DoD's $686M GE Contract: Fixed Price with Economic Adjustment, Awarded 1988, Ended 1997
Contract Overview
Contract Amount: $685,763,840 ($685.8M)
Contractor: General Electric Company
Awarding Agency: Department of Defense
Start Date: 1988-05-15
End Date: 1997-09-30
Contract Duration: 3,425 days
Daily Burn Rate: $200.2K/day
Competition Type: FULL AND OPEN COMPETITION
Number of Offers Received: 2
Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT
Sector: Defense
Place of Performance
Location: LYNN, ESSEX County, MASSACHUSETTS, 01905
Plain-Language Summary
Department of Defense obligated $685.8 million to GENERAL ELECTRIC COMPANY for work described as: Key points: 1. Significant contract value of $685.8 million over its lifespan. 2. Awarded under full and open competition, suggesting a competitive bidding process. 3. Fixed Price with Economic Price Adjustment (EPA) contract type introduces potential for cost escalation. 4. The contract spanned nearly a decade, indicating a long-term requirement. 5. No specific small business participation noted.
Value Assessment
Rating: fair
The contract utilized a Fixed Price with Economic Price Adjustment (EPA) structure. While intended to protect against inflation, this can lead to higher final costs for the government compared to firm fixed-price contracts if economic conditions fluctuate significantly.
Cost Per Unit: N/A
Competition Analysis
Competition Level: full-and-open
The contract was awarded through full and open competition, which typically fosters competitive pricing. However, the EPA clause may have influenced initial bids by introducing uncertainty regarding future price adjustments.
Taxpayer Impact: The use of EPA introduces a risk of increased taxpayer cost due to potential economic fluctuations over the contract's long duration.
Public Impact
Taxpayers bore the risk of economic inflation over a 9-year period. Long-term commitment by the Department of Defense for a significant value. Potential for price increases beyond initial projections due to EPA. The contract's duration suggests a critical or sustained need for the goods/services provided.
Waste & Efficiency Indicators
Waste Risk Score: 50 / 10
Warning Flags
- Economic Price Adjustment (EPA) clause can lead to cost overruns.
- Long contract duration (9 years) increases exposure to market volatility.
- Lack of specific small business participation noted.
Positive Signals
- Awarded via Full and Open Competition, promoting initial price discovery.
- Fixed Price structure provides some cost certainty, mitigated by EPA.
- Contract completed, indicating fulfillment of the requirement.
Sector Analysis
This contract falls within the Defense sector, likely for major equipment or systems. Spending benchmarks in this area are highly variable based on the specific defense articles procured. The $686 million value is substantial for a single contract.
Small Business Impact
The data indicates the prime contractor was General Electric Company and does not specify any small business subcontracting. Further investigation would be needed to determine if small businesses were involved in the supply chain.
Oversight & Accountability
Awarded under full and open competition suggests a structured procurement process. The long duration and EPA clause warrant scrutiny for potential cost efficiencies and oversight throughout the contract lifecycle.
Related Government Programs
- Department of Defense Contracting
- Defense Contract Management Agency Programs
Risk Flags
- Potential for cost overruns due to Economic Price Adjustment (EPA).
- Long contract duration increases exposure to market volatility and inflation.
- Lack of transparency regarding specific goods/services procured.
- No explicit mention of small business participation or subcontracting goals.
- The contract ended in 1997, limiting current relevance for future procurement strategies.
Tags
department-of-defense, ma, definitive-contract, 100m-plus
Frequently Asked Questions
What is this federal contract paying for?
Department of Defense awarded $685.8 million to GENERAL ELECTRIC COMPANY. See the official description on USAspending.
Who is the contractor on this award?
The obligated recipient is GENERAL ELECTRIC COMPANY.
Which agency awarded this contract?
Awarding agency: Department of Defense (Defense Contract Management Agency).
What is the total obligated amount?
The obligated amount is $685.8 million.
What is the period of performance?
Start: 1988-05-15. End: 1997-09-30.
What specific goods or services did General Electric Company provide under this contract, and how did their performance align with the fixed-price with economic price adjustment terms?
The provided data does not specify the goods or services. To assess value, one would need to compare the final price paid against the market value of similar items/services procured during the 1988-1997 period. The EPA clause complicates direct value assessment without knowing the actual price adjustments applied and their justification.
What was the total impact of the economic price adjustments on the contract's final cost, and did this exceed the anticipated range for such clauses?
The data does not provide the final adjusted price or the specific indices used for the economic price adjustments. To assess risk, analysis would require examining the actual price escalations applied over the contract's nine-year term and comparing them to inflation rates for the relevant goods/services and the initial contract estimates.
How effective was the full and open competition in achieving the best possible price, considering the subsequent use of economic price adjustments?
Full and open competition generally promotes price effectiveness by allowing multiple bidders. However, the inclusion of an EPA clause introduces long-term uncertainty. The effectiveness hinges on whether the competitive bids accurately factored in potential EPA impacts and if the final price, including adjustments, remained competitive compared to alternative procurement strategies.
Competition & Pricing
Extent Competed: FULL AND OPEN COMPETITION
Offers Received: 2
Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT (K)
Contractor Details
Address: 1100 WESTERN AVE, LYNN
Business Categories: Category Business, Not Designated a Small Business
Contract Characteristics
Multi-Year Contract: Yes
Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED
Timeline
Start Date: 1988-05-15
Current End Date: 1997-09-30
Potential End Date: 1997-09-30 00:00:00
Last Modified: 2021-07-29
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