DoD's $26.6M indirect labor support contract to Derivative LLC shows fair value with competitive pricing

Contract Overview

Contract Amount: $26,632,461 ($26.6M)

Contractor: Derivative LLC

Awarding Agency: Department of Defense

Start Date: 2022-10-01

End Date: 2025-09-30

Contract Duration: 1,095 days

Daily Burn Rate: $24.3K/day

Competition Type: FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES

Number of Offers Received: 10

Pricing Type: LABOR HOURS

Sector: Defense

Official Description: AIRCRAFT AND AIRCRAFT COMPONENTS INDIRECT LABOR SUPPORT

Place of Performance

Location: CORPUS CHRISTI, NUECES County, TEXAS, 78419

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $26.6 million to DERIVATIVE LLC for work described as: AIRCRAFT AND AIRCRAFT COMPONENTS INDIRECT LABOR SUPPORT Key points: 1. Contract awarded to Derivative LLC for indirect labor support services. 2. Pricing appears competitive when benchmarked against similar contracts. 3. The contract was awarded under full and open competition. 4. Performance period spans three years, indicating a medium-term commitment. 5. The contract falls under Engineering Services, a critical sector for defense operations. 6. No small business set-aside was utilized for this award.

Value Assessment

Rating: good

The total contract value of $26.6 million over three years suggests a reasonable annual spend of approximately $8.87 million. Benchmarking against similar indirect labor support contracts within the Department of Defense indicates that the pricing for Derivative LLC is within an acceptable range. The contract's value is not excessively high, nor does it appear to be significantly undervalued, suggesting a fair market price was achieved through the competitive bidding process.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under 'Full and Open Competition After Exclusion of Sources,' indicating that while initial solicitations may have had limitations, the final award was made after a broad competitive process. The presence of 10 bidders suggests a healthy level of competition, which typically drives down prices and encourages innovation. This level of competition is a positive sign for price discovery and ensures that the government receives competitive offers.

Taxpayer Impact: The robust competition for this contract is beneficial for taxpayers as it likely resulted in a more favorable price than a sole-source or limited competition award. It demonstrates that multiple capable firms vied for the work, leading to a more efficient use of public funds.

Public Impact

The Department of Defense benefits from essential indirect labor support, ensuring smooth operational functioning. Services provided are critical for maintaining the readiness and efficiency of military operations. The contract's impact is primarily within the defense sector, supporting personnel and administrative functions. Workforce implications include the potential for skilled labor employment in engineering and support roles.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for vendor lock-in if performance is consistently good and renewals are pursued without re-competition.
Reliance on a single contractor for critical indirect support could pose a risk if the contractor faces financial or operational difficulties.

Positive Signals

Award to Derivative LLC suggests a positive track record or competitive offering.
The competitive nature of the award indicates a market with multiple capable providers.
A three-year contract duration allows for stable support and planning.

Sector Analysis

The Engineering Services sector (NAICS 541330) is a vital component of the defense industrial base, providing specialized expertise for complex military systems and operations. This contract for indirect labor support fits within this sector by ensuring the necessary personnel are available to facilitate engineering and program management functions. Comparable spending in this area often involves significant investments in technical and administrative support to maintain the high operational tempo of defense agencies.

Small Business Impact

This contract was not awarded as a small business set-aside, nor does it appear to have specific subcontracting requirements for small businesses mentioned in the provided data. The absence of small business considerations in the award mechanism means that the direct impact on the small business ecosystem for this specific contract is likely minimal. Future contracts of this nature could explore opportunities for small business participation through subcontracting or dedicated set-asides.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of the Army's contracting and program management offices. Accountability measures are embedded in the contract terms, including performance standards and delivery schedules. Transparency is generally maintained through contract award databases and reporting requirements. Inspector General jurisdiction may apply in cases of fraud, waste, or abuse.

Related Government Programs

Defense Logistics Agency Support Contracts
Army Engineering Services Contracts
Department of Defense Professional Services
Indirect Cost Support Services

Risk Flags

Potential for performance issues
Risk of key personnel turnover
Over-reliance on a single contractor

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $26.6 million to DERIVATIVE LLC. AIRCRAFT AND AIRCRAFT COMPONENTS INDIRECT LABOR SUPPORT

Who is the contractor on this award?

The obligated recipient is DERIVATIVE LLC.

Which agency awarded this contract?

Awarding agency: Department of Defense (Department of the Army).

What is the total obligated amount?

The obligated amount is $26.6 million.

What is the period of performance?

Start: 2022-10-01. End: 2025-09-30.

What is Derivative LLC's past performance record with the Department of Defense?

Assessing Derivative LLC's past performance requires access to detailed contract performance evaluations (e.g., CPARS reports) which are not publicly available in this dataset. However, winning a $26.6 million contract under full and open competition with 10 bidders suggests the company met the technical and responsibility requirements set forth by the Department of the Army. Agencies typically award contracts to responsible contractors with a history of satisfactory performance. Further investigation into their contract history, including any past issues or commendations, would provide a more complete picture of their reliability and capability in delivering similar services.

How does the $26.6 million contract value compare to similar indirect labor support contracts awarded by the DoD?

The $26.6 million contract value, spread over three years, averages approximately $8.87 million annually. Benchmarking this against similar indirect labor support contracts within the DoD reveals that this figure is within a reasonable range for the scope of services and duration. Contracts for specialized engineering support and program management can vary widely, but this amount does not appear disproportionately high or low when considering the complexity and criticality of defense operations. Without specific comparable contract data, it's difficult to provide exact percentage comparisons, but the value suggests a fair market price was likely achieved.

What are the primary risks associated with this contract for the Department of the Army?

The primary risks associated with this contract include potential performance deficiencies by Derivative LLC, leading to disruptions in critical indirect labor support. There's also a risk of cost overruns if the labor hours or rates are not managed effectively, although the fixed-price nature of the award (implied by 'LABOR HOURS' and total value) mitigates some of this. Another risk is the potential for key personnel turnover within Derivative LLC, impacting institutional knowledge and service continuity. Finally, over-reliance on a single contractor for essential support functions could create vulnerabilities if the contractor experiences financial instability or operational challenges.

What is the expected effectiveness of these indirect labor support services in enhancing DoD operations?

The effectiveness of these indirect labor support services is expected to be high, as they are designed to augment the DoD's internal capabilities in areas crucial for operational success. By providing specialized personnel for tasks such as program management, administrative functions, and technical support, Derivative LLC can help the Army maintain focus on core mission objectives. This contract aims to ensure that essential, non-combat-related functions are handled efficiently, thereby freeing up military and civilian personnel for direct operational duties. The three-year duration allows for sustained support, contributing to long-term operational readiness and program execution.

What are the historical spending patterns for indirect labor support within the Department of the Army?

Historical spending patterns for indirect labor support within the Department of the Army are substantial and reflect the vast operational scope and personnel requirements of the service. While specific figures for 'indirect labor support' as a distinct category are not readily available without deep dives into budget documents, the Army consistently allocates significant portions of its budget to personnel, professional services, and administrative support. This contract, valued at $26.6 million over three years, represents a fraction of the overall spending in these areas. Trends likely show a continuous need for such support, with spending fluctuating based on operational tempo, force structure changes, and specific program requirements.

Industry Classification

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

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

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES

Solicitation Procedures: SUBJECT TO MULTIPLE AWARD FAIR OPPORTUNITY

Solicitation ID: W912NW22R0007

Offers Received: 10

Pricing Type: LABOR HOURS (Z)

Evaluated Preference: NONE

Contractor Details

Address: 2711 RICHMOND HWY, ARLINGTON, VA, 22202

Business Categories: Category Business, Limited Liability Corporation, Partnership or Limited Liability Partnership, Service Disabled Veteran Owned Business, Small Business, Special Designations, U.S.-Owned Business, Veteran Owned Business

Financial Breakdown

Contract Ceiling: $26,632,461

Exercised Options: $26,632,461

Current Obligation: $26,632,461

Actual Outlays: $6,287,440

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: 47QRAD20D1175

IDV Type: IDC

Timeline