DoD's $40.8M BAE Systems contract for fluid meters lacked competition, raising cost concerns

Contract Overview

Contract Amount: $40,794,293 ($40.8M)

Contractor: BAE Systems Information and Electronic Systems Integration Inc.

Awarding Agency: Department of Defense

Start Date: 2011-12-21

End Date: 2014-06-30

Contract Duration: 922 days

Daily Burn Rate: $44.2K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: ARMY PROCUREMENT AGAINST BAE CORPORATE CONTRACT SPM400-06-D-9405. THIS SUBSUMABLE FOR CAGE 94117.

Place of Performance

Location: NASHUA, HILLSBOROUGH County, NEW HAMPSHIRE, 03060

State: New Hampshire Government Spending

Plain-Language Summary

Department of Defense obligated $40.8 million to BAE SYSTEMS INFORMATION AND ELECTRONIC SYSTEMS INTEGRATION INC. for work described as: ARMY PROCUREMENT AGAINST BAE CORPORATE CONTRACT SPM400-06-D-9405. THIS SUBSUMABLE FOR CAGE 94117. Key points: 1. The contract was not competed, suggesting potential for higher costs due to limited price discovery. 2. BAE Systems received the full value of the contract, with no indication of small business subcontracting. 3. The contract duration was substantial, spanning over two years, for a specialized manufacturing need. 4. The award was made under a firm-fixed-price structure, which typically shifts risk to the contractor. 5. The procurement was managed by the Defense Logistics Agency, indicating a focus on operational readiness. 6. The North American Industry Classification System code suggests a niche manufacturing requirement.

Value Assessment

Rating: questionable

Without competitive bidding, it is difficult to benchmark the value for money. The total award of $40.8 million for specialized fluid meters and counting devices suggests a significant investment. The lack of competition means there's no clear market comparison to assess if the pricing was optimal. The firm-fixed-price contract type is generally favorable for the government in controlling costs, but the absence of competition undermines the potential for aggressive pricing.

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 limits the government's ability to explore a wider range of pricing and technical solutions. The lack of competition means that BAE Systems was the only provider considered, potentially leading to less favorable terms than if a competitive process had been undertaken.

Taxpayer Impact: Sole-source awards can result in higher costs for taxpayers as there is no market pressure to drive down prices. This limits the government's purchasing power and potentially diverts funds that could be used for other critical needs.

Public Impact

The Department of Defense benefits from the acquisition of specialized fluid metering and counting devices, crucial for operational functions. BAE Systems, the contractor, receives significant revenue from this sole-source award. The contract supports manufacturing activities, potentially impacting the workforce within BAE Systems' facilities. The geographic impact is primarily linked to New Hampshire, where BAE Systems' relevant division is located.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to inflated prices and reduced value for taxpayer dollars.
Sole-source awards can stifle innovation by not encouraging new market entrants or alternative solutions.
Limited transparency in pricing due to the absence of a competitive bidding process.
Potential for over-reliance on a single contractor for critical components.

Positive Signals

Firm-fixed-price contract structure shifts cost overrun risk to the contractor.
Award to an established defense contractor like BAE Systems may indicate a known capability and reliability.
Procurement managed by the Defense Logistics Agency suggests alignment with established defense supply chain processes.

Sector Analysis

This contract falls within the manufacturing sector, specifically for specialized instrumentation. The North American Industry Classification System (NAICS) code 334514 covers 'Totalizing Fluid Meter and Counting Device Manufacturing.' This is a niche market where specialized expertise is required. Benchmarking spending in this specific sub-sector is challenging due to its specialized nature, but overall defense spending on electronic and precision equipment is substantial.

Small Business Impact

There is no indication that this contract included small business set-asides, nor is there information suggesting subcontracting opportunities for small businesses. The award was made directly to BAE Systems, a large defense contractor. This means the direct economic benefit flows to the prime contractor, and the impact on the broader small business ecosystem is likely minimal unless BAE Systems voluntarily engages them.

Oversight & Accountability

Oversight for this contract would typically fall under the purview of the Department of Defense, specifically the Defense Logistics Agency (DLA). As a sole-source award, scrutiny might be higher to ensure fair and reasonable pricing, although the firm-fixed-price nature shifts some risk. Inspector General investigations could be initiated if any fraud, waste, or abuse is suspected. Transparency is limited due to the non-competitive nature of the award.

Related Government Programs

BAE Systems Information and Electronic Systems Integration Inc. Contracts
Defense Logistics Agency Procurement
Sole-Source Defense Contracts
Manufacturing of Measurement and Control Instruments

Risk Flags

Lack of Competition
Potential for Inflated Pricing
Limited Transparency

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $40.8 million to BAE SYSTEMS INFORMATION AND ELECTRONIC SYSTEMS INTEGRATION INC.. ARMY PROCUREMENT AGAINST BAE CORPORATE CONTRACT SPM400-06-D-9405. THIS SUBSUMABLE FOR CAGE 94117.

Who is the contractor on this award?

The obligated recipient is BAE SYSTEMS INFORMATION AND ELECTRONIC SYSTEMS INTEGRATION INC..

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Logistics Agency).

What is the total obligated amount?

The obligated amount is $40.8 million.

What is the period of performance?

Start: 2011-12-21. End: 2014-06-30.

What is the track record of BAE Systems Information and Electronic Systems Integration Inc. with the Department of Defense?

BAE Systems Information and Electronic Systems Integration Inc. is a significant defense contractor with a long history of providing various systems and services to the Department of Defense. They are involved in a wide range of areas, including electronic warfare, communications, sensor systems, and naval systems. Their performance history with the DoD is extensive, encompassing numerous contracts of varying sizes and complexities. While specific performance metrics for individual contracts are often not publicly detailed, their continued role as a prime contractor suggests a generally accepted level of capability and reliability. However, like any large contractor, they may have faced performance issues or contract disputes on specific awards, which are not detailed here.

How does the $40.8 million contract value compare to similar procurements for fluid meters and counting devices?

Directly comparing the $40.8 million contract value for totalizing fluid meter and counting device manufacturing is challenging due to the specialized nature of the product and the sole-source award. Publicly available data on comparable sole-source procurements for such niche items is scarce. In a competitive market, this value might be considered high or reasonable depending on the exact specifications, quantity, and technological sophistication. However, the absence of competition prevents a definitive assessment of whether this represents optimal value for money compared to what could have been achieved through a bidding process. Without competitive bids, it's difficult to establish a market price benchmark.

What are the primary risks associated with a sole-source award of this magnitude?

The primary risks associated with a sole-source award of this magnitude include potential overpricing due to the lack of competitive pressure, limited innovation as alternative solutions are not explored, and a reduced incentive for the contractor to offer the most cost-effective approach. There's also a risk of vendor lock-in, making it difficult to switch providers in the future. Furthermore, the lack of transparency in the pricing negotiation process can raise concerns about fairness and efficiency. For taxpayers, the risk is that funds are not utilized as effectively as they could be in a competitive environment, potentially leading to higher overall defense spending.

How effective is the firm-fixed-price contract type in managing costs for specialized manufacturing?

The firm-fixed-price (FFP) contract type is generally considered effective in managing costs for specialized manufacturing because it shifts the risk of cost overruns from the government to the contractor. The contractor agrees to a set price, and any costs incurred above that price are absorbed by them. This incentivizes the contractor to manage their expenses efficiently. However, the effectiveness of FFP is maximized when combined with robust competition, which helps ensure the initial fixed price is fair and reasonable. In a sole-source scenario, while the government's exposure to cost overruns is limited, the initial fixed price itself might be higher than it would be in a competitive environment.

What are the historical spending patterns for totalizing fluid meter and counting device manufacturing by the DoD?

Historical spending patterns for totalizing fluid meter and counting device manufacturing by the DoD are not readily available in a consolidated public format. This specific category (NAICS 334514) represents a niche within the broader defense procurement landscape. While the DoD spends billions annually on various manufactured goods and equipment, detailed breakdowns for highly specialized components like these are often embedded within larger program budgets or contract vehicles. The $40.8 million awarded to BAE Systems represents a significant single award for this specific type of equipment, suggesting it may fulfill a critical or substantial need within a particular defense system or operational requirement.

What oversight mechanisms are in place for sole-source defense contracts awarded by the DLA?

Oversight mechanisms for sole-source defense contracts awarded by the Defense Logistics Agency (DLA) typically involve several layers. Before a sole-source award is made, agencies must justify why full and open competition is not practicable. This justification is reviewed internally and sometimes by higher authorities. Once awarded, the contract is subject to standard contract administration, including monitoring performance and ensuring compliance with terms. For significant sole-source awards, there may be additional reviews focused on ensuring the price is fair and reasonable, often involving cost analysis. The DLA's Inspector General also provides oversight, investigating allegations of fraud, waste, and abuse. Transparency is often limited in sole-source awards compared to competed ones.

Industry Classification

NAICS: Manufacturing › Navigational, Measuring, Electromedical, and Control Instruments Manufacturing › Totalizing Fluid Meter and Counting Device Manufacturing

Product/Service Code: COMM/DETECT/COHERENT RADIATION

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: BAE Systems PLC (UEI: 217304393)

Address: 65 SPIT BROOK RD, NASHUA, NH, 02

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Manufacturer of Goods, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $40,794,293

Exercised Options: $40,794,293

Current Obligation: $40,794,293

Contract Characteristics

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: SPM4AX11D9402

IDV Type: IDC

Timeline