Department of the Navy awarded $115.8M for system design and integration, with Penn State as the sole contractor

Contract Overview

Contract Amount: $115,835,032 ($115.8M)

Contractor: THE Pennsylvania State University

Awarding Agency: Department of Defense

Start Date: 2018-09-11

End Date: 2022-12-31

Contract Duration: 1,572 days

Daily Burn Rate: $73.7K/day

Competition Type: NOT COMPETED

Pricing Type: COST PLUS FIXED FEE

Sector: R&D

Official Description: SYSTEM DESIGN AND INTEGRATION AGENT FY18-FY21

Place of Performance

Location: UNIVERSITY PARK, CENTRE County, PENNSYLVANIA, 16802

State: Pennsylvania Government Spending

Plain-Language Summary

Department of Defense obligated $115.8 million to THE PENNSYLVANIA STATE UNIVERSITY for work described as: SYSTEM DESIGN AND INTEGRATION AGENT FY18-FY21 Key points: 1. The contract spans four years, indicating a long-term need for system design and integration services. 2. The award was not competed, raising questions about potential cost efficiencies and market-driven pricing. 3. The primary focus is on Research and Development in Physical, Engineering, and Life Sciences, a critical area for defense innovation. 4. The contract's value suggests a significant investment in advanced technological development. 5. The geographic location of the contractor in Pennsylvania may have implications for regional economic impact. 6. The cost-plus-fixed-fee contract type allows for cost reimbursement plus a fixed fee, which can incentivize cost control but also carries inherent risks.

Value Assessment

Rating: fair

Benchmarking the value of this contract is challenging due to its specific R&D focus and sole-source nature. However, the $115.8 million awarded over four years for system design and integration suggests a substantial investment. Without competitive bids, it's difficult to definitively assess if the pricing represents optimal value for money. The cost-plus-fixed-fee structure necessitates careful oversight to ensure costs remain reasonable and the fixed fee is appropriate for the scope of work.

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 among multiple vendors. This approach is typically used when a specific contractor possesses unique capabilities or when urgency dictates a direct award. The lack of competition means that the government did not benefit from the price discovery mechanisms inherent in a competitive bidding process, potentially leading to higher costs than might be achieved in an open market.

Taxpayer Impact: Taxpayers may have paid a premium due to the absence of competitive pressure. The government's ability to negotiate the best possible price is diminished in sole-source situations.

Public Impact

The primary beneficiary is the Department of the Navy, which receives critical system design and integration services for its research and development initiatives. The contract supports advanced research in physical, engineering, and life sciences, potentially leading to technological advancements with broad defense applications. The contract's impact is primarily concentrated within the research and development sector, fostering innovation and scientific progress. The workforce implications are likely centered around highly skilled researchers, engineers, and technical staff at The Pennsylvania State University.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing and potential cost savings for taxpayers.
Cost-plus-fixed-fee contracts can incentivize cost overruns if not rigorously managed.
Lack of competition may reduce the incentive for the contractor to innovate beyond the contract's immediate scope.
The specific R&D focus might lead to specialized knowledge that is difficult to replicate, justifying sole-source in some cases, but still warrants scrutiny.

Positive Signals

The Pennsylvania State University is a reputable research institution with a strong track record in relevant scientific fields.
The long-term nature of the contract (four years) suggests a stable and ongoing need for the services provided.
The contract supports critical research and development for the Department of Defense, aligning with national security objectives.
The fixed fee component provides some level of cost predictability compared to purely cost-reimbursement contracts.

Sector Analysis

The contract falls within the Research and Development (R&D) sector, specifically focusing on physical, engineering, and life sciences. This sector is characterized by innovation, long development cycles, and often requires specialized expertise. The Department of Defense is a major investor in R&D, seeking to maintain technological superiority. Comparable spending in this area can vary widely based on the specific research domain, but significant government investment in advanced scientific research is common.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. The prime contractor is a large university. There is no explicit information regarding subcontracting plans for small businesses. This means that opportunities for small businesses to participate in this specific contract may be limited unless they are subcontracted by the prime, which is not guaranteed.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy's contracting and program management offices. As a cost-plus-fixed-fee contract, rigorous financial oversight is crucial to monitor expenditures and ensure the fixed fee remains appropriate. Transparency is dependent on the reporting requirements stipulated in the contract and the agency's willingness to disclose information. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse.

Related Government Programs

Department of Defense Research and Development Contracts
University Research Grants and Contracts
System Design and Integration Services
Naval Research Laboratory Contracts

Risk Flags

Sole-source award
Cost-plus-fixed-fee contract type
Lack of competitive bidding

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $115.8 million to THE PENNSYLVANIA STATE UNIVERSITY. SYSTEM DESIGN AND INTEGRATION AGENT FY18-FY21

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 $115.8 million.

What is the period of performance?

Start: 2018-09-11. End: 2022-12-31.

What is the track record of The Pennsylvania State University in securing and executing similar large-scale R&D contracts with the Department of Defense?

The Pennsylvania State University (PSU) has a long and established history of securing significant research funding and executing complex R&D contracts with various federal agencies, including the Department of Defense (DoD). PSU's Applied Research Laboratory (ARL) is a DoD-designated University Affiliated Research Center (UARC), which inherently involves extensive collaboration and contract work with the Navy and other military branches. ARL's mission is to support national security through research and development, often in areas directly related to system design and integration. While specific dollar amounts for past contracts are not provided here, PSU's designation as a UARC implies a substantial and ongoing portfolio of work with the DoD, demonstrating a proven capability to manage large, complex, and often sole-source R&D efforts.

How does the awarded amount of $115.8 million compare to typical R&D spending for system design and integration within the Department of the Navy?

The awarded amount of $115.8 million over approximately four years for system design and integration represents a substantial investment. Within the Department of the Navy (DoN), R&D spending can vary significantly based on the specific technological area and program. Contracts for system design and integration, particularly those involving advanced research in physical, engineering, and life sciences, often require significant funding due to the complexity, specialized personnel, and long development timelines involved. While direct comparisons are difficult without knowing the precise nature of the systems being designed and integrated, this figure is within the range of major R&D initiatives undertaken by the DoN. It suggests a program of significant scope and importance to naval capabilities.

What are the primary risks associated with a sole-source, cost-plus-fixed-fee contract for R&D services?

Sole-source contracts eliminate competitive pressure, which is the primary risk as it can lead to inflated pricing and reduced incentive for cost efficiency. The government does not benefit from the price discovery that occurs in a competitive bidding process. The cost-plus-fixed-fee (CPFF) structure carries its own set of risks. While the fixed fee provides some cost certainty, the 'cost-plus' element means the government reimburses the contractor for allowable costs. This can incentivize cost overruns, as the contractor may incur higher costs to achieve the fixed profit margin. Effective oversight is critical to scrutinize allowable costs, ensure efficient resource utilization, and prevent scope creep that could inflate the overall contract value beyond initial expectations.

What is the potential impact of this contract on future technological advancements within the Navy's R&D portfolio?

This contract has the potential to significantly impact future technological advancements within the Navy's R&D portfolio by funding critical system design and integration efforts in physical, engineering, and life sciences. The duration of the contract (four years) suggests a commitment to developing complex solutions that may take time to mature. The focus on R&D implies that the work could lead to novel capabilities, improved system performance, or entirely new technological paradigms for naval operations. The specific outcomes will depend on the research conducted and the successful integration of developed systems, potentially influencing future naval platforms, communication systems, sensor technologies, or other critical operational assets.

How has federal spending in the 'Research and Development in the Physical, Engineering, and Life Sciences' category (NAICS 541715) trended in recent years, and how does this contract fit into that tre

Federal spending in NAICS code 541715, 'Research and Development in the Physical, Engineering, and Life Sciences (except Nanotechnology and Biotechnology),' has generally shown a consistent upward trend over the past decade, driven by national security imperatives, technological competition, and investments in scientific advancement. The Department of Defense is consistently one of the largest federal funders in this category. This specific contract, awarded for FY18-FY21, aligns with this trend by representing a significant, albeit single, investment within this broad R&D domain. While $115.8 million is a substantial sum for one contract, it is part of a much larger overall federal R&D expenditure, reflecting the government's ongoing commitment to advancing scientific and engineering capabilities.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Scientific Research and Development Services › Research and Development in the Physical, Engineering, and Life Sciences (except Nanotechnology and 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: 201 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: $115,835,032

Exercised Options: $115,835,032

Current Obligation: $115,835,032

Actual Outlays: $4,424,591

Subaward Activity

Number of Subawards: 1

Total Subaward Amount: $518,608

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: N0002418D6401

IDV Type: IDC

Timeline