Navy awards $52.4M contract for optical instruments, citing sole-source justification

Contract Overview

Contract Amount: $52,384,178 ($52.4M)

Contractor: L3 Technologies, Inc.

Awarding Agency: Department of Defense

Start Date: 2021-09-30

End Date: 2027-02-28

Contract Duration: 1,977 days

Daily Burn Rate: $26.5K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: MK20 EOSS MOD 1

Place of Performance

Location: NORTHAMPTON, HAMPSHIRE County, MASSACHUSETTS, 01060

State: Massachusetts Government Spending

Plain-Language Summary

Department of Defense obligated $52.4 million to L3 TECHNOLOGIES, INC. for work described as: MK20 EOSS MOD 1 Key points: 1. Contract awarded on a sole-source basis, limiting competitive price discovery. 2. Long contract duration of 1977 days suggests a need for sustained support. 3. Firm Fixed Price contract type aims to control costs for the government. 4. No small business set-aside, potentially limiting opportunities for smaller firms. 5. Contract falls under optical instrument manufacturing, a specialized sector. 6. High contract value indicates significant investment in this capability.

Value Assessment

Rating: fair

Benchmarking the value of this sole-source contract is challenging without competitive data. The firm fixed price structure is a positive indicator for cost control. However, the absence of competition means there's no direct comparison to market rates or alternative providers to definitively assess value for money. The contract's duration and value suggest a substantial requirement, but the lack of transparency in pricing makes a precise value assessment difficult.

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 among multiple vendors. The justification for this approach is not detailed in the provided data. Sole-source awards can lead to higher prices and reduced innovation compared to competitive procurements, as there is no market pressure to drive down costs or improve offerings.

Taxpayer Impact: Taxpayers may face higher costs due to the lack of competition. Without a competitive bidding process, the government cannot be assured it is receiving the best possible price for these optical instruments.

Public Impact

The Department of the Navy is the primary beneficiary, receiving critical optical instrument and lens manufacturing services. This contract supports national defense by ensuring the availability of specialized equipment. The contract is geographically located in Massachusetts, potentially impacting the local economy and workforce. The workforce implications include employment opportunities within L3 TECHNOLOGIES, INC. and its supply chain in the optical manufacturing sector.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition and potential taxpayer savings.
Long contract duration could indicate potential for cost overruns if not managed effectively.
Lack of small business participation may limit broader economic impact and innovation.

Positive Signals

Firm Fixed Price contract type provides cost certainty for the government.
Award to an established company (L3 TECHNOLOGIES, INC.) suggests a degree of reliability.
Contract supports a critical defense capability, aligning with national security objectives.

Sector Analysis

The optical instrument and lens manufacturing sector is a specialized niche within the broader manufacturing industry. This contract falls under NAICS code 333314. The market for defense-related optical systems is often characterized by high barriers to entry due to technological complexity and stringent quality requirements. Comparable spending benchmarks are difficult to establish without more specific details on the type of optical instruments procured.

Small Business Impact

This contract was not awarded as a small business set-aside, nor does it indicate any subcontracting requirements for small businesses. This means that opportunities for small businesses to participate in this specific procurement are limited. The absence of small business involvement could mean that the full spectrum of potential suppliers and innovative solutions from the small business ecosystem is not being leveraged.

Oversight & Accountability

The provided data does not detail specific oversight mechanisms for this contract. However, as a Department of Defense contract, it would likely be subject to internal DoD oversight, contract performance reviews, and potentially audits by the Defense Contract Audit Agency (DCAA). Transparency would depend on the public availability of contract modifications and performance reports, which are not included here.

Related Government Programs

Defense Procurement
Optical Manufacturing
Sole-Source Contracts
Department of the Navy Acquisitions

Risk Flags

Sole-source award lacks competitive transparency.
Long contract duration increases risk of technological obsolescence.
No small business participation noted.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $52.4 million to L3 TECHNOLOGIES, INC.. MK20 EOSS MOD 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 $52.4 million.

What is the period of performance?

Start: 2021-09-30. End: 2027-02-28.

What is the specific type of optical instrument or lens being procured under this contract?

The provided data identifies the North American Industry Classification System (NAICS) code as 333314, which corresponds to Optical Instrument and Lens Manufacturing. However, it does not specify the exact type of optical instruments or lenses. This could range from complex targeting systems and surveillance equipment to specialized lenses for scientific or communication purposes. Understanding the specific application is crucial for assessing the contract's strategic importance and potential risks associated with technological obsolescence or performance requirements.

What was the justification for awarding this contract on a sole-source basis?

The data indicates the contract was awarded under the 'NOT COMPETED' category, implying a sole-source justification. Common reasons for sole-source awards include unique capabilities possessed by only one vendor, urgent and compelling needs where competition is not feasible, or follow-on work to a previously competed contract where only the original contractor can provide the necessary integration or support. Without further documentation, the specific rationale remains undisclosed, which limits the ability to assess if competitive alternatives were truly unavailable or if the justification was robust.

How does the contract value of approximately $52.4 million compare to similar procurements in the optical instrument sector?

Direct comparison of this contract's value to similar procurements is challenging without more granular data on the specific types of optical instruments and their intended use. However, a value of $52.4 million for a definitive contract over nearly five years (September 2021 to February 2027) suggests a significant investment. The optical instrument and lens manufacturing sector for defense applications can involve high-value, specialized systems. To provide a meaningful benchmark, one would need to analyze contracts for comparable systems (e.g., advanced targeting pods, specialized sensor lenses) awarded to other prime contractors or through competitive processes.

What are the potential risks associated with the long contract duration of 1977 days?

A contract duration of 1977 days (approximately 5.4 years) presents several potential risks. Firstly, technological obsolescence is a significant concern in the rapidly evolving field of optics; the technology procured at the start of the contract may be outdated by its end. Secondly, long-term contracts can sometimes mask inefficiencies or allow for scope creep if not rigorously managed. Thirdly, market conditions and material costs can fluctuate significantly over such a period, potentially impacting the initial fixed-price assumptions if not adequately hedged. Effective program management and regular performance reviews are critical to mitigate these risks.

What is the track record of L3 TECHNOLOGIES, INC. in fulfilling similar defense contracts?

L3 Technologies, Inc. (now part of L3Harris Technologies) has a substantial track record in fulfilling defense contracts, including those involving advanced electronics, sensors, and communication systems, which often incorporate optical components. While specific performance metrics for this particular contract are not detailed, the company's history suggests it possesses the technical capabilities and manufacturing capacity required for such procurements. However, a comprehensive assessment would require reviewing past performance evaluations, any past performance issues, and the company's overall financial health and strategic focus within the defense sector.

What are the implications of the 'FIRM FIXED PRICE' contract type for cost control and contractor risk?

The 'FIRM FIXED PRICE' (FFP) contract type places the primary cost risk on the contractor, L3 TECHNOLOGIES, INC. This means the contractor is obligated to complete the work for a predetermined price, regardless of their actual costs. For the government, this offers the highest degree of cost certainty and predictability, making budgeting more straightforward. It incentivizes the contractor to manage costs efficiently and avoid overruns. However, if the initial price was not set appropriately due to lack of competition or incomplete understanding of requirements, the contractor might either incur significant losses or, conversely, if the price was set too high, the government might overpay.

Industry Classification

NAICS: Manufacturing › Commercial and Service Industry Machinery Manufacturing › Optical Instrument and Lens Manufacturing

Product/Service Code: FIRE CONTROL EQPT.

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0002420R5322

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: L3harris Technologies, Inc

Address: 50 PRINCE ST, NORTHAMPTON, MA, 01060

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: $56,064,363

Exercised Options: $52,419,192

Current Obligation: $52,384,178

Subaward Activity

Number of Subawards: 66

Total Subaward Amount: $9,599,001

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline