DoD's $23.6M contract for airborne communication equipment awarded to Varian Medical Systems, Inc

Contract Overview

Contract Amount: $23,655,659 ($23.7M)

Contractor: Varian Medical Systems, Inc

Awarding Agency: Department of Defense

Start Date: 1999-12-16

End Date: 2018-02-01

Contract Duration: 6,622 days

Daily Burn Rate: $3.6K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Official Description: 200005!1700!005104!D910B !NAVAL COMMAND CONTROL & OCEAN SU!N6523699D5829 !A!*!0002 !19991216!20000430!009120817!009120817!009120817!N!52151!VARIAN MEDICAL SYSTEMS, INC !3100 HANSEN WAY !PALO ALTO !CA!94304!19000!113!48!DALLAS !DALLAS !TEXAS !0001!+000003779465!N!N!000000000000!5821!RADIO AND TV COMM EQUIPMENT, AIRBORNE !A7 !ELECTRONICS AND COMMUNICATION !2000!NOT DISCERNABLE OR CLASSIFIED !3663!5!B!S!*!B!A!*!A !N!V!2!002!B!* !A!N!Z!* !* !N!B!N!A!*!A!A!A!A!* !*!N!A!B!N!*!*!*!*!*!

Place of Performance

Location: DALLAS, DALLAS County, TEXAS, 75227

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $23.7 million to VARIAN MEDICAL SYSTEMS, INC for work described as: 200005!1700!005104!D910B !NAVAL COMMAND CONTROL & OCEAN SU!N6523699D5829 !A!*!0002 !19991216!20000430!009120817!009120817!009120817!N!52151!VARIAN MEDICAL SYSTEMS, INC !3100 HANSEN WAY !PALO ALTO !CA!94304!19000!113!48!DALLAS !DAL… Key points: 1. Contract awarded to a single vendor, raising questions about competitive pricing. 2. The contract's duration of over 18 years suggests potential for cost overruns and scope creep. 3. The 'Cost Plus Incentive Fee' pricing structure may incentivize higher costs. 4. The specific equipment procured is for airborne radio and TV communication, indicating a specialized defense need. 5. The contract was awarded under full and open competition, but only one bid was received. 6. The small business set-aside status is false, indicating no specific provisions for small business participation.

Value Assessment

Rating: questionable

The total contract value of $23.6 million over an 18-year period is substantial. Without comparable contracts for similar airborne communication equipment, it is difficult to definitively benchmark the value for money. The 'Cost Plus Incentive Fee' (CPIF) contract type, while offering flexibility, can lead to higher costs if not managed tightly, as the contractor is incentivized to meet certain performance targets, potentially at an increased expense. The lack of multiple bids in a 'full and open competition' scenario further complicates a clear assessment of pricing fairness.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was advertised as 'full and open competition,' suggesting that all responsible sources were permitted to submit a bid. However, only one bid was received from Varian Medical Systems, Inc. This outcome, despite the open competition announcement, could indicate a lack of market interest, specialized capabilities required that only Varian possessed, or potential barriers to entry for other firms. The limited number of bidders raises concerns about the effectiveness of the competition in driving down prices.

Taxpayer Impact: When only one bid is received in a full and open competition, taxpayers may not benefit from the price discovery that typically occurs with multiple competing offers. This can lead to a higher-than-necessary price for the goods or services procured.

Public Impact

The primary beneficiary is the Department of Defense, specifically naval command and control operations requiring airborne communication capabilities. The contract delivers specialized radio and TV communication equipment essential for airborne platforms. The geographic impact is primarily within the United States, with potential deployment to naval bases and operational areas globally. Workforce implications include specialized technical roles for manufacturing, integration, and maintenance of the communication systems.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Extended contract duration (over 18 years) increases risk of cost escalation and obsolescence.
CPIF contract type can lead to higher costs if not rigorously managed.
Single bid received under 'full and open competition' suggests potential lack of market competition or barriers to entry.
Lack of transparency on specific performance metrics and how they relate to incentive fees.
Potential for vendor lock-in due to specialized nature of equipment and long contract term.

Positive Signals

Awarded under 'full and open competition' framework, theoretically allowing broad participation.
Contract includes incentive fees, which can align contractor performance with government objectives.
The vendor, Varian Medical Systems, Inc., has a history of supplying complex systems, suggesting technical capability.
The contract specifies a clear product/service category (airborne radio and TV communication equipment).

Sector Analysis

This contract falls within the Electronics and Communication sector, specifically focusing on specialized airborne communication equipment for defense applications. The market for such niche defense technology is often characterized by high barriers to entry due to R&D costs, stringent performance requirements, and security clearances. Comparable spending benchmarks are difficult to establish without more detailed specifications of the equipment and its intended use, but defense spending on communication systems is a significant portion of the overall defense budget.

Small Business Impact

The contract was not set aside for small businesses (ss: false) and there is no indication of subcontracting plans specifically targeting small businesses. This suggests that the procurement was likely for highly specialized equipment or services where large, established defense contractors are the primary providers. The absence of small business set-aside provisions means that opportunities for small businesses to participate in this specific contract are limited, potentially impacting the small business defense ecosystem.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Defense's established contract management and oversight mechanisms, potentially involving the Defense Contract Management Agency (DCMA) given the agency listed. Accountability measures are embedded within the 'Cost Plus Incentive Fee' structure, which links contractor profit to performance. Transparency is moderate; while the award is public, detailed performance metrics, specific equipment functionalities, and the rationale for only one bid are not readily available without further inquiry.

Related Government Programs

Naval Command, Control, and Ocean Surveillance
Airborne Communication Systems
Defense Electronics Procurement
Cost Plus Incentive Fee Contracts
Department of Defense Contracts

Risk Flags

Extended contract duration
Single bid received under full and open competition
Cost Plus Incentive Fee contract type
Lack of detailed performance metrics in public data

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $23.7 million to VARIAN MEDICAL SYSTEMS, INC. 200005!1700!005104!D910B !NAVAL COMMAND CONTROL & OCEAN SU!N6523699D5829 !A!*!0002 !19991216!20000430!009120817!009120817!009120817!N!52151!VARIAN MEDICAL SYSTEMS, INC !3100 HANSEN WAY !PALO ALTO !CA!94304!19000!113!48!DALLAS !DALLAS !TEXAS !0001!+000003779465!N!N!000000000000!5821!RADIO AND TV COMM EQUIPMENT, AIRBORNE !A7 !ELECTRONICS AND COMMUNICATION !2000!NOT DISCERNABLE OR CLASSIFIED !3663!5!B!S!*!B!A!*!A !N!V!

Who is the contractor on this award?

The obligated recipient is VARIAN MEDICAL SYSTEMS, INC.

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Contract Management Agency).

What is the total obligated amount?

The obligated amount is $23.7 million.

What is the period of performance?

Start: 1999-12-16. End: 2018-02-01.

What is the specific nature of the 'radio and TV communication equipment, airborne' procured under this contract, and what are its intended operational uses within naval command and control?

The provided data classifies the equipment under PSC 5821 as 'Radio and TV Communication Equipment, Airborne.' While the exact specifications are not detailed, this category typically encompasses systems used for transmitting and receiving radio and television signals from airborne platforms. For naval command and control, such equipment could be crucial for maintaining situational awareness, disseminating information to forces, coordinating operations, and potentially for electronic warfare or intelligence gathering. The 'airborne' designation implies integration into aircraft, drones, or other aerial vehicles operated by the Navy. The long contract duration suggests a need for ongoing supply, maintenance, or upgrades of these critical communication assets.

How does the 'Cost Plus Incentive Fee' (CPIF) structure for this contract potentially impact overall cost and contractor performance compared to other contract types?

A Cost Plus Incentive Fee (CPIF) contract allows the contractor to recover all allowable costs plus a predetermined fee, which is then adjusted based on the contractor's performance against a target. In this case, the fee is adjusted upward or downward depending on whether the final costs are below or above the target cost, and potentially based on other performance metrics. For taxpayers, this structure carries a risk of higher costs if the target cost is not well-defined or if the performance targets are not sufficiently challenging or are achieved through costly means. However, it can incentivize the contractor to achieve specific performance objectives efficiently, which might be beneficial for complex, R&D-intensive, or uncertain projects where cost and performance targets are difficult to predict precisely at the outset. The effectiveness hinges on robust government negotiation and oversight of the target cost and incentive structure.

Given that only one bid was received under 'full and open competition,' what factors might have contributed to this limited market response, and what are the implications for future procurements of si

Several factors could explain the single bid despite 'full and open competition.' The equipment might be highly specialized, requiring unique technical expertise, proprietary technology, or extensive R&D investment that only Varian Medical Systems, Inc. possessed or was willing to leverage for this bid. Alternatively, the contract's terms, such as the CPIF structure, the long duration, or specific performance requirements, might have deterred other potential bidders. Market consolidation within this niche defense sector could also be a factor. The implication for future procurements is that the government may face continued limited competition, potentially leading to higher prices or a need to re-evaluate procurement strategies, such as breaking down requirements into smaller lots, encouraging new entrants, or exploring alternative technologies. This outcome warrants a review of market research and solicitation strategies.

What is Varian Medical Systems, Inc.'s track record with the Department of Defense, particularly concerning contracts of similar value, duration, and complexity?

While the provided data identifies Varian Medical Systems, Inc. as the contractor, it does not offer details on their broader track record with the Department of Defense. To assess their reliability and performance on this $23.6 million, 18-year contract, a deeper dive into their past performance history with DoD would be necessary. This would include examining previous contract awards, delivery performance, quality ratings, and any history of disputes or contract terminations. Without this context, it's difficult to gauge their experience with large, long-term defense procurements and their ability to manage CPIF contracts effectively. Assuming Varian Medical Systems, Inc. is a legitimate entity supplying this type of equipment, their ability to secure such a long-term contract suggests some level of established relationship or capability, but specific performance data is crucial for a thorough assessment.

How does the total spending of $23.6 million on this specific contract compare to broader trends in airborne communication equipment procurement within the Department of Defense over the period of the

The total contract value of $23.6 million spread over approximately 18 years (from 1999 to 2018) averages to roughly $1.3 million per year. To compare this to broader trends, one would need data on the total DoD spending on airborne communication equipment during that timeframe. This contract represents a specific, albeit long-term, investment in a particular type of equipment. Without aggregate spending data for the PSC 5821 category or similar airborne communication systems across the DoD for the relevant years, it's challenging to determine if this contract's value is indicative of a significant trend, a niche requirement, or a relatively minor expenditure within the larger defense budget. The extended duration suggests a sustained need rather than a one-off purchase.

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Offers Received: 2

Pricing Type: COST PLUS INCENTIVE FEE (V)

Contractor Details

Address: 3100 HANSEN WAY, PALO ALTO, CA, 94304

Business Categories: Category Business, Small Business

Financial Breakdown

Contract Ceiling: $11,731,318

Exercised Options: $11,731,318

Current Obligation: $23,655,659

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline