DoD's $208.5M contract for search and detection systems awarded to L3 Technologies, Inc

Contract Overview

Contract Amount: $208,490,373 ($208.5M)

Contractor: L3 Technologies, Inc.

Awarding Agency: Department of Defense

Start Date: 2022-04-26

End Date: 2027-07-22

Contract Duration: 1,913 days

Daily Burn Rate: $109.0K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Official Description: SPEIR E&MD

Place of Performance

Location: MASON, WARREN County, OHIO, 45040

State: Ohio Government Spending

Plain-Language Summary

Department of Defense obligated $208.5 million to L3 TECHNOLOGIES, INC. for work described as: SPEIR E&MD Key points: 1. Contract awarded through full and open competition, suggesting a competitive bidding process. 2. The contract type is Cost Plus Incentive Fee, which can incentivize cost control but also carries inherent risk. 3. The duration of the contract is over 1900 days, indicating a long-term need for these systems. 4. The contract is for manufacturing of search, detection, navigation, guidance, aeronautical, and nautical systems. 5. The prime contractor, L3 Technologies, Inc., is a significant player in the defense industry. 6. The contract is managed by the Department of the Navy, a major component of the Department of Defense.

Value Assessment

Rating: fair

Benchmarking the value of this $208.5 million contract is challenging without specific performance metrics or comparable contract data. The Cost Plus Incentive Fee (CPIF) structure means the final cost will depend on performance against targets, making a fixed value assessment difficult at this stage. However, the duration of the contract (over 5 years) suggests a substantial and ongoing need for these specialized systems. The contract's value should be evaluated against the technological advancements and operational capabilities it aims to deliver.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under 'full and open competition,' indicating that all responsible sources were permitted to submit a bid. The number of bidders is not specified, but this procurement method generally fosters a competitive environment, which can lead to better pricing and innovation. The Navy's approach suggests they sought the best available solution through a broad solicitation.

Taxpayer Impact: A competitive bidding process like full and open competition is generally favorable for taxpayers as it encourages multiple companies to offer their best prices and solutions, potentially driving down costs and improving value.

Public Impact

The primary beneficiaries are the Department of Defense and specifically the Department of the Navy, which will receive advanced search, detection, navigation, and guidance systems. These systems are crucial for national security operations, enhancing situational awareness and operational effectiveness for naval forces. The contract supports the manufacturing sector, likely involving skilled labor in engineering, production, and quality assurance. The geographic impact is primarily within the United States, where the contractor L3 Technologies, Inc. will perform the work, potentially benefiting various states through its supply chain and employment.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost Plus Incentive Fee contracts can lead to cost overruns if incentive targets are not met or if the baseline cost is underestimated.
Long-term contracts (over 5 years) carry the risk of technological obsolescence if not managed with regular reviews and potential updates.
Reliance on a single prime contractor for such a critical system could pose a risk if performance issues arise.
The specific nature of 'search, detection, navigation, guidance' systems implies high technical complexity and potential for development challenges.

Positive Signals

Awarded through full and open competition, suggesting a robust selection process and potential for competitive pricing.
The CPIF contract structure includes incentives, which can motivate the contractor to achieve cost efficiencies and performance targets.
L3 Technologies, Inc. is an established defense contractor with a track record in complex systems, suggesting technical capability.
The contract addresses critical defense needs, ensuring the Navy has access to advanced technology for operational readiness.

Sector Analysis

This contract falls within the 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' sector (NAICS 334511). This industry is characterized by high technological sophistication, significant R&D investment, and close ties to government defense spending. The market is dominated by a few large defense contractors capable of meeting stringent military specifications. Comparable spending benchmarks would involve other large-scale defense contracts for advanced sensor and navigation systems, often running into hundreds of millions of dollars over several years.

Small Business Impact

The data indicates that small business participation (sb) is false, and there is no indication of a small business set-aside (ss). This suggests the contract was not specifically targeted towards small businesses. While L3 Technologies, Inc. may engage small businesses as subcontractors, the primary award is to a large corporation. The absence of set-aside provisions means the focus was on securing the best solution through open competition, rather than prioritizing small business inclusion at the prime contract level.

Oversight & Accountability

Oversight for this contract will likely be managed by the Department of the Navy's contracting and program management offices. The Cost Plus Incentive Fee structure necessitates close monitoring of costs, performance, and adherence to contract terms. Transparency is typically maintained through regular reporting requirements from the contractor. Inspector General jurisdiction would apply to investigations of fraud, waste, or abuse related to the contract.

Related Government Programs

Naval Systems
Defense Electronics
Navigation and Guidance Systems
Search and Detection Equipment
Aerospace Manufacturing
DoD Procurement

Risk Flags

Cost Plus Incentive Fee contract type requires careful monitoring to manage potential cost overruns.
Long contract duration (over 5 years) increases risk of technological obsolescence.
Complexity of 'search, detection, navigation, guidance' systems may lead to unforeseen technical challenges.
Dependence on a single prime contractor for critical systems.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $208.5 million to L3 TECHNOLOGIES, INC.. SPEIR E&MD

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 $208.5 million.

What is the period of performance?

Start: 2022-04-26. End: 2027-07-22.

What is L3 Technologies, Inc.'s track record with similar Cost Plus Incentive Fee (CPIF) contracts, particularly within the Department of Defense?

L3 Technologies, Inc. (now part of L3Harris Technologies) has a significant history of performing on complex defense contracts, including those utilizing CPIF structures. These contracts often involve advanced technology development and production for various military branches. Analyzing their past performance on similar CPIF awards would involve reviewing metrics such as cost variances, achievement of incentive targets, and delivery timeliness. Historically, CPIF contracts aim to balance contractor risk and reward, encouraging efficiency. However, the success of such contracts heavily depends on the clarity of performance metrics, the accuracy of initial cost estimates, and robust government oversight to ensure fair pricing and effective execution. L3Harris's extensive experience suggests they possess the infrastructure and expertise to manage such agreements, but specific performance data for this particular contract would be needed for a definitive assessment.

How does the $208.5 million value compare to other contracts for similar search, detection, and navigation systems awarded by the Navy or DoD?

The $208.5 million value for this 5-year contract (2022-2027) for advanced search, detection, navigation, and guidance systems appears substantial, reflecting the complexity and critical nature of the technology involved. To benchmark this value, one would compare it against other definitive contracts awarded by the Department of Defense for similar systems, considering factors like system capabilities, quantity, and contract duration. For instance, contracts for radar systems, sonar equipment, or advanced avionics suites often fall within this range or higher, especially for long-term development and production efforts. The specific NAICS code (334511) covers a broad range of instruments, so direct comparisons require matching system functionalities. Given the duration and the nature of the systems, this contract's value seems aligned with typical large-scale defense procurements in this specialized technological domain.

What are the primary risks associated with the Cost Plus Incentive Fee (CPIF) contract type for this specific procurement?

The primary risks associated with the CPIF contract type for this procurement revolve around cost control and performance measurement. While CPIF incentivizes the contractor to reduce costs below a target, it also means the government pays the actual costs incurred plus a fee that varies based on performance. Risks include: 1) Potential for cost overruns if the initial target cost is set too high or if unforeseen technical challenges significantly increase actual costs. 2) Difficulty in establishing objective and measurable performance incentives that accurately reflect the desired outcomes for complex systems. 3) Increased government oversight burden to monitor costs, progress, and ensure the incentive structure is effective and fair. 4) The contractor might prioritize achieving incentive targets over other critical factors like long-term reliability or maintainability if not carefully specified in the contract.

How effective is the 'full and open competition' approach likely to be in ensuring the best value for taxpayers on this $208.5M contract?

The 'full and open competition' approach is generally considered the most effective method for ensuring the best value for taxpayers on large, complex contracts like this $208.5 million award. By allowing all responsible sources to compete, it maximizes the pool of potential offerors, fostering a competitive environment that drives innovation and encourages lower pricing. This method increases the likelihood that the government receives technically superior solutions at a fair and reasonable price. However, the ultimate value realized depends on the clarity of the solicitation requirements, the rigor of the evaluation process, and the government's ability to negotiate effectively. If the competition is robust (i.e., multiple strong bidders), taxpayers benefit from price discovery and a wider range of options, leading to a more advantageous outcome compared to sole-source or limited competition scenarios.

What are the historical spending patterns for search, detection, navigation, and guidance systems within the Department of the Navy over the last five years?

Historical spending patterns for search, detection, navigation, and guidance systems within the Department of the Navy (DoN) typically show consistent, significant investment due to the critical nature of these technologies for naval operations. Over the last five years, the DoN has allocated substantial budgets towards modernizing and maintaining its fleet's sensor, communication, and navigation capabilities. This includes funding for radar, sonar, electronic warfare systems, GPS/inertial navigation units, and related software. Spending often fluctuates based on specific platform procurements (e.g., new ship classes, aircraft), upgrade cycles for existing systems, and emerging technological requirements driven by evolving threats. Contracts in this domain are frequently long-term, involving research, development, testing, and production, with values often in the tens to hundreds of millions of dollars. Analyzing specific budget lines for 'Systems Command' or 'Naval Air Systems Command' would reveal detailed spending trends.

What are the potential implications of this contract on the broader defense industrial base, particularly for competitors and potential subcontractors?

This $208.5 million contract awarded to L3 Technologies, Inc. has several implications for the broader defense industrial base. For competitors, it signifies a significant win for L3, potentially impacting their market share and future bidding strategies. It also highlights the ongoing demand for advanced defense systems, encouraging competitors to invest in R&D and maintain their own competitive capabilities. For potential subcontractors, this contract represents opportunities for business, particularly for firms specializing in specific components, software development, testing services, or niche manufacturing related to search, detection, and navigation systems. L3 Technologies will likely leverage its supply chain, potentially engaging various small and medium-sized businesses, thereby distributing economic benefits. However, it also concentrates a large portion of this specific program's value with one prime contractor, influencing market dynamics.

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: COMM/DETECT/COHERENT RADIATION

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: N0002421R5514

Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE (V)

Evaluated Preference: NONE

Contractor Details

Address: 1 FEDERAL ST, CAMDEN, NJ, 08103

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: $603,494,604

Exercised Options: $247,689,886

Current Obligation: $208,490,373

Subaward Activity

Number of Subawards: 6

Total Subaward Amount: $639,625

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline