DoD's $66.4M L3Harris contract for AN/ALQ-172 LRU-1 redesign lacks competition, raising value concerns
Contract Overview
Contract Amount: $66,385,840 ($66.4M)
Contractor: L3harris Technologies, Inc.
Awarding Agency: Department of Defense
Start Date: 2016-09-19
End Date: 2025-12-01
Contract Duration: 3,360 days
Daily Burn Rate: $19.8K/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# 1 (LRU-1). 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 $66.4 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# 1 (LRU-1). 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, presents potential risks for cost overruns and reduced value for money. 2. Awarded on a sole-source basis, the absence of competitive bidding limits price discovery and may result in higher-than-market costs. 3. The long duration of the contract (over 9 years) increases the potential for scope creep and cost escalation without market checks. 4. Performance context is limited due to the sole-source nature, making it difficult to benchmark against industry standards or alternative solutions. 5. The contract focuses on engineering services and prototype development, a critical but specialized area within the defense sector. 6. The lack of small business involvement raises questions about broader economic impact and potential missed opportunities for smaller innovative firms.
Value Assessment
Rating: questionable
The cost-plus-fixed-fee (CPFF) contract type, while suitable for R&D, can lead to higher costs compared to fixed-price contracts, especially when competition is absent. Without competitive benchmarking, it's difficult to ascertain if the $66.4 million awarded represents fair value. The lack of transparency in pricing due to sole-source award makes a direct comparison to similar contracts challenging, but the extended duration and CPFF structure warrant scrutiny for potential cost inefficiencies.
Cost Per Unit: N/A
Competition Analysis
Competition Level: sole-source
This contract was awarded on a sole-source basis, meaning no other vendors were solicited or considered. This approach is typically justified when a specific contractor possesses unique capabilities or intellectual property essential for the requirement. However, the absence of competition prevents a thorough price discovery process and limits the government's ability to secure the most advantageous terms through market forces.
Taxpayer Impact: Taxpayers may be paying a premium due to the lack of competitive pressure. Without competing bids, there's less incentive for the contractor to offer the lowest possible price, potentially leading to inefficient use of public funds.
Public Impact
The primary beneficiary is L3Harris Technologies, Inc., which receives a significant contract for specialized engineering and prototyping services. The contract delivers essential engineering services for the Form, Fit, and Function Interface (FFFI) redesign of a critical military avionics system (AN/ALQ-172 LRU-1). The geographic impact is concentrated in New Jersey, where the contractor is located, potentially benefiting the local economy through employment and subcontracting. Workforce implications include the need for specialized engineering and manufacturing expertise within L3Harris to fulfill the contract requirements.
Waste & Efficiency Indicators
Waste Risk Score: 50 / 10
Warning Flags
- Sole-source award limits competitive pricing and potential cost savings.
- Cost-plus-fixed-fee structure can incentivize higher spending without strict cost controls.
- Long contract duration increases risk of cost escalation and scope creep.
- Lack of transparency in pricing due to no competition.
- Limited opportunities for small businesses to participate in this high-value contract.
Positive Signals
- Addresses a critical need for redesigning a key military avionics component.
- Focuses on essential engineering and prototyping, indicating a specialized capability.
- Contract awarded to an established defense contractor with relevant experience.
Sector Analysis
This contract falls within the Engineering Services sector, specifically supporting defense avionics. The market for specialized defense engineering and redesign services is often characterized by high barriers to entry due to technical expertise, security clearances, and established relationships. While specific market size data for this niche is not readily available, the overall defense electronics market is substantial, with significant government investment in maintaining and upgrading aging platforms like the AN/ALQ-172.
Small Business Impact
This contract does not appear to have a small business set-aside component, as indicated by 'sb: false'. Furthermore, the sole-source nature of the award limits opportunities for small businesses to participate as prime contractors. While L3Harris may engage small businesses as subcontractors, the primary award does not directly foster the small business ecosystem in this specific procurement. This represents a missed opportunity to leverage the innovation and agility often found within the small business sector for critical defense needs.
Oversight & Accountability
Oversight for this contract would primarily fall under the Department of the Air Force's contracting and program management offices. The Inspector General (IG) of the Department of Defense would have jurisdiction for audits and investigations into potential fraud, waste, or abuse. Transparency is limited due to the sole-source nature and the CPFF structure, making detailed public oversight challenging. Accountability relies heavily on the government's internal program management and contract administration.
Related Government Programs
- AN/ALQ-172 Electronic Warfare System
- Avionics Modernization Programs
- Defense Engineering Services Contracts
- Sole-Source Defense Procurements
- Cost-Plus-Fixed-Fee Contracts
Risk Flags
- Sole-source award
- Cost-plus-fixed-fee contract type
- Long contract duration
- Lack of competitive benchmarking
Tags
defense, department-of-defense, air-force, engineering-services, avionics, sole-source, cost-plus-fixed-fee, large-contract, new-jersey, prototyping, redesign, electronic-warfare
Frequently Asked Questions
What is this federal contract paying for?
Department of Defense awarded $66.4 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# 1 (LRU-1). 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 $66.4 million.
What is the period of performance?
Start: 2016-09-19. End: 2025-12-01.
What is L3Harris Technologies, Inc.'s track record with similar sole-source, cost-plus-fixed-fee defense engineering contracts?
L3Harris Technologies, Inc. (and its predecessor companies) has a long history of performing complex defense contracts, including those involving engineering services, system integration, and avionics. They frequently engage in sole-source or limited-competition procurements due to their specialized capabilities and established position within the defense industrial base. Analyzing their past performance on similar CPFF contracts would involve reviewing contract award data for cost overruns, schedule delays, and audit findings. While specific details on all past sole-source CPFF contracts are not publicly itemized, their extensive portfolio suggests significant experience. However, the inherent nature of CPFF contracts, especially when sole-sourced, requires diligent government oversight to ensure cost control and value.
How does the $66.4 million total contract value compare to industry benchmarks for similar avionics redesign projects?
Directly benchmarking the $66.4 million total contract value is challenging without detailed cost breakdowns and specific technical scope comparisons. Avionics redesign projects vary significantly based on system complexity, required performance upgrades, and the age of the original system. However, given the sole-source nature and the CPFF structure, there is an inherent risk that the price may not be as competitive as it would be under a fully competed scenario. Industry benchmarks for comparable redesigns, if available through market research reports or defense budget analyses, would typically consider factors like labor hours, material costs, and overhead rates. The absence of competition makes it difficult to definitively state if this value is optimal, but it warrants scrutiny against any available internal or external cost estimates.
What are the primary risks associated with the Cost Plus Fixed Fee (CPFF) contract type in this sole-source context?
The primary risks associated with a CPFF contract in a sole-source context are twofold. Firstly, the CPFF structure means the contractor is reimbursed for all allowable costs plus a negotiated fixed fee. This can incentivize cost overruns, as the contractor is guaranteed to cover their expenses and still earn their fee, potentially reducing the motivation for stringent cost control. Secondly, when combined with a sole-source award, there is no competitive pressure to drive down costs. The government lacks the leverage of multiple bids to ensure the most economical price. This combination increases the risk of the government paying more than necessary for the services and prototypes, and necessitates robust government oversight to manage costs effectively.
What is the historical spending pattern for the AN/ALQ-172 program or similar electronic warfare system upgrades?
Historical spending patterns for the AN/ALQ-172 program, or similar electronic warfare (EW) system upgrades, often reveal significant and sustained investment by the Department of Defense. EW systems are critical for modern air combat, requiring continuous updates to counter evolving threats. Spending typically involves research and development, system integration, hardware/software modifications, testing, and sustainment. Contracts for upgrades can range from millions to hundreds of millions of dollars, depending on the scope. Analyzing past spending on the AN/ALQ-172 specifically would likely show prior sustainment contracts, component replacements, and potentially earlier modernization efforts. This $66.4 million contract for a specific LRU redesign fits within the broader pattern of ongoing investment in maintaining and enhancing the capabilities of legacy EW platforms.
What are the potential implications of the long contract duration (ending in 2025) on the project's adaptability and cost?
A long contract duration, such as the one ending in December 2025 (over 9 years from award), presents several implications for adaptability and cost. On the adaptability front, it can make it challenging to incorporate new technologies or adapt to evolving threat landscapes that emerge during the contract period. Changes might require costly contract modifications. Regarding cost, extended durations increase the risk of cost escalation due to inflation, potential scope creep, and the contractor's reduced incentive to achieve efficiencies early on. Furthermore, the longer the contract, the greater the potential for unforeseen technical challenges or requirement changes that could significantly impact the final cost beyond initial estimates, especially within a CPFF framework.
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
Solicitation ID: FA852216R0002
Offers Received: 1
Pricing Type: COST PLUS FIXED FEE (U)
Evaluated Preference: NONE
Contractor Details
Parent Company: L3harris Technologies, Inc
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: $66,385,840
Exercised Options: $66,385,840
Current Obligation: $66,385,840
Subaward Activity
Number of Subawards: 10
Total Subaward Amount: $1,776,450
Contract Characteristics
Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED
Cost or Pricing Data: YES
Timeline
Start Date: 2016-09-19
Current End Date: 2025-12-01
Potential End Date: 2025-12-01 00:00:00
Last Modified: 2025-09-18
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