Navy awards $95.5M contract for guided missile launchers to BAE Systems, citing sole-source justification

Contract Overview

Contract Amount: $95,518,067 ($95.5M)

Contractor: BAE Systems Land & Armaments L.P.

Awarding Agency: Department of Defense

Start Date: 2004-11-30

End Date: 2010-07-30

Contract Duration: 2,068 days

Daily Burn Rate: $46.2K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIXED PRICE AWARD FEE

Sector: Defense

Official Description: 200504!046436!1700!N00024!NAVAL SEA SYSTEMS COMMAND !N0002404C5464 !A!N! !N! ! !20041130!20091231!006481543!824825459!217304393!N!B A E SYSTEMS LAND & ARMAMENTS!4800 E RIVER RD !MINNEAPOLIS !MN!55421!00100!013!46!ABERDEEN !BROWN !S DAKOTA !+000017144896!N!N!000104362455!1440!LAUNCHERS, GUIDED MISSILE !A2 !MISSILE AND SPACE SYSTEMS !370 !COMMON MISSILE !336414!E! !3! ! ! ! ! !20200930!B! ! !B! !D!N!M!1!001!N!1G!A!Y!Z! ! !N!C!N! ! ! !A!A!A!A!000!A!C!Y! ! ! ! !1700!N00024!0001! !

Place of Performance

Location: ABERDEEN, BROWN County, SOUTH DAKOTA, 57401

State: South Dakota Government Spending

Plain-Language Summary

Department of Defense obligated $95.5 million to BAE SYSTEMS LAND & ARMAMENTS L.P. for work described as: 200504!046436!1700!N00024!NAVAL SEA SYSTEMS COMMAND !N0002404C5464 !A!N! !N! ! !20041130!20091231!006481543!824825459!217304393!N!B A E SYSTEMS LAND & ARMAMENTS!4800 E RIVER RD !MINNEAPOLIS !MN!55421!00100!013!46!ABERDEEN !BROW… Key points: 1. Contract awarded on a sole-source basis, raising questions about potential price overruns and limited market exploration. 2. The fixed-price award fee contract structure may incentivize cost control but also introduces performance-based incentives. 3. Long contract duration of over 2000 days suggests a significant, long-term need for these specialized components. 4. The awardee, BAE Systems, is a major defense contractor with established capabilities in this sector. 5. Geographic location of the contractor in South Dakota may have implications for supply chain logistics and regional economic impact. 6. The specific product code for 'Launchers, Guided Missile' indicates a critical component for naval defense systems.

Value Assessment

Rating: fair

The contract value of $95.5 million for guided missile launchers appears substantial. Without direct comparable contracts for the exact same system, it's difficult to definitively benchmark the value. However, the sole-source nature of the award suggests that competitive pricing pressures were not fully leveraged, potentially leading to a less favorable price for the government compared to a fully competed procurement. Further analysis of the award fee structure and performance metrics would be needed to assess if the contractor is delivering value commensurate with the cost.

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 Land & Armaments L.P., was solicited. The justification for this approach is not detailed in the provided data, but sole-source awards typically occur when a unique capability or proprietary technology is required, or in cases of urgent and compelling need where competition is not feasible. The lack of competition limits the government's ability to explore alternative solutions and potentially secure lower prices through a bidding process.

Taxpayer Impact: Sole-source awards can result in higher costs for taxpayers as the government does not benefit from the price competition that typically drives down costs in open procurements.

Public Impact

The primary beneficiaries are the U.S. Navy, which receives critical components for its guided missile systems, enhancing its defense capabilities. The contract delivers specialized launchers essential for the operation of guided missiles, supporting naval combat readiness. The geographic impact is concentrated around the contractor's facility in South Dakota, potentially creating or sustaining jobs in that region. The contract supports the defense industrial base, particularly in the area of missile and space systems manufacturing.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition, potentially increasing costs for taxpayers.
Long contract duration may indicate potential for scope creep or unforeseen cost increases over time.
Lack of detailed performance metrics in the provided data makes it difficult to assess contractor efficiency.
Reliance on a single contractor for critical components could pose supply chain risks.

Positive Signals

BAE Systems is an established defense contractor with a proven track record in complex systems.
Fixed-price award fee structure can provide cost control incentives for the contractor.
The contract addresses a specific and critical need for naval defense systems.

Sector Analysis

This contract falls within the Guided Missile and Space Vehicle Manufacturing sector, a specialized segment of the broader aerospace and defense industry. This sector is characterized by high barriers to entry, significant R&D investment, and long production cycles. The market is dominated by a few large, established defense contractors. Spending in this area is driven by national security requirements and technological advancements in missile defense and offensive capabilities. Comparable spending benchmarks would likely involve other large-scale, sole-source or limited-competition contracts for complex defense systems.

Small Business Impact

The provided data indicates that this contract was not set aside for small businesses and that the prime contractor, BAE Systems, is a large business. There is no information available regarding subcontracting plans or performance related to small business participation. Therefore, the direct impact on the small business ecosystem is likely minimal, unless BAE Systems actively engages small businesses as subcontractors for specific components or services.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy and potentially the Department of Defense's Inspector General. Given the sole-source nature, oversight would focus on ensuring the contractor meets the terms of the contract, delivers quality products on time, and adheres to pricing agreements. Transparency is limited due to the lack of competitive bidding, and accountability would be managed through contract performance reviews and award fee evaluations.

Related Government Programs

Naval Sea Systems Command (NAVSEA) Contracts
Defense Contract Management Agency (DCMA) Oversight
Guided Missile Systems Procurement
Aerospace and Defense Manufacturing Contracts
Sole-Source Defense Procurements

Risk Flags

Sole-source award
Long contract duration
Lack of competitive bidding
Potential for cost overruns
Critical defense component reliance

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $95.5 million to BAE SYSTEMS LAND & ARMAMENTS L.P.. 200504!046436!1700!N00024!NAVAL SEA SYSTEMS COMMAND !N0002404C5464 !A!N! !N! ! !20041130!20091231!006481543!824825459!217304393!N!B A E SYSTEMS LAND & ARMAMENTS!4800 E RIVER RD !MINNEAPOLIS !MN!55421!00100!013!46!ABERDEEN !BROWN !S DAKOTA !+000017144896!N!N!000104362455!1440!LAUNCHERS, GUIDED MISSILE !A2 !MISSILE AND SPACE SYSTEMS !370 !COMMON MISSILE !336414!E! !3! ! ! ! ! !202

Who is the contractor on this award?

The obligated recipient is BAE SYSTEMS LAND & ARMAMENTS L.P..

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $95.5 million.

What is the period of performance?

Start: 2004-11-30. End: 2010-07-30.

What is the specific justification provided by 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 circumstances such as the existence of only one responsible source capable of providing the required supplies or services, urgent and compelling needs that preclude competition, or when the acquisition is for a unique item or technology. Without the official justification document, it is impossible to determine the precise rationale. However, the nature of specialized defense components like missile launchers often leads to situations where only a limited number of contractors possess the necessary expertise, facilities, and security clearances, potentially leading to sole-source considerations.

How does the 'Fixed Price Award Fee' contract type influence cost control and contractor performance for this $95.5M award?

A Fixed Price Award Fee (FPAF) contract aims to balance cost control with performance incentives. The 'Fixed Price' component establishes a ceiling on the total amount the government will pay, encouraging the contractor to manage costs effectively to maximize profit. The 'Award Fee' component allows the government to grant additional compensation to the contractor based on performance against pre-defined criteria. This incentivizes the contractor to exceed minimum performance standards. For this $95.5M contract, the Navy would have established specific performance metrics related to quality, delivery, and potentially technical achievement. BAE Systems would earn a base fee and could earn an additional award fee if they meet or exceed these targets, while remaining within the fixed price ceiling. This structure can be effective in achieving desired outcomes but requires careful definition of award criteria to ensure alignment with government objectives.

What is the historical spending pattern for guided missile launchers by the Department of the Navy, and how does this award compare?

Analyzing historical spending patterns for guided missile launchers by the Department of the Navy requires access to comprehensive contract databases beyond the single record provided. However, it is known that the Navy consistently invests significant funds in missile systems and their associated launch platforms due to their critical role in naval warfare. Awards in this category are typically large, complex, and often involve long-term contracts with major defense contractors like BAE Systems. This $95.5 million award for launchers appears to be a substantial, but not necessarily unprecedented, investment. Without comparative data on the number of units, specific missile types, or contract duration for other similar awards, a precise comparison is difficult. However, the sole-source nature of this award suggests it might represent a specific, perhaps unique, requirement or a continuation of an existing program where competition was deemed impractical.

What are the potential risks associated with a sole-source contract of this magnitude and duration for critical defense components?

A sole-source contract of this magnitude ($95.5M) and duration (over 2000 days) for critical defense components like guided missile launchers carries several potential risks. Firstly, the lack of competition can lead to higher prices than might be achieved in a competitive bidding process, as the government does not benefit from market pressures driving down costs. Secondly, there's a risk of complacency from the contractor, as there is no direct competitor vying for future business based on performance and price. Thirdly, the long duration increases the potential for cost overruns due to unforeseen economic factors, material price fluctuations, or changes in program requirements that may not be adequately captured in the initial agreement. Finally, reliance on a single source can create supply chain vulnerabilities; any disruption at the contractor's facility could significantly impact the Navy's operational readiness.

What is BAE Systems Land & Armaments' track record with the Department of the Navy, particularly concerning missile systems?

BAE Systems Land & Armaments L.P. is a major defense contractor with a significant and established track record of supplying various systems to the Department of the Navy and other branches of the U.S. military. They are known for their expertise in areas such as armored vehicles, naval guns, and missile systems. While the specific data provided here is for a single contract, BAE Systems has historically been involved in numerous large-scale defense contracts, including those related to missile launchers, fire control systems, and other ordnance. Their long-standing presence in the defense industry suggests a level of experience and capability necessary for fulfilling complex requirements like those for guided missile launchers. However, a comprehensive assessment of their track record would involve reviewing their performance across multiple contracts, including on-time delivery, quality adherence, and cost management.

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

Offers Received: 1

Pricing Type: FIXED PRICE AWARD FEE (M)

Evaluated Preference: NONE

Contractor Details

Parent Company: BAE Systems PLC

Address: 4800 E RIVER RD, MINNEAPOLIS, MN, 55421

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

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline