DoD's $1.7B missile and space systems R&D contract awarded to ITT Industries, Inc. shows potential value concerns
Contract Overview
Contract Amount: $1,703,161,709 ($1.7B)
Contractor: Peraton Inc.
Awarding Agency: Department of Defense
Start Date: 2000-11-03
End Date: 2015-04-25
Contract Duration: 5,286 days
Daily Burn Rate: $322.2K/day
Competition Type: FULL AND OPEN COMPETITION
Number of Offers Received: 3
Pricing Type: COST PLUS AWARD FEE
Sector: R&D
Official Description: 200107!000034!5700!GZ80 !SMC/PKS !F0470101C0001 !A!N!*!Y! !20001103!20061031!052819732!052819732!001216845!N!ITT INDUSTRIES, INC , SYSTEMS !4410 E FOUNTAIN BLVD !COLORADO SPRIN !CO!80916!16000!041!08!COLORADO SPRINGS !EL PASO !COLORADO !+000016429445!N!N!000000000000!AC26!RDTE/MISSILE AND SPACE SYSTEMS-MGMT SUPPORT !A2 !MISSILE AND SPACE SYSTEMS !3000!NOT DISCERNABLE OR CLASSIFIED !541710!*!*!3! ! ! !*!*!*!B!*!*!B! !A !Y!R!2!003!B! !A!N!Z! ! !N!C!N! ! ! !C!C!A!A!000!A!C!N! ! ! !Y! ! !0001!
Place of Performance
Location: PATRICK AFB, BREVARD County, FLORIDA, 32925
State: Florida Government Spending
Plain-Language Summary
Department of Defense obligated $1.70 billion to PERATON INC. for work described as: 200107!000034!5700!GZ80 !SMC/PKS !F0470101C0001 !A!N!*!Y! !20001103!20061031!052819732!052819732!001216845!N!ITT INDUSTRIES, INC , SYSTEMS !4410 E FOUNTAIN BLVD !COLORADO SPRIN !CO!80916!16000!041!08!COLORADO SPRINGS !EL PA… Key points: 1. The contract's duration of over 14 years and significant value raise questions about cost-effectiveness and oversight. 2. While awarded under full and open competition, the limited number of bidders (3) warrants scrutiny of price discovery. 3. The 'Cost Plus Award Fee' structure can incentivize cost overruns if not managed tightly. 4. The contract's primary focus on R&D for missile and space systems places it within a critical but complex defense sector. 5. Performance data and specific deliverables are not detailed, making a direct assessment of value for money challenging. 6. The contract's significant value and long duration suggest a substantial impact on the contractor's operations and potentially the workforce.
Value Assessment
Rating: questionable
The contract's total value of $1.7 billion over a period of more than 14 years (from award to final delivery) suggests a substantial investment. Without detailed performance metrics or comparison to similar R&D efforts, it's difficult to definitively assess value for money. The 'Cost Plus Award Fee' (CPAF) contract type, while allowing for flexibility in R&D, can lead to higher costs if not rigorously managed. Benchmarking this against other large-scale, long-term defense R&D contracts would be necessary for a more precise evaluation of pricing and value.
Cost Per Unit: N/A
Competition Analysis
Competition Level: full-and-open
This contract was awarded under 'full and open competition,' indicating that all responsible sources were permitted to submit offers. However, with only three bidders participating, the level of competition may have been limited. This suggests that while the process was open, the market for this specific type of advanced missile and space systems R&D might be concentrated among a few key players. The limited number of bidders could impact the government's ability to secure the most competitive pricing.
Taxpayer Impact: A limited number of bidders, even in a full and open competition, can mean taxpayers may not have benefited from the lowest possible prices achievable with broader market participation.
Public Impact
The primary beneficiaries are likely the Department of Defense's research and development initiatives, specifically in advanced missile and space systems. The contract supports the development and management of critical technologies for national security. The geographic impact is centered around the contractor's facilities in Colorado Springs, Colorado, and potentially other sites involved in R&D. Workforce implications include employment for scientists, engineers, and support staff involved in complex research and development projects.
Waste & Efficiency Indicators
Waste Risk Score: 50 / 10
Warning Flags
- Long contract duration (over 14 years) increases risk of cost escalation and potential for scope creep.
- Cost Plus Award Fee (CPAF) structure requires robust oversight to prevent contractor inefficiencies from driving up costs.
- Limited number of bidders (3) in a full and open competition may indicate a concentrated market, potentially limiting price competition.
- Lack of specific performance metrics in the provided data makes it difficult to assess contractor performance and value realization.
- The significant dollar value ($1.7B) necessitates stringent financial oversight to ensure funds are used effectively.
Positive Signals
- Awarded under full and open competition, suggesting an effort to maximize potential sources.
- The contract is for Research, Development, Test, and Evaluation (RDT&E), indicating investment in critical future capabilities.
- The contractor, ITT Industries, Inc. (now part of L3Harris Technologies), has a history in defense contracting, suggesting relevant expertise.
- The contract was managed by the Defense Contract Management Agency (DCMA), a key agency for oversight.
Sector Analysis
This contract falls within the Research and Development (R&D) sector, specifically focusing on advanced missile and space systems. This is a highly specialized and critical area within the broader aerospace and defense industry. The market for such advanced R&D is often characterized by high barriers to entry, significant capital investment, and a limited number of highly specialized contractors. Comparable spending benchmarks would involve looking at other large-scale, long-term R&D contracts within the Department of Defense for similar technological domains.
Small Business Impact
The provided data does not indicate any specific small business set-asides or subcontracting plans for this contract. Given the nature of advanced missile and space systems R&D, it is possible that the prime contractor relies on specialized large or mid-tier subcontractors. Further investigation would be needed to determine the extent of small business participation, either directly through set-asides or indirectly through the supply chain.
Oversight & Accountability
Oversight for this contract would typically be managed by the contracting agency (Department of Defense, likely through a specific service branch like the Air Force or Army) and administered by the Defense Contract Management Agency (DCMA). Accountability measures would be tied to the contract's performance requirements and the Cost Plus Award Fee structure, which includes incentives for meeting or exceeding targets. Transparency would depend on the level of detail made public regarding performance reviews and award fee determinations, which are often sensitive for defense contracts.
Related Government Programs
- Missile Defense Systems
- Space Systems Development
- Advanced Technology Research
- Department of Defense R&D Programs
- Aerospace Engineering Services
Risk Flags
- Long contract duration
- Cost Plus Award Fee structure
- Limited competition
- Potential for cost overruns
- Lack of detailed performance metrics
Tags
defense, department-of-defense, itt-industries, research-and-development, missile-systems, space-systems, cost-plus-award-fee, full-and-open-competition, definitive-contract, colorado-springs, el-paso-county, large-contract
Frequently Asked Questions
What is this federal contract paying for?
Department of Defense awarded $1.70 billion to PERATON INC.. 200107!000034!5700!GZ80 !SMC/PKS !F0470101C0001 !A!N!*!Y! !20001103!20061031!052819732!052819732!001216845!N!ITT INDUSTRIES, INC , SYSTEMS !4410 E FOUNTAIN BLVD !COLORADO SPRIN !CO!80916!16000!041!08!COLORADO SPRINGS !EL PASO !COLORADO !+000016429445!N!N!000000000000!AC26!RDTE/MISSILE AND SPACE SYSTEMS-MGMT SUPPORT !A2 !MISSILE AND SPACE SYSTEMS !3000!NOT DISCERNABLE OR CLASSIFIED !541710!*!*!3! ! ! !*!*!*!B!*!*!B!
Who is the contractor on this award?
The obligated recipient is PERATON INC..
Which agency awarded this contract?
Awarding agency: Department of Defense (Defense Contract Management Agency).
What is the total obligated amount?
The obligated amount is $1.70 billion.
What is the period of performance?
Start: 2000-11-03. End: 2015-04-25.
What was the specific performance history of ITT Industries, Inc. on this contract, and how did it influence award fees?
The provided data does not contain specific details on the performance history of ITT Industries, Inc. (now part of L3Harris Technologies) for this particular contract, nor does it detail how award fees were determined. Contracts of the 'Cost Plus Award Fee' (CPAF) type typically involve the government evaluating the contractor's performance against pre-defined criteria. Based on this evaluation, an award fee is granted, ranging from zero to a maximum amount. Without access to the contract's performance work statement, inspection reports, and the government's award fee determinations, a detailed analysis of performance and its impact on fees is not possible. This information is often considered sensitive and may not be publicly available.
How does the $1.7 billion total contract value compare to similar R&D efforts in missile and space systems?
The $1.7 billion total contract value for research and development in missile and space systems over a period exceeding 14 years is substantial. To benchmark this effectively, one would need to compare it against other large-scale, long-term R&D contracts awarded by the Department of Defense or other government agencies for similar technological advancements. Factors such as the specific technological maturity, the scope of research (e.g., fundamental vs. applied), and the number of competitors involved would influence comparability. Without access to a broader dataset of comparable contracts, it's challenging to definitively state whether this represents a high, low, or average investment for its category. However, the significant sum indicates a major strategic investment in this domain.
What are the primary risks associated with a Cost Plus Award Fee (CPAF) contract of this magnitude and duration?
The primary risks associated with a Cost Plus Award Fee (CPAF) contract of this magnitude ($1.7 billion) and duration (over 14 years) revolve around cost control and effective oversight. CPAF contracts allow the contractor to recover all allowable costs plus an award fee that is based on performance. The risk is that if the government's oversight is insufficient or the performance metrics are not well-defined, the contractor may have less incentive to control costs rigorously, potentially leading to cost overruns. The long duration amplifies this risk, as market conditions, technological requirements, and personnel can change significantly over such a period. Ensuring that the award fee criteria are challenging, measurable, and aligned with the government's objectives is crucial to mitigate these risks and ensure value for taxpayer money.
What does the limited competition (3 bidders) in a 'full and open' process imply for the government's negotiating power?
A 'full and open' competition with only three bidders suggests that the market for this specific type of advanced missile and space systems R&D may be concentrated among a few key players. While the process was open, the limited number of participants can reduce the government's negotiating leverage. With fewer alternatives, the government may have less power to drive down prices compared to a scenario with numerous bidders actively competing. This situation necessitates strong negotiation skills from the government's contracting team and a thorough understanding of the market landscape to ensure the best possible value is secured, even with limited competition.
How has ITT Industries, Inc.'s business evolution (e.g., divestitures, mergers) potentially impacted the execution or oversight of this contract?
ITT Industries, Inc. has undergone significant transformations since the inception of this contract. Notably, its defense electronics and systems business was spun off to form Exelis, which was later acquired by Harris Corporation, which then merged with L3 Technologies to form L3Harris Technologies. These corporate changes can impact contract execution and oversight in several ways. Key personnel may change, corporate priorities might shift, and the integration of different business units can create complexities. The government would need to ensure that the successor entity (L3Harris) fully understands and adheres to the original contract terms, maintains the required technical capabilities, and continues to provide adequate reporting and oversight. The transition of contract ownership and responsibilities requires careful management by the contracting agency.
What are the potential long-term implications of this contract for technological advancement in US missile and space capabilities?
This contract, valued at $1.7 billion and focused on R&D for missile and space systems, has significant potential implications for the long-term technological advancement of US capabilities in these critical areas. Investments in R&D are foundational for developing next-generation technologies that can enhance national security, maintain a strategic advantage, and potentially lead to dual-use applications. The specific advancements resulting from this contract could influence future military strategies, space exploration initiatives, and the overall technological competitiveness of the United States. The duration of the contract suggests a commitment to developing complex, potentially groundbreaking, technologies that may take years to mature and field.
Industry Classification
NAICS: Professional, Scientific, and Technical Services › Scientific Research and Development Services › Research and Development in the Physical, Engineering, and Life Sciences
Product/Service Code: RESEARCH AND DEVELOPMENT › C – National Defense R&D Services
Competition & Pricing
Extent Competed: FULL AND OPEN COMPETITION
Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE
Offers Received: 3
Pricing Type: COST PLUS AWARD FEE (R)
Evaluated Preference: NONE
Contractor Details
Parent Company: Veritas Capital Fund Management, L.L.C. (UEI: 078628925)
Address: 1047 PATRICK DR BLDG 986, PATRICK AFB, FL, 32925
Business Categories: Category Business, Corporate Entity Not Tax Exempt, Manufacturer of Goods, Not Designated a Small Business
Financial Breakdown
Contract Ceiling: $1,935,774,389
Exercised Options: $1,915,279,655
Current Obligation: $1,703,161,709
Contract Characteristics
Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED
Cost or Pricing Data: NO
Timeline
Start Date: 2000-11-03
Current End Date: 2015-04-25
Potential End Date: 2015-04-25 00:00:00
Last Modified: 2020-05-07
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