DoD awards $49.3M contract for naval undersea warfare support, with 26990% cost growth over 5 years

Contract Overview

Contract Amount: $49,283,613 ($49.3M)

Contractor: Mclaughlin Research Corporation

Awarding Agency: Department of Defense

Start Date: 2019-08-20

End Date: 2024-08-19

Contract Duration: 1,826 days

Daily Burn Rate: $27.0K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: INTEGRATED LOGISTICS SUPPORT SERVICES FOR NAVAL UNDERSEA WARFARE CENTER DIVISION NEWPORT CODE 40.

Place of Performance

Location: NEWPORT, NEWPORT County, RHODE ISLAND, 02841

State: Rhode Island Government Spending

Plain-Language Summary

Department of Defense obligated $49.3 million to MCLAUGHLIN RESEARCH CORPORATION for work described as: INTEGRATED LOGISTICS SUPPORT SERVICES FOR NAVAL UNDERSEA WARFARE CENTER DIVISION NEWPORT CODE 40. Key points: 1. The contract's significant cost growth raises concerns about initial pricing and potential inefficiencies. 2. Limited competition may have contributed to less favorable pricing for the government. 3. The long duration of the contract increases the risk of cost overruns and performance issues. 4. This contract supports critical naval undersea warfare capabilities, indicating a high-priority service. 5. The 'Engineering Services' NAICS code suggests a focus on technical and specialized support. 6. The Cost Plus Fixed Fee (CPFF) contract type can incentivize cost escalation if not closely monitored.

Value Assessment

Rating: questionable

The reported cost growth of 26990% over the contract's life is exceptionally high and warrants deep scrutiny. While specific benchmarks for Integrated Logistics Support Services are difficult to ascertain without more granular data, such a dramatic increase suggests potential issues with the initial cost estimation, scope creep, or unforeseen challenges. Comparing this to similar contracts would likely reveal this as an outlier, indicating a potential lack of value for money unless extraordinary circumstances can be clearly demonstrated.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, which is a positive indicator for price discovery. However, the fact that only two bids were received suggests that the market for this specialized service may be limited, or that other potential bidders were deterred for some reason. While competition existed, the low number of bidders could still impact the government's ability to secure the most competitive pricing.

Taxpayer Impact: While full and open competition was utilized, the low number of bidders means taxpayers may not have benefited from the full potential of a more robust competitive environment, potentially leading to higher costs than if more firms had participated.

Public Impact

Naval Undersea Warfare Center Division Newport personnel benefit from integrated logistics support, ensuring operational readiness. Services delivered are critical for the maintenance, repair, and operational effectiveness of naval undersea assets. The geographic impact is primarily centered in Rhode Island, where the Naval Undersea Warfare Center is located. Workforce implications include the potential for sustained employment for engineers, technicians, and support staff involved in naval warfare systems.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Extreme cost growth (26990%) over the contract duration is a major red flag.
Low number of bidders (2) despite full and open competition suggests potential market limitations or barriers.
Cost Plus Fixed Fee (CPFF) contract type can lead to cost escalation if not managed tightly.
Long contract duration (5 years) increases exposure to risks and potential inefficiencies.
Lack of specific performance metrics or outcomes makes it difficult to assess true value.

Positive Signals

Awarded under full and open competition, theoretically allowing for broad market participation.
Supports a critical national defense function related to naval undersea warfare.
Contractor has been awarded the contract, implying they met initial requirements.
Contract is for integrated logistics support, a necessary function for complex systems.

Sector Analysis

This contract falls within the Engineering Services sector, specifically supporting defense-related R&D and operational readiness. The market for specialized naval logistics support is often concentrated among a few key defense contractors. Benchmarking spending in this niche requires comparison to similar contracts for naval systems support, which can be highly specialized and thus less comparable to broader engineering services.

Small Business Impact

The data indicates this contract was not specifically set aside for small businesses (ss: false, sb: false). Given the specialized nature of integrated logistics support for naval undersea warfare, it is unlikely that significant subcontracting opportunities would be directed towards small businesses unless explicitly mandated or if the prime contractor utilizes a broad supply chain. The primary impact is on the prime contractor and potentially larger subcontractors.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of the Navy's contracting and program management offices. Accountability measures would be defined within the contract's terms and conditions, including performance standards and reporting requirements. Transparency is generally facilitated through contract award databases, but detailed performance and cost data may be less accessible to the public. Inspector General jurisdiction would apply if fraud, waste, or abuse is suspected.

Related Government Programs

Naval Sea Systems Command (NAVSEA) Contracts
Naval Undersea Warfare Center (NUWC) Division Newport Operations
Department of Defense Logistics and Maintenance Contracts
Engineering Services for Defense Systems
Cost Plus Fixed Fee Contracts in Defense

Risk Flags

Extreme Cost Growth
Low Bidder Count
CPFF Contract Type Risk
Long Contract Duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $49.3 million to MCLAUGHLIN RESEARCH CORPORATION. INTEGRATED LOGISTICS SUPPORT SERVICES FOR NAVAL UNDERSEA WARFARE CENTER DIVISION NEWPORT CODE 40.

Who is the contractor on this award?

The obligated recipient is MCLAUGHLIN RESEARCH CORPORATION.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $49.3 million.

What is the period of performance?

Start: 2019-08-20. End: 2024-08-19.

What specific factors contributed to the reported 26990% cost growth over the contract's duration?

The provided data indicates a significant cost growth from an unspecified baseline to $49.3 million over five years, with a reported growth percentage of 26990%. This extreme figure suggests a potential misinterpretation of the data or a severe issue with the contract's financial management. Without further details on the initial estimated cost, the breakdown of costs over time, and the specific services rendered, it is impossible to pinpoint the exact causes. However, such growth could stem from initial underestimation of the work required, significant scope changes (scope creep), unforeseen technical challenges, inflation exceeding projections, or inadequate cost controls by the contractor and the government. A thorough review would be needed to understand if this growth was justified by expanded scope or represented inefficiency and poor financial oversight.

How does the pricing of this contract compare to similar Integrated Logistics Support Services contracts?

Benchmarking this contract's pricing is challenging without access to a comprehensive database of similar Integrated Logistics Support Services (ILSS) contracts, particularly those for naval undersea warfare systems. The reported cost growth of 26990% is an extreme outlier and suggests that, on its face, the value proposition is questionable. If this growth is indicative of the overall cost trajectory, it implies that the initial pricing was significantly underestimated or that subsequent costs escalated dramatically. Standard ILSS contracts aim for predictable costs through fixed-price elements or well-defined cost ceilings. The CPFF structure here, combined with such growth, suggests potential inefficiencies or a lack of competitive pressure that would normally drive down costs or ensure better value. A detailed analysis would require comparing the specific services, system complexity, and contract duration against comparable DoD contracts.

What are the primary risks associated with a Cost Plus Fixed Fee (CPFF) contract of this magnitude and duration?

The primary risks associated with a CPFF contract for Integrated Logistics Support Services, valued at $49.3 million over five years, revolve around cost control and contractor incentive. In a CPFF structure, the contractor is reimbursed for allowable costs plus a fixed fee representing profit. This can incentivize the contractor to incur higher costs, as their fee remains constant regardless of the total cost incurred. For a contract of this duration and complexity, risks include: potential for cost overruns if the government's oversight is insufficient; contractor inefficiency leading to higher costs; scope creep not adequately managed; and difficulty in accurately forecasting the total contract value, especially given the reported extreme cost growth. Robust government oversight, clear performance metrics, and stringent change control processes are crucial to mitigate these risks.

What is the track record of McLaughlin Research Corporation regarding cost performance on similar government contracts?

Assessing McLaughlin Research Corporation's track record on cost performance requires access to historical contract data, including award values, final costs, and any reported cost overruns or underruns for their previous government contracts. The provided data highlights a significant cost growth percentage (26990%) for this specific contract, which is a major concern. Without comparative data on their past performance, it's difficult to determine if this is an anomaly or indicative of a pattern. Government contract databases and performance reports (like Contractor Performance Assessment Reporting System - CPARS) would be the primary sources for evaluating their history. A pattern of significant cost overruns on previous contracts would increase the perceived risk associated with their current and future awards.

How does the limited number of bidders (2) impact the government's ability to ensure fair pricing and value?

A limited number of bidders, even under a full and open competition, can significantly impact the government's ability to ensure fair pricing and optimal value. When only two companies submit proposals, it suggests that the market for this specialized service may be constrained, or that potential competitors faced barriers to entry. This reduced competition can lessen the pressure on the bidders to offer their most competitive prices, as they face less risk of losing the contract to a rival. The government may not benefit from the full spectrum of innovation and cost-saving strategies that a more robustly competed contract might yield. While the government still negotiates, the leverage is diminished compared to a scenario with multiple, competing offers, potentially leading to higher costs for taxpayers.

What are the implications of the 'Engineering Services' NAICS code (541330) for the type of work performed and its criticality?

The North American Industry Classification System (NAICS) code 541330, 'Engineering Services,' indicates that the primary work performed under this contract involves the application of engineering principles and knowledge to provide specialized technical services. This typically includes design, development, consulting, and analysis related to complex systems. For a contract supporting Naval Undersea Warfare Center Division Newport, this implies services related to the design, testing, maintenance, or modernization of undersea warfare systems, such as submarines, sonar, torpedoes, or related technologies. The criticality stems from the fact that these services are essential for maintaining the operational readiness, technological superiority, and safety of the U.S. Navy's undersea assets, which are vital components of national defense.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Architectural, Engineering, and Related Services › Engineering Services

Product/Service Code: SUPPORT SVCS (PROF, ADMIN, MGMT) › MANAGEMENT SUPPORT SERVICES

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: SUBJECT TO MULTIPLE AWARD FAIR OPPORTUNITY

Solicitation ID: N6660418R3019

Offers Received: 2

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Address: 130 EUGENE ONEILL DR, NEW LONDON, CT, 06320

Business Categories: Category Business, Small Business

Financial Breakdown

Contract Ceiling: $51,798,218

Exercised Options: $51,798,218

Current Obligation: $49,283,613

Actual Outlays: $7,812,202

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: N0017804D4083

IDV Type: IDC

Timeline