DoD's $46.5M settlement with SRI International for semiconductor manufacturing highlights long-term supply chain needs

Contract Overview

Contract Amount: $46,514,562 ($46.5M)

Contractor: SRI International

Awarding Agency: Department of Defense

Start Date: 2014-04-28

End Date: 2018-11-20

Contract Duration: 1,667 days

Daily Burn Rate: $27.9K/day

Competition Type: FULL AND OPEN COMPETITION

Pricing Type: FIRM FIXED PRICE

Sector: Other

Official Description: 8500875853!LUMP SUM SETTLEMENT - INCREAS

Place of Performance

Location: PRINCETON, MERCER County, NEW JERSEY, 08540

State: New Jersey Government Spending

Plain-Language Summary

Department of Defense obligated $46.5 million to SRI INTERNATIONAL for work described as: 8500875853!LUMP SUM SETTLEMENT - INCREAS Key points: 1. The settlement amount represents a significant financial resolution for a contract spanning over four years. 2. SRI International's role in semiconductor manufacturing points to critical defense industrial base capabilities. 3. The firm fixed-price contract type suggests a defined scope and cost structure, though the settlement indicates complexities. 4. The duration of the contract (1667 days) implies a substantial and ongoing requirement for the services provided. 5. The settlement's nature, rather than a standard completion, may signal performance or delivery issues. 6. The contract's focus on semiconductor manufacturing aligns with national security interests in advanced technology.

Value Assessment

Rating: questionable

The settlement of $46.5 million for semiconductor manufacturing services raises questions about the initial contract value and performance. Without knowing the original award amount or the specific terms leading to the settlement, it's difficult to benchmark value for money. However, large settlements often indicate that the final cost exceeded initial expectations or that there were disputes regarding deliverables or quality. This suggests potential inefficiencies or unforeseen challenges that impacted the overall cost-effectiveness.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that multiple bidders likely had the opportunity to compete. This process is generally expected to foster competitive pricing and drive value. However, the subsequent settlement suggests that even with robust competition, unforeseen issues or complexities arose that necessitated a financial resolution outside the original contract terms.

Taxpayer Impact: While full and open competition is beneficial for taxpayers by promoting market-based pricing, the need for a significant settlement indicates that the anticipated cost savings from competition may not have been fully realized in this instance.

Public Impact

The primary beneficiaries are likely the Department of Defense, ensuring access to critical semiconductor manufacturing capabilities. The services delivered are essential for national security, supporting advanced technological requirements. The geographic impact is centered in New Jersey, where SRI International is located, potentially supporting the local economy and workforce. Workforce implications include the employment of skilled engineers, technicians, and manufacturing personnel involved in semiconductor production.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

The substantial settlement amount suggests potential cost overruns or performance issues that warrant scrutiny.
The long contract duration coupled with a settlement could indicate challenges in managing complex manufacturing processes.
Lack of detailed public information on the settlement's specifics makes it hard to assess the root causes and prevent recurrence.

Positive Signals

The contract was awarded through full and open competition, indicating a competitive bidding process.
SRI International is a reputable research and technology organization with a history of government contracting.
The focus on semiconductor manufacturing addresses a critical and strategic need for the Department of Defense.

Sector Analysis

The semiconductor industry is a cornerstone of modern technology and national security. This contract falls within the 'Semiconductor and Related Device Manufacturing' sector, which is characterized by high R&D investment, complex supply chains, and significant geopolitical importance. The market is dominated by a few key global players, making domestic manufacturing capabilities, especially for defense applications, highly valuable. Comparable spending benchmarks are difficult to establish due to the specialized nature of defense-related semiconductor needs, but investments in this area are generally considered strategic.

Small Business Impact

This contract does not appear to have involved small business set-asides, as indicated by the 'sb' field being false. The primary contractor, SRI International, is a large research organization. There is no explicit information provided regarding subcontracting plans or their impact on the small business ecosystem. Therefore, the direct impact on small businesses through this specific contract appears minimal based on the available data.

Oversight & Accountability

Oversight mechanisms for this contract would typically involve the Defense Contract Management Agency (DCMA) and potentially the Department of Defense's Inspector General, especially given the settlement. Accountability measures would be tied to the contract terms and the resolution process for the settlement. Transparency is limited, as the specific details of the lump-sum settlement are not publicly detailed, making a full assessment of oversight effectiveness challenging.

Related Government Programs

Defense Industrial Base Programs
Advanced Manufacturing Initiatives
Semiconductor Supply Chain Security
Research and Development Contracts

Risk Flags

Settlement Indicates Potential Contractual Disputes
Long Contract Duration May Imply Complexity or Delays
Lack of Specifics on Settlement Terms Limits Transparency

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $46.5 million to SRI INTERNATIONAL. 8500875853!LUMP SUM SETTLEMENT - INCREAS

Who is the contractor on this award?

The obligated recipient is SRI INTERNATIONAL.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $46.5 million.

What is the period of performance?

Start: 2014-04-28. End: 2018-11-20.

What were the specific reasons for the lump-sum settlement with SRI International?

The provided data indicates a 'LUMP SUM SETTLEMENT - INCREAS' with a value of $46,514,562. However, the specific reasons driving this settlement are not detailed in the available information. Settlements typically arise from disputes over contract performance, delivery schedules, quality of goods or services, or unforeseen cost increases that were not adequately addressed by the original contract terms. Without further documentation or a public case file, the exact nature of the disagreement or issue leading to this financial resolution remains unknown. It is possible that the settlement resolved claims related to increased costs, delays, or deviations from the original scope of work.

How does the $46.5 million settlement compare to typical contract values for semiconductor manufacturing for the DoD?

Benchmarking the $46.5 million settlement against typical contract values for DoD semiconductor manufacturing is challenging without more specific data on the contract's original scope and duration. However, the semiconductor industry is capital-intensive and involves high R&D costs. Contracts for specialized defense-grade semiconductors can range widely, from tens of millions to hundreds of millions of dollars, depending on the technology, volume, and customization required. A settlement of this magnitude suggests a significant undertaking. If the original contract was awarded for a similar amount, it might be within the expected range for a substantial project. If the settlement represents a significant increase over the original award, it points to potential cost escalation or scope creep issues that warrant further investigation into contract management and pricing.

What are the potential risks associated with relying on a single contractor for critical semiconductor manufacturing capabilities?

Relying on a single contractor for critical semiconductor manufacturing capabilities presents several risks. Firstly, it creates a single point of failure; if the contractor experiences production issues, financial instability, or goes out of business, the supply chain can be severely disrupted. Secondly, it reduces competitive pressure, potentially leading to higher prices and less incentive for innovation over time. Thirdly, it can limit flexibility in adapting to new technological requirements or scaling production rapidly in response to increased demand. For national security, this dependence can be a strategic vulnerability, especially if the contractor is based in a region with geopolitical instability or if intellectual property protection is a concern.

What was the original scope of work for this contract, and how did it evolve to necessitate a settlement?

The provided data identifies the North American Industry Classification System (NAICS) code as 334413, which corresponds to 'Semiconductor and Related Device Manufacturing.' This indicates the general area of work. However, the specific scope of work is not detailed. Contracts in this sector can range from the fabrication of integrated circuits to the manufacturing of specialized semiconductor devices for military applications. The evolution of the scope that necessitated a settlement is also not specified. It could involve changes in technical requirements, unforeseen manufacturing challenges, or adjustments to production volumes. The settlement itself suggests that the parties could not resolve these evolving issues within the original contractual framework, leading to a negotiated financial conclusion.

What is SRI International's track record with federal contracts, particularly in defense and manufacturing?

SRI International is a well-established research institute with a long history of performing work for various U.S. federal agencies, including the Department of Defense. They have a strong reputation in research and development across numerous scientific and technical fields. Their portfolio includes work in areas relevant to defense, such as advanced materials, sensors, robotics, and information technology. While specific details on all their contracts are not provided here, their consistent engagement with federal agencies suggests a generally positive track record. However, the occurrence of a significant settlement, as seen in this case, indicates that like any large contractor managing complex projects, challenges and disputes can arise.

Industry Classification

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

Product/Service Code: ELECTRICAL/ELECTRONIC EQPT COMPNTS

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 333 RAVENSWOOD AVE, MENLO PARK, CA, 94025

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

Financial Breakdown

Contract Ceiling: $47,263,677

Exercised Options: $47,263,677

Current Obligation: $46,514,562

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: SPM7MX13D0081

IDV Type: IDC

Timeline