DoD's $268M satellite telecommunications contract awarded to L3Harris Technologies raises questions about competition and value

Contract Overview

Contract Amount: $268,244,754 ($268.2M)

Contractor: L3harris Technologies Integrated Systems L.P.

Awarding Agency: Department of Defense

Start Date: 2018-08-16

End Date: 2025-03-31

Contract Duration: 2,419 days

Daily Burn Rate: $110.9K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: IGF::OT::IGF AMSS HCX

Place of Performance

Location: GREENVILLE, HUNT County, TEXAS, 75402

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $268.2 million to L3HARRIS TECHNOLOGIES INTEGRATED SYSTEMS L.P. for work described as: IGF::OT::IGF AMSS HCX Key points: 1. Contract awarded on a sole-source basis, limiting price discovery and potentially increasing costs. 2. Long contract duration of over 6 years may not reflect evolving technological needs. 3. Firm Fixed Price contract type offers limited flexibility for adjustments in scope or cost. 4. Lack of competition indicators suggests potential for reduced value for taxpayer dollars. 5. Contract performance is tied to satellite telecommunications, a critical but complex sector. 6. Geographic location in Texas for contract administration may not be optimal for all services.

Value Assessment

Rating: questionable

The contract's value is difficult to benchmark due to its sole-source nature and the specialized services provided. Without competitive bids, it's challenging to ascertain if the $268 million price tag represents a fair market value for satellite telecommunications. The firm fixed-price structure, while providing cost certainty, may not be the most advantageous for a rapidly evolving technology sector where needs can change. Further analysis would require comparing the per-unit service costs to similar, competitively awarded contracts, which are likely scarce for this specific scope.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning it was not competed. This approach bypasses the standard procurement process where multiple vendors submit bids, which typically drives down prices and encourages innovation. The lack of competition means that L3Harris Technologies was the only vendor considered, raising concerns about whether the government secured the best possible terms and pricing. The justification for a sole-source award would need to be exceptionally strong to outweigh the benefits of a competitive process.

Taxpayer Impact: Sole-source awards mean taxpayers may not be getting the most cost-effective solution. The absence of competition limits the government's leverage to negotiate lower prices, potentially leading to overspending on essential services.

Public Impact

The Department of Defense benefits from sustained satellite telecommunications services, crucial for national security operations. The contract supports advanced communication capabilities, enabling secure and reliable data transmission for military personnel. Services are likely to have a broad geographic impact, supporting global military deployments. The contract may indirectly impact the aerospace and defense workforce through L3Harris Technologies' operations.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure, potentially leading to higher costs.
Lack of transparency in the procurement process hinders public scrutiny of value for money.
Long contract duration might not align with the rapid pace of technological advancements in satellite communications.
Firm fixed-price contract may not be ideal for services subject to significant technological change or scope creep.

Positive Signals

L3Harris Technologies is a known entity in the defense sector, suggesting a degree of reliability.
Firm fixed-price contract provides cost certainty for the awarded amount.
Contract supports critical national security functions, indicating high strategic importance.

Sector Analysis

The satellite telecommunications sector is a vital component of the broader aerospace and defense industry, characterized by high barriers to entry, significant R&D investment, and stringent regulatory requirements. This contract falls within a niche segment focused on providing essential communication infrastructure for government operations. Comparable spending benchmarks are difficult to establish precisely due to the specialized nature and sole-source award, but the overall defense spending on C4ISR (Command, Control, Communications, Computers, Intelligence, Surveillance, and Reconnaissance) systems is substantial, indicating the strategic importance of such services.

Small Business Impact

The contract data does not indicate any small business set-aside provisions or subcontracting requirements. As a sole-source award to a large prime contractor, it is unlikely to directly benefit small businesses through set-asides. The potential for small business involvement would depend on L3Harris Technologies' own subcontracting strategy, which is not detailed in the provided information. This lack of explicit small business focus could limit opportunities for smaller, innovative firms in the satellite telecommunications supply chain.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contracting and program management offices. The Defense Contract Management Agency (DCMA) likely plays a role in monitoring performance and compliance. Transparency is limited due to the sole-source nature of the award. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse, but the initial procurement process lacks the inherent transparency of a competitive bid.

Related Government Programs

DoD Satellite Communications Services
Defense Information Systems Agency Contracts
National Security Space Programs
Tactical Satellite Communications
Global Command and Control Systems

Risk Flags

Sole-source award
Lack of competition
Long contract duration
Potential for price inflation
Limited transparency in procurement

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $268.2 million to L3HARRIS TECHNOLOGIES INTEGRATED SYSTEMS L.P.. IGF::OT::IGF AMSS HCX

Who is the contractor on this award?

The obligated recipient is L3HARRIS TECHNOLOGIES INTEGRATED SYSTEMS L.P..

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Information Systems Agency).

What is the total obligated amount?

The obligated amount is $268.2 million.

What is the period of performance?

Start: 2018-08-16. End: 2025-03-31.

What is L3Harris Technologies' track record with similar sole-source Department of Defense contracts?

L3Harris Technologies, and its predecessor companies, have a history of receiving sole-source contracts from the Department of Defense, particularly in areas related to advanced communication systems, intelligence, surveillance, and reconnaissance (ISR), and space-based technologies. These awards often stem from the company's specialized capabilities, proprietary technologies, or existing system integration expertise. While sole-source awards are justified when a specific capability is required that only one contractor can provide, they necessitate rigorous justification and oversight to ensure fair pricing and value. Analyzing past sole-source awards to L3Harris can provide insights into the typical pricing structures, performance metrics, and oversight applied to such contracts, though direct comparisons are challenging due to the unique nature of each requirement.

How does the $268 million value compare to other satellite telecommunications contracts within the DoD?

Directly comparing the $268 million value of this sole-source contract to other satellite telecommunications contracts within the DoD is challenging without knowing the specific services, duration, and scope. However, the magnitude suggests a significant, long-term commitment to a critical capability. Competitively procured contracts for similar services, if available, would offer a better benchmark for value. Sole-source awards, by their nature, lack the price discovery mechanism inherent in competition. Therefore, while the dollar amount is substantial, its 'value' relative to the market is inherently less transparent than if it had been competed. The Defense Information Systems Agency (DISA) manages numerous telecommunications contracts, and understanding the specific service level agreements and performance metrics tied to this $268 million award is crucial for a meaningful comparison.

What are the primary risks associated with a sole-source award of this magnitude for satellite telecommunications?

The primary risks associated with a sole-source award of this magnitude for satellite telecommunications include: 1) **Price Inflation:** Without competitive pressure, the contractor may charge higher prices than would be achievable in a competitive environment. 2) **Lack of Innovation:** The absence of competition can reduce the incentive for the contractor to innovate or offer more cost-effective solutions over the contract's life. 3) **Vendor Lock-in:** The government may become overly reliant on a single vendor, making it difficult and costly to switch providers in the future, even if performance or pricing becomes unsatisfactory. 4) **Reduced Transparency:** Sole-source procurements are often less transparent, making it harder for oversight bodies and the public to assess whether the government is receiving fair value. 5) **Potential for Scope Creep:** Without the discipline of competitive bidding, there's a risk that contract requirements could expand without adequate price adjustments.

What are the implications of the 'Firm Fixed Price' contract type for this satellite telecommunications service?

A Firm Fixed Price (FFP) contract type means that the contractor, L3Harris Technologies, is obligated to perform the work specified in the contract for a stated price, regardless of the actual costs incurred. This provides the government with cost certainty, as the total expenditure is known upfront. However, for a service like satellite telecommunications, which can be subject to rapid technological advancements, evolving operational requirements, or unforeseen technical challenges, an FFP contract can present risks. If the contractor underestimates costs or if requirements change significantly, they bear the loss. Conversely, if the contractor manages costs very efficiently or if the scope is less demanding than anticipated, they realize a higher profit margin. This structure offers less flexibility for scope adjustments compared to cost-reimbursement contracts, potentially requiring contract modifications for any significant changes, which can be a cumbersome process.

How does the contract duration (2419 days) impact the assessment of value and risk?

The contract duration of 2419 days, approximately 6.6 years, is substantial for a technology-dependent service like satellite telecommunications. This long duration increases the risk that the technology underpinning the service could become outdated or that the government's needs might evolve beyond the contract's scope. While longer contracts can offer stability and reduce the frequency of re-procurement efforts, they also lock the government into a specific solution for an extended period. Assessing value over such a long term requires careful consideration of potential technological obsolescence and the flexibility to adapt to future requirements. A shorter duration might have allowed for more frequent reassessments of technology and pricing, potentially leading to better value over time, especially in a rapidly advancing field.

What is the significance of the contract being awarded by the Defense Information Systems Agency (DISA)?

The award by the Defense Information Systems Agency (DISA) is significant because DISA is the primary provider of IT and communications services for the Department of Defense (DoD). DISA is responsible for ensuring that military branches and combatant commands have the necessary communication and information infrastructure to operate effectively. Awarding a large satellite telecommunications contract signifies that this service is critical to DISA's mission and, by extension, to the DoD's overall operational capabilities. DISA's involvement suggests a high level of technical expertise and stringent requirements associated with the contract, aiming to ensure reliable, secure, and interoperable communication services essential for national defense missions globally.

Industry Classification

NAICS: Information › Satellite Telecommunications › Satellite Telecommunications

Product/Service Code: IT AND TELECOM - INFORMATION TECHNOLOGY AND TELECOMMUNICATIONS › ADP AND TELECOMMUNICATIONS

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: HC101318R0019

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: L3harris Technologies, Inc

Address: 10001 JACK FINNEY BLVD, GREENVILLE, TX, 75402

Business Categories: Category Business, Manufacturer of Goods, Not Designated a Small Business, Partnership or Limited Liability Partnership, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $268,244,754

Exercised Options: $268,244,754

Current Obligation: $268,244,754

Subaward Activity

Number of Subawards: 2

Total Subaward Amount: $202,714,021

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Timeline