DoD's $45M Engineering Services Contract with BAE Systems Faces Scrutiny Over Cost-Plus Structure
Contract Overview
Contract Amount: $45,182,715 ($45.2M)
Contractor: BAE Systems Land & Armaments L.P.
Awarding Agency: Department of Defense
Start Date: 2011-12-09
End Date: 2018-12-28
Contract Duration: 2,576 days
Daily Burn Rate: $17.5K/day
Competition Type: FULL AND OPEN COMPETITION
Number of Offers Received: 2
Pricing Type: COST PLUS FIXED FEE
Sector: Defense
Official Description: ENGINEERING SERVICES
Place of Performance
Location: MINNEAPOLIS, ANOKA County, MINNESOTA, 55421
Plain-Language Summary
Department of Defense obligated $45.2 million to BAE SYSTEMS LAND & ARMAMENTS L.P. for work described as: ENGINEERING SERVICES Key points: 1. Contract awarded to BAE Systems Land & Armaments L.P. for $45.18M. 2. Utilized a Cost Plus Fixed Fee (CPFF) structure, potentially leading to higher costs. 3. No small business participation noted, raising concerns about broader economic impact. 4. The contract spans nearly 8 years, indicating a long-term commitment. 5. Sector: Defense, specifically related to turbine generator sets.
Value Assessment
Rating: questionable
The Cost Plus Fixed Fee (CPFF) pricing structure can incentivize contractors to increase costs, as their fee is a percentage of the total cost. Without strong oversight, this can lead to overspending compared to fixed-price contracts.
Cost Per Unit: N/A
Competition Analysis
Competition Level: full-and-open
The contract was awarded under full and open competition, suggesting a competitive bidding process. However, the CPFF structure may have limited the effectiveness of price discovery, potentially allowing for higher costs than a fixed-price approach.
Taxpayer Impact: Taxpayer funds may be at risk of inefficiency due to the CPFF structure, potentially exceeding the value achieved in a more cost-controlled contract.
Public Impact
Taxpayers may be overpaying due to the CPFF contract type. Lack of small business involvement limits economic opportunities for smaller firms. Long contract duration (nearly 8 years) ties up significant federal resources. The specific nature of turbine generator sets suggests critical defense infrastructure is involved.
Waste & Efficiency Indicators
Waste Risk Score: 50 / 10
Warning Flags
- Cost-Plus Fixed Fee structure
- No small business participation
- Long contract duration
- Potential for cost overruns
Positive Signals
- Full and open competition
- Awarded to a major defense contractor
Sector Analysis
This contract falls within the Defense sector, specifically supporting manufacturing related to turbine and turbine generator sets. Spending benchmarks in this area are highly variable, depending on technological complexity and specific defense needs.
Small Business Impact
The contract explicitly states no small business participation (sb: false). This indicates a missed opportunity to engage smaller businesses in the defense supply chain and potentially limits competition and innovation.
Oversight & Accountability
The CPFF structure necessitates robust oversight from the Defense Contract Management Agency (DCMA) to ensure costs are reasonable and the fixed fee is justified. The long duration requires sustained vigilance to prevent scope creep and cost escalation.
Related Government Programs
- Turbine and Turbine Generator Set Units Manufacturing
- Department of Defense Contracting
- Defense Contract Management Agency Programs
Risk Flags
- Cost-Plus Fixed Fee pricing structure
- Lack of small business participation
- Long contract duration (nearly 8 years)
- Potential for cost overruns and inefficiencies
- Limited transparency on specific engineering services provided
Tags
turbine-and-turbine-generator-set-units-, department-of-defense, mn, definitive-contract, 10m-plus
Frequently Asked Questions
What is this federal contract paying for?
Department of Defense awarded $45.2 million to BAE SYSTEMS LAND & ARMAMENTS L.P.. ENGINEERING SERVICES
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 (Defense Contract Management Agency).
What is the total obligated amount?
The obligated amount is $45.2 million.
What is the period of performance?
Start: 2011-12-09. End: 2018-12-28.
What specific engineering services were provided under this contract, and how did they directly contribute to the operational readiness or development of defense assets?
The contract data indicates services related to 'Turbine and Turbine Generator Set Units Manufacturing' (NA 333611). These services likely involved design, development, testing, or modification of critical power generation components for military platforms. The exact nature of the engineering services would require deeper analysis of contract line items and deliverables to ascertain their direct contribution to defense capabilities.
Given the CPFF structure, what mechanisms were in place to control costs and ensure the fixed fee was appropriate for the level of effort and risk undertaken by BAE Systems?
With a CPFF contract, robust oversight by the contracting agency (Department of Defense via DCMA) is crucial. This typically involves detailed cost audits, review of labor hours and material costs, and verification that the fixed fee aligns with the contract's complexity and the contractor's performance. The effectiveness of these controls would depend on the rigor of the DCMA's surveillance and reporting.
How did the 'full and open competition' process ensure the best value was achieved, especially considering the inherent cost-reimbursable nature of the CPFF contract?
Full and open competition aims to solicit the widest possible range of offers, driving down prices through market forces. However, with a CPFF contract, the primary focus shifts from a fixed price to managing costs and ensuring the fixed fee is fair. The competition likely focused on the contractor's technical approach, past performance, and proposed fee structure, rather than solely on the lowest price, making effective oversight even more critical.
Industry Classification
NAICS: Manufacturing › Engine, Turbine, and Power Transmission Equipment Manufacturing › Turbine and Turbine Generator Set Units Manufacturing
Product/Service Code: RESEARCH AND DEVELOPMENT › OTHER RESEARCH/DEVELOPMENT
Competition & Pricing
Extent Competed: FULL AND OPEN COMPETITION
Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE
Offers Received: 2
Pricing Type: COST PLUS FIXED FEE (U)
Evaluated Preference: NONE
Contractor Details
Parent Company: BAE Systems PLC
Address: 4800 E RIVER RD, MINNEAPOLIS, MN, 55421
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: $45,374,562
Exercised Options: $45,374,562
Current Obligation: $45,182,715
Actual Outlays: $95,322
Contract Characteristics
Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED
Cost or Pricing Data: NO
Timeline
Start Date: 2011-12-09
Current End Date: 2018-12-28
Potential End Date: 2018-12-28 00:00:00
Last Modified: 2022-04-02
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