DoD's $91.1M contract for Saab's EMD efforts shows strong competition and fixed-price value

Contract Overview

Contract Amount: $91,117,628 ($91.1M)

Contractor: Saab, Inc

Awarding Agency: Department of Defense

Start Date: 2016-09-21

End Date: 2018-04-30

Contract Duration: 586 days

Daily Burn Rate: $155.5K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: THE ENGINEERING AND MANUFACTURING DEVELOPMENT (EMD) NON-RECURRING EFFORTS TO DEVELOP, TEST AND UPDATE THE CONTRACTOR DESIGN TO A POST-CDR CONFIGURATION MODEL.

Place of Performance

Location: EAST SYRACUSE, ONONDAGA County, NEW YORK, 13057

State: New York Government Spending

Plain-Language Summary

Department of Defense obligated $91.1 million to SAAB, INC for work described as: THE ENGINEERING AND MANUFACTURING DEVELOPMENT (EMD) NON-RECURRING EFFORTS TO DEVELOP, TEST AND UPDATE THE CONTRACTOR DESIGN TO A POST-CDR CONFIGURATION MODEL. Key points: 1. The contract leverages a firm-fixed-price structure, aiming to control costs for development and testing. 2. Full and open competition suggests a robust market for these specialized engineering services. 3. The relatively short duration of 586 days indicates a focused effort on specific design updates. 4. The contract's value is moderate within the context of major defense system development. 5. Saab's role as a key supplier in defense systems positions them well for this type of work. 6. The absence of small business set-asides means the primary focus is on large, specialized contractors.

Value Assessment

Rating: good

The $91.1 million contract value for Engineering and Manufacturing Development (EMD) non-recurring efforts appears reasonable given the specialized nature of developing and testing a post-CDR configuration model for a defense system. Benchmarking against similar EMD contracts for complex systems would provide a clearer picture, but the firm-fixed-price (FFP) award structure is a positive indicator for cost control. The contract's value is not excessively high when considering the typical costs associated with advanced engineering, prototyping, and rigorous testing required in defense acquisition.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that multiple capable vendors were allowed to bid. The presence of two bids suggests a competitive environment, though the exact number of bidders is not fully detailed. A competitive process like this is generally expected to drive better pricing and innovation as contractors vie for the award. The specific details of the bidding process and the number of proposals received would offer more insight into the intensity of the competition.

Taxpayer Impact: Full and open competition is beneficial for taxpayers as it typically leads to more competitive pricing and ensures that the government receives the best value for its investment. It prevents potential price gouging and encourages a wider pool of contractors to participate, fostering a healthier market.

Public Impact

The primary beneficiaries are the Department of the Navy and Saab, Inc., through the advancement of defense system capabilities. The contract delivers critical engineering and manufacturing development services for a specific defense system. The geographic impact is primarily centered around Saab's operations in New York. The contract supports specialized engineering and manufacturing jobs within the defense sector.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost overruns if initial estimates for non-recurring efforts are inaccurate, despite FFP.
Dependence on a single contractor (Saab) for critical design updates could pose supply chain risks.
The specific system being developed is not detailed, making it hard to assess broader technological risks.

Positive Signals

Firm-fixed-price contract structure provides cost certainty for the government.
Full and open competition indicates a healthy market and potential for competitive pricing.
Saab's established presence in defense manufacturing suggests technical capability and experience.

Sector Analysis

This contract falls within the 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' sector, a critical component of the defense industry. This industry is characterized by high R&D investment, long product lifecycles, and stringent quality and performance requirements. Spending in this sector is driven by national security needs and technological advancements. Comparable spending benchmarks would involve looking at other EMD contracts for similar complex defense systems, which can range from tens to hundreds of millions of dollars.

Small Business Impact

This contract was not awarded as a small business set-aside, nor does it appear to have specific subcontracting requirements for small businesses mentioned in the provided data. The focus is on a large prime contractor, Saab, Inc., for specialized engineering and manufacturing development. This implies that the direct impact on the small business ecosystem may be limited unless Saab actively engages small businesses as subcontractors, which is not explicitly detailed here. Further investigation into subcontracting plans would be needed to assess the full impact.

Oversight & Accountability

The contract is a definitive contract awarded by the Department of the Navy, implying oversight from the agency's contracting and program management offices. As a firm-fixed-price contract, oversight would focus on adherence to the defined scope, schedule, and technical specifications. Transparency is generally expected through contract award databases and reporting mechanisms. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected during the contract's performance or closeout.

Related Government Programs

Defense System Development Contracts
Engineering and Manufacturing Development (EMD)
Naval Systems Acquisition
Search and Navigation Systems
Aeronautical and Nautical Instruments

Risk Flags

Potential for cost overruns if scope is underestimated.
Dependence on contractor's technical expertise for successful development.
Risk of schedule delays impacting follow-on production phases.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $91.1 million to SAAB, INC. THE ENGINEERING AND MANUFACTURING DEVELOPMENT (EMD) NON-RECURRING EFFORTS TO DEVELOP, TEST AND UPDATE THE CONTRACTOR DESIGN TO A POST-CDR CONFIGURATION MODEL.

Who is the contractor on this award?

The obligated recipient is SAAB, INC.

Which agency awarded this contract?

Awarding agency: Department of Defense (Department of the Navy).

What is the total obligated amount?

The obligated amount is $91.1 million.

What is the period of performance?

Start: 2016-09-21. End: 2018-04-30.

What is Saab, Inc.'s track record with similar Department of Defense contracts, particularly in Engineering and Manufacturing Development?

Saab, Inc. has a significant history of contracting with the Department of Defense, particularly in areas related to naval systems, radar, and avionics. Their track record includes numerous contracts for development, production, and support of complex defense equipment. For Engineering and Manufacturing Development (EMD) phases, Saab's experience likely involves rigorous testing, design refinement, and integration of new technologies into existing or new platforms. Analyzing their past performance on similar EMD contracts would reveal their ability to meet technical requirements, manage schedules, and control costs within the defense acquisition framework. Specific past performance reviews and contract closeout data would be crucial for a comprehensive assessment of their reliability in this domain.

How does the $91.1 million value compare to other EMD contracts for navigation and guidance systems?

The $91.1 million value for this EMD contract is within a moderate range for specialized defense system development. Engineering and Manufacturing Development phases for complex systems like navigation, detection, and guidance instruments often require substantial investment in research, design, prototyping, and testing. Depending on the system's complexity, technological novelty, and scale, EMD contracts can range from tens of millions to several hundred million dollars, or even billions for major platform developments. This specific contract's value appears reasonable when considering it's for non-recurring efforts to refine a design to a post-CDR (Critical Design Review) configuration. A more precise comparison would require analyzing the scope and technical maturity of other comparable EMD contracts within the same sub-sector.

What are the primary risks associated with this firm-fixed-price contract for Saab, Inc.?

For Saab, Inc., the primary risk with a firm-fixed-price (FFP) contract is the potential for cost overruns if the scope of work is underestimated or unforeseen technical challenges arise during development and testing. Unlike cost-reimbursement contracts, Saab bears the financial burden of any expenses exceeding the agreed-upon price. This necessitates meticulous planning, accurate cost estimation, and efficient execution. If the non-recurring efforts prove more complex or time-consuming than anticipated, Saab's profit margins could be significantly eroded. Additionally, scope creep, if not managed through formal change orders, could also lead to financial strain. The success of an FFP contract hinges on the contractor's ability to accurately predict and control costs throughout the performance period.

How effective is the 'full and open competition' approach in ensuring value for money in this specific defense sector?

The 'full and open competition' approach is generally considered highly effective in ensuring value for money, especially in specialized sectors like defense manufacturing. By allowing all responsible sources to submit bids, the government maximizes the potential for receiving competitive pricing and innovative solutions. In the context of navigation, detection, and guidance systems, this approach encourages multiple companies with varying technological approaches and cost structures to compete, driving down prices and improving the quality of the final product. The presence of multiple bidders, as indicated by the two bids received in this case, suggests that the market is sufficiently robust to support competition. This process helps prevent sole-source situations that could lead to inflated costs and limits the government's options.

What are the historical spending patterns for similar 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' contracts by the Department of the Navy?

Historical spending patterns for 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' contracts by the Department of the Navy typically show significant and consistent investment. This sector is crucial for naval operations, encompassing everything from radar and sonar systems to GPS and inertial navigation units, as well as flight control instruments for aircraft. Spending in this area is often characterized by large, multi-year contracts for system development, upgrades, and sustainment, driven by the need for technological superiority and platform modernization. The total annual spending can fluctuate based on specific program requirements, budget allocations, and the lifecycle stage of various naval assets. Analyzing historical data reveals a trend of substantial, ongoing expenditure to maintain and advance these critical capabilities, often involving high-value contracts awarded through competitive processes.

What are the implications of the contract being awarded as a 'Definitive Contract' with a 'FIRM FIXED PRICE' type?

A 'Definitive Contract' is a standard contract type used when the exact quantity of supplies or services is not known at the time of award but is expected to be determined during the contract period. When combined with a 'FIRM FIXED PRICE' (FFP) type, it signifies that the contractor, Saab, Inc., agrees to perform the specified work for a predetermined price, regardless of the actual costs incurred. This structure provides the government with the highest level of cost certainty. For the contractor, it presents a risk of financial loss if costs exceed the fixed price, but also the potential for higher profits if they can perform efficiently. This type of award is common for well-defined projects where the scope is understood, and the government wants to avoid cost overruns, making it suitable for EMD efforts where specific design updates are targeted.

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

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: N0001915R0081

Offers Received: 2

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Saab Defense and Security USA LLC

Address: 5717 ENTERPRISE PKWY, EAST SYRACUSE, NY, 13057

Business Categories: Category Business, Foreign Owned, Foreign-Owned and U.S.-Incorporated Business, Not Designated a Small Business, Partnership or Limited Liability Partnership, Special Designations

Financial Breakdown

Contract Ceiling: $91,117,628

Exercised Options: $91,117,628

Current Obligation: $91,117,628

Actual Outlays: $4,585,410

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline