On Jan 21/11, Us Navy Space and Naval Warfare Systems Command in San Diego, CA announced a set of 4 multiple-award contracts to install and certify Command, Control, Communications, Computers, Intelligence, Surveillance and Reconnaissance (C4ISR) systems. These systems will be delivered under a combination of cost-plus-incentive-fee, fixed-price-incentive (firm target), firm-fixed-price, and cost-plus-fixed-fee delivery orders as “Government Furnished Equipment” (GFE), for installation on board surface ships, submarines, and shore stations located worldwide.
With the umbrella terms all set, contracts can be placed on behalf of SPAWAR, and also on behalf of other prospective U.S. Government and Foreign Military Sales customers. There’s an initial 3-year base period that runs to 2014, and a 2-year option period that would extend it to 2016. When these contracts were issued, several media outlets added them together, and reported $5+ billion in contracts. That isn’t correct. Here’s what is correct, and how the contracts work…
SPAWAR confirms to DID that as a multiple-award contract, they’ve estimated just over $1.4 billion as the limit, with each winner competing for specific task orders. In other words, reaching even one contractor’s maximum value means that contractor would have to win every single task order competition, and the others would have to win none. That never happens.
It’s also important to note that these contracts don’t cover the act of buying the electronic systems being installed, which is a separate set of contracts. So, too, is the production of the ships or shore facilities where these C4ISR systems are installed. This is why the real cost of a ship is always higher than the build contract would imply – often hundreds of millions of dollars higher, as the build contract is missing these other 2 costs: “Government Furnished Equipment,” and (some of) its installation.
This SPAWAR contract was competitively procured via full and open competition via the Commerce Business Daily’s Federal Business Opportunities website and the SPAWAR e-Commerce Central website, with 4 offers received. All 4 contractors qualified, and can now compete for individual task orders. They are:
* AMSEC, LLC in Virginia Beach, VA wins a maximum $794.1 million, or $1.313 billion maximum if the option is exercised (N00039-11-D-0030).
* Lockheed Martin Services, Inc. in Gaithersburg, MD wins a maximum $831.1 million, or $1.376 billion maximum if the option is exercised (N00039-11-D-0031).
* Serco, Inc. in Reston, VA wins a maximum $852.1 million, or $1.405 billion maximum if the option is exercised (N00039-11-D-0032).
* VT Milcom in Virginia Beach, VA wins a maximum $843.3 million, or $1.386 billion maximum if the option is exercised (N00039-11-D-0033).
Given that it’s a multiple award contract, one normally expects a given maximum for all contractors. It’s also possible, however, to have an RFP for a specific volume of work, with each contractor bidding notional prices for that maximum. In that scenario, the maximums are different, but those are only ever guidelines at best. Each specific task order is still competed on an individual basis.