DoD awards $400M for missile guidance sections, with BAE Systems as sole source

Contract Overview

Contract Amount: $399,637,110 ($399.6M)

Contractor: BAE Systems Information & Electronic Systems Integration Inc

Awarding Agency: Department of Defense

Start Date: 2018-03-08

End Date: 2020-12-04

Contract Duration: 1,002 days

Daily Burn Rate: $398.8K/day

Competition Type: NOT COMPETED

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: PROCUREMENT OF APKWS II WGU-59/B GUIDANCE SECTIONS

Place of Performance

Location: HUDSON, HILLSBOROUGH County, NEW HAMPSHIRE, 03051

State: New Hampshire Government Spending

Plain-Language Summary

Department of Defense obligated $399.6 million to BAE SYSTEMS INFORMATION & ELECTRONIC SYSTEMS INTEGRATION INC for work described as: PROCUREMENT OF APKWS II WGU-59/B GUIDANCE SECTIONS Key points: 1. Significant investment in critical missile components. 2. Sole-source award raises questions about competition and potential cost savings. 3. Contract duration of over two years indicates a substantial, ongoing need. 4. Focus on guided missile manufacturing highlights a key defense sector. 5. Lack of small business participation noted in this specific award. 6. Fixed-price contract type aims to control costs, but sole-source nature limits price discovery.

Value Assessment

Rating: fair

The contract value of approximately $400 million for guidance sections is substantial. Without direct comparable contracts or detailed cost breakdowns, a precise value-for-money assessment is challenging. However, the sole-source nature of the award suggests limited opportunity for competitive bidding, which can sometimes lead to higher prices than in a fully competed environment. Benchmarking against similar guidance section procurements or industry standards for manufacturing complex aerospace components would be necessary for a more definitive value assessment.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one bidder, BAE Systems Information & Electronic Systems Integration Inc., was considered. This approach is typically used when a unique capability or proprietary technology is required, or when only one responsible source can fulfill the requirement. The lack of competition means that the government did not benefit from a bidding process that could drive down prices through market forces.

Taxpayer Impact: Taxpayers may have paid a premium due to the absence of competitive pressure. The government's ability to negotiate the best possible price was constrained by the sole-source determination.

Public Impact

The primary beneficiaries are the U.S. Navy, receiving critical components for its missile systems. Services delivered include the manufacturing of WGU-59/B guidance sections for Advanced Precision Kill Weapon Systems (APKWS). The geographic impact is primarily within the United States, supporting defense manufacturing capabilities. Workforce implications include skilled labor in advanced manufacturing and aerospace engineering within BAE Systems.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing and potential cost savings for taxpayers.
Lack of transparency in the justification for sole-source procurement.
Potential for vendor lock-in due to specialized nature of components.
Absence of small business participation in this specific contract.

Positive Signals

Contract awarded to an established defense contractor with existing capabilities.
Fixed-price contract type provides cost certainty for the government.
Ensures supply of critical missile components for national defense.

Sector Analysis

The guided missile and space vehicle manufacturing sector is a highly specialized and critical part of the defense industrial base. This contract falls within the broader aerospace and defense industry, characterized by high barriers to entry, significant R&D investment, and stringent quality requirements. Spending in this sector is heavily influenced by geopolitical factors and national security priorities. Comparable spending benchmarks would involve looking at other major missile system procurements or component manufacturing contracts within the Department of Defense.

Small Business Impact

This contract does not appear to have a small business set-aside. The sole-source nature of the award to a large prime contractor, BAE Systems, suggests limited opportunities for small businesses to participate directly as the prime awardee. Subcontracting opportunities may exist, but the overall impact on the small business ecosystem for this specific procurement is likely minimal unless specific subcontracting goals were mandated and met.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of the Navy's contracting and program management offices. Accountability measures are inherent in the fixed-price contract type, which shifts some risk to the contractor. Transparency is limited by the sole-source justification. Inspector General jurisdiction would apply to investigations of fraud, waste, or abuse related to the contract.

Related Government Programs

Advanced Precision Kill Weapon System (APKWS)
Guided Missile Manufacturing
Department of the Navy Weapon Systems Procurement
Aerospace Component Manufacturing
Defense Industrial Base Contracts

Risk Flags

Sole-source award may indicate limited competition.
Lack of detailed cost breakdown hinders value assessment.
No indication of small business participation.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $399.6 million to BAE SYSTEMS INFORMATION & ELECTRONIC SYSTEMS INTEGRATION INC. PROCUREMENT OF APKWS II WGU-59/B GUIDANCE SECTIONS

Who is the contractor on this award?

The obligated recipient is BAE SYSTEMS INFORMATION & ELECTRONIC SYSTEMS INTEGRATION 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 $399.6 million.

What is the period of performance?

Start: 2018-03-08. End: 2020-12-04.

What is the specific justification provided by the Department of the Navy for awarding this contract on a sole-source basis to BAE Systems?

The provided data does not include the specific justification for the sole-source award. Typically, sole-source procurements are justified under specific circumstances outlined in federal acquisition regulations, such as the existence of only one responsible source capable of providing the required supplies or services, or when a public exigency requires immediate delivery and other sources are not available. For this contract, the justification would likely detail why BAE Systems was the only viable option for producing the WGU-59/B guidance sections, potentially due to proprietary technology, unique manufacturing capabilities, or integration requirements with existing systems. Further investigation into the contract file or specific sole-source justifications published by the agency would be needed to ascertain the precise reasoning.

How does the unit cost of the WGU-59/B guidance sections compare to industry benchmarks or similar components?

The provided data aggregates the total contract value ($399,637,109.60) over a duration of 1002 days, but it does not break down the number of units procured or the per-unit cost. Without this specific unit cost information, a direct comparison to industry benchmarks or similar components is not possible. To perform such an analysis, one would need to know the total quantity of guidance sections delivered under this contract. If the quantity were known, the average unit price could be calculated and then benchmarked against publicly available data for similar missile guidance systems, considering factors like technological sophistication, material costs, and manufacturing complexity. The sole-source nature of the award also complicates direct price comparisons, as competitive market forces were absent.

What is BAE Systems' track record with producing APKWS II guidance sections or similar defense components?

BAE Systems Information & Electronic Systems Integration Inc. is a major defense contractor with extensive experience in producing a wide range of electronic systems, including those for guided munitions. While the specific data here confirms they were awarded this significant contract for WGU-59/B guidance sections, their broader track record in producing APKWS II components or similar defense electronics would need to be assessed through their contract history with the DoD and other agencies. This would involve reviewing past performance evaluations, on-time delivery rates, quality control metrics, and any history of contract disputes or issues. Given the sole-source nature of this award, it implies a level of confidence or established capability by the Navy in BAE Systems' ability to meet the requirements for these critical guidance sections.

What are the potential risks associated with a sole-source award for critical defense components like missile guidance sections?

Sole-source awards for critical defense components carry several potential risks. Firstly, the absence of competition can lead to higher prices than might be achieved in a competitive bidding process, as the contractor faces less pressure to offer the most cost-effective solution. Secondly, it can reduce innovation, as there is less incentive for the sole provider to invest in developing more efficient or advanced manufacturing techniques if they are guaranteed the contract. Thirdly, it creates a dependency on a single supplier, which can be a strategic vulnerability if that supplier experiences production issues, financial difficulties, or changes its business focus. Finally, it can limit transparency and make it harder for the government to independently verify the fairness of the pricing and the overall value received.

How does this contract fit into the broader spending patterns for guided missile manufacturing within the Department of Defense?

This contract, valued at approximately $400 million, represents a significant investment in a specific component of guided missile systems. To understand its place within broader DoD spending patterns, one would need to analyze historical and current aggregate spending data for the 'Guided Missile and Space Vehicle Manufacturing' (NAICS 336414) sector, or more specifically, for APKWS II program components. This $400 million award, spread over roughly 2.75 years, indicates a steady demand for these guidance sections. Comparing this figure to the total annual DoD budget allocated to missile procurement, or to the spending on other major missile programs, would provide context on its relative scale and importance within the overall defense acquisition landscape.

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

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: BAE Systems PLC (UEI: 217304393)

Address: 65 RIVER RD, HUDSON, NH, 03051

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: $399,637,110

Exercised Options: $399,637,110

Current Obligation: $399,637,110

Subaward Activity

Number of Subawards: 165

Total Subaward Amount: $227,143,969

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: N0001917D5517

IDV Type: IDC

Timeline