DoD's $49.2M AEGIS Combat System contract awarded to SAIC shows strong performance signals

Contract Overview

Contract Amount: $49,252,527 ($49.3M)

Contractor: Science Applications International Corporation

Awarding Agency: Department of Defense

Start Date: 2009-07-30

End Date: 2024-01-25

Contract Duration: 5,292 days

Daily Burn Rate: $9.3K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: ADVANCED TECHNOLOGY SUPPORT FOR AEGIS COMBAT SYSTEM AND FUTURE COMBAT SYSTEMS

Place of Performance

Location: ANDOVER, ESSEX County, MASSACHUSETTS, 01810

State: Massachusetts Government Spending

Plain-Language Summary

Department of Defense obligated $49.3 million to SCIENCE APPLICATIONS INTERNATIONAL CORPORATION for work described as: ADVANCED TECHNOLOGY SUPPORT FOR AEGIS COMBAT SYSTEM AND FUTURE COMBAT SYSTEMS Key points: 1. Value for money appears favorable given the long-term nature and complexity of the AEGIS system. 2. Competition dynamics were robust, indicating a healthy market for advanced combat system support. 3. Risk indicators are moderate, typical for large-scale defense system development and sustainment. 4. Performance context suggests a sustained need for specialized engineering services. 5. Sector positioning is within the critical defense technology and engineering services market.

Value Assessment

Rating: good

The contract's value of approximately $49.2 million over its duration suggests a significant investment in critical defense capabilities. Benchmarking against similar large-scale, long-term defense system support contracts indicates that this level of expenditure is within expected ranges for specialized engineering services. The cost-plus-fixed-fee (CPFF) contract type allows for flexibility while providing cost control through a fixed fee, which can be advantageous for complex, evolving systems like AEGIS. Without specific per-unit cost data, a direct price assessment is challenging, but the overall value appears aligned with the scope of work.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, suggesting that multiple qualified vendors had the opportunity to bid. The presence of two bidders, as indicated by the 'no' field, points to a competitive environment, though the exact number of proposals received is not detailed. Full and open competition generally leads to better price discovery and ensures that the government selects the most capable and cost-effective solution available in the market.

Taxpayer Impact: A full and open competition process is beneficial for taxpayers as it drives down costs through market forces and ensures that government funds are used efficiently by selecting the best value offer.

Public Impact

The primary beneficiaries are the U.S. Navy warfighters who rely on the advanced capabilities of the AEGIS Combat System. The services delivered include critical engineering support for the development, integration, and sustainment of the AEGIS system. The geographic impact is likely concentrated around key naval bases and defense contractor facilities, primarily in Massachusetts. Workforce implications include the employment of highly skilled engineers, technicians, and support staff specializing in complex defense systems.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Long-term nature of the contract could lead to vendor lock-in if not managed carefully.
Cost-plus-fixed-fee contracts can sometimes incentivize cost overruns if not rigorously monitored.
Reliance on a single contractor for such a critical system poses a strategic risk.

Positive Signals

Awarded through full and open competition, indicating a competitive process.
The contractor, Science Applications International Corporation (SAIC), has a significant track record in defense contracting.
The contract duration suggests a stable and predictable need for these specialized services.

Sector Analysis

The defense engineering services sector is characterized by high barriers to entry, specialized expertise, and significant government investment. Contracts like this are crucial for maintaining the technological superiority of U.S. military platforms. The market is dominated by a few large, established defense contractors. Spending in this area is driven by the need for continuous upgrades, maintenance, and modernization of complex weapon systems, with comparable contracts often running into hundreds of millions or billions of dollars over their lifecycle.

Small Business Impact

There is no indication that this contract was specifically set aside for small businesses, nor is there information on subcontracting plans. Given the specialized nature and scale of the AEGIS Combat System support, it is likely that large prime contractors like SAIC would engage in subcontracting with other specialized firms, potentially including small businesses, to fulfill specific technical requirements. However, the primary awardee is a large business, and the direct impact on the small business ecosystem through set-asides appears minimal for this specific contract.

Oversight & Accountability

Oversight for this contract is likely managed by the Defense Contract Management Agency (DCMA), which is responsible for ensuring contractor performance and compliance. Accountability measures are embedded within the contract terms, including performance metrics and reporting requirements. Transparency is facilitated through contract awards databases and reporting mechanisms, though detailed operational oversight specifics are typically internal. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

AEGIS Combat System Modernization Programs
Naval Surface Warfare Center Contracts
Defense Engineering Services Indefinite Delivery/Indefinite Quantity (IDIQ) Contracts
Future Combat Systems Programs

Risk Flags

Long-term contract duration
Cost-plus contract type
Critical defense system support

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $49.3 million to SCIENCE APPLICATIONS INTERNATIONAL CORPORATION. ADVANCED TECHNOLOGY SUPPORT FOR AEGIS COMBAT SYSTEM AND FUTURE COMBAT SYSTEMS

Who is the contractor on this award?

The obligated recipient is SCIENCE APPLICATIONS INTERNATIONAL CORPORATION.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $49.3 million.

What is the period of performance?

Start: 2009-07-30. End: 2024-01-25.

What is SAIC's track record with the AEGIS Combat System and similar defense contracts?

Science Applications International Corporation (SAIC) has a long-standing history of supporting complex defense systems, including the AEGIS Combat System. Their involvement often spans various phases, from research and development to sustainment and modernization. SAIC is a major defense contractor with extensive experience in systems engineering, integration, and technical support for naval platforms. Their track record with AEGIS and similar large-scale programs suggests a deep understanding of the technical requirements and operational needs of the U.S. Navy. This includes managing complex projects, delivering advanced technological solutions, and adhering to stringent defense standards. Their consistent presence in this sector indicates a strong capability to handle the demands of such critical contracts.

How does the value of this contract compare to other AEGIS system support contracts?

The $49.2 million awarded over approximately 15 years (from July 2009 to January 2024) represents an average annual value of roughly $3.3 million. This figure needs to be contextualized within the broader lifecycle costs of the AEGIS Combat System, which are in the billions of dollars. Support contracts for major defense systems are typically long-term and can vary significantly in value based on the specific services required (e.g., software development, hardware maintenance, training, integration). Compared to the overall program costs, this contract appears to represent a specific, albeit significant, component of the AEGIS sustainment and modernization effort. Without access to detailed breakdowns of other AEGIS support contracts, a precise comparison is difficult, but the value seems commensurate with specialized engineering services for a critical naval platform.

What are the primary risks associated with this type of long-term, complex defense contract?

Long-term, complex defense contracts like this one carry several inherent risks. One primary risk is technological obsolescence, where the system or its support requirements may become outdated before the contract's end, necessitating costly modifications or replacements. Another significant risk is cost escalation, particularly with Cost Plus Fixed Fee (CPFF) contracts, where unforeseen technical challenges or scope changes can drive up expenses beyond initial estimates, even with a fixed fee component. Contractor performance risk is also present; a contractor might fail to deliver the required quality or timeliness of services, impacting operational readiness. Furthermore, there's a strategic risk associated with relying heavily on a single contractor for critical system support, potentially leading to vendor lock-in and reduced leverage for the government in future negotiations. Cybersecurity threats targeting sensitive defense systems also pose a continuous risk.

How effective is the Cost Plus Fixed Fee (CPFF) contract type for managing AEGIS system support?

The Cost Plus Fixed Fee (CPFF) contract type is often employed for complex, developmental, or uncertain scope projects where precise cost estimation is difficult upfront. For AEGIS system support, CPFF offers a balance: the government pays the actual allowable costs incurred by the contractor, plus a predetermined fixed fee representing profit. This structure incentivizes the contractor to control costs, as the fee remains constant regardless of the final cost. However, it can also lead to potential inefficiencies if not rigorously monitored, as the contractor may not have as strong an incentive to minimize costs as they would in a fixed-price contract. Effective management, including detailed cost tracking, performance reviews, and scope control, is crucial to ensure value for money and mitigate risks of cost overruns with CPFF contracts.

What are the historical spending patterns for AEGIS Combat System engineering services?

Historical spending on AEGIS Combat System engineering services has been substantial and consistent, reflecting the system's critical role in naval defense and its ongoing evolution. The U.S. Navy invests billions of dollars over the lifecycle of the AEGIS program, encompassing research, development, procurement, integration, testing, training, and long-term sustainment. Engineering services, including those provided under contracts like this one, form a significant portion of this spending. These services are essential for maintaining system readiness, implementing upgrades to counter emerging threats, and integrating new technologies. Spending patterns typically show sustained investment, with peaks corresponding to major modernization efforts or the introduction of new AEGIS variants. The long-term nature of these contracts underscores the continuous need for specialized technical expertise.

Industry Classification

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

Product/Service Code: SPECIAL STUDIES/ANALYSIS, NOT R&D › SPECIAL STUDIES - NOT R and D

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: SUBJECT TO MULTIPLE AWARD FAIR OPPORTUNITY

Solicitation ID: N0002409R3157

Offers Received: 2

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Address: 12010 SUNSET HILLS RD, RESTON, VA, 20190

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

Financial Breakdown

Contract Ceiling: $99,214,900

Exercised Options: $51,793,436

Current Obligation: $49,252,527

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: N0017804D4119

IDV Type: IDC

Timeline