Serco Inc. awarded $55.5M for engineering services, with a significant portion of the contract value potentially realized through incentive fees

Contract Overview

Contract Amount: $55,528,749 ($55.5M)

Contractor: Serco Inc

Awarding Agency: Department of Defense

Start Date: 2012-10-12

End Date: 2014-07-11

Contract Duration: 637 days

Daily Burn Rate: $87.2K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Other

Official Description: SERVICES IAW THE SOW

Plain-Language Summary

Department of Defense obligated $55.5 million to SERCO INC for work described as: SERVICES IAW THE SOW Key points: 1. The contract's Cost Plus Incentive Fee (CPIF) structure suggests potential for cost savings if performance targets are met, but also carries inherent risk. 2. With two bids received, the competition level indicates moderate market interest for these specialized engineering services. 3. The contract duration of 637 days (approx. 1.75 years) is relatively short for complex engineering projects, potentially impacting long-term value. 4. The engineering services sector is characterized by high technical expertise and often involves significant upfront investment. 5. The contract's value of $55.5M places it in the mid-tier range for federal engineering service procurements. 6. The absence of small business set-aside flags suggests this contract was not specifically targeted for smaller enterprises.

Value Assessment

Rating: fair

The total award amount is $55.5M. Benchmarking against similar engineering services contracts is challenging without more specific details on the Statement of Work (SOW). The CPIF pricing model introduces variability; while it can incentivize efficiency, it also means the final cost could exceed initial estimates if targets are missed. The contract's value relative to its duration suggests a focus on specific, perhaps shorter-term, engineering tasks rather than broad, long-term program support.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, with two bids received. While competition is present, a lower number of bidders can sometimes lead to less aggressive pricing compared to contracts with numerous offers. The Department of the Navy's approach aimed to solicit proposals from a wide range of qualified contractors, but the final number of bids suggests a specialized service area where fewer firms may possess the requisite capabilities.

Taxpayer Impact: A full and open competition, even with two bidders, is generally favorable for taxpayers as it allows for a broader market to compete, potentially driving down costs. However, the limited number of bids warrants scrutiny to ensure the price achieved reflects true market value.

Public Impact

The Department of the Navy benefits from specialized engineering expertise to support its operations and maintenance needs. Services delivered likely include design, analysis, testing, and technical support crucial for naval systems and infrastructure. The geographic impact is likely concentrated around naval facilities or operational areas where these engineering services are required. The contract supports a workforce of skilled engineers and technical professionals within Serco Inc. and potentially its subcontractors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost overruns due to the Cost Plus Incentive Fee (CPIF) structure if performance targets are not met.
Limited competition (two bidders) may have restricted price negotiation leverage.
The relatively short contract duration might lead to follow-on contract needs, increasing overall program costs.
Lack of specific details on the SOW makes it difficult to fully assess value for money.
The absence of small business participation could limit opportunities for smaller, specialized firms.

Positive Signals

Awarded through full and open competition, ensuring a broad market was considered.
The CPIF model incentivizes contractor performance and efficiency, potentially leading to better outcomes.
Serco Inc. is a known entity in government contracting, suggesting a degree of established capability.
The contract addresses critical engineering needs for the Department of the Navy.

Sector Analysis

Engineering services represent a significant segment of the federal procurement landscape, encompassing a wide array of technical disciplines. This contract falls within the professional, scientific, and technical services category, often characterized by high barriers to entry due to specialized knowledge and security requirements. Comparable spending benchmarks for engineering services vary widely based on complexity, duration, and specific technical requirements, but contracts in the tens of millions are common for specialized support.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. This means the competition was open to all eligible businesses, regardless of size. While this maximizes the pool of potential offerors, it may limit direct opportunities for small businesses unless they are part of a larger prime contractor's subcontracting plan. The absence of specific subcontracting information makes it difficult to assess the downstream impact on the small business ecosystem.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy's contracting and program management offices. The Cost Plus Incentive Fee (CPIF) structure necessitates robust monitoring of performance metrics and cost accumulation to ensure incentive targets are appropriately met and costs are reasonable. Transparency is facilitated through contract award databases, but detailed performance reports and audits are typically internal or subject to specific reporting requirements outlined in the contract.

Related Government Programs

Naval Sea Systems Command (NAVSEA) Engineering Services
Department of Defense Engineering Support Contracts
Professional, Scientific, and Technical Services (NAICS 541330)
Cost Plus Incentive Fee Contracts

Risk Flags

Limited competition may impact price reasonableness.
CPIF structure requires close monitoring of performance and costs.
Short contract duration may indicate a discrete need or potential for follow-on work.
Lack of detailed SOW information hinders comprehensive value assessment.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $55.5 million to SERCO INC. SERVICES IAW THE SOW

Who is the contractor on this award?

The obligated recipient is SERCO 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 $55.5 million.

What is the period of performance?

Start: 2012-10-12. End: 2014-07-11.

What specific engineering services were provided under this contract?

The provided data indicates the contract was for 'SERVICES IAW THE SOW' (Services In Accordance With The Statement of Work) under the North American Industry Classification System (NAICS) code 541330, which corresponds to Engineering Services. However, the specific nature of these services is not detailed in the abbreviated data. Typically, engineering services for the Department of the Navy could encompass a broad range of activities, including but not limited to, systems engineering, design, analysis, testing, integration, technical documentation, and lifecycle support for naval platforms, weapons systems, or infrastructure. Without the Statement of Work (SOW), it is impossible to determine the precise technical tasks performed, the criticality of these services to naval operations, or the specific deliverables expected by the government.

How does the $55.5M award compare to typical engineering service contracts for the Navy?

The $55.5 million award for engineering services is a substantial sum, placing it in the mid-to-large tier for individual federal contracts. However, 'typical' is highly variable in federal contracting. The Department of the Navy procures a vast array of engineering support, ranging from small, specialized task orders worth a few million dollars to massive, multi-year programs exceeding hundreds of millions or even billions. This $55.5M contract, with a duration of approximately 1.75 years, suggests a significant but focused scope of work. To provide a precise comparison, one would need to analyze contracts with similar NAICS codes (541330), similar agencies (Department of the Navy), and comparable contract types (CPIF) and durations. Generally, this value indicates a contract of considerable importance, likely supporting critical naval systems or infrastructure development/maintenance.

What are the risks associated with a Cost Plus Incentive Fee (CPIF) contract?

Cost Plus Incentive Fee (CPIF) contracts carry inherent risks for both the government and the contractor. For the government, the primary risk is that the final cost could exceed the target cost, especially if the contractor fails to meet the performance targets that trigger the incentive fees. This can lead to cost overruns if the incentive structure is not well-defined or if performance is difficult to measure objectively. There's also a risk that the contractor might focus excessively on achieving the incentive metrics at the expense of other important, unstated objectives. For the contractor, the risk lies in not achieving the performance targets, which would reduce their profit margin below the target. The complexity of CPIF contracts also requires robust government oversight to ensure costs are reasonable and allocable, and that performance metrics are fairly assessed. In this case, the $55.5M award suggests a significant potential for both cost savings and overruns depending on Serco Inc.'s performance.

What does the limited competition (2 bidders) imply for this contract's value?

The fact that this contract received only two bids under a full and open competition suggests that the market for these specific engineering services may be limited, or that the requirements were highly specialized, deterring a larger number of potential offerors. Limited competition can sometimes lead to higher prices for the government, as there is less pressure from a wider array of competitors to offer the most cost-effective solution. While two bidders still provide a basis for price comparison, it is less robust than having five or more. This situation warrants careful analysis by the contracting officers to ensure that the awarded price is fair and reasonable, potentially through detailed cost analysis or benchmarking against similar, previously awarded contracts. The government may have had to accept a higher price due to the specialized nature of the services required.

How does the contract duration of 637 days impact its overall value assessment?

A contract duration of 637 days, approximately 1 year and 9 months, is relatively short for complex engineering projects that often span multiple years. This duration suggests that the contract likely focused on a specific phase, a defined set of tasks, or a particular system's support rather than long-term program management or development. From a value perspective, a shorter duration might mean less opportunity for cost efficiencies to accrue over time, but it also limits the government's exposure to potential cost increases or performance issues over an extended period. It could also indicate that the services were needed for a discrete requirement, potentially leading to follow-on contracts if the need persists. The value is thus tied to the successful completion of the defined scope within this timeframe, rather than sustained, long-term support.

What is the significance of the 'DELIVERY ORDER' contract type?

The 'DELIVERY ORDER' designation indicates that this contract is likely a task order issued under a larger indefinite-delivery, indefinite-quantity (IDIQ) contract or a similar multiple-award contract vehicle. This means that while Serco Inc. was awarded a contract, the specific work and funding were released through this particular order. The total award amount of $55.5M represents the value allocated to this specific delivery order. IDIQ contracts are common for services that are needed periodically or in varying quantities over time, allowing agencies to procure services more efficiently once a basic contract is in place. The 'DELIVERY ORDER' itself specifies the scope, timeline, and cost for the particular services being procured at that moment.

Industry Classification

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

Product/Service Code: MAINT, REPAIR, REBUILD EQUIPMENT › MAINT, REPAIR, REBUILD OF EQUIPMENT

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: SUBJECT TO MULTIPLE AWARD FAIR OPPORTUNITY

Offers Received: 2

Pricing Type: COST PLUS INCENTIVE FEE (V)

Evaluated Preference: NONE

Contractor Details

Parent Company: Serco Group PLC (UEI: 298452707)

Address: 12930 WORLDGATE DR STE 600, HERNDON, VA, 20170

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

Financial Breakdown

Contract Ceiling: $69,734,055

Exercised Options: $69,734,055

Current Obligation: $55,528,749

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: N0003911D0032

IDV Type: IDC

Timeline