DoD awards $58M for ALR-56M spares, a sole-source contract with a 4.6-year duration

Contract Overview

Contract Amount: $58,079,749 ($58.1M)

Contractor: BAE Systems Information and Electronic Systems Integration Inc.

Awarding Agency: Department of Defense

Start Date: 2024-09-27

End Date: 2028-02-25

Contract Duration: 1,246 days

Daily Burn Rate: $46.6K/day

Competition Type: NOT COMPETED

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: ALR-56M SPARES

Place of Performance

Location: TOTOWA, PASSAIC County, NEW JERSEY, 07512

State: New Jersey Government Spending

Plain-Language Summary

Department of Defense obligated $58.1 million to BAE SYSTEMS INFORMATION AND ELECTRONIC SYSTEMS INTEGRATION INC. for work described as: ALR-56M SPARES Key points: 1. Contract awarded to a single supplier, raising questions about price competitiveness. 2. Long contract duration suggests a sustained need for these specific electronic components. 3. The award is a delivery order against an existing contract, indicating a pre-established relationship. 4. No small business set-aside was utilized, potentially limiting opportunities for smaller firms. 5. The contract type is Firm Fixed Price, which shifts cost risk to the contractor. 6. The North American Industry Classification System (NAICS) code 334419 points to a specialized manufacturing sector.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging without comparable sole-source awards for the ALR-56M system spares. The firm fixed-price structure is standard for ensuring cost certainty, but the lack of competition means there's no market-driven validation of the pricing. Without access to historical pricing data for these specific spares or details on the contractor's cost structure, a definitive value-for-money assessment is difficult. The total award amount of $58 million over nearly five years suggests a significant investment in maintaining critical defense systems.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was not competed, indicating it was awarded directly to BAE SYSTEMS INFORMATION AND ELECTRONIC SYSTEMS INTEGRATION INC. without soliciting bids from other potential suppliers. This approach is typically used when a specific item or service is only available from a single source, or in cases of urgent need where competition is not feasible. The lack of competition means that taxpayers did not benefit from potential price reductions or innovative solutions that might have emerged from a competitive bidding process.

Taxpayer Impact: Sole-source awards can lead to higher prices for taxpayers as there is no market pressure to drive down costs. This limits the government's ability to secure the best possible value.

Public Impact

The primary beneficiaries are the Department of Defense, ensuring the operational readiness of aircraft equipped with the ALR-56M system. The contract delivers essential spare parts for the ALR-56M, a critical electronic warfare system. The geographic impact is national, supporting military operations across various theaters. Workforce implications are likely within BAE Systems' manufacturing and supply chain operations, potentially in New Jersey where the contractor is located.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may result in inflated prices for taxpayers.
Sole-source awards can reduce government leverage in negotiations.
Dependence on a single supplier can create supply chain vulnerabilities.
Limited transparency into the contractor's cost structure due to non-competitive nature.

Positive Signals

Firm Fixed Price contract shifts cost overrun risk to the contractor.
Long-term award provides supply chain stability for critical spares.
Awarding to an established prime contractor likely ensures quality and timely delivery.
The ALR-56M system is a proven and essential component of military readiness.

Sector Analysis

This contract falls within the Electronic Components and Accessories Manufacturing sector, specifically related to defense electronics. The market for specialized military electronic spares is often characterized by high barriers to entry due to stringent performance requirements, security clearances, and intellectual property protections. Spending in this sector is driven by defense modernization efforts and the need to maintain the operational readiness of existing platforms. Comparable spending benchmarks would typically involve other sole-source or limited-competition awards for similar high-value, specialized defense electronic components.

Small Business Impact

This contract was not set aside for small businesses, nor does it appear to have specific subcontracting requirements for small businesses mentioned in the provided data. This means that opportunities for small businesses to participate in fulfilling this contract are likely limited to those who can subcontract through the prime contractor, BAE Systems. The absence of a small business set-aside may reduce the direct economic impact on the small business ecosystem for this specific award.

Oversight & Accountability

Oversight for this contract would primarily fall under the Defense Contract Management Agency (DCMA) and the Defense Contract Audit Agency (DCAA), responsible for ensuring contract compliance, quality, and fair pricing. Transparency is limited due to the sole-source nature of the award. Accountability measures are inherent in the Firm Fixed Price contract type, which obligates the contractor to deliver the specified spares within the agreed-upon price. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse.

Related Government Programs

ALR-56M System Support
Electronic Warfare Systems
Defense Logistics Agency Procurement
Department of Defense Aircraft Spares
BAE Systems Defense Contracts

Risk Flags

Sole-source award
Lack of competition
Potential for price inflation
Long-term dependency on single supplier

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $58.1 million to BAE SYSTEMS INFORMATION AND ELECTRONIC SYSTEMS INTEGRATION INC.. ALR-56M SPARES

Who is the contractor on this award?

The obligated recipient is BAE SYSTEMS INFORMATION AND ELECTRONIC SYSTEMS INTEGRATION INC..

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Logistics Agency).

What is the total obligated amount?

The obligated amount is $58.1 million.

What is the period of performance?

Start: 2024-09-27. End: 2028-02-25.

What is the historical spending pattern for ALR-56M spares with BAE Systems?

Analyzing historical spending for ALR-56M spares with BAE Systems is crucial for understanding the long-term cost trends and value proposition of this sole-source relationship. Without access to specific historical contract data, it's difficult to provide precise figures. However, the current $58 million award over approximately 4.3 years (1246 days) suggests an average annual spend of roughly $13.5 million. If previous awards for these spares were also sole-source and of similar value, it indicates a consistent, albeit potentially unoptimized, expenditure. A deeper dive would involve examining past delivery orders or contract modifications under any parent contract to identify any price escalations, volume discounts, or changes in the scope of spares provided over time. This historical context is vital for assessing whether the current pricing is reasonable in light of past performance and market evolution.

How does the pricing of these ALR-56M spares compare to similar electronic warfare component contracts?

Directly comparing the pricing of these ALR-56M spares to similar electronic warfare (EW) component contracts is challenging due to the unique nature of military hardware and the proprietary information surrounding specific components. EW systems often involve highly specialized, low-volume production runs with significant research and development costs embedded. Furthermore, this contract is sole-source, meaning there's no competitive bidding to establish a market-based price. To perform a robust comparison, one would need access to data on the unit cost of comparable EW components (e.g., radar warning receivers, jammers, countermeasures) procured under competitive solicitations or from other sole-source agreements. Factors like technological sophistication, obsolescence risk, and required reliability levels significantly influence pricing. Without such granular data, any comparison remains speculative, but the lack of competition inherently raises concerns about potential price inflation compared to what might be achieved in a more open market.

What are the key risks associated with a sole-source award for critical defense spares?

The primary risk associated with a sole-source award for critical defense spares like the ALR-56M is the potential for inflated pricing due to the absence of competition. The government lacks the leverage to negotiate the best possible price when only one supplier can meet the requirement. This can lead to higher costs for taxpayers over the life of the contract. Another significant risk is supply chain vulnerability; dependence on a single manufacturer can create dependencies and potential disruptions if the supplier faces production issues, financial instability, or decides to discontinue the product line. Furthermore, sole-source awards can stifle innovation, as there is less incentive for the contractor to invest in cost-saving efficiencies or develop alternative solutions when competition is not a factor. Finally, oversight becomes more critical to ensure the contractor is not exploiting their独占 position.

What is the track record of BAE Systems in delivering electronic warfare components to the DoD?

BAE Systems has a long-standing and extensive track record as a major defense contractor, including significant involvement in electronic warfare (EW) systems for the Department of Defense (DoD). The company is a key provider of various EW suites, radar systems, and related components across multiple military platforms. Their experience with the ALR-56M system specifically suggests a deep understanding of its technical requirements and operational context. Historically, BAE Systems has generally demonstrated the capability to deliver complex defense systems and components. However, like any large defense contractor, they may have faced performance issues or contract disputes on specific programs. Assessing their overall track record involves reviewing past performance evaluations, on-time delivery rates, and quality metrics for similar contracts. Given their established presence, it is likely they possess the necessary expertise and infrastructure to fulfill this spares contract, but rigorous oversight remains essential.

How does the duration of this contract (1246 days) impact the overall value and risk?

The contract duration of 1246 days (approximately 4.3 years) for ALR-56M spares has several implications for value and risk. On the positive side, a longer duration provides supply chain stability and predictability for the Department of Defense, ensuring that critical spares are available over an extended period without the need for frequent re-solicitation. This can reduce administrative burden and procurement lead times. For the contractor, it offers a more stable revenue stream, potentially allowing for better production planning and investment in necessary tooling or inventory. However, a longer duration also increases the risk of price escalation if market conditions change unfavorably, although the Firm Fixed Price structure aims to mitigate this for the government. It also locks the government into a potentially suboptimal price if market conditions were to improve significantly or if a more competitive alternative emerged mid-contract. The extended period necessitates robust oversight to ensure continued value and performance.

Industry Classification

NAICS: Manufacturing › Semiconductor and Other Electronic Component Manufacturing › Other Electronic Component Manufacturing

Product/Service Code: COMM/DETECT/COHERENT RADIATION

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Compagnie DE Developpement DE L'eau S.A.

Address: 100 CAMPUS RD STE 1, TOTOWA, NJ, 07512

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

Financial Breakdown

Contract Ceiling: $58,079,749

Exercised Options: $58,079,749

Current Obligation: $58,079,749

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: SPE4AX15D9441

IDV Type: IDC

Timeline