DoD awards BAE Systems $228.6M for Navigation Systems, a sole-source contract with potential for cost overruns

Contract Overview

Contract Amount: $228,649,045 ($228.6M)

Contractor: BAE Systems Information and Electronic Systems Integration Inc.

Awarding Agency: Department of Defense

Start Date: 2012-09-28

End Date: 2025-09-03

Contract Duration: 4,723 days

Daily Burn Rate: $48.4K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Official Description: MGUE INCREMENT 1 TD RCI

Place of Performance

Location: CEDAR RAPIDS, LINN County, IOWA, 52404

State: Iowa Government Spending

Plain-Language Summary

Department of Defense obligated $228.6 million to BAE SYSTEMS INFORMATION AND ELECTRONIC SYSTEMS INTEGRATION INC. for work described as: MGUE INCREMENT 1 TD RCI Key points: 1. Contract Value: $228.6 million awarded to BAE Systems. 2. Competition: Sole-source award raises concerns about price discovery. 3. Risk: Cost-plus incentive fee structure may incentivize higher costs. 4. Sector: Defense industry, specifically navigation and guidance systems.

Value Assessment

Rating: questionable

The contract's cost-plus incentive fee structure, combined with a sole-source award, makes it difficult to benchmark pricing against similar contracts. The lack of competition limits the government's ability to negotiate the best possible price.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one vendor was solicited. This significantly limits competition and can lead to higher prices as there is no pressure from competing bids to drive down costs.

Taxpayer Impact: The lack of competitive bidding on this sole-source contract may result in taxpayers paying more than necessary for these navigation systems.

Public Impact

Military readiness may be impacted if navigation systems are not acquired at the best possible value. Taxpayer funds are allocated to a sole-source contract, raising questions about cost-effectiveness. The long duration of the contract (over 10 years) means sustained potential for inefficient spending.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award
Cost-plus incentive fee
Long contract duration

Positive Signals

Essential defense system
Experienced contractor

Sector Analysis

This contract falls within the Defense sector, specifically for the manufacturing of navigation and guidance systems. Spending in this area is critical for military operations, but often involves complex, specialized equipment where sole-source awards can be more common.

Small Business Impact

There is no indication that small businesses were involved in this sole-source award, either as prime contractors or subcontractors. Further analysis would be needed to determine any potential small business participation.

Oversight & Accountability

The contract is managed by the Defense Contract Management Agency. Oversight will be crucial to ensure cost controls and performance targets are met, especially given the contract type and sole-source nature.

Related Government Programs

Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing
Department of Defense Contracting
Defense Contract Management Agency Programs

Risk Flags

Sole-source award limits price competition.
Cost-plus incentive fee may lead to higher costs.
Long contract duration increases exposure to cost growth.
Lack of transparency in pricing due to sole-source nature.
Potential for contractor to prioritize profit over cost savings.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $228.6 million to BAE SYSTEMS INFORMATION AND ELECTRONIC SYSTEMS INTEGRATION INC.. MGUE INCREMENT 1 TD RCI

Who is the contractor on this award?

The obligated recipient is BAE SYSTEMS INFORMATION AND 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 $228.6 million.

What is the period of performance?

Start: 2012-09-28. End: 2025-09-03.

What is the projected total cost if all incentives are met and potential contract modifications are considered?

The current awarded value is $228.6 million, but the cost-plus incentive fee structure means the final cost could exceed this if performance targets are met or exceeded. Without detailed incentive clauses and historical cost data, projecting the final cost is speculative. Further analysis of contract modifications and performance metrics is required.

What are the specific risks associated with the 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' for this contract?

Key risks include technological obsolescence in a rapidly evolving field, potential cost overruns due to the incentive fee structure, and reliance on a single supplier which can lead to supply chain vulnerabilities. Ensuring the system meets stringent military requirements under budget is paramount.

How effective is the cost-plus incentive fee structure in ensuring value for money in this sole-source defense contract?

The effectiveness is questionable. While intended to incentivize performance, the cost-plus nature combined with sole-source award can reduce the pressure to minimize costs. The government must meticulously monitor expenditures and performance metrics to ensure the contractor is not simply maximizing profit at taxpayer expense.

Industry Classification

NAICS: Manufacturing › Navigational, Measuring, Electromedical, and Control Instruments Manufacturing › Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing

Product/Service Code: INSTRUMENTS AND LABORATORY EQPT

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE (V)

Evaluated Preference: NONE

Contractor Details

Address: 7825 6TH ST SW, CEDAR RAPIDS, IA, 52404

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

Financial Breakdown

Contract Ceiling: $278,905,974

Exercised Options: $248,962,868

Current Obligation: $228,649,045

Subaward Activity

Number of Subawards: 9

Total Subaward Amount: $547,909

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline