DoD's $110M MK38 Machine Gun System Contract Awarded to BAE Systems Lacks Competition
Contract Overview
Contract Amount: $109,733,633 ($109.7M)
Contractor: BAE Systems Land & Armaments L.P.
Awarding Agency: Department of Defense
Start Date: 2017-09-29
End Date: 2022-12-28
Contract Duration: 1,916 days
Daily Burn Rate: $57.3K/day
Competition Type: NOT COMPETED
Number of Offers Received: 1
Pricing Type: FIRM FIXED PRICE
Sector: Defense
Official Description: FY17-MK38 MOD 3 25MM MACHINE GUN SYSTEM
Place of Performance
Location: MINNEAPOLIS, ANOKA County, MINNESOTA, 55421
Plain-Language Summary
Department of Defense obligated $109.7 million to BAE SYSTEMS LAND & ARMAMENTS L.P. for work described as: FY17-MK38 MOD 3 25MM MACHINE GUN SYSTEM Key points: 1. Significant spending on a defense system with no competitive bidding. 2. BAE Systems is the sole awardee, raising questions about price discovery. 3. Long contract duration (1916 days) suggests a sustained, high-value program. 4. The 'Ammunition (except Small Arms) Manufacturing' sector is critical for defense readiness.
Value Assessment
Rating: questionable
The total award value of $109.7 million over five years is substantial. Without competition, it's difficult to assess if this represents fair market value compared to potential alternatives or previous pricing.
Cost Per Unit: N/A
Competition Analysis
Competition Level: sole-source
This contract was not competed, indicating a sole-source award to BAE Systems. This lack of competition limits price discovery and potentially leads to higher costs for the government.
Taxpayer Impact: Taxpayers may be overpaying due to the absence of competitive pressure to drive down costs on this significant defense procurement.
Public Impact
Ensures operational readiness for naval platforms requiring the MK38 system. Supports BAE Systems' manufacturing capabilities and workforce. Potential for cost overruns due to lack of competitive bidding. Impacts the availability and cost of critical defense materiel.
Waste & Efficiency Indicators
Waste Risk Score: 57 / 10
Warning Flags
- Lack of competition
- Sole-source award
- Long contract duration
Positive Signals
- Essential defense system
- Firm fixed price contract
Sector Analysis
This contract falls within the defense manufacturing sector, specifically ammunition production. Spending benchmarks for similar sole-source defense contracts can vary widely, but significant value suggests a critical capability.
Small Business Impact
The contract data does not indicate any specific provisions or subcontracting goals for small businesses, suggesting limited direct impact or benefit to the small business sector in this instance.
Oversight & Accountability
The 'NOT COMPETED' status warrants further oversight to understand the justification for a sole-source award and ensure fair pricing was pursued through other means.
Related Government Programs
- Ammunition (except Small Arms) Manufacturing
- Department of Defense Contracting
- Department of the Navy Programs
Risk Flags
- Lack of competition
- Sole-source award
- Potential for inflated pricing
- Limited transparency in price discovery
- Long contract duration without re-evaluation
Tags
ammunition-except-small-arms-manufacturi, department-of-defense, mn, definitive-contract, 100m-plus
Frequently Asked Questions
What is this federal contract paying for?
Department of Defense awarded $109.7 million to BAE SYSTEMS LAND & ARMAMENTS L.P.. FY17-MK38 MOD 3 25MM MACHINE GUN SYSTEM
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 $109.7 million.
What is the period of performance?
Start: 2017-09-29. End: 2022-12-28.
What is the justification for awarding this contract on a sole-source basis, and what steps were taken to ensure fair and reasonable pricing without competition?
The justification for a sole-source award typically involves factors like unique capabilities, proprietary technology, or urgent needs where only one source can fulfill the requirement. Agencies are expected to conduct market research and price analyses, even for sole-source contracts, to ensure the price is fair and reasonable. This might involve comparing to historical prices, using cost-plus-incentive-fee structures, or independent government cost estimates.
What are the potential risks associated with a sole-source award of this magnitude over a five-year period?
The primary risk is paying a premium due to the lack of competitive pressure, potentially leading to significant cost overruns for taxpayers. Other risks include vendor lock-in, reduced innovation from the supplier, and a lack of transparency in pricing. If BAE Systems faces production issues, the government has limited recourse to switch providers, potentially impacting program timelines and readiness.
How does the firm fixed-price contract type mitigate or exacerbate the risks associated with this sole-source award?
A firm fixed-price (FFP) contract generally shifts most of the risk to the contractor, providing cost certainty for the government. In a sole-source scenario, while the government has price certainty, it doesn't guarantee the price is the lowest possible. The FFP structure here means BAE Systems bears the risk of cost overruns, but the government may still be paying a higher price than if competition had been present to drive down costs.
Industry Classification
NAICS: Manufacturing › Other Fabricated Metal Product Manufacturing › Ammunition (except Small Arms) Manufacturing
Product/Service Code: AMMUNITION AND EXPLOSIVES
Competition & Pricing
Extent Competed: NOT COMPETED
Solicitation Procedures: ONLY ONE SOURCE
Solicitation ID: N0017416R0006
Offers Received: 1
Pricing Type: FIRM FIXED PRICE (J)
Evaluated Preference: NONE
Contractor Details
Parent Company: BAE Systems PLC
Address: 4800 E RIVER RD, MINNEAPOLIS, MN, 55421
Business Categories: Category Business, Foreign Owned, Foreign-Owned and U.S.-Incorporated Business, Not Designated a Small Business, Partnership or Limited Liability Partnership, Special Designations
Financial Breakdown
Contract Ceiling: $109,733,633
Exercised Options: $109,733,633
Current Obligation: $109,733,633
Subaward Activity
Number of Subawards: 122
Total Subaward Amount: $75,910,895
Contract Characteristics
Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED
Cost or Pricing Data: YES
Timeline
Start Date: 2017-09-29
Current End Date: 2022-12-28
Potential End Date: 2023-06-01 00:00:00
Last Modified: 2023-01-09
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