DoD awards $103M contract for NRE DBD Development to BAE Systems, with a 1.2B ceiling

Contract Overview

Contract Amount: $102,884,182 ($102.9M)

Contractor: BAE Systems Information and Electronic Systems Integration Inc.

Awarding Agency: Department of Defense

Start Date: 2023-09-12

End Date: 2026-12-25

Contract Duration: 1,200 days

Daily Burn Rate: $85.7K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Official Description: NRE DBD DEVELOPMENT

Place of Performance

Location: NASHUA, HILLSBOROUGH County, NEW HAMPSHIRE, 03060

State: New Hampshire Government Spending

Plain-Language Summary

Department of Defense obligated $102.9 million to BAE SYSTEMS INFORMATION AND ELECTRONIC SYSTEMS INTEGRATION INC. for work described as: NRE DBD DEVELOPMENT Key points: 1. Contract value of $102.9M for NRE DBD Development, with a potential ceiling of $1.2B, indicates significant long-term investment. 2. BAE Systems, a major defense contractor, secured this award through full and open competition. 3. The contract type is Cost Plus Incentive Fee (CPIF), suggesting performance incentives tied to cost and schedule. 4. The contract duration of 1200 days (approximately 3.3 years) points to a substantial development and integration effort. 5. The North American Industry Classification System (NAICS) code 334511 covers Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing. 6. The award was made by the Department of the Navy, a key component of the Department of Defense. 7. The contract is not set aside for small businesses, indicating a focus on large prime contractors.

Value Assessment

Rating: good

The contract's value of $102.9M for NRE DBD Development appears reasonable given the scope of work in advanced system development. While a definitive value-for-money assessment requires detailed cost breakdowns and performance metrics, the CPIF structure allows for potential savings if BAE Systems meets or exceeds targets. Benchmarking against similar complex system development contracts within the DoD would provide further context on pricing efficiency.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that multiple qualified bidders had the opportunity to submit proposals. The presence of two bids suggests a competitive environment, which typically drives better pricing and innovation. The level of competition is a positive sign for price discovery and ensuring the government receives competitive offers for complex development work.

Taxpayer Impact: Full and open competition generally benefits taxpayers by fostering a marketplace where contractors strive to offer the best value, potentially leading to lower overall costs and higher quality outcomes.

Public Impact

The primary beneficiaries are the Department of the Navy and the broader Department of Defense, who will receive advanced NRE DBD Development capabilities. The services delivered will enhance critical search, detection, navigation, guidance, and related systems. The geographic impact is likely centered around BAE Systems' facilities in New Hampshire, but the end-use systems will have national security implications. The contract supports a highly skilled workforce in advanced engineering, software development, and systems integration within the defense industrial base.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

The CPIF contract type introduces potential for cost overruns if performance incentives are not carefully managed and monitored.
The substantial potential ceiling of $1.2B warrants close oversight to ensure that future task orders remain aligned with the initial development objectives and budget.
Reliance on a single large prime contractor for critical system development can create vendor lock-in risks.
The long contract duration necessitates robust program management to adapt to evolving technological requirements and geopolitical landscapes.

Positive Signals

Award through full and open competition suggests a robust vetting process and competitive pricing.
BAE Systems' established track record in defense contracting provides a degree of confidence in their ability to execute complex projects.
The CPIF structure incentivizes contractor performance, potentially leading to cost efficiencies and schedule adherence.
The contract supports the development of advanced technologies crucial for national security, aligning with strategic defense objectives.

Sector Analysis

This contract falls within the Defense sector, specifically focusing on the manufacturing and development of advanced navigation and detection systems. The market for such specialized defense electronics is characterized by high barriers to entry, significant R&D investment, and a limited number of large, experienced prime contractors like BAE Systems. Spending in this area is driven by the need for technological superiority and modernization of military platforms.

Small Business Impact

This contract was not set aside for small businesses, and there is no explicit mention of subcontracting requirements for small businesses in the provided data. This suggests that the primary awardee, BAE Systems, will likely handle the majority of the work with its own resources or through large subcontractors. The absence of small business set-asides means direct opportunities for small businesses may be limited unless they are part of BAE's supply chain.

Oversight & Accountability

Oversight for this contract will likely be managed by the Department of the Navy's contracting and program management offices. The CPIF structure necessitates close monitoring of costs, performance, and schedule to ensure incentives are met and taxpayer funds are used efficiently. Transparency will depend on the reporting requirements stipulated in the contract and the agency's commitment to public disclosure of contract performance data.

Related Government Programs

Naval Systems Development
Defense Electronics Manufacturing
Advanced Sensor Technology
Guidance and Navigation Systems
Department of Defense Research and Development

Risk Flags

Potential for cost overruns due to CPIF structure
Long contract duration requires sustained oversight
Concentration of work with a single large prime contractor
Need for clear performance metrics and incentive alignment

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $102.9 million to BAE SYSTEMS INFORMATION AND ELECTRONIC SYSTEMS INTEGRATION INC.. NRE DBD DEVELOPMENT

Who is the contractor on this award?

The obligated recipient is BAE SYSTEMS INFORMATION AND 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 $102.9 million.

What is the period of performance?

Start: 2023-09-12. End: 2026-12-25.

What is BAE Systems' track record with similar Cost Plus Incentive Fee (CPIF) contracts within the Department of Defense?

BAE Systems has a long history of executing complex defense contracts, many of which utilize CPIF or similar incentive-based fee structures. Their experience spans a wide range of defense systems, including C4ISR, electronic warfare, and naval platforms. Analyzing their past performance on CPIF contracts would involve reviewing contract award data, performance reports, and any documented instances of cost overruns or underruns, as well as the effectiveness of the incentive mechanisms in driving desired outcomes. Generally, BAE Systems is considered a capable contractor, but like any large firm, performance can vary by program and specific contract terms. A deeper dive would require examining specific contract histories for adherence to budget, schedule, and technical performance targets.

How does the $102.9M initial award compare to the total potential value of $1.2B, and what does this imply for future spending?

The initial award of $102.9M represents the funding allocated for the initial phase of NRE DBD Development, likely covering specific research, design, and early development tasks. The significantly larger potential ceiling of $1.2B indicates that this contract is structured to accommodate substantial future work, such as full-scale development, testing, integration, and potentially production or sustainment over its lifespan. This implies that the Department of the Navy anticipates a long-term need for the capabilities being developed and has reserved significant funding. Taxpayers should be aware that while $102.9M is the current obligation, the total expenditure could reach up to $1.2B if subsequent phases are exercised, necessitating ongoing budget allocation and program justification.

What are the primary risks associated with a CPIF contract for advanced system development, and how are they mitigated?

The primary risks with a CPIF contract for advanced system development include potential cost growth if the contractor struggles to meet performance targets or if unforeseen technical challenges arise, leading to higher costs to achieve the incentive. There's also a risk that the incentive structure itself might not perfectly align with the government's ultimate goals or could inadvertently encourage certain behaviors that aren't in the government's best interest. Mitigation strategies typically involve robust government oversight, clear and measurable performance metrics, well-defined baseline costs and schedules, and strong negotiation of the incentive fee structure. The government must actively manage the contract, monitor progress closely, and be prepared to adjust oversight as needed to ensure the contractor is motivated to deliver the best value within the agreed-upon framework.

What is the typical market size and competitive landscape for 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' (NAICS 334511)?

The market for NAICS code 334511, encompassing advanced navigation and detection systems, is a specialized segment within the broader aerospace and defense industry. It is characterized by high R&D intensity, long product development cycles, and stringent performance requirements. The market size is substantial, driven by government defense spending and, to a lesser extent, commercial aviation and maritime needs. However, the competitive landscape is relatively concentrated, dominated by a few large, established defense contractors with the technical expertise, security clearances, and manufacturing capabilities required. Smaller, niche players may exist but often operate as subcontractors to primes like BAE Systems. The high barriers to entry, including intellectual property, capital investment, and regulatory hurdles, limit the number of potential competitors for large-scale government contracts.

How does the geographic location of the award (New Hampshire) impact the distribution of federal spending and potential economic benefits?

The award to BAE Systems in New Hampshire directs a significant portion of federal spending to that state, supporting jobs and economic activity within the region's defense industrial base. While the ultimate use of the developed systems is national security, the initial contract funds will flow to BAE's facilities in New Hampshire for research, development, and manufacturing. This concentration of spending can have a multiplier effect on the local economy through employment, supplier contracts, and tax revenues. For taxpayers nationwide, the benefit is the advancement of critical defense capabilities, regardless of where the initial development occurs. However, it also highlights the geographic concentration of defense contracting and its associated economic dependencies.

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: N0001921R0050

Offers Received: 2

Pricing Type: COST PLUS INCENTIVE FEE (V)

Evaluated Preference: NONE

Contractor Details

Parent Company: Ball Corporation

Address: 65 SPIT BROOK RD, NASHUA, NH, 03060

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: $128,176,140

Exercised Options: $103,309,020

Current Obligation: $102,884,182

Subaward Activity

Number of Subawards: 3

Total Subaward Amount: $690,375

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline