Commerce Department awards $756M sole-source contract for satellite sustainment to BAE Systems

Contract Overview

Contract Amount: $7,564,334 ($7.6M)

Contractor: BAE Systems Space & Mission Systems Inc.

Awarding Agency: Department of Commerce

Start Date: 2023-04-05

End Date: 2027-03-04

Contract Duration: 1,429 days

Daily Burn Rate: $5.3K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Other

Official Description: SATELLITE SUSTAINMENT ENGINEERING SERVICES AND SOFTWARE UPKEEP

Place of Performance

Location: BOULDER, BOULDER County, COLORADO, 80301

State: Colorado Government Spending

Plain-Language Summary

Department of Commerce obligated $7.6 million to BAE SYSTEMS SPACE & MISSION SYSTEMS INC. for work described as: SATELLITE SUSTAINMENT ENGINEERING SERVICES AND SOFTWARE UPKEEP Key points: 1. Contract awarded on a sole-source basis, raising questions about potential cost efficiencies and market competition. 2. Significant contract value suggests critical need for sustained satellite operations and engineering support. 3. Long contract duration (over 3 years) indicates a need for stable, long-term provider relationship. 4. Cost-plus-fixed-fee pricing structure may incentivize cost overruns if not closely monitored. 5. Focus on engineering services and software upkeep highlights the complexity of modern satellite systems. 6. Lack of competition may limit opportunities for innovative solutions from other market players.

Value Assessment

Rating: questionable

The contract's value of $756 million over approximately four years for satellite sustainment engineering and software upkeep is substantial. Without comparable sole-source contracts for similar services, it is difficult to benchmark value. The cost-plus-fixed-fee (CPFF) structure, while allowing for flexibility, can lead to higher costs if the contractor's expenses are not rigorously managed and scrutinized by the agency. The absence of competition further complicates a direct value assessment against market alternatives.

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 typically occurs when a specific contractor possesses unique capabilities, proprietary technology, or is the only source capable of meeting the requirement. The lack of competition means there were no other bidders, and price discovery through a competitive process was bypassed. This approach can sometimes lead to higher prices compared to a fully competed contract.

Taxpayer Impact: Taxpayers may be paying a premium due to the absence of competitive bidding. Without a competitive process, there is less pressure on the contractor to offer the lowest possible price for the services rendered.

Public Impact

The National Oceanic and Atmospheric Administration (NOAA) benefits from the continued operation and maintenance of its satellite systems, crucial for weather forecasting, climate monitoring, and environmental research. Services delivered include essential engineering support and software upkeep, ensuring the reliability and functionality of vital space-based assets. The geographic impact is national, as NOAA's data collection affects weather predictions and disaster response across the United States and its territories. Workforce implications may include specialized engineering and software development roles within BAE Systems, supporting high-tech jobs.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure, potentially impacting cost-effectiveness.
Cost-plus-fixed-fee contract type requires diligent oversight to prevent cost escalation.
Long-term nature of the contract may reduce agility in adopting new technologies.
Lack of transparency in the sole-source justification process.

Positive Signals

BAE Systems is a recognized leader in space and defense, suggesting technical expertise.
Contract ensures continuity of critical satellite operations for NOAA.
Fixed fee component provides some cost predictability within the CPFF structure.
Long duration contract may foster deep institutional knowledge and efficiency.

Sector Analysis

This contract falls within the aerospace and defense sector, specifically focusing on satellite operations and sustainment. The market for satellite engineering and software services is highly specialized, often dominated by a few large, experienced contractors. The total addressable market for satellite sustainment globally is significant, driven by the increasing number of satellite constellations and the need for their ongoing operational support. This contract represents a substantial portion of spending within this niche for NOAA.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb: false'. Furthermore, the prime contractor, BAE Systems, is a large defense contractor. While large prime contractors are often required to subcontract a portion of their work to small businesses, the specific subcontracting plan for this contract is not detailed here. The absence of a set-aside suggests that the primary focus was on securing specialized capabilities rather than promoting small business participation.

Oversight & Accountability

Oversight for this contract would primarily reside with the Department of Commerce and NOAA. As a sole-source award, the justification and negotiation process would be critical transparency points. The cost-plus-fixed-fee structure necessitates robust financial oversight and auditing by the agency to ensure costs are reasonable and allocable. Inspector General jurisdiction would apply to any allegations of fraud, waste, or abuse related to the contract.

Related Government Programs

NOAA Satellite Operations
Space-Based Surveillance and Reconnaissance
Defense Satellite Communications
Civilian Space Programs
Aerospace Engineering Services
Software Maintenance and Support

Risk Flags

Sole-source award lacks competitive justification.
Cost-plus-fixed-fee contract type requires stringent cost oversight.
Potential for vendor lock-in due to specialized nature of services.

Frequently Asked Questions

What is this federal contract paying for?

Department of Commerce awarded $7.6 million to BAE SYSTEMS SPACE & MISSION SYSTEMS INC.. SATELLITE SUSTAINMENT ENGINEERING SERVICES AND SOFTWARE UPKEEP

Who is the contractor on this award?

The obligated recipient is BAE SYSTEMS SPACE & MISSION SYSTEMS INC..

Which agency awarded this contract?

Awarding agency: Department of Commerce (National Oceanic and Atmospheric Administration).

What is the total obligated amount?

The obligated amount is $7.6 million.

What is the period of performance?

Start: 2023-04-05. End: 2027-03-04.

What specific capabilities does BAE Systems possess that uniquely qualify them for this sole-source satellite sustainment contract?

BAE Systems Space & Mission Systems Inc. is a major defense contractor with extensive experience in space systems, including satellite design, manufacturing, integration, and sustainment. For this specific contract, their unique qualifications likely stem from prior work on NOAA's satellite programs, potentially involving proprietary technologies, specialized knowledge of existing satellite architectures, or unique software interfaces developed by BAE Systems. The sole-source justification would detail these specific capabilities, demonstrating why no other contractor could fulfill the requirement as effectively or efficiently, especially given the need for continuity in maintaining complex, operational satellite systems.

How does the cost-plus-fixed-fee (CPFF) structure compare to other contract types for similar satellite sustainment services, and what are the implications for cost control?

The Cost-Plus-Fixed-Fee (CPFF) structure is common for complex projects where the scope of work can be difficult to define precisely upfront, such as ongoing sustainment and software upkeep. Unlike fixed-price contracts, CPFF allows the contractor to recover all allowable costs plus a predetermined fixed fee. This provides flexibility but can incentivize higher spending if not managed carefully. Compared to other cost-reimbursement types like Cost Plus Incentive Fee (CPIF), the fixed fee offers less direct incentive for the contractor to reduce costs. Effective cost control under CPFF relies heavily on robust government oversight, detailed cost accounting, and rigorous auditing to ensure all claimed costs are reasonable, allocable, and allowable.

What is the historical spending trend for satellite sustainment engineering and software upkeep within NOAA, and how does this $756M contract fit into that pattern?

Historical spending data for NOAA's satellite sustainment engineering and software upkeep would reveal trends in investment in maintaining its space-based assets. Without specific historical figures, it's reasonable to infer that such spending is substantial and likely increasing due to the aging of current satellite fleets and the development of new ones. A $756 million contract over approximately four years represents a significant, ongoing investment. If previous contracts for similar services were also in the hundreds of millions of dollars, this award would align with a pattern of substantial, long-term commitment to satellite operational readiness. Fluctuations might occur based on specific program lifecycles and modernization efforts.

What are the primary risks associated with a sole-source award for critical satellite sustainment services, and what mitigation strategies are typically employed?

The primary risks of a sole-source award for critical satellite sustainment include potential overpricing due to lack of competition, reduced incentive for innovation, and vendor lock-in. Without competitive pressure, the contractor may have less motivation to seek cost efficiencies or offer novel solutions. Vendor lock-in can make it difficult and costly to switch providers in the future. Mitigation strategies typically involve rigorous negotiation of contract terms and pricing, strong government oversight of performance and costs, and potentially conducting market research to identify potential future competitors or alternative solutions. For critical systems, ensuring the sole-source provider has a proven track record and robust security protocols is also paramount.

How does the 'Engineering Services' (NAICS 541330) classification for this contract align with the specific needs of satellite sustainment and software upkeep?

The NAICS code 541330, 'Engineering Services,' broadly encompasses establishments primarily engaged in providing professional engineering services. This classification aligns well with satellite sustainment and software upkeep because maintaining complex space systems requires a high degree of specialized engineering expertise. This includes systems engineering, mechanical, electrical, and aerospace engineering for hardware components, as well as software engineering for command and control systems, data processing, and mission planning software. The code covers the design, development, and application of engineering principles to ensure the ongoing functionality, reliability, and performance of the satellite assets throughout their operational life.

Industry Classification

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

Product/Service Code: SUPPORT SVCS (PROF, ADMIN, MGMT) › PROFESSIONAL SERVICES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: 1332KP23BNEEB0001

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Ball Corporation

Address: 1600 COMMERCE ST, BOULDER, CO, 80301

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: $9,999,172

Exercised Options: $7,863,155

Current Obligation: $7,564,334

Actual Outlays: $3,880,148

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline