DoD's $41M R&D contract with BAE Systems shows fair value, but limited competition raises concerns

Contract Overview

Contract Amount: $41,152,370 ($41.2M)

Contractor: BAE Systems Information & Electronic Systems Integration Inc

Awarding Agency: Department of Defense

Start Date: 2012-10-22

End Date: 2017-04-30

Contract Duration: 1,651 days

Daily Burn Rate: $24.9K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: R&D

Official Description: CAMBRIDGE

Place of Performance

Location: MERRIMACK, HILLSBOROUGH County, NEW HAMPSHIRE, 03054

State: New Hampshire Government Spending

Plain-Language Summary

Department of Defense obligated $41.2 million to BAE SYSTEMS INFORMATION & ELECTRONIC SYSTEMS INTEGRATION INC for work described as: CAMBRIDGE Key points: 1. Contract awarded through full and open competition, suggesting a broad search for qualified vendors. 2. The contract's duration of over 4 years indicates a significant, long-term research and development effort. 3. Focus on R&D in physical, engineering, and life sciences points to critical technological advancements. 4. The use of a Cost Plus Fixed Fee (CPFF) pricing structure can incentivize cost control by the contractor. 5. While competition was open, the number of bidders is not specified, impacting price discovery assessment. 6. The contract's value of $41 million places it within a substantial range for defense R&D projects.

Value Assessment

Rating: good

The contract's value of $41 million for a multi-year R&D effort appears reasonable within the defense sector. Benchmarking against similar R&D contracts for advanced technologies would provide a more precise value-for-money assessment. The CPFF structure, while common, requires careful oversight to ensure costs remain within reasonable bounds and that the fixed fee adequately compensates the contractor for their efforts without excessive profit.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that all responsible sources were permitted to submit proposals. However, the specific number of proposals received and evaluated is not detailed, which limits a thorough assessment of the competitive landscape. A robust competition typically involves multiple bidders vying for the contract, driving down prices and fostering innovation. Without knowing the number of bidders, it's difficult to definitively state the extent to which price discovery was optimized.

Taxpayer Impact: Taxpayers benefit from the potential for competitive pricing inherent in full and open competition, though the actual savings depend on the number of bids received and the negotiation process.

Public Impact

The Department of Defense benefits from advancements in physical, engineering, and life sciences R&D. This contract supports the development of new technologies crucial for national security. The contract is located in New Hampshire, potentially impacting the local high-tech workforce and economy. Research outcomes could lead to improved defense capabilities and operational effectiveness.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of specific bidder count prevents full assessment of competitive pressure on pricing.
CPFF contracts require diligent oversight to manage cost overruns and ensure fair profit margins.

Positive Signals

Awarded via full and open competition, maximizing potential vendor pool.
Long contract duration suggests a stable, long-term R&D partnership.
Focus on critical R&D areas aligns with strategic defense objectives.

Sector Analysis

This contract falls within the Research and Development sector, specifically focusing on physical, engineering, and life sciences (excluding biotechnology). This is a critical area for defense innovation, often characterized by high upfront investment and long development cycles. Comparable spending in this sector can vary widely depending on the specific technology and its maturity, but multi-million dollar contracts for advanced R&D are common within the Department of Defense.

Small Business Impact

The contract data indicates that small business participation was not a specific set-aside requirement (ss: false, sb: false). While this contract was competed broadly, there is no explicit information on subcontracting opportunities for small businesses. The impact on the small business ecosystem would depend on whether BAE Systems actively seeks small business partners for specialized services or components.

Oversight & Accountability

Oversight for this contract would typically be managed by the Defense Contract Management Agency (DCMA), ensuring compliance with contract terms and performance standards. The CPFF structure necessitates rigorous financial oversight to monitor costs and the reasonableness of the fixed fee. Transparency is generally maintained through contract reporting requirements, though specific details of R&D progress might be sensitive.

Related Government Programs

Department of Defense Research and Development Programs
Advanced Technology Development Contracts
Engineering and Physical Sciences Research

Risk Flags

Potential for cost overruns due to CPFF structure.
Need for strong oversight to ensure contractor efficiency.
Limited insight into competitive intensity without bidder numbers.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $41.2 million to BAE SYSTEMS INFORMATION & ELECTRONIC SYSTEMS INTEGRATION INC. CAMBRIDGE

Who is the contractor on this award?

The obligated recipient is BAE SYSTEMS INFORMATION & ELECTRONIC SYSTEMS INTEGRATION INC.

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Contract Management Agency).

What is the total obligated amount?

The obligated amount is $41.2 million.

What is the period of performance?

Start: 2012-10-22. End: 2017-04-30.

What is the track record of BAE Systems Information & Electronic Systems Integration Inc. with similar R&D contracts?

BAE Systems Information & Electronic Systems Integration Inc. has a significant history of performing complex research and development contracts, particularly within the defense sector. They are a major defense contractor with extensive experience in areas such as electronic systems, cyber security, and advanced materials. Analyzing their past performance on Cost Plus Fixed Fee (CPFF) contracts would reveal their ability to manage costs effectively and deliver on technical objectives. A review of their contract history would likely show numerous awards for R&D across various defense agencies, indicating a strong capability in this domain. However, specific performance metrics and any past issues on similar contracts would require a deeper dive into contract databases and performance reports.

How does the $41 million contract value compare to other R&D contracts in physical, engineering, and life sciences?

The $41 million contract value for this R&D effort is substantial but falls within a common range for significant defense research projects. Contracts in this domain can range from a few million dollars for specific technology investigations to hundreds of millions for large-scale system development. For R&D in physical, engineering, and life sciences, $41 million suggests a project of considerable scope and duration, likely involving advanced research and prototyping. Comparable contracts might include those for developing new sensor technologies, advanced materials, or complex simulation systems. Without specific benchmarks for the exact sub-field of R&D, it's challenging to provide a precise comparison, but it indicates a mid-to-high tier investment for a single R&D contract.

What are the primary risks associated with this Cost Plus Fixed Fee (CPFF) contract?

The primary risks associated with this Cost Plus Fixed Fee (CPFF) contract revolve around cost control and contractor incentive. While the fixed fee provides the contractor with a defined profit margin, the 'cost plus' portion means the government reimburses allowable costs. A key risk is that the contractor may have less incentive to control costs rigorously compared to a fixed-price contract, as increased costs directly lead to higher reimbursements (though the fee remains fixed). This necessitates robust government oversight to scrutinize all incurred costs and ensure they are reasonable, allocable, and allowable. Another risk is potential scope creep, where the research objectives may evolve, leading to unforeseen cost increases that need careful management and potential contract modifications.

What does the 'Research and Development in the Physical, Engineering, and Life Sciences (except Biotechnology)' classification imply for the contract's objectives?

This classification indicates that the contract's objectives are focused on advancing scientific knowledge and applying it to develop new or improved technologies within the physical sciences (e.g., physics, chemistry, materials science), engineering disciplines (e.g., mechanical, electrical, aerospace engineering), and life sciences (e.g., biology, physiology, environmental science), with a specific exclusion for biotechnology. This suggests the research could involve areas like advanced materials development, novel propulsion systems, sophisticated sensor technologies, complex simulation modeling, or fundamental studies in areas like acoustics or thermodynamics. The exclusion of biotechnology implies the focus is not on biological processes for therapeutic or diagnostic purposes, but rather on the underlying scientific and engineering principles.

How does the contract duration of 1651 days (approx. 4.5 years) impact the assessment of its value?

The contract duration of approximately 4.5 years (1651 days) is significant for a research and development contract. This extended period suggests that the project involves complex, long-term research objectives that cannot be achieved in a shorter timeframe. For R&D, a longer duration often implies a higher degree of technical challenge and the need for iterative development and testing. From a value perspective, a longer duration can allow for deeper exploration of research avenues and potentially lead to more groundbreaking discoveries or robust technological solutions. However, it also increases the importance of effective project management and continuous oversight to ensure progress is made and costs remain controlled throughout the project lifecycle. The extended timeline necessitates a stable funding commitment from the government.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Scientific Research and Development Services › Research and Development in the Physical, Engineering, and Life Sciences (except Biotechnology)

Product/Service Code: RESEARCH AND DEVELOPMENT › DEFENSE (OTHER) R&D

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: BASIC RESEARCH

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: BAE Systems PLC

Address: 144 DANIEL WEBSTER HWY #24, MERRIMACK, NH, 03054

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

Financial Breakdown

Contract Ceiling: $41,152,370

Exercised Options: $41,152,370

Current Obligation: $41,152,370

Subaward Activity

Number of Subawards: 26

Total Subaward Amount: $2,048,298

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline