DoD's $131.8M missile contract awarded to BAE Systems, raising questions about competition and value

Contract Overview

Contract Amount: $131,815,119 ($131.8M)

Contractor: BAE Systems Information & Electronic Systems Integration Inc

Awarding Agency: Department of Defense

Start Date: 2016-10-14

End Date: 2018-05-31

Contract Duration: 594 days

Daily Burn Rate: $221.9K/day

Competition Type: NOT COMPETED

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: APKWS FRP 5-7 DELIVERY ORDER 0001 TO PROCURE 5,000 UNITS AND RAMP TO RAT UP TO QUANTITY 7,500

Place of Performance

Location: HUDSON, HILLSBOROUGH County, NEW HAMPSHIRE, 03051

State: New Hampshire Government Spending

Plain-Language Summary

Department of Defense obligated $131.8 million to BAE SYSTEMS INFORMATION & ELECTRONIC SYSTEMS INTEGRATION INC for work described as: APKWS FRP 5-7 DELIVERY ORDER 0001 TO PROCURE 5,000 UNITS AND RAMP TO RAT UP TO QUANTITY 7,500 Key points: 1. Contract awarded on a sole-source basis, limiting price discovery and potentially increasing costs. 2. Significant investment in guided missile manufacturing, indicating a focus on defense capabilities. 3. Long contract duration of 594 days suggests a complex or lengthy production cycle. 4. Firm Fixed Price contract type offers cost certainty but may reduce contractor incentive for efficiency. 5. No small business set-aside or subcontracting noted, potentially excluding smaller players. 6. Awarded by the Department of the Navy, aligning with naval defense procurement needs.

Value Assessment

Rating: questionable

The contract's value of $131.8 million for 5,000 units of APKWS missiles is difficult to benchmark without more specific cost breakdowns or comparisons to similar sole-source awards. The lack of competition inherently limits the ability to assess if the pricing represents a fair market value. While firm fixed price contracts provide budget predictability, they can sometimes lead to higher costs if the contractor does not face competitive pressure to optimize expenses. Further analysis of the per-unit cost in relation to production volume and technological complexity is needed.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning there was no open competition among multiple bidders. This approach is typically used when only one source is capable of meeting the requirement, or in cases of urgent need. The absence of competition means that the government did not benefit from the price reductions and innovation that typically arise from a competitive bidding process. This limits the government's ability to ensure it is receiving the best possible price and value.

Taxpayer Impact: Taxpayers may have paid a premium due to the lack of competitive bidding. Without multiple offers, there's less assurance that the negotiated price reflects the lowest achievable cost for these missile systems.

Public Impact

The primary beneficiaries are the U.S. Navy and potentially other Department of Defense branches requiring advanced missile capabilities. The contract delivers 5,000 units of the APKWS (Advanced Precision Kill Weapon System), enhancing precision strike capabilities. The geographic impact is primarily within the defense sector, supporting military operations and readiness. Workforce implications include employment at BAE Systems and its supply chain, particularly in New Hampshire where the contract is associated.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing and potential cost savings for taxpayers.
Lack of transparency in the sole-source justification makes it difficult to assess necessity.
Firm fixed price without competition might disincentivize cost efficiency for the contractor.
No indication of small business involvement raises concerns about equitable distribution of contracts.

Positive Signals

Awarding a significant quantity of advanced missile systems addresses critical defense needs.
Firm fixed price contract provides budget certainty for this large procurement.
BAE Systems is a known defense contractor, suggesting established capabilities.

Sector Analysis

The contract falls within the Guided Missile and Space Vehicle Manufacturing sector (NAICS 336414), a critical component of the defense industrial base. This sector is characterized by high technological complexity, significant R&D investment, and stringent quality control requirements. Spending in this area is driven by national security priorities and geopolitical factors. Comparable spending benchmarks would typically involve other large-scale missile system procurements, which often run into hundreds of millions or billions of dollars.

Small Business Impact

This contract does not appear to have included a small business set-aside, nor is there information indicating subcontracting opportunities for small businesses. This suggests that the primary contract was awarded directly to a large prime contractor, BAE Systems. The absence of small business participation in the prime contract could limit opportunities for smaller, specialized firms within the defense supply chain to contribute to this specific procurement.

Oversight & Accountability

Oversight for this Department of Defense contract would typically fall under the purview of the Department of the Navy's contracting command and potentially the DoD Inspector General's office. Accountability measures are inherent in the firm fixed price structure, requiring delivery of specified goods. Transparency is limited due to the sole-source nature of the award, making detailed public scrutiny of the procurement process challenging.

Related Government Programs

Department of Defense Procurement
Naval Air Systems Command Contracts
Missile Systems Procurement
BAE Systems Defense Contracts
Guided Missile Manufacturing

Risk Flags

Sole-source award lacks transparency and competitive justification.
Potential for inflated pricing due to lack of competition.
No small business participation noted.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $131.8 million to BAE SYSTEMS INFORMATION & ELECTRONIC SYSTEMS INTEGRATION INC. APKWS FRP 5-7 DELIVERY ORDER 0001 TO PROCURE 5,000 UNITS AND RAMP TO RAT UP TO QUANTITY 7,500

Who is the contractor on this award?

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

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $131.8 million.

What is the period of performance?

Start: 2016-10-14. End: 2018-05-31.

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

The provided data does not include the specific justification for the sole-source award. Typically, sole-source contracts are justified under circumstances such as when only one responsible source is available, or when there is a compelling urgency that will not permit a competitive solicitation. For defense procurements, this might involve proprietary technology, unique manufacturing capabilities, or critical, time-sensitive operational needs. Without the official justification document (e.g., a Justification and Approval or J&A), it is impossible to definitively state why competition was precluded for this $131.8 million contract.

How does the per-unit cost of these APKWS compare to market rates or similar contracts?

The total award amount is $131,815,118.76 for 5,000 units, ramping up to 7,500. This implies a base per-unit cost of approximately $26,363 for the initial 5,000 units. However, without knowing the exact quantities procured under this specific delivery order and the final ramp-up quantity, a precise per-unit cost is difficult to ascertain. Furthermore, comparing this to market rates is challenging due to the sole-source nature of the award and the proprietary aspects of military hardware. Publicly available data on similar precision-guided munition costs can vary widely based on features, quantity, and specific contract terms. A true benchmark would require access to competitive bids or government cost analyses for comparable systems.

What are the performance risks associated with this contract for BAE Systems?

Performance risks for BAE Systems primarily revolve around meeting the stringent quality and delivery requirements of the Department of the Navy within the firm fixed price structure. Failure to deliver the specified 5,000 (potentially up to 7,500) APKWS units on time and to specification could result in penalties, contract termination, or reputational damage. Given the nature of guided missile manufacturing, technical performance risks, such as ensuring the reliability and accuracy of the weapons systems, are also significant. Supply chain disruptions or unforeseen manufacturing challenges could impact production schedules and costs, which BAE Systems would bear under the fixed-price agreement.

What is the historical spending trend for APKWS or similar missile systems by the Department of the Navy?

Historical spending on APKWS and similar precision-guided munitions by the Department of the Navy has been substantial, reflecting the military's increasing reliance on standoff precision strike capabilities. The APKWS program itself has seen significant investment over multiple years, evolving from development to full-rate production. While this specific $131.8 million delivery order represents a large single award, it is part of a broader, ongoing procurement strategy for these types of munitions. Analyzing past contract awards for APKWS and comparable systems would reveal a pattern of consistent, multi-million dollar investments, often awarded through various contract types and competition levels, driven by operational demand and modernization efforts.

Are there any known issues with BAE Systems' track record on similar defense contracts?

BAE Systems is a major global defense contractor with a long history of delivering complex systems to various military branches, including the U.S. Navy. While specific performance issues on individual contracts can arise for any large supplier, BAE Systems generally has a well-established track record. However, like many large defense firms, they may have faced scrutiny or challenges related to cost overruns, schedule delays, or technical performance on certain programs in the past. Without delving into specific contract histories or government accountability reports related to BAE Systems' missile programs, it's difficult to pinpoint issues directly relevant to this APKWS contract. The sole-source nature of this award, however, bypasses the typical performance evaluations that occur during competitive bidding.

Industry Classification

NAICS: Manufacturing › Aerospace Product and Parts Manufacturing › Guided Missile and Space Vehicle Manufacturing

Product/Service Code: AMMUNITION AND EXPLOSIVES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: BAE Systems PLC (UEI: 217304393)

Address: 65 RIVER RD, HUDSON, NH, 03051

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Manufacturer of Goods, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $131,815,119

Exercised Options: $131,815,119

Current Obligation: $131,815,119

Subaward Activity

Number of Subawards: 90

Total Subaward Amount: $37,823,376

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: N0001917D5517

IDV Type: IDC

Timeline