DoD awards $75M contract for Universal Modular Mast Shipset, raising questions about competition and value

Contract Overview

Contract Amount: $74,873,559 ($74.9M)

Contractor: L3 Technologies Inc

Awarding Agency: Department of Defense

Start Date: 2020-08-17

End Date: 2027-02-26

Contract Duration: 2,384 days

Daily Burn Rate: $31.4K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: UNIVERSAL MODULAR MAST SHIPSET 1

Place of Performance

Location: NORTHAMPTON, HAMPSHIRE County, MASSACHUSETTS, 01060

State: Massachusetts Government Spending

Plain-Language Summary

Department of Defense obligated $74.9 million to L3 TECHNOLOGIES INC for work described as: UNIVERSAL MODULAR MAST SHIPSET 1 Key points: 1. Contract awarded on a sole-source basis, limiting price discovery and potentially increasing costs. 2. The firm-fixed-price structure offers some cost certainty but may not reflect true market value without competition. 3. Significant contract value suggests a critical need for these specialized navigation systems. 4. The duration of the contract (over 6 years) indicates a long-term requirement for the specified equipment. 5. The absence of small business participation raises concerns about broader economic impact. 6. The contract's focus on navigation systems places it within a critical defense technology sector.

Value Assessment

Rating: questionable

Benchmarking the value of this $75M contract is challenging due to its sole-source nature and the specialized 'Universal Modular Mast Shipset' designation. Without competitive bids, it's difficult to ascertain if the price reflects fair market value or if alternative solutions could offer better value. The firm-fixed-price contract type provides cost predictability for the government, but the lack of competition means the government cannot leverage market forces to drive down costs. Further analysis would require understanding the specific technical requirements and comparing them to similar, competitively procured systems if available.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one bidder, L3 TECHNOLOGIES INC, was considered. This approach bypasses the standard competitive bidding process, which typically involves multiple vendors submitting proposals. The lack of competition means the government did not benefit from the price reductions and innovation that often arise from a competitive environment. This raises concerns about whether the government secured the best possible price and terms for these critical navigation systems.

Taxpayer Impact: Sole-source awards mean taxpayers may not be getting the most cost-effective solution, as the potential for price negotiation and competitive pressure is absent. This can lead to higher overall spending for the government on essential defense equipment.

Public Impact

The Department of the Navy is the primary beneficiary, receiving advanced navigation systems for its fleet. The contract delivers specialized 'Universal Modular Mast Shipset' components crucial for search, detection, navigation, and guidance. The geographic impact is likely concentrated within naval operations and shipyards, primarily in Massachusetts where the contractor is based. The contract supports specialized manufacturing roles within L3 TECHNOLOGIES INC, contributing to the defense industrial workforce.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing and potential innovation.
Lack of transparency in the justification for sole-source procurement.
No indication of small business participation or subcontracting opportunities.
Long contract duration could lock in potentially suboptimal pricing if market conditions change.

Positive Signals

Firm-fixed-price contract provides budget certainty.
Award to an established contractor suggests reliability for critical systems.
Focus on specialized navigation systems addresses a clear defense requirement.

Sector Analysis

The contract falls within the 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' sector (NAICS 334511). This is a specialized segment of the broader aerospace and defense industry, characterized by high technological barriers to entry and significant R&D investment. The market is often dominated by a few key players capable of meeting stringent military specifications. Comparable spending benchmarks are difficult to establish without more specific details on the shipset's capabilities, but contracts in this sub-sector can range from tens to hundreds of millions of dollars depending on complexity and quantity.

Small Business Impact

This contract does not appear to have a small business set-aside (ss=false, sb=false). The absence of specific small business participation goals or subcontracting requirements means that opportunities for small businesses within the defense supply chain may be limited for this particular award. This could potentially reduce the broader economic impact on the small business ecosystem that supports the defense industrial base.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contracting and financial management regulations. The firm-fixed-price nature simplifies some aspects of financial oversight compared to cost-plus contracts. Transparency regarding the justification for the sole-source award is crucial for accountability. The Inspector General of the Department of Defense may have jurisdiction to investigate any allegations of fraud, waste, or abuse related to this contract.

Related Government Programs

Naval Ship Systems
Defense Navigation Systems
Maritime Surveillance Technology
Aerospace and Defense Manufacturing
Military Electronics

Risk Flags

Sole-source award without clear justification.
Potential for non-competitive pricing.
Lack of small business participation.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $74.9 million to L3 TECHNOLOGIES INC. UNIVERSAL MODULAR MAST SHIPSET 1

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 Navy).

What is the total obligated amount?

The obligated amount is $74.9 million.

What is the period of performance?

Start: 2020-08-17. End: 2027-02-26.

What specific technical capabilities does the Universal Modular Mast Shipset provide, and how do these justify a sole-source award?

The Universal Modular Mast Shipset (UMMS) is designed to integrate various sensors and communication equipment onto naval vessels, serving critical functions in search, detection, navigation, guidance, and overall situational awareness. Its modular design likely allows for customization and upgrades across different ship classes. The justification for a sole-source award typically hinges on unique capabilities, proprietary technology, or the contractor's exclusive ability to meet specific, urgent requirements that cannot be fulfilled by other sources within a reasonable timeframe. Without access to the specific justification documentation (e.g., Justification and Approval - J&A), it is difficult to definitively assess the validity of these claims. However, the specialized nature of integrated mast systems for naval platforms often involves complex engineering and proprietary interfaces, which can sometimes lead to sole-source procurements if no other vendor can replicate the exact functionality or meet the stringent integration requirements.

How does the $74.8 million contract value compare to similar navigation system procurements by the Department of Defense?

Directly comparing the $74.8 million value of the Universal Modular Mast Shipset contract is challenging without knowing the exact quantity of shipsets procured and their specific configurations. However, the figure represents a substantial investment in a single system. For context, major naval platform upgrades or new system integrations can easily run into tens or hundreds of millions of dollars. For instance, contracts for advanced radar systems, electronic warfare suites, or integrated combat systems often fall within this range or higher. The 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' sector (NAICS 334511) includes a wide array of products, from individual sensors to complex integrated systems. Given this contract is for a 'shipset,' implying a comprehensive package, the $75M figure appears within the upper-middle range for significant, specialized naval electronic systems, especially when procured on a sole-source basis which often lacks competitive price pressure.

What are the primary risks associated with awarding a contract of this magnitude on a sole-source basis?

The primary risks associated with awarding a $74.8 million contract on a sole-source basis are threefold: inflated costs, lack of innovation, and reduced accountability. Without competition, the contractor has less incentive to offer the lowest possible price, potentially leading to the government overpaying. The absence of multiple bidders also stifles innovation, as there's no competitive pressure to develop more efficient or advanced solutions. Furthermore, sole-source awards can sometimes indicate a lack of market research or an over-reliance on a single supplier, which can create long-term dependencies and vulnerabilities. Accountability is also diminished, as the government has fewer leverage points to ensure optimal performance and value compared to a competitive scenario where multiple vendors vie for the contract.

What is the track record of L3 TECHNOLOGIES INC in delivering similar defense systems, and have they previously received sole-source contracts?

L3 Technologies Inc. (now part of L3Harris Technologies) has a long and established history of delivering a wide range of defense systems, including sensors, communication equipment, and electronic warfare capabilities, to the U.S. military and allied nations. They are a significant defense contractor with extensive experience in complex system integration. Publicly available contract data indicates that L3 Technologies has been awarded numerous contracts, including sole-source awards, particularly for specialized or proprietary technologies where competition may be limited. Their track record generally reflects a capacity to meet demanding military specifications. However, the specifics of past sole-source awards and their justifications would require deeper investigation into individual contract files and performance reviews to fully assess any patterns or potential concerns related to pricing or competition.

How does the firm-fixed-price (FFP) contract type mitigate risks for the government in this sole-source scenario?

The firm-fixed-price (FFP) contract type offers a significant risk mitigation for the government, even in a sole-source scenario like this one. Under an FFP contract, the price is set and not subject to adjustment based on the contractor's cost experience. This provides the government with budget certainty and protects it from cost overruns that might occur if the contractor's actual expenses exceed their estimates. While the sole-source nature means the initial price might not be the lowest achievable, the FFP structure ensures that the government knows exactly what it will pay for the specified goods or services. This contrasts with cost-reimbursement contracts, where the government bears the risk of contractor cost overruns. Therefore, FFP is generally preferred for its cost control predictability, especially when dealing with well-defined requirements.

What are the potential implications of this contract on future spending for similar navigation systems within the Department of the Navy?

This $75 million sole-source contract for the Universal Modular Mast Shipset could set a precedent for future procurements of similar systems. If the UMMS proves effective and L3 Technologies remains the sole provider of this specific technology, subsequent contracts could also be awarded on a sole-source basis, potentially at similar price points. This could lead to sustained higher costs for taxpayers if competitive alternatives are not explored or developed. Conversely, if the government can leverage this contract to negotiate favorable terms for follow-on orders or if the technology becomes standardized, it might lead to more predictable, albeit not necessarily lower, future spending. The lack of competition here highlights a potential risk of locking the Navy into a specific vendor's ecosystem for an extended period.

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: FIRE CONTROL EQPT.

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0002419R6205

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: L3harris Technologies, Inc

Address: 1121 BENFIELD BLVD STE H, MILLERSVILLE, MD, 21108

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Manufacturer of Goods, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $82,502,689

Exercised Options: $76,259,739

Current Obligation: $74,873,559

Subaward Activity

Number of Subawards: 4

Total Subaward Amount: $8,808,428

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline