DoD's $35M research contract with Penn State for system design integration shows limited competition

Contract Overview

Contract Amount: $34,923,219 ($34.9M)

Contractor: THE Pennsylvania State University

Awarding Agency: Department of Defense

Start Date: 2018-01-17

End Date: 2020-03-31

Contract Duration: 804 days

Daily Burn Rate: $43.4K/day

Competition Type: NOT COMPETED

Pricing Type: COST PLUS FIXED FEE

Sector: R&D

Official Description: SYSTEM DESIGNED INTEGRATION AGENT (FY18-FY19)

Place of Performance

Location: UNIVERSITY PARK, CENTRE County, PENNSYLVANIA, 16802

State: Pennsylvania Government Spending

Plain-Language Summary

Department of Defense obligated $34.9 million to THE PENNSYLVANIA STATE UNIVERSITY for work described as: SYSTEM DESIGNED INTEGRATION AGENT (FY18-FY19) Key points: 1. Contract awarded to a single academic institution, raising questions about competitive pricing. 2. Research and Development focus in physical, engineering, and life sciences. 3. Long contract duration of 804 days suggests a complex, ongoing project. 4. Cost Plus Fixed Fee pricing structure may incentivize cost escalation. 5. No small business set-aside noted, potentially limiting broader economic participation. 6. High value for a single-award R&D contract warrants scrutiny of performance metrics.

Value Assessment

Rating: fair

The contract's value of approximately $35 million over two years for R&D services is substantial. Benchmarking this against similar research contracts is challenging without more specific details on the project's scope and deliverables. The Cost Plus Fixed Fee (CPFF) structure, while common in R&D, can lead to higher overall costs compared to fixed-price contracts if not managed rigorously. The lack of competitive bidding further complicates a direct value-for-money assessment.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis to The Pennsylvania State University. This indicates that the Department of the Navy identified a unique capability or requirement that only this specific institution could fulfill, or that other competitive avenues were deemed impractical. The absence of multiple bidders means there was no direct price competition to drive down costs or encourage innovative solutions from a wider pool of potential contractors.

Taxpayer Impact: Sole-source awards limit the opportunity for taxpayers to benefit from competitive pricing, potentially resulting in higher costs than if multiple bids had been solicited.

Public Impact

The primary beneficiary is The Pennsylvania State University, receiving significant funding for research. The contract supports research and development in physical, engineering, and life sciences. The geographic impact is concentrated in Pennsylvania, where the university is located. The contract likely supports academic researchers and potentially graduate students, contributing to the scientific workforce.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price discovery and potential cost savings for taxpayers.
Cost Plus Fixed Fee contract type can lead to cost overruns if not closely monitored.
Lack of competition may stifle innovation by not engaging a broader research community.
Limited transparency on specific research outcomes and their direct applicability.

Positive Signals

Award to a reputable academic institution suggests a focus on specialized research capabilities.
Long-term engagement indicates a potentially critical and complex research need.
Research funding supports scientific advancement and educational development.

Sector Analysis

This contract falls within the Research and Development sector, specifically focusing on physical, engineering, and life sciences. The market for academic R&D contracts is often characterized by specialized expertise and long-term projects. While specific market size data for this niche is difficult to isolate, federal R&D spending is a significant portion of the overall federal budget, with universities being key recipients of these funds. This contract represents a portion of the Department of the Navy's investment in advancing scientific and technological capabilities.

Small Business Impact

This contract does not appear to have a small business set-aside. As a sole-source award to a large university, there are no direct subcontracting opportunities mandated for small businesses through this specific award mechanism. The impact on the small business ecosystem is therefore minimal in the context of this direct contract.

Oversight & Accountability

Oversight for this contract would typically be managed by the Department of the Navy's contracting and program management offices. Accountability measures would be tied to the terms of the Cost Plus Fixed Fee agreement, requiring detailed reporting on research progress and expenditures. Transparency is generally limited for R&D contracts, especially concerning proprietary research findings, though programmatic updates may be available. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Department of Defense Research and Development Contracts
University Research Grants
Navy Science and Technology Programs
Physical Sciences Research Funding
Engineering Research Contracts

Risk Flags

Sole-source award
Cost Plus Fixed Fee pricing
Lack of competition

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $34.9 million to THE PENNSYLVANIA STATE UNIVERSITY. SYSTEM DESIGNED INTEGRATION AGENT (FY18-FY19)

Who is the contractor on this award?

The obligated recipient is THE PENNSYLVANIA STATE UNIVERSITY.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $34.9 million.

What is the period of performance?

Start: 2018-01-17. End: 2020-03-31.

What specific research objectives were pursued under this contract, and what were the key findings or deliverables?

The contract data indicates the purpose was 'SYSTEM DESIGNED INTEGRATION AGENT (FY18-FY19)'. This suggests a focus on developing or refining systems related to integration, potentially for naval applications. Specific research objectives and key findings are not detailed in the provided data. Typically, such contracts would involve theoretical research, simulation, prototyping, and testing of integrated systems. Deliverables would likely include technical reports, design documents, software, and potentially functional prototypes. Without access to the contract's SOW (Statement of Work) or interim/final reports, a precise accounting of objectives and outcomes is not possible. The value and duration suggest a significant undertaking in a specialized area of engineering or computer science relevant to the Department of the Navy's operational needs.

How does the Cost Plus Fixed Fee (CPFF) pricing structure compare to other contract types for similar R&D projects?

Cost Plus Fixed Fee (CPFF) contracts are common in research and development where the scope of work is not fully defined at the outset, or where innovation and exploration are primary goals. In a CPFF contract, the contractor is reimbursed for allowable costs plus a fixed fee representing profit. This differs from fixed-price contracts, where the price is set regardless of the final cost, incentivizing efficiency. It also differs from Cost Plus Incentive Fee (CPIF) or Cost Plus Award Fee (CPAF) contracts, which include mechanisms to adjust the fee based on performance. For R&D, CPFF can be advantageous when the government wants to encourage exploration without imposing strict cost ceilings that might stifle creativity. However, it carries a higher risk of cost overruns compared to fixed-price contracts, requiring robust government oversight to manage expenditures effectively. The 'fair' value assessment is influenced by this structure, as it inherently allows for higher potential costs than a competitive fixed-price bid might yield.

What are the potential risks associated with awarding a large R&D contract on a sole-source basis?

Awarding a large R&D contract on a sole-source basis carries several potential risks. Firstly, the absence of competition means the government may not achieve the best possible price, as there is no market pressure to drive down costs. Secondly, it limits the exposure to a wider range of innovative approaches or technologies that other potential contractors might offer. The government relies heavily on the unique capabilities claimed by the sole-source provider, which may not always be as exclusive or advanced as initially assessed. Furthermore, sole-source awards can sometimes be perceived as less transparent, potentially leading to scrutiny regarding the justification for not competing the requirement. For R&D, this can mean missing out on potentially disruptive technologies or more cost-effective solutions developed elsewhere in the research community.

What is the track record of The Pennsylvania State University in securing and executing federal R&D contracts, particularly with the Department of Defense?

The Pennsylvania State University (Penn State) has a long and extensive history of securing and executing federal research and development contracts, particularly with agencies like the Department of Defense (DoD). As a major research university, it consistently ranks among the top institutions for federal R&D expenditures. Penn State's Applied Research Laboratory (APL) is a significant DoD-affiliated research center, often undertaking large, complex projects for various military branches, including the Navy. Their track record generally indicates a strong capacity for managing substantial research grants and contracts, contributing to advancements in numerous scientific and engineering fields. While specific performance metrics for every contract are not publicly detailed, their sustained success in obtaining federal funding suggests a generally positive track record in delivering research outcomes and managing complex projects.

How does the $34.9 million spending on this contract compare to overall federal R&D spending in the physical, engineering, and life sciences (NAICS 541712) over the contract period?

The $34.9 million spent on this specific contract between FY18 and FY19 represents a fraction of the total federal R&D spending in NAICS code 541712 (Research and Development in the Physical, Engineering, and Life Sciences (except Biotechnology)). Federal agencies collectively spend hundreds of billions of dollars annually on R&D. For instance, in FY18, total federal R&D obligations were estimated to be around $150 billion, with a significant portion allocated to physical sciences and engineering. While this contract is substantial for a single award, it is relatively small when viewed against the backdrop of the entire federal R&D landscape. The DoD itself is one of the largest federal funders of R&D, and this contract forms part of their broader investment strategy in these critical scientific domains.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Scientific Research and Development Services › Research and Development in the Physical, Engineering, and Life Sciences (except Biotechnology)

Product/Service Code: RESEARCH AND DEVELOPMENT › DEFENSE (OTHER) R&D

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Address: 408 OLD MAIN, UNIVERSITY PARK, PA, 16802

Business Categories: Category Business, Corporate Entity Tax Exempt, Educational Institution, Higher Education, Nonprofit Organization, Not Designated a Small Business, Higher Education (Public), Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $34,957,720

Exercised Options: $34,923,219

Current Obligation: $34,923,219

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: N0002412D6404

IDV Type: IDC

Timeline