DoD awards $330M to BAE Systems for guided missile manufacturing, raising questions about competition

Contract Overview

Contract Amount: $329,644,224 ($329.6M)

Contractor: BAE Systems Information & Electronic Systems Integration Inc

Awarding Agency: Department of Defense

Start Date: 2019-09-25

End Date: 2024-01-25

Contract Duration: 1,583 days

Daily Burn Rate: $208.2K/day

Competition Type: NOT COMPETED

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: FRP 8 DELIVERY FOR WGU-59/B GUIDANCE SECTIONS

Place of Performance

Location: NASHUA, HILLSBOROUGH County, NEW HAMPSHIRE, 03060

State: New Hampshire Government Spending

Plain-Language Summary

Department of Defense obligated $329.6 million to BAE SYSTEMS INFORMATION & ELECTRONIC SYSTEMS INTEGRATION INC for work described as: FRP 8 DELIVERY FOR WGU-59/B GUIDANCE SECTIONS Key points: 1. Contract awarded on a sole-source basis, limiting price discovery and potentially increasing costs. 2. Significant contract value for guided missile manufacturing, indicating a critical defense need. 3. Fixed-price contract type aims to control costs, but sole-source nature may negate benefits. 4. Long performance period of over 4 years suggests a substantial and ongoing requirement. 5. Contractor is a major defense supplier, implying established capabilities but also potential market concentration. 6. Lack of competition is a key risk indicator for value for money. 7. Geographic location in New Hampshire for a major defense contract.

Value Assessment

Rating: questionable

The contract value of $329.6 million for guided missile manufacturing is substantial. However, without competitive bidding, it is difficult to benchmark the pricing against market rates or similar contracts. The firm fixed-price structure is a positive sign for cost control, but the sole-source award means taxpayers may not be receiving the best possible value. Further analysis would be needed to compare this award to historical sole-source awards for similar systems.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning it was not competed. This indicates that the Department of Defense likely determined that only BAE Systems Information & Electronic Systems Integration Inc. could fulfill the requirement. The lack of competition means there were no other bidders to drive down prices through a bidding process, which can lead to higher costs for the government.

Taxpayer Impact: Taxpayers may be paying a premium due to the absence of competitive pressure. Without competing offers, the government has less leverage to negotiate the lowest possible price for these critical missile components.

Public Impact

The primary beneficiaries are the Department of Defense, ensuring the supply of guided missiles for national security. Services delivered include the manufacturing and delivery of guided missiles and related components. The geographic impact is centered in New Hampshire, where BAE Systems' facility is located, supporting local employment and the regional economy. Workforce implications include skilled manufacturing jobs in the defense sector at BAE Systems.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competition and potentially inflates costs.
Lack of transparency in pricing due to no competitive bidding.
Long contract duration could mask inefficiencies if not closely monitored.
Reliance on a single contractor for critical defense components poses supply chain risk.

Positive Signals

Firm fixed-price contract type provides cost certainty for the government.
BAE Systems is an established defense contractor with proven capabilities.
Contract supports critical national defense requirements.

Sector Analysis

This contract falls within the Defense Industrial Base sector, specifically focusing on the manufacturing of guided missiles and space vehicles. The market for such specialized defense components is typically dominated by a few large, established contractors due to high barriers to entry, including technological expertise, security clearances, and significant capital investment. Spending in this sub-sector is driven by national security priorities and geopolitical factors. Comparable spending benchmarks would typically involve analyzing other sole-source or competitively awarded contracts for similar missile systems.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'ss': false and 'sb': false. The prime contractor, BAE Systems, is a large corporation. There is no explicit information provided regarding subcontracting plans to small businesses. Therefore, the direct impact on the small business ecosystem from this specific award is likely minimal, though BAE Systems may engage small businesses as part of its broader supply chain.

Oversight & Accountability

Oversight for this contract would typically fall under the Defense Contract Management Agency (DCMA), which is responsible for ensuring contractor performance and compliance. The firm fixed-price nature of the contract provides some level of cost accountability. However, the sole-source award necessitates robust oversight to ensure fair pricing and prevent potential cost overruns. Transparency regarding the justification for the sole-source award and ongoing performance metrics would be key accountability measures.

Related Government Programs

Guided Missile Manufacturing
Defense Procurement
BAE Systems Contracts
Sole-Source Defense Contracts
Naval Systems
Aerospace Manufacturing

Risk Flags

Sole-source award
Lack of competition
Potential for inflated pricing
Long-term commitment without competitive validation

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $329.6 million to BAE SYSTEMS INFORMATION & ELECTRONIC SYSTEMS INTEGRATION INC. FRP 8 DELIVERY FOR 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 (Defense Contract Management Agency).

What is the total obligated amount?

The obligated amount is $329.6 million.

What is the period of performance?

Start: 2019-09-25. End: 2024-01-25.

What is the justification for awarding this contract on a sole-source basis?

The provided data does not include the specific justification for the sole-source award. Typically, sole-source contracts are awarded when only one responsible source is available to meet the government's needs. This could be due to unique capabilities, proprietary technology, urgent requirements where competition is not feasible, or specific program requirements that limit the pool of potential contractors. For a contract of this magnitude and criticality, the Department of Defense would have likely conducted a thorough review to determine if competitive procedures were truly impracticable. Further investigation into official justification documents, such as a Justification and Approval (J&A) for Other Than Full and Open Competition, would be necessary to understand the precise rationale.

How does the firm fixed-price (FFP) contract type mitigate risks in a sole-source award?

A Firm Fixed-Price (FFP) contract type is generally advantageous for the government as it shifts the risk of cost overruns to the contractor. The contractor agrees to a set price for the work, and any costs incurred above that price are absorbed by them. In the context of a sole-source award, FFP provides a degree of cost certainty for the government, preventing open-ended spending. However, it does not eliminate the risk of paying an inflated price, as the baseline price was not established through competition. Robust oversight is still crucial to ensure the FFP is fair and reasonable, especially when there's no competitive benchmark.

What is BAE Systems' track record with the Department of Defense for similar contracts?

BAE Systems Information & Electronic Systems Integration Inc. is a major defense contractor with a significant history of working with the Department of Defense. While specific details on their track record for guided missile manufacturing contracts are not provided in this data snippet, the company is known for its extensive work in defense electronics, aerospace, and naval systems. They are a frequent recipient of large DoD contracts. A comprehensive review of their past performance, including on-time delivery, quality, and cost control on similar programs, would be essential for a complete assessment. Their established presence suggests a capacity to handle complex defense manufacturing requirements.

What are the potential implications of a long contract performance period (over 4 years)?

A long contract performance period, such as the 1583 days (approximately 4.3 years) for this contract, suggests a sustained and significant requirement for the delivered goods or services. For the government, it can provide supply chain stability and predictability. However, it also means that potential inefficiencies or cost issues may persist for an extended duration if not actively managed. From the contractor's perspective, it offers revenue stability. For taxpayers, a long duration on a sole-source contract heightens the importance of ongoing oversight to ensure the price remains fair and competitive throughout the contract's life, and that the contractor remains incentivized to perform efficiently.

Are there any comparable spending benchmarks for guided missile manufacturing contracts?

Establishing precise comparable spending benchmarks for guided missile manufacturing is challenging without access to detailed contract databases and specific system requirements. Missile systems vary significantly in complexity, technology, and quantity. However, general benchmarks can be derived by analyzing the average cost per unit for similar classes of missiles awarded through competitive processes. Factors like the type of missile (e.g., air-to-air, surface-to-air, cruise), range, payload, and guidance systems heavily influence cost. Sole-source awards, like this one, make direct cost comparisons difficult as they lack the competitive validation that typically drives prices down. Industry reports and government accountability office (GAO) reviews on major defense programs can offer broader insights into cost trends.

What is the significance of the 'Guided Missile and Space Vehicle Manufacturing' North American Industry Classification System (NAICS) code?

The NAICS code 336414, 'Guided Missile and Space Vehicle Manufacturing,' signifies that the contract is for the production of complex, high-technology defense systems. This industry is characterized by stringent quality control, advanced engineering, specialized manufacturing processes, and significant research and development investment. Companies operating under this code are typically large, established defense prime contractors with extensive experience and security clearances. Contracts within this sector often involve substantial dollar values due to the sophisticated nature of the products and the critical role they play in national security. The code helps categorize spending and understand the industrial base supporting defense capabilities.

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: N0001918R0018

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: BAE Systems PLC

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: $329,644,224

Exercised Options: $329,644,224

Current Obligation: $329,644,224

Actual Outlays: $14,426,454

Subaward Activity

Number of Subawards: 106

Total Subaward Amount: $163,031,032

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: N0001919D0026

IDV Type: IDC

Timeline