analyzing past contract values, durations, and competition levels for similar items would reveal trends in pricing, contractor performance, and the government's reliance on sole-source awards in this domain. This analysis is crucial for validating the current award's value and necessity.

How does the geographic concentration of this contract in Pennsylvania impact the broader defense industrial base and supply chain resilience?

Concentrating a significant contract for armored vehicle components in Pennsylvania, where BAE Systems Land & Armaments L.P. operates, highlights the importance of regional defense industrial hubs. While this concentration can foster expertise and efficiency within that region, it also raises questions about supply chain resilience. Over-reliance on a single geographic location or a limited number of large prime contractors can create vulnerabilities. Disruptions due to natural disasters, economic downturns, or geopolitical events in that specific region could significantly impact the availability of critical defense components. Diversifying manufacturing locations or fostering competition among suppliers in different regions could enhance overall supply chain robustness, though it may also increase logistical complexity and initial setup costs.

Industry Classification

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

Product/Service Code: SUPPORT SVCS (PROF, ADMIN, MGMT) › PROFESSIONAL SERVICES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: W56HZV15R0286

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: $97,358,552

Exercised Options: $97,358,552

Current Obligation: $97,358,552

Actual Outlays: $90,009

Subaward Activity

Number of Subawards: 57

Total Subaward Amount: $13,825,781

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline