DoD's $59M un-definitized contract for missiles awarded without competition, raising value concerns

Contract Overview

Contract Amount: $58,937,339 ($58.9M)

Contractor: Alliant Techsystems Operations LLC

Awarding Agency: Department of Defense

Start Date: 2008-12-23

End Date: 2014-11-07

Contract Duration: 2,145 days

Daily Burn Rate: $27.5K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIXED PRICE INCENTIVE

Sector: Defense

Official Description: UNDEFINITIZED CONTRACT ACTION (UCA) FOR AGM-88E AARGM(FY08&FY09) LOW-RATE INITIAL PRODUCTION (LRIP). QUANTITY OF 25 AUR'S AND 2 CATMS AND ASSOCIATED HARDWARE AND SERVICES.

Place of Performance

Location: NORTHRIDGE, LOS ANGELES County, CALIFORNIA, 91324, UNITED STATES OF AMERICA

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $58.9 million to ALLIANT TECHSYSTEMS OPERATIONS LLC for work described as: UNDEFINITIZED CONTRACT ACTION (UCA) FOR AGM-88E AARGM(FY08&FY09) LOW-RATE INITIAL PRODUCTION (LRIP). QUANTITY OF 25 AUR'S AND 2 CATMS AND ASSOCIATED HARDWARE AND SERVICES. Key points: 1. Contract awarded as an Undefinitized Contract Action (UCA), indicating initial agreement on terms but not final pricing. 2. The contract was not competed, raising questions about price discovery and potential overpayment. 3. The fixed-price incentive contract type aims to control costs but may not be fully effective without competitive benchmarking. 4. The contract duration of over 2000 days suggests a long-term need for these missile components. 5. The primary contractor, Alliant Techsystems Operations LLC, is a significant player in the defense manufacturing sector. 6. The absence of small business set-asides or subcontracting plans warrants further investigation into broader economic impact.

Value Assessment

Rating: questionable

The contract's value of $58.9 million for 25 Advanced Anti-Radiation Guided Missile (AARGM) units and associated hardware/services is difficult to benchmark due to its undefinitized nature and lack of competition. Without competitive bids, it's challenging to ascertain if the pricing reflects fair market value. The fixed-price incentive structure suggests an attempt to manage costs, but the initial lack of defined terms in a UCA can lead to cost growth during definitization. Further analysis would be needed to compare unit costs to similar missile systems or previous production runs.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was explicitly marked as 'NOT COMPETED,' indicating a sole-source award. This means that only one contractor, Alliant Techsystems Operations LLC, was solicited or considered for this procurement. The lack of competition prevents a robust price discovery process, where multiple bidders would typically drive down prices through their offers. This approach is often used when a specific capability is required from a single source, but it bypasses the benefits of a competitive environment.

Taxpayer Impact: Taxpayers may have paid a premium for this missile system due to the absence of competitive pressure. Without competing offers, there is a reduced likelihood of achieving the lowest possible price for the government.

Public Impact

The primary beneficiaries are the U.S. Navy and potentially other branches of the Department of Defense requiring advanced anti-radiation missile capabilities. The contract delivers 25 AUR's (All-Up Rounds) and 2 CATM's (Captive Carry Training Missiles), along with associated hardware and services, crucial for air defense suppression missions. The contract was awarded to a facility in California, suggesting potential workforce implications and economic impact within that state. This procurement supports the operational readiness and technological advancement of the U.S. Air Force's combat capabilities.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Awarded as an Undefinitized Contract Action (UCA), which carries inherent risks of cost growth during the definitization period.
Lack of competition means potential for inflated pricing and reduced value for taxpayer dollars.
The long contract duration (over 2000 days) increases the exposure to potential scope creep or unforeseen cost increases.
Fixed-price incentive contracts, while aiming for cost control, can still lead to higher costs if the baseline is not well-established through competition.

Positive Signals

The contract specifies a Fixed Price Incentive (FPI) type, which includes provisions for sharing excess costs or savings between the government and the contractor, incentivizing cost control.
Alliant Techsystems Operations LLC is an established defense contractor with experience in missile systems, suggesting technical capability.
The procurement addresses a specific defense need for advanced anti-radiation missiles, contributing to national security objectives.

Sector Analysis

The Guided Missile and Space Vehicle Manufacturing sector (NAICS 336414) is a highly specialized and critical component of the defense industrial base. This contract for AGM-88E AARGM falls squarely within this domain, focusing on air-to-ground missile technology. The market is characterized by high barriers to entry, significant R&D investment, and a limited number of prime contractors capable of producing such advanced systems. Spending in this sector is driven by evolving threat landscapes and the need for technological superiority.

Small Business Impact

The data indicates that this contract was not subject to small business set-asides (ss: false) and there is no explicit mention of small business subcontracting plans (sb: false). This suggests that the primary award went to a large business, and there may be limited direct opportunities for small businesses within this specific contract's prime award. The impact on the small business ecosystem would depend on whether the prime contractor utilizes small businesses in its supply chain, which is not detailed in the provided data.

Oversight & Accountability

As an Undefinitized Contract Action (UCA), this contract likely falls under the oversight of the Defense Contract Management Agency (DCMA) or a similar entity responsible for contract administration and ensuring contractor performance. Transparency regarding the definitization process and final pricing would be crucial for accountability. Inspector General reviews could be triggered if cost overruns or performance issues arise during the contract's lifecycle. The fixed-price incentive structure itself is an oversight mechanism designed to align contractor and government interests.

Related Government Programs

AGM-88 HARM Missile Program
Advanced Precision Kill Weapon System (APKWS)
Joint Air-to-Surface Standoff Missile (JASSM)
Standard Missile Family
Missile Defense Systems

Risk Flags

Undefinitized Contract Action (UCA)
Sole-Source Award
Potential for Cost Growth
Lack of Competitive Benchmarking
Long Contract Duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $58.9 million to ALLIANT TECHSYSTEMS OPERATIONS LLC. UNDEFINITIZED CONTRACT ACTION (UCA) FOR AGM-88E AARGM(FY08&FY09) LOW-RATE INITIAL PRODUCTION (LRIP). QUANTITY OF 25 AUR'S AND 2 CATMS AND ASSOCIATED HARDWARE AND SERVICES.

Who is the contractor on this award?

The obligated recipient is ALLIANT TECHSYSTEMS OPERATIONS LLC.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $58.9 million.

What is the period of performance?

Start: 2008-12-23. End: 2014-11-07.

What is the track record of Alliant Techsystems Operations LLC with similar missile system contracts?

Alliant Techsystems Operations LLC, now part of Northrop Grumman, has a significant history in defense contracting, including extensive experience with missile systems. They have been a key player in the production of various munitions and missile components for the U.S. military. Their involvement often spans research, development, testing, and full-rate production. Specific to anti-radiation missiles, their predecessor companies and current operations have been involved in programs like the Advanced Anti-Radiation Guided Missile (AARGM) itself, as well as other air-to-ground and air-to-air missile systems. Analyzing their past performance on similar fixed-price incentive contracts and UCAs would provide insight into their ability to manage costs and deliver on schedule. Historical data on contract modifications, cost overruns, and delivery performance for Alliant Techsystems on comparable programs would be essential for a comprehensive assessment of their reliability and value proposition in this specific instance.

How does the unit cost of the AGM-88E AARGM compare to previous or alternative missile systems?

Directly comparing the unit cost of the AGM-88E AARGM from this specific $58.9 million contract is challenging without knowing the final definitized price and the exact quantity of All-Up Rounds (AURs) and Captive Carry Training Missiles (CATMs) included in the final settlement. However, the AGM-88 series is a relatively advanced and specialized weapon system designed for suppressing enemy air defenses. Its cost is expected to be higher than simpler munitions. Benchmarking against publicly available data for previous lots of AARGM or comparable anti-radiation missiles from other nations or manufacturers would be necessary. For instance, if previous LRIP (Low-Rate Initial Production) lots of AARGM had significantly lower unit costs, it would raise questions about the current pricing. Similarly, comparing it to other advanced air-to-ground missiles with different guidance systems or ranges could provide context, though direct apples-to-apples comparisons are often difficult due to varying capabilities and production scales.

What are the primary risks associated with awarding a contract as an Undefinitized Contract Action (UCA)?

The primary risk associated with awarding a contract as an Undefinitized Contract Action (UCA) is the potential for significant cost growth during the definitization period. A UCA allows work to begin before all contract terms, including price, are finalized. This can lead to the government agreeing to terms that are less favorable than if the contract had been fully negotiated upfront. Risks include the contractor incurring costs based on assumptions that may not align with the government's final requirements or pricing expectations, leading to protracted negotiations and potential disputes. There's also a risk that the government may pay more than necessary if the final negotiated price is higher than initially anticipated, especially in a sole-source situation where competitive pressure is absent. Furthermore, UCAs can extend the overall contract timeline, delaying final delivery and increasing administrative burden.

What is the expected effectiveness and operational impact of the AGM-88E AARGM?

The AGM-88E AARGM (Advanced Anti-Radiation Guided Missile) is designed to detect and destroy enemy radar emitters, primarily those associated with surface-to-air missile (SAM) sites and air defense systems. Its effectiveness lies in its ability to engage targets at longer ranges and with greater precision than its predecessors, thanks to improved guidance, seeker technology, and a broader frequency range detection capability. The AGM-88E offers enhanced performance against newer and more sophisticated radar threats. Operationally, the AARGM is crucial for Suppression of Enemy Air Defenses (SEAD) missions, enabling friendly aircraft to operate more safely in contested airspace. Its deployment allows air forces to neutralize enemy air defense networks, paving the way for follow-on strike packages. The 25 AURs and 2 CATMs procured under this contract contribute directly to the operational readiness and capability of platforms equipped to employ this missile.

How has federal spending on guided missile manufacturing evolved over recent fiscal years?

Federal spending on guided missile manufacturing has historically been substantial, driven by national security requirements and ongoing modernization efforts across military branches. While specific figures for the 'Guided Missile and Space Vehicle Manufacturing' NAICS code (336414) fluctuate based on program lifecycles and new procurements, overall defense spending in this category tends to remain robust. Recent fiscal years have seen continued investment in advanced missile technologies, including hypersonic capabilities, air-to-air missiles, air-to-ground precision-guided munitions, and defensive interceptors. Spending levels are influenced by geopolitical tensions, strategic defense reviews, and the retirement of older systems necessitating replacements. Analyzing trends requires looking at aggregate defense budgets allocated to missile programs, often detailed within the Department of Defense's Future Years Defense Program (FYDP) and specific service budget requests. This particular contract, initiated in FY08/FY09, reflects spending patterns from that era.

What are the implications of awarding a sole-source contract for critical defense components?

Awarding a sole-source contract for critical defense components like the AGM-88E AARGM has several implications. Firstly, it bypasses the competitive process, which is generally intended to ensure the government receives the best value (price, quality, delivery). This can lead to higher costs for taxpayers, as there is no market pressure to drive down prices. Secondly, it relies heavily on the government's ability to negotiate a fair price and manage the contractor effectively, often requiring robust cost analysis and oversight. Thirdly, it can create dependency on a single supplier, potentially leading to supply chain vulnerabilities if that supplier faces production issues or business disruptions. While sole-source awards are sometimes justified by unique capabilities, proprietary technology, or urgent needs, they necessitate stringent justification and careful monitoring to mitigate the inherent risks to cost, schedule, and long-term strategic sourcing.

Industry Classification

NAICS: Manufacturing › Aerospace Product and Parts Manufacturing › Guided Missile and Space Vehicle Manufacturing

Product/Service Code: GUIDED MISSLES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0001908R0044

Offers Received: 1

Pricing Type: FIXED PRICE INCENTIVE (L)

Evaluated Preference: NONE

Contractor Details

Parent Company: Northrop Grumman Innovation Systems LLC (UEI: 618705925)

Address: 21301 BURBANK BLVD, WOODLAND HILLS, CA, 91367

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: $58,937,339

Exercised Options: $58,937,339

Current Obligation: $58,937,339

Contract Characteristics

Cost or Pricing Data: YES

Timeline