DoD's $311M Engineering Services Contract with Serco-IPS Corporation shows fair value despite limited competition

Contract Overview

Contract Amount: $311,096,471 ($311.1M)

Contractor: Serco-Ips Corporation

Awarding Agency: Department of Defense

Start Date: 2012-06-06

End Date: 2023-03-31

Contract Duration: 3,950 days

Daily Burn Rate: $78.8K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 4

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: SUPPORT SERVICES FOR PEO SUBS

Place of Performance

Location: WASHINGTON NAVY YARD, DISTRICT OF COLUMBIA County, DISTRICT OF COLUMBIA, 20376

State: District of Columbia Government Spending

Plain-Language Summary

Department of Defense obligated $311.1 million to SERCO-IPS CORPORATION for work described as: SUPPORT SERVICES FOR PEO SUBS Key points: 1. Contract value of $311M over 10 years suggests a significant, long-term need for engineering support. 2. The use of Cost Plus Fixed Fee (CPFF) pricing indicates potential for cost overruns if not closely managed. 3. With 4 bidders, competition was present but not robust, potentially impacting price discovery. 4. The contract's duration and scale point to a critical role in supporting PEO Submarines. 5. Geographic concentration in DC warrants attention for potential localized economic impact. 6. The absence of small business set-asides means limited direct benefit to smaller enterprises.

Value Assessment

Rating: fair

The contract's total value of $311 million over nearly 10 years averages approximately $31 million annually. Benchmarking this against similar large-scale engineering support contracts for major defense programs is challenging without more specific service details. However, the CPFF contract type, while common for complex R&D or services where costs are uncertain, carries inherent risks of exceeding initial estimates. The fixed fee component provides some cost control, but the overall value proposition depends heavily on efficient execution and diligent oversight to ensure costs remain reasonable relative to the services delivered.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, with four bids received. While competition existed, having only four bidders for a contract of this magnitude might suggest a specialized market or high barriers to entry. The level of competition is moderate, indicating that while multiple firms were considered, the pricing might not have been driven down to the lowest possible point as it might be in a more crowded field. This suggests a balance between ensuring qualified contractors and achieving optimal price discovery.

Taxpayer Impact: The moderate competition level means taxpayers likely paid a fair, but not necessarily the absolute lowest, price for these engineering services. The presence of multiple bidders prevented a sole-source situation, offering some assurance of competitive pricing.

Public Impact

The primary beneficiaries are the PEO Submarines program within the Department of the Navy, receiving essential engineering support. Services delivered likely encompass a wide range of engineering disciplines critical for submarine acquisition, modernization, and sustainment. The contract's performance is geographically concentrated in the District of Columbia, suggesting a localized impact on the regional economy and workforce. The contract supports a specialized engineering workforce, potentially including engineers, technicians, and project managers.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost Plus Fixed Fee (CPFF) pricing structure can lead to cost overruns if not meticulously managed and monitored.
Moderate competition (4 bidders) may have limited the downward pressure on pricing, potentially resulting in a higher cost than a more competitive scenario.
Long contract duration (nearly 10 years) increases the risk of scope creep or evolving requirements not being adequately addressed in the original pricing.
Concentration of contract performance in Washington D.C. could limit broader economic benefits and create localized dependencies.

Positive Signals

Awarded under full and open competition, ensuring a broad pool of potential contractors were considered.
The contract has a defined end date, providing a clear timeframe for service delivery and future re-competition.
The fixed fee component in the CPFF structure provides a degree of cost certainty for the government.
The contract supports a critical defense program (PEO Submarines), indicating strategic importance and likely adherence to high standards.

Sector Analysis

This contract falls within the Engineering Services sector (NAICS 541330), a critical component of the defense industrial base. The market for specialized engineering support for complex platforms like submarines is often concentrated among a few large, experienced firms. Annual spending in this sector for defense is substantial, with billions allocated across various agencies for similar services. This contract represents a significant portion of spending for PEO Submarines, highlighting its importance in maintaining naval capabilities.

Small Business Impact

This contract does not appear to have included specific small business set-asides, as indicated by 'sb: false'. Consequently, small businesses are unlikely to have received direct awards. Subcontracting opportunities for small businesses may exist, but they are not explicitly mandated or tracked in the provided data. The absence of set-asides means the direct economic impact on the small business ecosystem for this specific contract is likely minimal.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy's contracting and program management offices, responsible for ensuring adherence to contract terms and performance standards. Given the significant value and duration, regular reviews and audits are expected. Transparency is facilitated through contract databases like FPDS, but detailed performance metrics and cost breakdowns are typically internal. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Naval Sea Systems Command (NAVSEA) Contracts
Submarine Acquisition Programs
Defense Engineering Services
PEO Programs Support Contracts
Cost Plus Fixed Fee Contracts
Department of Defense IT and Professional Services

Risk Flags

Cost Plus Fixed Fee (CPFF) pricing structure carries inherent risk of cost escalation.
Moderate competition (4 bidders) may limit price competitiveness.
Long contract duration increases risk of scope creep and requirement changes.
Geographic concentration in DC limits broader economic distribution.
Lack of explicit small business set-asides limits direct SMB participation.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $311.1 million to SERCO-IPS CORPORATION. SUPPORT SERVICES FOR PEO SUBS

Who is the contractor on this award?

The obligated recipient is SERCO-IPS CORPORATION.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $311.1 million.

What is the period of performance?

Start: 2012-06-06. End: 2023-03-31.

What is the historical spending trend for engineering services supporting PEO Submarines?

Historical spending data for engineering services supporting PEO Submarines prior to this specific contract (awarded June 2012) is not directly available in the provided snippet. However, the substantial value of this $311 million contract over nearly a decade suggests a consistent and significant requirement for such services. Defense programs, especially those involving complex platforms like submarines, typically involve long-term engineering support needs spanning research, development, acquisition, and sustainment phases. Annual spending on engineering services within the Department of Defense often runs into the tens of billions of dollars, reflecting the critical role these services play across numerous platforms and programs. Without access to historical contract databases or specific program budget documents, a precise trend analysis is not feasible, but the scale of this award implies sustained, high-level investment in submarine engineering.

How does the per-unit cost of this contract compare to similar engineering support contracts?

Determining a meaningful 'per-unit cost' for this contract is challenging due to its broad scope encompassing diverse engineering support services over a long period. The contract type (Cost Plus Fixed Fee) and the lack of specific deliverable breakdowns prevent a direct comparison to market rates or similar contracts on a unit basis. Benchmarking would require detailed knowledge of the specific engineering tasks performed, their complexity, and the labor categories involved. Generally, engineering services for major defense platforms are high-value and require specialized expertise, leading to higher costs compared to less complex services. The average annual value of approximately $31 million suggests a significant investment, but without granular data on the services rendered, a precise value-for-money assessment based on per-unit cost is not possible.

What are the key performance indicators (KPIs) used to evaluate Serco-IPS Corporation's performance under this contract?

The provided data does not specify the Key Performance Indicators (KPIs) used to evaluate Serco-IPS Corporation's performance. However, for a contract of this nature supporting PEO Submarines, typical KPIs would likely include adherence to project schedules, meeting technical performance specifications, quality of engineering deliverables, cost control within the fixed fee parameters, and responsiveness to task orders. Performance evaluations would also consider factors like personnel qualifications, cybersecurity compliance, and effective program management. The Department of the Navy would establish these KPIs in the contract's Performance Work Statement (PWS) and monitor them through regular reporting and reviews.

What is the risk profile associated with this contract, and how is it being managed?

The primary risks associated with this contract include potential cost overruns inherent in the CPFF structure, the possibility of scope creep over the long duration, and ensuring the contractor maintains the necessary technical expertise and security clearances. Management of these risks would involve rigorous oversight by the Navy contracting officers and program managers, detailed task order management, regular performance reviews against established KPIs, and potentially independent cost reviews. The fixed fee provides some incentive for the contractor to manage costs efficiently. The moderate competition level also presents a risk if it leads to suboptimal pricing. The long duration necessitates proactive management of evolving technological and strategic requirements.

How has the contractor, Serco-IPS Corporation, performed on previous government contracts?

Serco-IPS Corporation, as part of the broader Serco Group, has a significant history of performing government contracts across various agencies and sectors, including defense, civilian, and health. While specific performance details for Serco-IPS Corporation on prior contracts are not provided here, Serco has generally been a major contractor for the U.S. government. Performance on such contracts can vary; reviews often highlight strengths in program management and service delivery, but like many large contractors, they may also face scrutiny regarding cost management or specific project outcomes. A comprehensive assessment would require reviewing their past performance evaluations (e.g., Contractor Performance Assessment Reporting System - CPARS) for relevant contracts.

What is the potential impact of this contract on the submarine industrial base?

This contract directly supports the Program Executive Office (PEO) Submarines, playing a crucial role in the acquisition and sustainment of the U.S. submarine fleet. By providing essential engineering services, it helps maintain the technological edge and operational readiness of these critical assets. The contract's value and duration indicate a stable demand for specialized engineering expertise, which can foster workforce development and sustainment within the defense engineering sector. While the contract is concentrated in Washington D.C., the services rendered contribute to the broader health and capability of the submarine industrial base by ensuring the complex systems involved are properly engineered and supported throughout their lifecycle.

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: FULL AND OPEN COMPETITION

Solicitation Procedures: SUBJECT TO MULTIPLE AWARD FAIR OPPORTUNITY

Solicitation ID: N0002412R3250

Offers Received: 4

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Serco Inc

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

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $538,488,237

Exercised Options: $536,275,925

Current Obligation: $311,096,471

Subaward Activity

Number of Subawards: 42

Total Subaward Amount: $32,856,873

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: N0017804D4066

IDV Type: IDC

Timeline