DoD's $3.27B R&D contract with The Aerospace Corporation shows concerning value and limited competition

Contract Overview

Contract Amount: $3,267,354,966 ($3.3B)

Contractor: THE Aerospace Corporation

Awarding Agency: Department of Defense

Start Date: 2003-10-09

End Date: 2008-10-31

Contract Duration: 1,849 days

Daily Burn Rate: $1.8M/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: R&D

Place of Performance

Location: EL SEGUNDO, LOS ANGELES County, CALIFORNIA, 90245

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $3.27 billion to THE AEROSPACE CORPORATION for work described as: Key points: 1. The contract's value proposition is questionable given the lack of competition and cost-plus contract type. 2. Sole-source procurement limits price discovery and potentially inflates costs for taxpayers. 3. The long duration and cost-plus structure present significant cost overrun risks. 4. Performance context is limited due to the R&D nature, making direct outcome assessment difficult. 5. This contract positions The Aerospace Corporation as a key R&D partner for the Air Force. 6. The absence of small business participation is noted.

Value Assessment

Rating: concerning

The contract's cost-plus-fixed-fee structure, combined with a sole-source award, raises concerns about value for money. Without competitive pressure, there is less incentive for the contractor to minimize costs. Benchmarking is difficult without comparable sole-source R&D contracts, but the overall price appears high given the procurement method. The long duration further amplifies potential cost inefficiencies.

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 limits the number of potential bidders to one, which typically leads to higher prices and reduced innovation compared to a full and open competition. The lack of competition suggests a specific capability or relationship was deemed essential, but it bypasses the benefits of a broader market search.

Taxpayer Impact: Sole-source awards mean taxpayers do not benefit from the cost savings that competitive bidding can generate. This can result in higher overall spending for government research and development.

Public Impact

The primary beneficiary is The Aerospace Corporation, which receives substantial funding for R&D services. Services delivered include research and development in physical, engineering, and life sciences, supporting national security objectives. The geographic impact is concentrated in California, where the contractor is located. Workforce implications include the employment of highly skilled scientists and engineers.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing and potentially increases costs.
Cost-plus contract type carries inherent risk of cost overruns.
Long contract duration increases exposure to cost escalation and scope creep.
Lack of transparency in sole-source justification.
No small business participation noted.

Positive Signals

Contractor is a Federally Funded Research and Development Center (FFRDC), implying specialized expertise.
Focus on critical R&D areas for national security.
Long-term relationship may foster deep institutional knowledge.
Fixed fee component provides some cost control compared to pure cost-plus.

Sector Analysis

This contract falls within the Research and Development sector, specifically focusing on physical, engineering, and life sciences. The market for R&D services, particularly for defense applications, is highly specialized. The Aerospace Corporation, as an FFRDC, operates in a unique space, often serving as a strategic partner for government agencies. Comparable spending benchmarks are difficult to establish due to the specialized nature and sole-source award, but R&D spending by the DoD is substantial.

Small Business Impact

This contract does not appear to include any small business set-aside provisions, nor is there information suggesting significant subcontracting opportunities for small businesses. The award to a large, established organization like The Aerospace Corporation suggests a focus on specialized capabilities rather than broad market engagement, potentially limiting the direct impact on the small business ecosystem for this specific contract.

Oversight & Accountability

Oversight mechanisms for this contract would typically involve program managers within the Department of Defense and potentially the Inspector General's office. Accountability measures are tied to the delivery of R&D milestones and adherence to the contract's terms. Transparency is limited due to the sole-source nature of the award, making public scrutiny of the procurement process challenging.

Related Government Programs

Department of Defense Research and Development
Air Force Research Laboratory Contracts
Federally Funded Research and Development Centers (FFRDCs)
Aerospace and Defense R&D Spending

Risk Flags

Sole-source award
Cost-plus contract type
Long contract duration
Lack of small business participation

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $3.27 billion to THE AEROSPACE CORPORATION. See the official description on USAspending.

Who is the contractor on this award?

The obligated recipient is THE AEROSPACE CORPORATION.

Which agency awarded this contract?

Awarding agency: Department of Defense (Department of the Air Force).

What is the total obligated amount?

The obligated amount is $3.27 billion.

What is the period of performance?

Start: 2003-10-09. End: 2008-10-31.

What is the justification for awarding this significant R&D contract on a sole-source basis to The Aerospace Corporation?

The justification for a sole-source award typically stems from the unique capabilities, specialized knowledge, or critical role of the contractor that cannot be replicated by other sources. The Aerospace Corporation is a Federally Funded Research and Development Center (FFRDC), which are organizations established to meet specific long-term research needs of the government. FFRDCs often possess unique expertise, facilities, and an objective perspective essential for complex R&D projects. For this contract, the Department of Defense likely determined that The Aerospace Corporation's specific institutional knowledge, technical capabilities, and established relationship were indispensable for the research objectives, making competitive procurement impractical or detrimental to national security interests.

How does the cost-plus-fixed-fee (CPFF) contract type compare to other R&D contract structures in terms of risk and value?

Cost-plus-fixed-fee (CPFF) contracts are common for R&D where the scope of work is not fully defined at the outset, making it difficult to establish a firm fixed price. In a CPFF contract, the government pays the contractor's actual costs plus a fixed fee representing profit. This structure shifts some cost risk to the government, as the final price is not capped. Compared to firm-fixed-price (FFP) contracts, CPFF offers more flexibility for evolving R&D projects but can lead to higher costs if not managed diligently. Value is often assessed based on the successful achievement of research objectives and technological advancements rather than strict cost adherence, though efficient cost management is still expected. The fixed fee provides a ceiling on the contractor's profit, offering some cost control compared to pure cost-plus-award-fee contracts.

What are the potential risks associated with the long duration (1849 days) of this contract?

The long duration of this contract, exceeding five years, presents several potential risks. Firstly, it increases the likelihood of cost overruns due to inflation, changes in labor rates, and unforeseen technical challenges that may require extended effort. Secondly, the extended timeline can lead to scope creep, where the project's objectives or requirements evolve significantly over time, potentially deviating from the original intent and increasing costs. Thirdly, maintaining contractor focus and performance over such a long period can be challenging. Finally, the government's needs or technological landscape might change, rendering the research outcomes less relevant or requiring costly modifications to the project, making long-term R&D contracts inherently riskier than shorter-term, more defined efforts.

Can the performance of The Aerospace Corporation on this contract be benchmarked against similar R&D efforts?

Benchmarking the performance of The Aerospace Corporation on this specific contract is challenging due to several factors. Firstly, the sole-source nature of the award means there are no direct competitors to compare against in terms of pricing or efficiency for this particular procurement. Secondly, the contract is for Research and Development (R&D), which inherently involves uncertainty and innovation, making direct comparisons of outcomes difficult. Performance in R&D is often measured by the achievement of scientific breakthroughs or technological advancements rather than strict adherence to predefined metrics. While The Aerospace Corporation is an FFRDC with a known track record, comparing its performance on this specific $3.27 billion contract to other R&D contracts requires access to detailed technical reports, milestone achievements, and cost performance data, which are not publicly available.

What is the historical spending pattern for R&D contracts awarded to The Aerospace Corporation by the Department of Defense?

The Aerospace Corporation, as a key FFRDC supporting the Department of Defense (DoD) and specifically the Air Force, has a long history of receiving significant funding for research and development. Historical spending patterns indicate a consistent and substantial allocation of resources towards this organization for critical R&D initiatives, particularly in areas related to space, missile defense, and advanced technologies. While the exact figures fluctuate annually, the DoD represents a primary source of funding for The Aerospace Corporation. This particular $3.27 billion contract awarded in 2003 is indicative of the scale of investment the DoD has historically made in the organization's specialized R&D capabilities to address complex national security challenges.

Industry Classification

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

Product/Service Code: RESEARCH AND DEVELOPMENT › Space R&D Services

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Address: 2350 E EL SEGUNDO BLVD, EL SEGUNDO, CA, 36

Business Categories: Category Business, Nonprofit Organization, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $675,381,224

Exercised Options: $668,913,366

Current Obligation: $3,267,354,966

Contract Characteristics

Cost or Pricing Data: YES

Timeline