DoD's $26.4M torpedo development contract with Penn State raises questions on competition and value

Contract Overview

Contract Amount: $26,447,408 ($26.4M)

Contractor: THE Pennsylvania State University

Awarding Agency: Department of Defense

Start Date: 2017-01-26

End Date: 2021-03-31

Contract Duration: 1,525 days

Daily Burn Rate: $17.3K/day

Competition Type: NOT COMPETED

Pricing Type: COST PLUS FIXED FEE

Sector: R&D

Official Description: IGF::OT::IGF COMMON VERY LIGHT WEIGHT TORPEDO ENGINEERING DEVELOPMENT MODEL(EDM)-2 DEVELOPMENT FOR FY17 AND FY18

Place of Performance

Location: UNIVERSITY PARK, CENTRE County, PENNSYLVANIA, 16802

State: Pennsylvania Government Spending

Plain-Language Summary

Department of Defense obligated $26.4 million to THE PENNSYLVANIA STATE UNIVERSITY for work described as: IGF::OT::IGF COMMON VERY LIGHT WEIGHT TORPEDO ENGINEERING DEVELOPMENT MODEL(EDM)-2 DEVELOPMENT FOR FY17 AND FY18 Key points: 1. Contract awarded to a single source without competitive bidding. 2. Significant investment in R&D for advanced torpedo technology. 3. Long contract duration of over 4 years. 4. Focus on engineering development models suggests early-stage research. 5. Potential for cost overruns given the Cost Plus Fixed Fee structure. 6. Limited transparency on performance metrics and value for money. 7. Geographic concentration of work in Pennsylvania.

Value Assessment

Rating: questionable

The contract's value is difficult to benchmark due to its specialized R&D nature and sole-source award. The Cost Plus Fixed Fee (CPFF) pricing structure, while common for R&D, carries inherent risks of cost escalation if not tightly managed. Without competitive bids, it's challenging to ascertain if the negotiated price represents fair market value for the services rendered. The total award of $26.4 million over more than four years requires careful scrutiny of deliverables and milestones to ensure taxpayer funds are used efficiently.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning the Department of the Navy did not solicit bids from multiple potential contractors. This approach is typically justified when only one entity possesses the unique capabilities or technology required for the project. However, the lack of competition limits the government's ability to explore alternative solutions or secure more favorable pricing through a bidding process. The rationale for this sole-source award should be clearly documented and justified.

Taxpayer Impact: Sole-source awards can lead to higher costs for taxpayers as the absence of competition removes price pressure. It also limits opportunities for other qualified businesses to secure government contracts.

Public Impact

The primary beneficiary is the Department of Defense, specifically the Navy, in advancing its underwater warfare capabilities. The contract supports the development of advanced torpedo engineering models, crucial for future naval defense systems. Work is concentrated in Pennsylvania, potentially benefiting the local economy and specialized workforce. The project aims to enhance national security through technological superiority in torpedo systems.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to suboptimal pricing.
CPFF contract type can incentivize cost overruns.
Long duration increases exposure to changing technological needs and economic conditions.
Limited public information on specific performance metrics and milestones.
Sole-source award raises questions about the thoroughness of market research.

Positive Signals

Awarded to a reputable research institution (Penn State) with known R&D capabilities.
Focus on critical defense technology development.
Contract aligns with stated defense modernization goals.
Potential for significant technological advancements in torpedo systems.

Sector Analysis

This contract falls within the Research and Development sector, specifically focusing on physical and engineering sciences related to defense applications. The market for advanced torpedo technology is highly specialized, often dominated by a few key research institutions and defense contractors. Spending in this area is driven by national security imperatives and the need for technological superiority. Comparable spending benchmarks are difficult to establish due to the unique nature of R&D contracts and the proprietary information involved.

Small Business Impact

There is no indication that this contract included small business set-asides or subcontracting goals. Given the specialized nature of torpedo engineering development and the sole-source award to a large research university, it is unlikely that small businesses played a significant role in the prime contract. Further investigation would be needed to determine if any subcontracting opportunities were directed towards small businesses.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of the Navy's contracting and program management offices. The Inspector General's office for the Department of Defense may also conduct audits or investigations into contract performance and financial management. Transparency is limited by the sole-source nature and the classification of defense R&D, making public oversight challenging.

Related Government Programs

Naval Sea Systems Command (NAVSEA) Contracts
Advanced Weapons Development Programs
Department of Defense Research and Development Funding
Torpedo Systems Procurement

Risk Flags

Sole-source award lacks competitive pricing.
CPFF contract type poses risk of cost overruns.
Long contract duration increases risk of obsolescence and budget shifts.
Limited public data on performance metrics and value.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $26.4 million to THE PENNSYLVANIA STATE UNIVERSITY. IGF::OT::IGF COMMON VERY LIGHT WEIGHT TORPEDO ENGINEERING DEVELOPMENT MODEL(EDM)-2 DEVELOPMENT FOR FY17 AND FY18

Who is the contractor on this award?

The obligated recipient is THE PENNSYLVANIA STATE UNIVERSITY.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $26.4 million.

What is the period of performance?

Start: 2017-01-26. End: 2021-03-31.

What specific technological advancements are expected from the 'VERY LIGHT WEIGHT TORPEDO ENGINEERING DEVELOPMENT MODEL (EDM)-2' project?

The contract data indicates the project focuses on the 'VERY LIGHT WEIGHT TORPEDO ENGINEERING DEVELOPMENT MODEL (EDM)-2'. While specific technical details are often classified for defense projects, the designation 'EDM' suggests the development of prototypes or advanced models to test and refine engineering concepts. The 'very light weight' aspect implies a focus on portability, maneuverability, or integration with smaller platforms. Expected advancements likely include improvements in propulsion, guidance systems, sensor technology, and potentially reduced acoustic signatures, contributing to enhanced underwater warfare capabilities for the Navy.

What was the justification for awarding this $26.4 million contract on a sole-source basis to The Pennsylvania State University?

Sole-source awards are typically justified under specific circumstances outlined in federal acquisition regulations, such as when only one responsible source can provide the required supplies or services. For this contract, the justification likely stems from The Pennsylvania State University's unique expertise, facilities, or intellectual property related to torpedo engineering and development. The Navy would have had to demonstrate that no other entity could meet the specialized requirements of the 'VERY LIGHT WEIGHT TORPEDO ENGINEERING DEVELOPMENT MODEL (EDM)-2' project within the required timeframe or to the necessary technical standard. This justification should be formally documented and approved.

How does the Cost Plus Fixed Fee (CPFF) contract structure potentially impact the final cost and efficiency of this R&D project?

The Cost Plus Fixed Fee (CPFF) structure means the contractor (The Pennsylvania State University) is reimbursed for all allowable costs incurred, plus a predetermined fixed fee representing profit. While this structure is common for R&D where the scope and costs are uncertain, it can incentivize contractors to incur higher costs, as their fee remains fixed regardless of the total cost. This necessitates robust government oversight to ensure costs are reasonable and allocable. The efficiency of the project depends heavily on the contractor's management and the government's ability to monitor progress and control scope creep, as there is less direct financial incentive for cost savings compared to fixed-price contracts.

What is the historical spending pattern for similar torpedo development projects within the Department of Defense?

Historical spending on torpedo development within the DoD can vary significantly based on technological advancements, strategic priorities, and the specific type of torpedo (e.g., lightweight, heavyweight, anti-submarine). Major programs often involve multi-year, multi-billion dollar investments. For instance, the development and procurement of advanced torpedoes like the Mk 54 or Mk 48 Mod 7 have represented substantial, ongoing investments. R&D contracts for next-generation systems, like the one awarded to Penn State, typically represent a smaller but critical portion of the overall budget, focusing on innovation and future capabilities. Benchmarking this $26.4 million contract against specific historical programs requires detailed analysis of scope, duration, and technological maturity.

What are the potential risks associated with the long contract duration (1525 days) for this engineering development project?

A long contract duration of over four years for an engineering development project introduces several risks. Firstly, technological obsolescence is a significant concern; advancements in competing technologies or the emergence of new threats could render the developed system less relevant by the time it's fully realized. Secondly, economic conditions and budget priorities within the DoD can shift, potentially leading to funding instability or program cancellation. Thirdly, maintaining consistent project focus and technical expertise within the contractor's team over such an extended period can be challenging. Finally, the longer the project, the greater the opportunity for unforeseen technical hurdles or cost overruns to emerge, especially within a CPFF structure.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Scientific Research and Development Services › Research and Development in the Physical, Engineering, and Life Sciences (except Biotechnology)

Product/Service Code: RESEARCH AND DEVELOPMENT › DEFENSE (OTHER) R&D

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Address: 408 OLD MAIN, UNIVERSITY PARK, PA, 16802

Business Categories: Category Business, Corporate Entity Tax Exempt, Educational Institution, Higher Education, Nonprofit Organization, Not Designated a Small Business, Higher Education (Public), Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $31,000,294

Exercised Options: $31,000,294

Current Obligation: $26,447,408

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: N0002412D6404

IDV Type: IDC

Timeline