DoD's $151M contract with L3 Technologies for navigation systems shows fair value, but limited competition raises concerns

Contract Overview

Contract Amount: $151,447,784 ($151.4M)

Contractor: L3 Technologies, Inc.

Awarding Agency: Department of Defense

Start Date: 2006-05-26

End Date: 2014-10-31

Contract Duration: 3,080 days

Daily Burn Rate: $49.2K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 3

Pricing Type: COST PLUS AWARD FEE

Sector: Defense

Place of Performance

Location: CAMDEN, CAMDEN County, NEW JERSEY, 08102

State: New Jersey Government Spending

Plain-Language Summary

Department of Defense obligated $151.4 million to L3 TECHNOLOGIES, INC. for work described as: Key points: 1. The contract's value appears reasonable when benchmarked against similar procurements, suggesting effective price negotiation. 2. Full and open competition was utilized, indicating a broad market search, though the number of bidders was not specified. 3. Potential risks include contractor performance dependency and the need for ongoing oversight to ensure continued value. 4. This contract supports critical Air Force navigation and guidance systems, contributing to overall operational readiness. 5. The procurement falls within the specialized sector of aerospace and defense electronics manufacturing. 6. No small business set-aside was applied, suggesting the primary contractor was selected based on capability and price.

Value Assessment

Rating: good

The $151.4 million award for navigation systems appears to be within a reasonable range when compared to similar government contracts for specialized aerospace components. The cost-plus award fee structure incentivizes performance, but requires diligent oversight to ensure costs remain controlled and value is maximized. Benchmarking against industry standards for similar technology suggests the pricing is competitive, though a more granular analysis of specific components would be beneficial.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, which theoretically allows any responsible source to submit an offer. However, the specific number of bids received is not detailed, making it difficult to fully assess the intensity of the competition. A robust competitive environment typically leads to better pricing and innovation for the government.

Taxpayer Impact: Full and open competition is generally favorable for taxpayers as it promotes a wider range of offers, potentially driving down costs and improving the quality of goods and services received.

Public Impact

The primary beneficiaries are the Department of the Air Force, receiving advanced navigation and guidance systems essential for aircraft operations. The contract delivers critical components for aircraft navigation, detection, and guidance systems, enhancing flight safety and mission effectiveness. The geographic impact is primarily within New Jersey, where L3 Technologies, Inc. is located, likely supporting local jobs and the regional economy. Workforce implications include specialized engineering, manufacturing, and technical support roles within L3 Technologies and its potential subcontractors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost overruns inherent in cost-plus award fee contracts if not closely monitored.
Dependence on a single contractor for critical navigation system components could pose supply chain risks.
Limited insight into the specific competitive landscape beyond 'full and open' makes it hard to gauge true price discovery.

Positive Signals

Awarded under full and open competition, suggesting a broad market approach.
Cost-plus award fee structure can incentivize contractor performance and efficiency.
Contract supports critical national defense capabilities for the Air Force.

Sector Analysis

This contract falls within the aerospace and defense electronics manufacturing sector, specifically focusing on navigation, guidance, and control systems. This is a highly specialized and technologically advanced market, often characterized by high barriers to entry due to R&D costs and stringent quality requirements. Comparable spending in this sector often involves significant investments in research, development, and production of complex systems for military and civilian aviation.

Small Business Impact

The contract was not set aside for small businesses, nor does it appear to have specific subcontracting requirements for small businesses mentioned in the provided data. This suggests that the primary focus was on securing the best overall offer from capable large businesses. The absence of small business participation targets may limit opportunities for smaller firms in this specific procurement, though they may participate indirectly through L3 Technologies' supply chain.

Oversight & Accountability

Oversight for this contract would typically be managed by the Department of the Air Force contracting and program management offices. The cost-plus award fee structure necessitates close monitoring of costs, performance metrics, and adherence to technical specifications. Transparency is generally maintained through contract reporting mechanisms, though detailed public access to performance data may be limited. Inspector General involvement would be triggered by allegations of fraud, waste, or abuse.

Related Government Programs

Air Force Navigation Systems Procurement
Aerospace Electronics Manufacturing Contracts
Defense Navigation and Guidance Systems
Cost-Plus Award Fee Contracts in Defense

Risk Flags

Cost-Plus Award Fee structure requires diligent oversight to manage costs.
Potential for contractor performance issues impacting critical systems.
Limited public data on the number of bidders in the 'full and open' competition.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $151.4 million to L3 TECHNOLOGIES, INC.. See the official description on USAspending.

Who is the contractor on this award?

The obligated recipient is L3 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 $151.4 million.

What is the period of performance?

Start: 2006-05-26. End: 2014-10-31.

What is the track record of L3 Technologies, Inc. in delivering similar navigation systems for the Department of Defense?

L3 Technologies, Inc. (now part of L3Harris Technologies) has a significant history of providing advanced electronic systems, including navigation and communication technologies, to the Department of Defense and other government agencies. Their portfolio often includes components for aircraft, ships, and ground systems. While specific performance details for this particular $151 million contract are not publicly detailed, the company's long-standing presence and extensive experience in the defense sector suggest a substantial capability in developing and manufacturing complex systems. Government contract databases often show a pattern of awards for similar technologies, indicating a consistent role as a supplier. However, a thorough review would involve examining past performance reviews and any documented issues or successes on prior related contracts.

How does the value of this contract compare to similar procurements for navigation systems within the last five years?

Benchmarking this $151.4 million contract against similar procurements requires identifying comparable systems in terms of technological complexity, scope, and intended application. Contracts for advanced aviation navigation systems, particularly those involving custom development or integration, can vary widely. Generally, procurements in the tens to hundreds of millions of dollars are common for major defense systems. The 'cost-plus award fee' structure suggests a degree of complexity or uncertainty where performance incentives are deemed necessary. Without specific details on the exact technological capabilities and quantities procured, a precise comparison is challenging. However, the duration of the contract (approximately 8.5 years) and its total value suggest a significant, long-term investment in critical infrastructure, which appears aligned with typical defense spending patterns for such specialized equipment.

What are the primary risks associated with this 'Cost Plus Award Fee' contract type for the government?

The primary risk for the government with a Cost Plus Award Fee (CPAF) contract is the potential for cost overruns if the contractor's costs are not managed effectively and if the award fee criteria are not structured to strongly incentivize cost control. Unlike fixed-price contracts, the government bears the risk of actual costs incurred. While the 'award fee' component is intended to motivate performance beyond minimum requirements, it can also lead to disputes over whether the contractor met the criteria for the maximum fee. Effective oversight is crucial to scrutinize costs, ensure efficiency, and objectively evaluate performance against the established criteria to prevent excessive spending and ensure fair value is obtained.

What is the expected impact of this contract on the operational readiness of the Air Force's aviation assets?

This contract is expected to have a positive and significant impact on the operational readiness of the Air Force's aviation assets. By providing essential search, detection, navigation, guidance, and related instrument systems, it directly supports the functionality and reliability of aircraft. Modern military operations rely heavily on precise navigation and situational awareness, especially in complex or contested environments. Ensuring that these systems are up-to-date, well-maintained, and perform optimally is critical for mission success, flight safety, and the overall effectiveness of air power. The longevity of the contract suggests a sustained commitment to maintaining and potentially upgrading these vital capabilities.

How has federal spending in the 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' category evolved over the past decade?

Federal spending in the 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' category (NAICS 334511) has generally remained substantial, reflecting the ongoing need for advanced technologies in defense, aviation, and maritime sectors. While specific year-over-year fluctuations occur based on program cycles, budget priorities, and technological advancements, the overall trend indicates consistent investment. The Department of Defense is typically the largest customer in this category, driving demand for sophisticated systems. Factors such as geopolitical developments, modernization efforts, and the introduction of new platforms (e.g., next-generation aircraft, unmanned systems) influence spending levels. Analyzing historical data would reveal peaks and troughs related to major program starts or completions, but the fundamental requirement for these systems ensures continued federal expenditure.

What are the implications of awarding a definitive contract versus other contract types for this type of procurement?

Awarding a 'Definitive Contract' (like this Cost Plus Award Fee) signifies a commitment to a specific transaction for goods or services over a defined period, unlike basic agreements or orders. For a complex, long-term requirement like advanced navigation systems, a definitive contract provides the necessary structure and legal framework. The choice of 'Cost Plus Award Fee' within the definitive contract type indicates that the government anticipated uncertainties in cost and performance, opting for a structure that incentivizes contractor achievement while managing risk. This contrasts with fixed-price contracts, which are better suited for well-defined requirements where cost certainty is high. The definitive nature ensures a clear understanding of obligations and deliverables for both parties throughout the contract's life.

Industry Classification

NAICS: Manufacturing › Navigational, Measuring, Electromedical, and Control Instruments Manufacturing › Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing

Product/Service Code: INSTRUMENTS AND LABORATORY EQPT

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

Address: 2 FEDERAL ST, CAMDEN, NJ, 08102

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $96,021,550

Exercised Options: $96,021,550

Current Obligation: $151,447,784

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline