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In defense of the Navy’s $415M no-compete contract

When I wrote about the Navy awarding a $415 million contract to Penn State without conducting a competition, I knew it would stir up some outrage, but I didn’t expect so much of it to be directed at the point I was trying to make.

Of the 24 comments left on the blog so far, many were defenders of the contract, which could reach a value of over $850 million, with options.

Some pointed out that the work being done at Penn State dates back to World War II, when they were working on torpedo technologies. They objected to my assertion that the private sector could just as easily do the work.

KRL from Denver wrote that contracts with Penn State are needed because the private sector cannot keep on hand the research and engineering expertise that Navy needs to have on call.

One person quoted the FAR 6.302.-3, which allows for no competition under certain circumstances, such as maintaining essential research and development capabilities, or maintaining a facility, producer or other supplier.

“Perfectly legitimate,” this commenter proclaimed.

One person said that I know nothing about the market, and that Penn State could possibly be so leading edge, that holding competition would be a waste of taxpayer money.

Other commenters went to the other extreme, declaring the contract an example of fraud, waste and abuse. And that kickbacks are somehow involved.

I don’t agree with that view. I don’t think anyone did anything illegal, or even unethical. I think it is more of a systemic problem.

I don’t want to pick on Penn State, but does anyone really think that they are the only university with the kind of expertise the Navy needs?

My main objection is the lack of competition and the price tag when you breakdown to an hourly rate of $200 an hour.

As Jeff wrote: “Outside of how this was contracted and whether it was competed or not, we as taxpayers are paying this amount -- are you ok with those fees? That's the question we should be asking.”

 

Posted by Nick Wakeman on Sep 12, 2012 at 7:23 PM


Reader Comments

Thu, Sep 13, 2012 Dan

As a former Navy civilian I recall that PSU had some pretty unique facilities there for classified research that couldn't be easily replicated elsewhere or without significant cost. Not knowing the particulars, the previous comment about the FAR part 6 to maintaining a special facility may be right on. $200/sounds like a lot, but there should be some comparison to other labs or FFRDC's - maybe it is competitive.

Thu, Sep 13, 2012 Jeff

I think this all has been an interesting discussion. I do not have issue with any of the points made regarding the historical relationship between the Navy and Penn State. Nor do I disagree with Mr. KRL or others who wrote that these people at Penn State working on the contract are very knowledgeable scientists and PhD's. I do believe we'll see good things result from this contract. That being said, I'm more curious to understand whether there was any price reasonableness done to ensure that the pricing was "fair and reasonable". Since this was a sole source contract, I would hope there would have been some analysis. One of the concerns that does come up in these situations, whether it's a University providing highly critical research/development work or an incumbent that's been supporting an agency for 20+ years, is the amount of incumbent knowledge and experience that exists. If the University or incumbent contractor knows that they can't be replaced, why would they even consider lowering their fees?

Thu, Sep 13, 2012 Grady

Nick, I happen to agree with you. And, the person who compared a PhD with a plumber is extremely misguided. Plumbers do not have steady work. They have businesses to run, equipment to buy, licenses to maintain, etc. And, if they think the PhDs are getting the $200/hr, they are naive. I remember Oracle Corporation having a Corps of Engineers contract with rates over $200/hr. As a small business owner, we won that contract away from them and provided better quality at $85/hr!

Thu, Sep 13, 2012 Former Prof

Most of the public doesn't realize that many of the nation's top schools are like businesses, complete with dedicated business development staff. They work their political and government connections to win BILLIONS in Federal grant money. The problem, in many cases, is the accountability for a return on this taxpayer investment. Is the public gaining or is this another form of Federal welfare?

Thu, Sep 13, 2012

Nick, if you think $200 an hour is expensive for PhD engineering talent, you probably haven't hired a plumber lately or worse, used a lawyer.

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