DHS awards $70.3M follow-on contract to Sierra Nevada Company for aircraft modifications

Contract Overview

Contract Amount: $70,314,285 ($70.3M)

Contractor: Sierra Nevada Company, LLC

Awarding Agency: Department of Homeland Security

Start Date: 2023-09-28

End Date: 2027-03-31

Contract Duration: 1,280 days

Daily Burn Rate: $54.9K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: FOLLOW ON AWARD CONTRACT FOR AIRCRAFT MODIFICATIONS

Place of Performance

Location: ENGLEWOOD, DENVER County, COLORADO, 80112

State: Colorado Government Spending

Plain-Language Summary

Department of Homeland Security obligated $70.3 million to SIERRA NEVADA COMPANY, LLC for work described as: FOLLOW ON AWARD CONTRACT FOR AIRCRAFT MODIFICATIONS Key points: 1. Contract is a follow-on award, suggesting prior performance and potential for increased costs without competitive pressure. 2. The sole-source nature raises questions about price reasonableness and the absence of market-driven cost efficiencies. 3. Fixed-price contract type shifts performance risk to the contractor, but the lack of competition limits upside for taxpayers. 4. The duration of the contract (over 3 years) indicates a significant, long-term need for these aircraft modifications. 5. Focus on aircraft manufacturing (NAICS 336411) places this within a specialized and high-value sector. 6. The award to Sierra Nevada Company, LLC, warrants examination of their track record with similar government contracts.

Value Assessment

Rating: questionable

Without competitive bidding, it is difficult to benchmark the value for money on this $70.3 million contract. As a follow-on award, there's a risk that costs have escalated without market validation. Comparing this to similar aircraft modification contracts, especially those competed openly, would be crucial to assess if the pricing is reasonable. The firm fixed-price nature is positive, but the lack of competition undermines the potential for cost savings.

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. This typically occurs when only one responsible source can provide the required goods or services. The lack of competition means that potential cost savings that could arise from a bidding process are unlikely to be realized. It also limits the government's ability to explore alternative solutions or innovative approaches from a wider range of vendors.

Taxpayer Impact: Taxpayers may be paying a premium due to the absence of competitive pricing. The government has fewer opportunities to negotiate favorable terms or secure lower prices without multiple bidders vying for the contract.

Public Impact

U.S. Customs and Border Protection (CBP) will benefit from enhanced aircraft capabilities. Services delivered include modifications to aircraft, likely improving operational effectiveness for border security. Geographic impact is national, supporting CBP's nationwide aerial surveillance and interdiction missions. Workforce implications may include specialized technical roles for aircraft modification and maintenance.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition on a significant follow-on award limits price discovery and potential savings.
Sole-source awards can sometimes lead to complacency and reduced incentive for cost control by the contractor.
The substantial value of the contract warrants close scrutiny of performance and cost management.
Follow-on nature of the award may indicate a lack of proactive market research for alternative solutions.
Absence of small business participation noted (sb: false), potentially missing opportunities for smaller, specialized firms.

Positive Signals

Firm fixed-price contract type shifts performance risk to the contractor.
Follow-on award suggests a demonstrated need and potentially a contractor with existing knowledge of the requirements.
The contract is for aircraft modifications, a critical capability for national security and border protection.
The award is to an established entity (Sierra Nevada Company, LLC), potentially indicating a level of reliability.

Sector Analysis

This contract falls within the Aircraft Manufacturing sector (NAICS 336411), a high-value and technologically intensive industry. The aerospace and defense market is characterized by significant R&D investment, long product cycles, and specialized manufacturing capabilities. Government contracts, particularly for defense and homeland security, represent a substantial portion of this market. Benchmarking this contract's value against other aircraft modification programs, especially those with similar scope and complexity, would provide further context on its market positioning.

Small Business Impact

This contract was not set aside for small businesses (sb: false), nor does it indicate any specific subcontracting goals for small businesses (ss: false). This means that opportunities for small businesses to participate in this significant award are limited. The absence of a small business focus in a sole-source award of this magnitude could mean that the prime contractor is not incentivized to seek out smaller, specialized subcontractors, potentially impacting the broader small business ecosystem within the aerospace manufacturing sector.

Oversight & Accountability

Oversight for this contract will primarily fall under the Department of Homeland Security and U.S. Customs and Border Protection. As a sole-source award, enhanced oversight may be necessary to ensure fair pricing and diligent performance. Transparency regarding the justification for the sole-source award and ongoing performance metrics would be beneficial. The contract duration and value suggest that regular reviews and potential audits by relevant oversight bodies, such as the DHS Inspector General, would be appropriate.

Related Government Programs

Aircraft Procurement
Aircraft Maintenance and Repair
Defense Manufacturing
Homeland Security Technology

Risk Flags

Sole-source award
Follow-on contract
Lack of competition
Potential for cost overruns
Limited small business participation

Frequently Asked Questions

What is this federal contract paying for?

Department of Homeland Security awarded $70.3 million to SIERRA NEVADA COMPANY, LLC. FOLLOW ON AWARD CONTRACT FOR AIRCRAFT MODIFICATIONS

Who is the contractor on this award?

The obligated recipient is SIERRA NEVADA COMPANY, LLC.

Which agency awarded this contract?

Awarding agency: Department of Homeland Security (U.S. Customs and Border Protection).

What is the total obligated amount?

The obligated amount is $70.3 million.

What is the period of performance?

Start: 2023-09-28. End: 2027-03-31.

What is Sierra Nevada Company, LLC's track record with similar sole-source government contracts, particularly for aircraft modifications?

Sierra Nevada Company, LLC (SNC) has a history of performing complex aerospace and defense contracts for various government agencies, including the Department of Defense and DHS. While specific details on their sole-source awards for aircraft modifications require deeper data analysis, SNC is known for its capabilities in aircraft integration, modification, and upgrade programs. Their involvement in similar projects suggests they possess the technical expertise. However, the lack of competition on this specific award means that a comparative analysis of their pricing and performance against other potential providers is not readily available, making it harder to assess value for money in this instance. Further investigation into past performance reviews and any cost overruns on previous sole-source contracts with SNC would be prudent.

How does the pricing of this $70.3 million contract compare to similar aircraft modification contracts awarded competitively?

Direct comparison of pricing for this $70.3 million sole-source contract to competitively awarded aircraft modification contracts is challenging without specific details on the scope of work, aircraft type, and complexity of modifications. However, as a general principle, sole-source awards tend to be higher than competitively bid contracts because they lack the downward price pressure inherent in a bidding process. To assess value, one would need to identify comparable contracts for similar aircraft platforms and modification types that underwent full and open competition. Analyzing the cost per modification hour, or cost per major system upgrade, across a range of contracts would reveal potential price discrepancies. The absence of such comparative data for this specific award necessitates a cautious approach to assessing its value for money.

What are the primary risks associated with a sole-source follow-on contract for aircraft modifications?

The primary risks associated with a sole-source follow-on contract for aircraft modifications include inflated pricing due to the absence of competitive pressure, potential for scope creep without market checks, and reduced incentive for the contractor to innovate or optimize costs. A follow-on award, while leveraging existing knowledge, can also perpetuate inefficiencies if not rigorously reviewed. For taxpayers, the risk is paying more than necessary for the modifications. For the government, there's a risk of becoming overly reliant on a single vendor, limiting future flexibility. The lack of competition also makes it harder to identify and mitigate performance risks proactively, as alternative solutions or vendors are not explored.

What is the historical spending pattern for aircraft modifications by U.S. Customs and Border Protection?

U.S. Customs and Border Protection (CBP) has consistently invested in aircraft modifications and acquisitions to maintain and enhance its aerial surveillance and interdiction capabilities. Historical spending data reveals a significant and ongoing commitment to its aviation fleet, which is critical for border security operations. This includes upgrades to sensors, communication systems, and airframes to adapt to evolving threats and technological advancements. The spending patterns often reflect a mix of competitive procurements for new platforms and modifications, alongside sole-source or limited competition awards for specialized upgrades or sustainment services, particularly for unique or legacy aircraft. This particular $70.3 million award fits within this broader pattern of sustained investment in critical aviation assets.

What specific aircraft platforms or systems are likely being modified under this contract?

While the contract details do not specify the exact aircraft platforms or systems, U.S. Customs and Border Protection (CBP) operates a diverse fleet of aircraft, including fixed-wing planes (e.g., P-3 Orion, E-2D Hawkeye, C-130 variants) and rotorcraft (e.g., UH-60 Black Hawk, MH-65 Dolphin). Modifications under this contract could encompass a wide range of upgrades, such as enhanced surveillance and sensor packages (e.g., radar, electro-optical/infrared systems), communication and data-link upgrades, structural reinforcements, engine improvements, or integration of new mission equipment. Given the 'follow-on' nature, it's probable these modifications are extensions or enhancements to existing capabilities on platforms already in CBP's inventory, aimed at improving operational effectiveness, extending service life, or adapting to new mission requirements.

Industry Classification

NAICS: Manufacturing › Aerospace Product and Parts Manufacturing › Aircraft Manufacturing

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

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: 01102022

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 12500 BELFORD AVE, ENGLEWOOD, CO, 80112

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Manufacturer of Goods, Not Designated a Small Business, Special Designations, Subchapter S Corporation, U.S.-Owned Business, Woman Owned Business

Financial Breakdown

Contract Ceiling: $70,489,820

Exercised Options: $70,314,285

Current Obligation: $70,314,285

Actual Outlays: $33,295,565

Subaward Activity

Number of Subawards: 33

Total Subaward Amount: $3,532,882

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline