DHS Coast Guard's $48.3M equitable adjustment for Stratos highlights need for robust contract management

Contract Overview

Contract Amount: $48,341,831 ($48.3M)

Contractor: Integrated Coast Guard Systems LLC

Awarding Agency: Department of Homeland Security

Start Date: 2005-02-23

End Date: 2006-02-26

Contract Duration: 368 days

Daily Burn Rate: $131.4K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: COST PLUS AWARD FEE

Sector: Defense

Official Description: EQUITABLE ADJUSTMENT FOR STRATOS

Place of Performance

Location: MOORESTOWN, BURLINGTON County, NEW JERSEY, 08057

State: New Jersey Government Spending

Plain-Language Summary

Department of Homeland Security obligated $48.3 million to INTEGRATED COAST GUARD SYSTEMS LLC for work described as: EQUITABLE ADJUSTMENT FOR STRATOS Key points: 1. The contract's equitable adjustment indicates potential cost overruns or scope changes, necessitating careful monitoring. 2. Integrated Coast Guard Systems LLC, the contractor, has a history with federal contracts, requiring review of past performance. 3. The award was made under a full and open competition, suggesting a competitive bidding process. 4. The contract type, Cost Plus Award Fee, can incentivize performance but also carries inherent cost-reimbursement risks. 5. The duration of the contract (368 days) is relatively short, but the adjustment represents a significant portion of the initial value. 6. The North American Industry Classification System (NAICS) code 334511 points to the manufacturing of navigation and guidance instruments.

Value Assessment

Rating: questionable

The $48.3 million equitable adjustment is a substantial increase, raising concerns about initial cost estimation or unforeseen project developments. Without a clear breakdown of the adjustment's drivers, it's difficult to benchmark against similar contracts. The Cost Plus Award Fee structure, while intended to incentivize performance, can lead to higher final costs if not managed tightly. This significant adjustment warrants a deeper dive into the contract's financial history and the justification provided.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that multiple bidders were likely considered. This generally promotes price discovery and can lead to more competitive pricing. However, the significant equitable adjustment later in the contract lifecycle raises questions about whether the initial competition adequately captured all potential costs or risks.

Taxpayer Impact: A competitive award process is generally favorable for taxpayers, as it aims to secure the best value. However, the subsequent large adjustment suggests that the initial competitive pricing may not have fully accounted for the final project scope or costs.

Public Impact

The primary beneficiaries are the U.S. Coast Guard, which receives updated or modified navigation and guidance systems. The contract supports the operational capabilities of the Coast Guard, enhancing its search, detection, and navigation functions. The contract is geographically focused in New Jersey, implying potential impacts on the local workforce and economy in that state. The manufacturing of specialized instruments likely involves skilled labor within the defense and aerospace manufacturing sector.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Significant equitable adjustment suggests potential issues with initial cost estimation or contract scope management.
Cost Plus Award Fee contracts can lead to cost overruns if not meticulously overseen.
Lack of detailed justification for the equitable adjustment hinders a thorough value assessment.
The contract's performance period is relatively short, making the adjustment's magnitude more pronounced.

Positive Signals

Awarded through full and open competition, indicating a potentially robust bidding process.
The contractor is involved in a critical sector (navigation and guidance systems) for national security.
The contract aims to improve essential Coast Guard operational capabilities.

Sector Analysis

This contract falls within the broader aerospace and defense manufacturing sector, specifically focusing on navigation and guidance systems. The market for such specialized instruments is characterized by high technical barriers to entry and significant government procurement. Comparable spending benchmarks would typically involve other contracts for similar sensor, navigation, or control systems for military or coast guard applications, often involving complex integration and testing.

Small Business Impact

The data indicates this contract was not set aside for small businesses (ss: false, sb: false). Therefore, the primary contractor, Integrated Coast Guard Systems LLC, is likely a large business. There is no direct information on subcontracting plans or their impact on the small business ecosystem from this data alone. Further investigation would be needed to determine if small business participation was mandated or occurred voluntarily.

Oversight & Accountability

Oversight for this contract would fall under the Department of Homeland Security and the U.S. Coast Guard. The Cost Plus Award Fee structure implies performance metrics and award criteria that require monitoring. Transparency regarding the justification for the equitable adjustment and the performance evaluations would be key oversight elements. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Coast Guard Command and Control Systems
Aeronautical and Nautical Instrument Procurement
Defense Manufacturing Contracts
Federal Equitable Adjustment Claims
Homeland Security Systems Integration

Risk Flags

Significant Equitable Adjustment
Cost Plus Award Fee Contract Type
Potential for Cost Overruns
Need for Detailed Justification of Adjustment

Frequently Asked Questions

What is this federal contract paying for?

Department of Homeland Security awarded $48.3 million to INTEGRATED COAST GUARD SYSTEMS LLC. EQUITABLE ADJUSTMENT FOR STRATOS

Who is the contractor on this award?

The obligated recipient is INTEGRATED COAST GUARD SYSTEMS LLC.

Which agency awarded this contract?

Awarding agency: Department of Homeland Security (U.S. Coast Guard).

What is the total obligated amount?

The obligated amount is $48.3 million.

What is the period of performance?

Start: 2005-02-23. End: 2006-02-26.

What specific factors led to the $48.3 million equitable adjustment for Stratos?

The provided data does not detail the specific factors contributing to the $48.3 million equitable adjustment. Equitable adjustments typically arise from changes in contract scope, unforeseen circumstances, differing site conditions, or government-directed changes that impact the contractor's cost or performance time. For Stratos, this could involve issues related to material costs, labor escalation, design modifications, or delays caused by external factors. A thorough review of contract modification documentation, correspondence between the contractor and the Coast Guard, and any dispute resolution records would be necessary to ascertain the precise reasons. Without this detailed information, it is difficult to assess whether the adjustment was justified or indicative of broader contract management issues.

How does the Cost Plus Award Fee (CPAF) structure impact the final cost and contractor performance in this case?

The Cost Plus Award Fee (CPAF) structure allows the contractor to recover allowable costs plus a fee that is composed of a base fee (often a small percentage of target cost) plus an award amount determined by the government based on performance against defined criteria. This structure incentivizes contractors to perform well by offering a potential award amount. However, it also carries the risk of cost growth if the base cost estimates are inaccurate or if performance targets are difficult to achieve, leading to higher overall costs. For the Stratos contract, the CPAF structure means the final cost includes incurred costs plus whatever award fee was determined. The significant equitable adjustment suggests that either the initial cost estimates were insufficient, or the performance that drove the adjustment also warranted a substantial award fee, making it crucial to examine the performance evaluations alongside the cost data.

What is the track record of Integrated Coast Guard Systems LLC with similar federal contracts?

The provided data identifies 'INTEGRATED COAST GUARD SYSTEMS LLC' as the contractor. To assess their track record, one would need to search federal procurement databases (like SAM.gov, FPDS, or USAspending.gov) for other contracts awarded to this entity. Key areas to investigate would include contract values, types (fixed-price, cost-reimbursement), competition levels, performance ratings (if available), and any history of disputes, claims, or contract terminations. A contractor with a history of successful, on-time, and on-budget delivery of similar systems would be viewed favorably. Conversely, a pattern of cost overruns, delays, or poor performance on prior contracts would raise concerns about their capability to execute this specific award effectively, especially given the substantial equitable adjustment.

How does the $48.3M equitable adjustment compare to the original contract value or similar procurements?

The provided data indicates an 'equitable adjustment' amount of $48,341,831. However, the original contract value or the total awarded value after this adjustment is not explicitly stated. Without the baseline contract value, it's impossible to determine the percentage increase represented by this adjustment. To compare this to similar procurements, one would need to identify contracts for comparable navigation, detection, and guidance systems for the Coast Guard or other maritime agencies. Benchmarking would involve looking at the typical magnitude of equitable adjustments (as a percentage of contract value) in such procurements and the reasons cited for them. A $48.3M adjustment, if it represents a significant portion of the original contract, would be considered substantial and warrant scrutiny.

What are the potential risks associated with the 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' sector for federal contracts?

Contracts in the 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' sector (NAICS 334511) carry several inherent risks for federal agencies. These include rapid technological obsolescence, requiring continuous upgrades and potentially leading to scope creep or the need for frequent contract modifications. Development and integration of complex systems can face unforeseen technical challenges, impacting schedules and costs. Furthermore, the specialized nature of these instruments often means limited sources, potentially reducing competition and increasing prices. Supply chain disruptions for critical components, stringent testing and certification requirements, and the need for highly skilled labor also contribute to project risks. For the government, these risks translate into potential cost overruns, schedule delays, and performance shortfalls if not managed proactively.

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: COMM/DETECT/COHERENT RADIATION

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Offers Received: 2

Pricing Type: COST PLUS AWARD FEE (R)

Evaluated Preference: NONE

Contractor Details

Address: 300 M ST SE STE 685, WASHINGTON, DC, 20003

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $299,876,297

Exercised Options: $296,487,500

Current Obligation: $48,341,831

Contract Characteristics

Multi-Year Contract: Yes

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Parent Contract

Parent Award PIID: DTCG2302C2DW001

IDV Type: IDC

Timeline