DoD's $63.6M L3Harris contract for AN/ALQ-172 LRU-8 redesign lacked competition, raising cost concerns
Contract Overview
Contract Amount: $63,600,000 ($63.6M)
Contractor: L3harris Technologies, Inc.
Awarding Agency: Department of Defense
Start Date: 2015-09-25
End Date: 2020-04-30
Contract Duration: 1,679 days
Daily Burn Rate: $37.9K/day
Competition Type: NOT COMPETED
Number of Offers Received: 1
Pricing Type: COST PLUS FIXED FEE
Sector: Defense
Official Description: IGF::OT::IGF ENGINEERING SERVICES FOR FORM, FIT AND FUNCTION INTERFACE (FFFI) REDESIGN OF THE AN/ALQ-172 LINE REPLACEABLE UNIT# 8 (LRU-8). INCLUDES DEVELOPMENT OF DATA AND MANUFACTURING AND DELIVERY OF PROTOTYPES.
Place of Performance
Location: CLIFTON, PASSAIC County, NEW JERSEY, 07014
Plain-Language Summary
Department of Defense obligated $63.6 million to L3HARRIS TECHNOLOGIES, INC. for work described as: IGF::OT::IGF ENGINEERING SERVICES FOR FORM, FIT AND FUNCTION INTERFACE (FFFI) REDESIGN OF THE AN/ALQ-172 LINE REPLACEABLE UNIT# 8 (LRU-8). INCLUDES DEVELOPMENT OF DATA AND MANUFACTURING AND DELIVERY OF PROTOTYPES. Key points: 1. The contract's cost-plus-fixed-fee structure, combined with a lack of competition, suggests potential for cost overruns and reduced value for money. 2. Sole-source procurement limits opportunities for market-driven pricing and innovation from a wider range of qualified contractors. 3. The extended duration of nearly five years indicates a complex project, but also a prolonged period without competitive pressure. 4. Performance context is limited due to the sole-source nature, making it difficult to benchmark against industry standards or alternative solutions. 5. This contract falls within the Defense sector, specifically supporting electronic warfare capabilities for the Air Force. 6. The absence of small business subcontracting requirements is noted, potentially limiting opportunities for smaller firms in this specialized area.
Value Assessment
Rating: questionable
The $63.6 million awarded for engineering services related to the AN/ALQ-172 LRU-8 redesign is difficult to benchmark due to the sole-source nature of the award. Without competitive bids, it's challenging to assess if this price represents fair market value. The cost-plus-fixed-fee (CPFF) contract type, while suitable for R&D with uncertain costs, can incentivize higher spending if not rigorously overseen. The obligated amount of $37.88 million suggests that not all funds were expended, but the total award value remains the primary figure for assessment.
Cost Per Unit: N/A
Competition Analysis
Competition Level: sole-source
This contract was awarded on a sole-source basis, meaning only one vendor, L3Harris Technologies, Inc., was solicited. This approach bypasses the standard competitive bidding process, which typically involves multiple companies submitting proposals. The lack of competition means the government did not benefit from price discovery through market forces, potentially leading to higher costs than if multiple firms had vied for the contract.
Taxpayer Impact: Taxpayers may have paid a premium for this service due to the absence of competitive pressure. Without alternative bids, the government had limited leverage to negotiate the lowest possible price.
Public Impact
The primary beneficiary is L3Harris Technologies, Inc., which received a significant contract for specialized engineering services. The services delivered include the redesign of a critical component (LRU-8) for the AN/ALQ-172 electronic warfare system. The geographic impact is primarily within New Jersey, where the contractor is located, and potentially at Air Force bases where the AN/ALQ-172 system is deployed. Workforce implications include employment for engineers and technical staff at L3Harris, contributing to specialized defense manufacturing capabilities.
Waste & Efficiency Indicators
Waste Risk Score: 50 / 10
Warning Flags
- Lack of competition on a large-value contract raises concerns about potential overpricing and reduced value for taxpayer dollars.
- The sole-source award limits the government's ability to explore innovative solutions or cost efficiencies from a broader market.
- The CPFF contract type, while sometimes necessary, can lead to cost escalation if not managed with stringent oversight.
- No explicit small business subcontracting goals were identified, potentially limiting opportunities for smaller, specialized firms.
Positive Signals
- The contract addresses a specific need for redesigning a critical component of an existing electronic warfare system.
- L3Harris Technologies is a known entity in the defense sector, suggesting a degree of established capability.
- The contract was awarded by the Department of the Air Force, indicating alignment with specific military requirements.
Sector Analysis
This contract falls within the Engineering Services sector, specifically supporting the aerospace and defense industry. The market for electronic warfare systems is highly specialized, often dominated by a few large prime contractors and their subcontractors. Benchmarking is difficult without comparable sole-source awards for similar redesign efforts, but the overall spending on defense electronics is substantial, reflecting the critical nature of these capabilities for national security.
Small Business Impact
This contract was not set aside for small businesses, nor does it appear to have explicit subcontracting requirements for small businesses based on the provided data. This means that opportunities for small businesses to participate in this specific project were likely limited to indirect contributions or potential subcontracts awarded at the discretion of the prime contractor. The absence of set-asides or mandated subcontracting can reduce the overall economic impact on the small business ecosystem within the defense supply chain.
Oversight & Accountability
Oversight for this contract would typically fall under the Department of the Air Force's contracting and program management offices. The Inspector General's office within the Department of Defense may also conduct audits or investigations into contract performance and spending. Transparency is limited due to the sole-source nature and the proprietary aspects of defense contracting. Accountability relies heavily on the government's ability to monitor costs, schedule, and performance metrics within the CPFF structure.
Related Government Programs
- AN/ALQ-172 Electronic Warfare System
- Air Force Avionics Modernization Programs
- Defense Engineering Services Contracts
- Sole-Source Defense Procurements
- Cost-Plus-Fixed-Fee Contracts
Risk Flags
- Lack of Competition
- Cost-Plus Contract Type
- Sole-Source Award
Tags
defense, department-of-defense, department-of-the-air-force, l3-harris-technologies, engineering-services, definitive-contract, cost-plus-fixed-fee, sole-source, new-jersey, electronic-warfare, an/alq-172, lrru-8
Frequently Asked Questions
What is this federal contract paying for?
Department of Defense awarded $63.6 million to L3HARRIS TECHNOLOGIES, INC.. IGF::OT::IGF ENGINEERING SERVICES FOR FORM, FIT AND FUNCTION INTERFACE (FFFI) REDESIGN OF THE AN/ALQ-172 LINE REPLACEABLE UNIT# 8 (LRU-8). INCLUDES DEVELOPMENT OF DATA AND MANUFACTURING AND DELIVERY OF PROTOTYPES.
Who is the contractor on this award?
The obligated recipient is L3HARRIS TECHNOLOGIES, INC..
Which agency awarded this contract?
Awarding agency: Department of Defense (Department of the Air Force).
What is the total obligated amount?
The obligated amount is $63.6 million.
What is the period of performance?
Start: 2015-09-25. End: 2020-04-30.
What is the track record of L3Harris Technologies, Inc. with sole-source defense contracts of similar scope and value?
L3Harris Technologies, Inc. has a significant history of engaging in defense contracts, including sole-source awards, given its position as a major defense contractor. Analyzing their past performance on sole-source contracts of comparable value (e.g., tens of millions of dollars) for engineering services or system upgrades would provide insight into their reliability and cost management. Publicly available data, such as contract award databases and Inspector General reports, can reveal patterns in performance, cost overruns, or schedule delays. A review of their contract history might indicate whether they consistently deliver on time and within budget on non-competitively awarded contracts, or if there are recurring issues that warrant closer scrutiny for this specific AN/ALQ-172 LRU-8 redesign.
How does the cost-plus-fixed-fee structure compare to alternative contract types for this type of engineering service, and what are the implications for value?
The Cost-Plus-Fixed-Fee (CPFF) contract type is often used when the scope of work involves research and development or services where costs are difficult to estimate precisely beforehand. For engineering services like the redesign of a Line Replaceable Unit (LRU), CPFF allows flexibility as unforeseen technical challenges arise. However, it shifts much of the cost risk to the government. Compared to fixed-price contracts, CPFF offers less incentive for the contractor to control costs rigorously, as their profit is fixed. This can lead to higher overall spending if not managed with robust oversight, potentially diminishing the value for money. Alternative contract types, such as Cost Plus Incentive Fee (CPIF) or Firm-Fixed-Price (FFP) with detailed scope, might offer better value if cost estimation is feasible and performance incentives can be clearly defined.
What specific risks are associated with sole-source procurements for critical defense components like the AN/ALQ-172 LRU-8?
Sole-source procurements for critical defense components like the AN/ALQ-172 LRU-8 carry several inherent risks. Firstly, the lack of competition can lead to inflated pricing, as the contractor faces no market pressure to offer competitive rates. Secondly, it can stifle innovation, as there is less incentive for the sole provider to explore novel or more cost-effective solutions when they are guaranteed the contract. Thirdly, it creates a dependency on a single supplier, which can be a strategic vulnerability if that supplier experiences financial difficulties, production issues, or decides to exit the market. Finally, without competitive benchmarking, it is harder for the government to objectively assess the contractor's performance and the true value received for the investment.
What is the historical spending pattern for the AN/ALQ-172 system or similar electronic warfare component redesigns by the Air Force?
Analyzing historical spending patterns for the AN/ALQ-172 system or comparable electronic warfare component redesigns by the Air Force is crucial for context. If previous redesigns or sustainment efforts for this system involved similar contract values and durations, it could indicate a consistent level of investment. However, if this $63.6 million contract represents a significant deviation upwards without clear justification (e.g., vastly increased scope, new technology integration), it warrants further investigation. Comparing this award to other Air Force contracts for LRU redesigns across different platforms can also reveal whether the pricing and terms are within an expected range for such specialized engineering work. A trend of increasing costs or sole-source awards in this domain might suggest systemic issues in procurement strategy or market dynamics.
What are the potential long-term implications of this sole-source contract on the sustainment and future upgrades of the AN/ALQ-172 system?
The long-term implications of this sole-source contract for the AN/ALQ-172 system's sustainment and future upgrades are significant. By awarding this redesign contract solely to L3Harris Technologies, the Air Force may have established a de facto sole-source provider for related future work. This could make it difficult and potentially more expensive to bring in other vendors for subsequent modifications, repairs, or upgrades, as L3Harris would possess unique knowledge and potentially intellectual property related to the redesign. This dependency could limit future competition, increase sustainment costs over the system's lifecycle, and potentially slow down the adoption of new technologies if L3Harris is not incentivized or capable of integrating them efficiently compared to a more competitive market.
Industry Classification
NAICS: Professional, Scientific, and Technical Services › Architectural, Engineering, and Related Services › Engineering Services
Product/Service Code: SUPPORT SVCS (PROF, ADMIN, MGMT) › PROFESSIONAL SERVICES
Competition & Pricing
Extent Competed: NOT COMPETED
Solicitation Procedures: ONLY ONE SOURCE
Offers Received: 1
Pricing Type: COST PLUS FIXED FEE (U)
Evaluated Preference: NONE
Contractor Details
Parent Company: L3harris Technologies, Inc (UEI: 004203337)
Address: 77 RIVER RD, CLIFTON, NJ, 07014
Business Categories: Category Business, Corporate Entity Not Tax Exempt, Not Designated a Small Business, Special Designations, U.S.-Owned Business
Financial Breakdown
Contract Ceiling: $63,600,000
Exercised Options: $63,600,000
Current Obligation: $63,600,000
Subaward Activity
Number of Subawards: 40
Total Subaward Amount: $156,795,455
Contract Characteristics
Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED
Cost or Pricing Data: YES
Timeline
Start Date: 2015-09-25
Current End Date: 2020-04-30
Potential End Date: 2020-04-30 00:00:00
Last Modified: 2021-08-27
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