DoD awards $85M firm-fixed-price contract for propulsor assemblies to BAE Systems, with a 7-year performance period

Contract Overview

Contract Amount: $84,960,567 ($85.0M)

Contractor: BAE Systems Land & Armaments L.P.

Awarding Agency: Department of Defense

Start Date: 2020-12-18

End Date: 2028-07-25

Contract Duration: 2,776 days

Daily Burn Rate: $30.6K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: BLOCK 5/E CONTRACT FOR THE PROCUREMENT OF PROPULSOR ASSEMBLIES, ENGINEERING SERVICES, AND TRAVEL.

Place of Performance

Location: MINNEAPOLIS, ANOKA County, MINNESOTA, 55421

State: Minnesota Government Spending

Plain-Language Summary

Department of Defense obligated $85.0 million to BAE SYSTEMS LAND & ARMAMENTS L.P. for work described as: BLOCK 5/E CONTRACT FOR THE PROCUREMENT OF PROPULSOR ASSEMBLIES, ENGINEERING SERVICES, AND TRAVEL. Key points: 1. Contract awarded on a sole-source basis, raising questions about price competition and potential value for money. 2. Long performance period of nearly 7 years suggests a need for sustained support or a complex, multi-year requirement. 3. The firm-fixed-price structure shifts cost risk to the contractor, which can be beneficial if well-defined. 4. Lack of competition may limit opportunities for innovation and cost savings that could arise from a more open bidding process. 5. The contract's value, while substantial, needs to be benchmarked against similar procurements for propulsor systems. 6. Focus on engineering services alongside hardware indicates a comprehensive support package is required.

Value Assessment

Rating: questionable

The contract's value of $85 million over nearly seven years for propulsor assemblies and engineering services is significant. Without comparable contract data or detailed cost breakdowns, it is difficult to definitively assess value for money. The sole-source nature of the award, however, inherently limits the ability to benchmark pricing against competitive offers, potentially leading to a higher-than-market price. The firm-fixed-price type is generally favorable for the government when scope is well-defined, but the absence of competition raises concerns about whether the government secured the best possible price.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning the Department of the Navy did not conduct a competitive bidding process. This typically occurs when only one responsible source can provide the required supplies or services. The lack of competition means there were no other bidders to compare against, and the government did not benefit from the price discovery mechanisms inherent in a competitive environment. This raises concerns about whether the negotiated price reflects the best value achievable.

Taxpayer Impact: Taxpayers may be paying a premium due to the absence of competitive pressure. Without multiple bids, there is less incentive for the contractor to offer the lowest possible price, and the government has limited leverage to negotiate aggressively.

Public Impact

The primary beneficiaries are the Department of the Navy, which will receive critical propulsor assemblies and associated engineering services for its vessels. The contract supports the maintenance and operational readiness of naval assets, ensuring the U.S. Navy can fulfill its mission requirements. The geographic impact is likely concentrated around BAE Systems' facilities in Minnesota, where the work will be performed. Workforce implications include job security and potential expansion for skilled engineers and manufacturing personnel at BAE Systems.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition and potential for cost savings.
Long contract duration could mask inefficiencies or scope creep if not closely managed.
Lack of transparency in the sole-source justification process.
Potential for contractor lock-in due to specialized nature of propulsor systems.

Positive Signals

Firm-fixed-price contract shifts cost risk to the contractor.
BAE Systems is a known entity with existing expertise in defense manufacturing.
Long-term contract provides stability for critical component supply.

Sector Analysis

The shipbuilding and repair industry (NAICS 336611) is a critical sector for national defense, involving complex manufacturing and engineering services. This contract for propulsor assemblies falls within this specialized niche. The market for such components is often concentrated among a few key defense contractors due to high barriers to entry, including technical expertise, capital investment, and security clearances. Spending in this sector is heavily influenced by defense budgets and strategic priorities.

Small Business Impact

The data indicates this contract was not set aside for small businesses (ss: false, sb: false). As a sole-source award to a large prime contractor, BAE Systems Land & Armaments L.P., there is a potential for subcontracting opportunities for small businesses. However, the extent to which small businesses will participate depends on BAE Systems' subcontracting plan and the availability of qualified small businesses capable of providing specialized components or services related to propulsor assemblies. Without specific subcontracting goals or reporting, the direct impact on the small business ecosystem remains unclear.

Oversight & Accountability

Oversight for this contract will primarily reside with the Department of the Navy's contracting and program management offices. The firm-fixed-price nature of the contract provides a degree of accountability by capping the government's financial liability. However, the sole-source award necessitates rigorous oversight to ensure the contractor is meeting all performance requirements and that the pricing remains fair and reasonable throughout the contract's duration. Transparency may be limited due to the non-competitive nature of the award, but contract performance data should be available through federal procurement databases.

Related Government Programs

Naval Ship Building
Propulsion Systems
Defense Procurement
Sole Source Contracts
Engineering Services

Risk Flags

Sole Source Award
Lack of Competition
Long Contract Duration
Potential for Cost Overruns
Limited Transparency

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $85.0 million to BAE SYSTEMS LAND & ARMAMENTS L.P.. BLOCK 5/E CONTRACT FOR THE PROCUREMENT OF PROPULSOR ASSEMBLIES, ENGINEERING SERVICES, AND TRAVEL.

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 $85.0 million.

What is the period of performance?

Start: 2020-12-18. End: 2028-07-25.

What is BAE Systems' track record with the Department of Defense for similar propulsor systems or large sole-source contracts?

BAE Systems Land & Armaments L.P. is a major defense contractor with a significant history of supplying complex systems to the Department of Defense, including naval components. While specific data on their track record for propulsor assemblies under sole-source awards is not detailed here, the company is known for its extensive experience in shipbuilding and defense manufacturing. A deeper analysis would involve reviewing past performance evaluations (e.g., CPARS), previous contract awards for similar systems, and any history of disputes or performance issues. Their established presence suggests a capacity to handle such requirements, but the lack of competition in this instance means past performance alone does not guarantee optimal value.

How does the $85 million contract value compare to industry benchmarks for propulsor assemblies and engineering services?

Benchmarking this $85 million contract is challenging without access to specific cost breakdowns or comparable sole-source awards for similar propulsor systems. The value encompasses both hardware and extensive engineering services over nearly seven years. Industry benchmarks for propulsor systems vary widely based on size, complexity, vessel type, and required performance. Given the sole-source nature, direct price comparisons are impossible. However, the Department of Defense typically conducts extensive price analyses for sole-source procurements to ensure reasonableness, often relying on historical pricing, cost realism assessments, and comparisons to commercial equivalents where applicable. The absence of competition means the government likely relied heavily on these internal analyses rather than market-driven price discovery.

What are the primary risks associated with a sole-source award of this magnitude and duration?

The primary risks associated with this sole-source award include potential overpricing due to the lack of competitive pressure, reduced incentive for the contractor to innovate or achieve efficiencies, and the risk of contractor lock-in. Without competition, the government has less leverage to negotiate the best possible price. Furthermore, the long duration (nearly 7 years) increases the risk of scope creep, cost overruns if not managed tightly, and potential obsolescence of technology if requirements are not updated. There's also a risk that the sole-source justification may not have fully explored all potential competitive avenues, potentially leaving taxpayer money on the table. Robust oversight and clear performance metrics are crucial to mitigate these risks.

How effective is the firm-fixed-price (FFP) contract type in managing costs for complex defense procurements like this one?

The firm-fixed-price (FFP) contract type is generally considered effective for managing costs in defense procurements when the scope of work is well-defined and stable. It shifts the majority of cost risk from the government to the contractor, providing budget certainty for the buyer. For this contract, which includes propulsor assemblies and engineering services, the FFP structure incentivizes the contractor to control costs and perform efficiently to maximize profit. However, the effectiveness is contingent on the accuracy of the initial cost estimates and the contractor's ability to manage unforeseen issues within the fixed price. In a sole-source scenario, the government must still ensure the initial price is fair and reasonable through rigorous negotiation and cost analysis.

What are the historical spending patterns for propulsor assemblies or similar naval components procured by the Department of the Navy?

Historical spending patterns for propulsor assemblies and similar naval components procured by the Department of the Navy are typically substantial, reflecting the high cost and critical nature of these systems. Major naval platforms require sophisticated propulsion, and contracts for these can run into tens or hundreds of millions of dollars, often spanning multiple years. Spending is driven by shipbuilding programs, fleet modernization efforts, and maintenance requirements. Analysis of past spending would likely reveal a concentration of awards among a few specialized, large defense contractors. The Navy's budget allocation for shipbuilding and conversion, and for maintenance and repair, would provide broader context for this specific contract's place within overall naval spending.

Industry Classification

NAICS: Manufacturing › Ship and Boat Building › Ship Building and Repairing

Product/Service Code: SHIP AND MARINE EQUIPMENT

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0002419R4106

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Ball Corporation

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

Business Categories: Category Business, Manufacturer of Goods, Not Designated a Small Business, Partnership or Limited Liability Partnership, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $86,032,060

Exercised Options: $85,521,789

Current Obligation: $84,960,567

Subaward Activity

Number of Subawards: 10

Total Subaward Amount: $890,080

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline