DoD's $1.23B communications equipment contract awarded to Vectrus Systems LLC shows fair competition and potential value concerns

Contract Overview

Contract Amount: $1,228,708,103 ($1.2B)

Contractor: Vectrus Systems LLC

Awarding Agency: Department of Defense

Start Date: 2006-02-01

End Date: 2011-11-30

Contract Duration: 2,128 days

Daily Burn Rate: $577.4K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 6

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: 200607!611001!2100!W91RUS!ACA, FORT HUACHUCA !W91RUS06C0002 !A!N! !Y! !P00003!20060405!20101130!030468243!030468243!001216845!N!ITT FEDERAL SERVICES INTERNATI!4410 E FOUNTAIN BLVD !COLORADO SPRIN !CO!80916!00000! !KU!* !* !KUWAIT !+000001759741!N!N!000000000000!D304!ADP TELECOMMUNICATIONS & TRANSMISSION SERVICES !A7 !ELECTRONICS AND COMMUNICATION EQUIP !000 !* !811213!E! !3! ! !B! ! !99990909!B!F!Y!B! !A!U!U!2!006!B! !Z!N!Z! ! !N!M!N! ! ! ! ! !A!A!000!A!B!N! ! ! !Y!2100!W61DEG!0001! !

Place of Performance

Location: COLORADO SPRINGS, EL PASO County, COLORADO, 80919

State: Colorado Government Spending

Plain-Language Summary

Department of Defense obligated $1.23 billion to VECTRUS SYSTEMS LLC for work described as: 200607!611001!2100!W91RUS!ACA, FORT HUACHUCA !W91RUS06C0002 !A!N! !Y! !P00003!20060405!20101130!030468243!030468243!001216845!N!ITT FEDERAL SERVICES INTERNATI!4410 E FOUNTAIN BLVD !COLORADO SPRIN !CO!80916!00000! !KU!* !* … Key points: 1. Contract awarded to Vectrus Systems LLC for communication equipment repair and maintenance. 2. The contract's cost-plus-fixed-fee structure warrants scrutiny for potential cost overruns. 3. Competition was robust, with 6 bidders, suggesting a healthy market for these services. 4. The contract duration of over 5 years indicates a long-term need for these services. 5. The contract's performance was primarily in Kuwait, highlighting its role in overseas operations. 6. Small business participation was not a stated priority, potentially limiting opportunities for smaller firms.

Value Assessment

Rating: fair

The contract's total value of $1.23 billion over five years suggests a significant investment in communication equipment maintenance. While the cost-plus-fixed-fee (CPFF) pricing structure can incentivize contractor efficiency, it also carries inherent risks of cost overruns if not meticulously managed. Benchmarking this contract's per-unit costs against similar services is challenging without more granular data on the specific equipment and services rendered. However, the substantial value and CPFF structure necessitate close monitoring to ensure value for money.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, with six bidders vying for the award. This level of competition is generally positive, as it suggests that multiple capable vendors were available and willing to bid, which can drive down prices and encourage innovation. The presence of six bidders indicates a relatively healthy market for these types of telecommunications and transmission services.

Taxpayer Impact: The robust competition for this contract is beneficial for taxpayers, as it likely resulted in a more competitive price than a sole-source award would have. It also signals that government funds are being allocated in a market where multiple providers can meet the requirements.

Public Impact

The primary beneficiary is the Department of Defense, ensuring operational readiness of communication systems. Services delivered include repair and maintenance of telecommunications and transmission equipment. The contract's performance was primarily in Kuwait, supporting overseas military operations. The contract likely supported a workforce involved in technical maintenance and logistics.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost-plus-fixed-fee structure may lead to cost overruns if not managed tightly.
Long contract duration could reduce flexibility to adapt to changing technological needs.
Focus on overseas operations might not reflect domestic communication infrastructure needs.
Lack of explicit small business set-aside could limit opportunities for smaller, specialized firms.

Positive Signals

Full and open competition indicates a healthy market and potential for competitive pricing.
Six bidders suggest a robust vendor pool with diverse capabilities.
The contract addresses a critical need for maintaining essential communication equipment.
Vectrus Systems LLC's role suggests established expertise in this domain.

Sector Analysis

This contract falls within the broader Defense sector, specifically focusing on IT and communication equipment maintenance. The market for such services is substantial, driven by the continuous need for reliable communication infrastructure for military operations, both domestically and abroad. Comparable spending benchmarks would typically involve other large-scale maintenance and sustainment contracts for complex electronic and communication systems within the DoD and potentially other federal agencies.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. While the contract was competed fully and openly, the large scale and nature of the services may have favored larger prime contractors. There is no explicit information on subcontracting plans for small businesses, which could represent missed opportunities for the small business ecosystem to participate in significant defense contracts.

Oversight & Accountability

Oversight for this contract would typically fall under the Defense Contract Management Agency (DCMA), responsible for ensuring contractor performance and compliance. The cost-plus-fixed-fee structure necessitates rigorous financial oversight to monitor expenditures and prevent cost overruns. Transparency regarding performance metrics and financial reporting would be key accountability measures, though specific details on IG jurisdiction or public reporting are not provided in the summary data.

Related Government Programs

Defense Communications Systems
Tactical Communication Equipment Maintenance
Global Information Grid (GIG) Support
Base Operations Support (BOS) Contracts
IT Services for Military Operations

Risk Flags

Cost-Plus-Fixed-Fee structure requires vigilant oversight to manage costs.
Long contract duration may not align with rapidly evolving technology.
Overseas performance introduces logistical and security risks.
Lack of explicit small business focus may limit broader economic participation.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $1.23 billion to VECTRUS SYSTEMS LLC. 200607!611001!2100!W91RUS!ACA, FORT HUACHUCA !W91RUS06C0002 !A!N! !Y! !P00003!20060405!20101130!030468243!030468243!001216845!N!ITT FEDERAL SERVICES INTERNATI!4410 E FOUNTAIN BLVD !COLORADO SPRIN !CO!80916!00000! !KU!* !* !KUWAIT !+000001759741!N!N!000000000000!D304!ADP TELECOMMUNICATIONS & TRANSMISSION SERVICES !A7 !ELECTRONICS AND COMMUNICATION EQUIP !000 !* !811213!E! !3! ! !B! ! !999

Who is the contractor on this award?

The obligated recipient is VECTRUS SYSTEMS LLC.

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Contract Management Agency).

What is the total obligated amount?

The obligated amount is $1.23 billion.

What is the period of performance?

Start: 2006-02-01. End: 2011-11-30.

What is the historical spending trend for similar communication equipment maintenance contracts within the Department of Defense over the last decade?

Analyzing historical spending trends for similar communication equipment maintenance contracts within the DoD reveals a consistent and significant investment in sustaining operational readiness. Over the last decade, spending in this category has generally remained robust, fluctuating with geopolitical demands and modernization efforts. While specific figures vary year-to-year and by contract type, the overall trend indicates a sustained need for these services. Factors influencing these trends include the deployment tempo of military forces, the lifecycle of communication technologies, and strategic shifts in defense posture. Contracts like the one awarded to Vectrus Systems LLC represent a substantial portion of this spending, underscoring the critical nature of maintaining reliable communication networks for global operations. Understanding these patterns helps in forecasting future budgetary needs and identifying potential areas for cost efficiencies or consolidation.

How does the performance of Vectrus Systems LLC on this contract compare to their other government contracts?

Assessing Vectrus Systems LLC's performance on this specific $1.23 billion contract requires a detailed review of performance metrics, delivery timelines, and quality assessments, which are not fully detailed in the provided summary data. Generally, contractor performance is evaluated through systems like the Contractor Performance Assessment Reporting System (CPARS). A review of CPARS data for Vectrus Systems LLC across their portfolio would reveal trends in their ability to meet cost, schedule, and performance requirements. High ratings across multiple contracts would suggest a reliable performer, while consistent issues might indicate systemic problems. For this particular contract, the long duration and significant value suggest that successful performance would be a key indicator of their capability in managing complex, long-term sustainment efforts for critical communication infrastructure.

What are the specific risks associated with the Cost Plus Fixed Fee (CPFF) contract type used here, and how were they mitigated?

The Cost Plus Fixed Fee (CPFF) contract type, used for this $1.23 billion award, presents inherent risks primarily related to cost control. The government agrees to pay the contractor's actual costs plus a fixed fee, which is the contractor's profit. The primary risk is that the contractor may have less incentive to control costs compared to fixed-price contracts, as cost overruns are generally reimbursable. This can lead to the government paying more than initially anticipated. Mitigation strategies typically involve robust government oversight, detailed cost accounting standards, stringent auditing, and clear definition of the 'cost' and 'fee' elements in the contract. Effective negotiation of the fixed fee itself is also crucial. Without detailed contract terms and oversight reports, it's difficult to ascertain the specific mitigation measures employed for this particular contract, but diligent monitoring by the Defense Contract Management Agency (DCMA) would be essential.

What is the estimated value of the services provided on a per-unit basis, and how does this compare to industry benchmarks?

Determining a precise per-unit cost for the communication equipment repair and maintenance services under this contract is challenging without specific details on the types and quantities of equipment serviced, as well as the nature of the repairs. The total contract value is $1.23 billion over approximately five years. If we consider the total duration in months (around 60 months), the average monthly spend is roughly $20.5 million. However, 'per-unit' could refer to a specific piece of equipment, a service call, or a maintenance hour. Benchmarking this against industry standards would require comparing the average cost per equipment type, per repair action, or per labor hour against similar commercial or government contracts. Given the specialized nature of military communication equipment and the overseas operational context, direct commercial comparisons might be difficult, but internal DoD benchmarks for similar sustainment services would be the most relevant comparison point.

How has the geographic focus on Kuwait impacted the overall cost and effectiveness of this contract?

The geographic focus on Kuwait for this contract significantly impacts both cost and effectiveness. Operating in a foreign, potentially austere, environment introduces logistical complexities and increased costs related to transportation, personnel deployment, security, housing, and compliance with local regulations. These factors often lead to higher labor rates and overhead compared to domestic operations. However, the effectiveness is directly tied to ensuring the operational readiness of critical communication systems supporting military missions in that specific region. The necessity of having dedicated maintenance and repair services on-site or readily available in Kuwait likely enhances response times and minimizes downtime for essential equipment, thereby contributing directly to mission success in a high-demand operational area. The cost implications are a trade-off for ensuring this critical capability in a strategic location.

What is the potential impact of this contract on the broader market for communication equipment maintenance services?

A contract of this magnitude ($1.23 billion) awarded to a single entity like Vectrus Systems LLC can have a considerable impact on the broader market for communication equipment maintenance services. Firstly, it signifies a substantial portion of the available government funding in this niche, potentially limiting opportunities for smaller competitors or those not selected. Secondly, it allows the prime contractor to achieve economies of scale, potentially strengthening their market position and competitive advantage for future contracts. The robust competition (6 bidders) suggests a healthy market exists, but the award itself concentrates significant resources and work with one provider. This could spur innovation and efficiency within the awarded contractor, but also raises questions about market concentration and the long-term availability of diverse, competitive options for the government.

Industry Classification

NAICS: Other Services (except Public Administration) › Electronic and Precision Equipment Repair and Maintenance › Communication Equipment Repair and Maintenance

Product/Service Code: IT AND TELECOM - INFORMATION TECHNOLOGY AND TELECOMMUNICATIONS › ADP AND TELECOMMUNICATIONS

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Offers Received: 6

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Vectrus, Inc.

Address: 2424 GARDEN OF THE GODS RD STE 300, COLORADO SPRINGS, CO, 80919

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $155,668,402

Exercised Options: $18,299,307

Current Obligation: $1,228,708,103

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline