Draper Lab awarded $295M contract for guidance systems, raising questions about competition and value

Contract Overview

Contract Amount: $295,189,736 ($295.2M)

Contractor: THE Charles Stark Draper Laboratory, Inc.

Awarding Agency: Department of Defense

Start Date: 2023-08-30

End Date: 2029-02-28

Contract Duration: 2,009 days

Daily Burn Rate: $146.9K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Official Description: MK6 GUIDANCE GEUS FY23

Place of Performance

Location: CAMBRIDGE, MIDDLESEX County, MASSACHUSETTS, 02139

State: Massachusetts Government Spending

Plain-Language Summary

Department of Defense obligated $295.2 million to THE CHARLES STARK DRAPER LABORATORY, INC. for work described as: MK6 GUIDANCE GEUS FY23 Key points: 1. Contract awarded on a sole-source basis, limiting price discovery and potentially increasing costs. 2. The contract type (Cost Plus Incentive Fee) can incentivize cost overruns. 3. Long-term contract duration (over 5 years) may not align with evolving technological needs. 4. Lack of competition raises concerns about whether the government is receiving the best possible value. 5. The contractor has a long history with the government, suggesting potential for established relationships influencing procurement. 6. The specific product/service falls under a broad manufacturing category, making direct cost comparisons difficult.

Value Assessment

Rating: questionable

The $295 million award to The Charles Stark Draper Laboratory, Inc. for guidance systems lacks a clear benchmark due to its sole-source nature. Without competitive bids, it is difficult to assess if the pricing is fair and reasonable. The Cost Plus Incentive Fee (CPIF) contract type, while offering some incentive for cost control, can also lead to higher overall expenditures if not closely managed. Comparing this to similar sole-source awards for complex defense systems suggests a pattern of limited price negotiation.

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. The Department of the Navy did not solicit bids from other potential contractors. This approach is typically used when only one source is capable of meeting the requirement, or in cases of urgent need. The absence of competition means there was no opportunity for market forces to drive down prices or encourage innovative solutions from multiple vendors.

Taxpayer Impact: Taxpayers may be paying a premium for this system due to the lack of competitive pressure. Without competing the award, the government has limited leverage to negotiate the lowest possible price.

Public Impact

The Department of Defense, specifically the Department of the Navy, is the primary beneficiary, receiving critical guidance systems. This contract supports the development and sustainment of advanced navigation and guidance technologies essential for military operations. The geographic impact is primarily within Massachusetts, where The Charles Stark Draper Laboratory, Inc. is located. The contract likely supports a specialized workforce in engineering, research, and manufacturing within the defense sector.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing and value for taxpayers.
Cost Plus Incentive Fee contract type can lead to cost overruns if not managed stringently.
Long contract duration may not adapt to rapid technological advancements in guidance systems.
Lack of transparency in the procurement process due to sole-source nature.

Positive Signals

The Charles Stark Draper Laboratory, Inc. is a recognized leader in its field, suggesting technical expertise.
The contract addresses a critical national defense need for advanced guidance systems.
The CPIF structure includes incentives, which could lead to cost efficiencies if performance targets are met.

Sector Analysis

The contract falls within the 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' sector (NAICS 334511). This is a highly specialized area within the broader defense industrial base, characterized by high barriers to entry, significant R&D investment, and long product development cycles. The market is dominated by a few key players with deep technical expertise and established relationships with government agencies. Comparable spending in this sector is substantial, reflecting the critical nature of these systems for national security.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb: false'. There is no explicit information provided regarding subcontracting plans for small businesses. Given the specialized nature of the work and the sole-source award to a large, established entity, the direct impact on the small business ecosystem is likely minimal unless specific subcontracting opportunities are mandated and pursued.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of the Navy's contracting and program management offices. The Inspector General for the Department of Defense may also have jurisdiction for audits and investigations. Transparency is limited due to the sole-source nature of the award, making public scrutiny of the procurement process challenging. Accountability would be managed through contract performance reviews and adherence to the CPIF terms.

Related Government Programs

Missile Guidance Systems
Inertial Navigation Systems
Aerospace Navigation Equipment
Defense Research and Development

Risk Flags

Sole-source award
Cost-plus contract type
Long contract duration
Lack of competitive bidding

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $295.2 million to THE CHARLES STARK DRAPER LABORATORY, INC.. MK6 GUIDANCE GEUS FY23

Who is the contractor on this award?

The obligated recipient is THE CHARLES STARK DRAPER LABORATORY, INC..

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $295.2 million.

What is the period of performance?

Start: 2023-08-30. End: 2029-02-28.

What is the historical spending trend for guidance systems from The Charles Stark Draper Laboratory, Inc. with the Department of Defense?

Historical spending data for The Charles Stark Draper Laboratory, Inc. with the Department of Defense in the area of guidance systems indicates a long-standing relationship. While specific figures for this exact contract are new, the company has consistently received significant funding for similar research, development, and production of advanced navigation and guidance technologies over many years. This includes numerous contracts, often sole-source or limited competition, for critical defense programs. The cumulative spending reflects the company's specialized expertise and its role as a key supplier in this niche but vital sector of defense procurement. Analyzing past awards can provide context for the current $295 million contract, suggesting a pattern of sustained investment in the company's capabilities.

How does the Cost Plus Incentive Fee (CPIF) structure typically impact project costs and contractor performance in defense contracts?

The Cost Plus Incentive Fee (CPIF) contract type is designed to share risks and rewards between the government and the contractor. The contractor is reimbursed for allowable costs and receives a fixed fee, plus an incentive fee that is adjusted based on performance against targets for cost, schedule, or technical objectives. While CPIF can motivate contractors to control costs and meet performance goals, it also carries risks. If the targets are not well-defined or if the incentive structure is flawed, it can lead to cost overruns as contractors pursue higher fees. Conversely, if targets are too easily met, the incentive may be minimal. Effective management and clear performance metrics are crucial for CPIF contracts to deliver value and ensure contractor accountability.

What are the primary risks associated with sole-source defense contracts of this magnitude?

Sole-source defense contracts of this magnitude carry several primary risks. Foremost is the risk of paying a non-competitive price, as the absence of bidding limits the government's leverage to negotiate the best value. This can lead to inflated costs for taxpayers. Another significant risk is the potential for reduced innovation; without competition, there is less pressure on the contractor to develop novel or more efficient solutions. Furthermore, sole-source awards can create vendor lock-in, making it difficult and costly to switch providers in the future. There's also a risk of complacency, where the incumbent contractor may not feel the same urgency to perform at peak efficiency as they would in a competitive environment. Finally, sole-source justifications can sometimes be weak, raising concerns about the fairness and transparency of the procurement process.

What are the potential implications of awarding a long-term contract (over 5 years) for advanced technology systems?

Awarding a long-term contract, such as this over-five-year agreement, for advanced technology systems like guidance systems has several implications. On the positive side, it can provide the contractor with the stability and predictability needed to make significant investments in research, development, and production capabilities. This can foster innovation and ensure a consistent supply of critical technology. However, a major risk is technological obsolescence. The pace of technological advancement, particularly in defense, can be rapid. A long-term contract might lock the government into using systems that become outdated before the contract term ends, requiring costly modifications or early termination. It also reduces flexibility to adapt to changing mission requirements or to adopt newer, potentially superior technologies that emerge during the contract period.

How does the NAICS code 334511 (Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing) typically perform in terms of competition and pricing?

The NAICS code 334511, encompassing Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing, is generally characterized by high barriers to entry and specialized technical requirements. This often leads to limited competition, with a relatively small number of firms possessing the necessary expertise, certifications, and security clearances to compete for government contracts. Consequently, pricing in this sector can be higher compared to industries with broader competition. Contracts are frequently awarded on a sole-source or limited-source basis, particularly for highly advanced or proprietary systems. While this specialization ensures critical defense needs are met, it necessitates rigorous government oversight to ensure fair pricing and value for money.

Industry Classification

NAICS: Manufacturing › Navigational, Measuring, Electromedical, and Control Instruments Manufacturing › Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing

Product/Service Code: GUIDED MISSLES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0003023R6008

Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE (V)

Evaluated Preference: NONE

Contractor Details

Address: 555 TECHNOLOGY SQ, CAMBRIDGE, MA, 02139

Business Categories: Category Business, Corporate Entity Tax Exempt, Nonprofit Organization, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $329,980,380

Exercised Options: $300,422,852

Current Obligation: $295,189,736

Subaward Activity

Number of Subawards: 5

Total Subaward Amount: $33,448,857

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline