DoD awards $20.3M for counter-IED systems, raising questions about competition and value

Contract Overview

Contract Amount: $20,333,153 ($20.3M)

Contractor: Applied Energetics, Inc

Awarding Agency: Department of Defense

Start Date: 2008-06-04

End Date: 2011-07-01

Contract Duration: 1,122 days

Daily Burn Rate: $18.1K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: TEN (10) BANSHEE COUNTER-IED SYSTEMS

Place of Performance

Location: TUCSON, PIMA County, ARIZONA, 85714

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $20.3 million to APPLIED ENERGETICS, INC for work described as: TEN (10) BANSHEE COUNTER-IED SYSTEMS Key points: 1. Contract awarded on a sole-source basis, limiting price discovery and potentially increasing costs. 2. High cost per unit suggests a need for benchmarking against similar systems. 3. Limited competition raises concerns about contractor performance incentives. 4. Long contract duration (1122 days) may not align with rapidly evolving threat landscapes. 5. The specific nature of the 'Banshee' system warrants further investigation into its capabilities and necessity. 6. Lack of small business participation noted, with no set-aside or subcontracting requirements specified.

Value Assessment

Rating: questionable

The contract's total value of $20.3 million for 10 counter-IED systems results in a per-unit cost of approximately $2 million. Without specific details on the system's capabilities and technological sophistication, it is difficult to benchmark this cost against comparable systems. The sole-source nature of the award further complicates a direct value-for-money assessment, as competitive pressures that typically drive down prices were absent. This pricing structure warrants a deeper dive into the cost components and justification provided by the contractor.

Cost Per Unit: Approximately $2.03 million per system.

Competition Analysis

Competition Level: sole-source

This contract was awarded using a sole-source justification, meaning only one vendor, Applied Energetics, Inc., was considered. This approach bypasses the standard competitive bidding process, which typically involves multiple companies submitting proposals. While sole-source awards can be justified in specific circumstances, such as when only one entity possesses the required technology or capability, it significantly reduces the opportunity for price negotiation and comparison, potentially leading to higher costs for the government.

Taxpayer Impact: Sole-source awards limit taxpayer value by removing the downward pressure on pricing that competition provides. Without multiple bids, the government may overpay for goods or services, as the selected contractor faces no direct price competition.

Public Impact

The primary beneficiaries are Department of Defense (Army) personnel who will be equipped with counter-Improvised Explosive Device (IED) systems. The contract delivers ten 'Banshee' counter-IED systems, aimed at enhancing soldier safety in combat zones. The geographic impact is likely focused on areas where IED threats are prevalent, primarily overseas operational theaters. Workforce implications are minimal for the awarding agency but could involve training and maintenance personnel for the new systems.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing and value assessment.
High per-unit cost requires further justification and benchmarking.
Contract duration may be misaligned with evolving threat technology.
Lack of transparency in the sole-source justification process.
No indication of small business participation or subcontracting goals.

Positive Signals

Addresses a critical need for counter-IED technology to protect soldiers.
Contract awarded to a single entity, potentially indicating specialized capabilities.
Contract includes provisions for cost-plus fixed fee, allowing for some cost control if managed effectively.

Sector Analysis

The defense sector is characterized by significant government spending on advanced technologies and specialized equipment. Contracts for systems like counter-IED devices are crucial for force protection and operational effectiveness. The market for such technologies is often specialized, with a limited number of firms possessing the requisite expertise. However, even within specialized markets, competitive procurement is generally preferred to ensure optimal use of taxpayer funds. Benchmarking against other similar systems procured by the DoD or allied nations would provide further context on the value received.

Small Business Impact

This contract does not appear to have included any small business set-aside provisions, nor is there any indication of subcontracting goals for small businesses. The sole-source nature of the award further limits opportunities for small businesses to participate in this specific contract. This suggests that the primary contractor, Applied Energetics, Inc., is expected to perform the majority, if not all, of the work. The absence of small business engagement in this significant award could represent a missed opportunity to foster growth within the small business defense industrial base.

Oversight & Accountability

Oversight for this contract would fall under the Department of the Army's contracting and program management offices. The 'Cost Plus Fixed Fee' (CPFF) contract type requires the contractor to exercise due diligence in managing costs, with the government paying actual allowable costs plus a fixed fee. Transparency is limited due to the sole-source award, with justification documents typically being the primary source of insight. Inspector General (IG) jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Department of Defense Counter-IED Programs
Army Procurement of Electronic Warfare Systems
Specialized Defense Technology Acquisitions
Cost-Plus Fixed Fee Contracts in Defense

Risk Flags

Sole-source award lacks competitive justification.
High per-unit cost requires validation.
Potential for overpayment due to lack of competition.
Limited transparency in procurement process.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $20.3 million to APPLIED ENERGETICS, INC. TEN (10) BANSHEE COUNTER-IED SYSTEMS

Who is the contractor on this award?

The obligated recipient is APPLIED ENERGETICS, INC.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $20.3 million.

What is the period of performance?

Start: 2008-06-04. End: 2011-07-01.

What specific capabilities does the 'Banshee' counter-IED system offer, and how do these capabilities justify the high per-unit cost?

The provided data does not detail the specific capabilities of the 'Banshee' counter-IED system. However, given the approximate $2.03 million per-unit cost, it is reasonable to infer that the system incorporates advanced technology, potentially including sophisticated detection, jamming, or neutralization capabilities for various types of improvised explosive devices. The justification for this high cost would typically be found in the system's unique technological advantages, its effectiveness rate in testing or previous deployments, and the specialized research and development investment required. Without access to the technical specifications and performance data, a definitive assessment of value-for-money is challenging. Further inquiry into the system's technical documentation and performance metrics would be necessary to validate the cost against its operational benefits and compare it to alternative solutions.

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

Sole-source contract awards are typically justified under specific circumstances outlined in federal acquisition regulations, such as when only one responsible source is available or possesses unique capabilities, or in cases of urgent and compelling need where competition is not feasible. For this contract, the justification for awarding to Applied Energetics, Inc. without competition would need to be formally documented by the Department of the Army. Common reasons include proprietary technology, unique expertise, or the need to maintain compatibility with existing systems. Without access to the official Justification and Approval (J&A) document, the precise rationale remains unknown. However, the sole-source nature inherently limits transparency and competitive price discovery, making it crucial that the justification is robust and thoroughly reviewed.

How does the $2.03 million per-unit cost compare to similar counter-IED systems procured by the DoD or other government agencies?

Benchmarking the $2.03 million per-unit cost for the 'Banshee' system against similar counter-IED systems is difficult without specific comparative data. The market for counter-IED technology is diverse, ranging from relatively simple jammers to complex integrated systems. Costs can vary significantly based on the system's technological sophistication, range, power, form factor (e.g., vehicle-mounted vs. man-portable), and the specific threats it is designed to counter. Generally, highly advanced, integrated systems with broad spectrum capabilities and robust performance characteristics command higher prices. To provide a meaningful comparison, one would need to identify systems with comparable functionalities and operational contexts, then analyze their procurement costs. Publicly available contract databases and defense budget reports might offer some comparable figures, but direct, apples-to-apples comparisons are often challenging due to the specialized nature of defense acquisitions.

What are the potential risks associated with a sole-source award for critical defense equipment like counter-IED systems?

Sole-source awards for critical defense equipment present several risks. Firstly, the absence of competition can lead to inflated prices, as the government lacks the leverage to negotiate the best possible deal. Secondly, it can reduce the incentive for the sole contractor to innovate or maintain high performance standards, as there is no direct competitive threat. Thirdly, it limits the government's options if the sole contractor experiences financial difficulties, production issues, or fails to meet delivery schedules. This can create supply chain vulnerabilities for essential equipment. Finally, sole-source awards can sometimes be perceived as less transparent, potentially raising concerns about fairness and the efficient use of taxpayer funds, especially if the justification for sole-sourcing is not sufficiently robust.

What is the historical spending pattern for counter-IED systems by the Department of the Army, and how does this contract fit within that trend?

The Department of the Army has consistently allocated significant funding towards counter-Improvised Explosive Device (IED) capabilities due to the persistent threat faced by ground forces. Historical spending patterns reflect a continuous effort to develop, procure, and upgrade technologies designed to detect, defeat, and mitigate IED threats. This includes investments in electronic warfare systems, sensors, blast-resistant vehicles, and training. The $20.3 million awarded for the 'Banshee' systems represents a specific procurement within this broader category. Without detailed historical data on the volume and cost of similar systems procured over time, it's challenging to definitively state how this contract fits the trend. However, it signifies an ongoing commitment to acquiring specialized counter-IED solutions, likely driven by evolving threat assessments and operational requirements.

Industry Classification

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

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

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Address: 3590 E COLUMBIA ST, TUCSON, AZ, 90

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Federally Funded Research and Development Corp, Manufacturer of Goods, Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $20,333,153

Exercised Options: $20,333,153

Current Obligation: $20,333,153

Contract Characteristics

Cost or Pricing Data: YES

Timeline