Navy awards $32M for prototype development, with limited competition impacting price discovery

Contract Overview

Contract Amount: $32,049,762 ($32.0M)

Contractor: L3harris Nexgen Communications LLC

Awarding Agency: Department of Defense

Start Date: 2023-11-01

End Date: 2026-01-30

Contract Duration: 821 days

Daily Burn Rate: $39.0K/day

Competition Type: NOT AVAILABLE FOR COMPETITION

Pricing Type: COST PLUS FIXED FEE

Sector: R&D

Official Description: TECHNICAL DEVELOPMENT OF NAVY PROTOTYPE UNITS INCLUDING PROTOTYPE MODIFICATION, ENGINEERING DEVELOPMENT MODEL (EDM) EMBARKABLE PROTOTYPE SYSTEM (EPS) PREPARATION AND PRODUCTION, AND PROTOTYPE INSTALLATION ON EVALUATION PLATFORMS.

Place of Performance

Location: WASHINGTON, DISTRICT OF COLUMBIA County, DISTRICT OF COLUMBIA, 20375

State: District of Columbia Government Spending

Plain-Language Summary

Department of Defense obligated $32.0 million to L3HARRIS NEXGEN COMMUNICATIONS LLC for work described as: TECHNICAL DEVELOPMENT OF NAVY PROTOTYPE UNITS INCLUDING PROTOTYPE MODIFICATION, ENGINEERING DEVELOPMENT MODEL (EDM) EMBARKABLE PROTOTYPE SYSTEM (EPS) PREPARATION AND PRODUCTION, AND PROTOTYPE INSTALLATION ON EVALUATION PLATFORMS. Key points: 1. Contract focuses on advanced prototype development for naval systems, indicating a need for specialized R&D capabilities. 2. The sole-source nature of this award raises questions about potential overpayment and the absence of competitive pressure on pricing. 3. Limited competition suggests a high degree of contractor specialization or unique technical requirements. 4. The contract duration of over two years points to a significant, long-term development effort. 5. Performance risk may be elevated due to the prototype nature of the work, requiring close monitoring. 6. This award falls within the R&D sector, specifically focusing on physical and engineering sciences.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to its specialized R&D nature and limited competition. The Cost Plus Fixed Fee (CPFF) contract type, while common for R&D, can lead to cost overruns if not managed tightly. Without comparable sole-source awards or a competitive bidding process, it's difficult to definitively assess if the $32 million price tag represents fair value for the prototype development services. Further analysis of the contractor's historical performance and the specific technical requirements would be needed for a more precise valuation.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one vendor, L3HARRIS NEXGEN COMMUNICATIONS LLC, was solicited. This approach is typically used when a unique capability or proprietary technology is required, and competition is not feasible or practicable. The absence of multiple bidders means there was no competitive pressure to drive down costs or encourage innovative solutions, potentially leading to a higher price than if the contract had been competed.

Taxpayer Impact: Taxpayers may not be receiving the best possible value due to the lack of competition. Without a bidding process, there's no assurance that the selected contractor offered the most cost-effective solution for the Navy's needs.

Public Impact

The primary beneficiary is the Department of the Navy, which will receive advanced prototype units for evaluation and potential future deployment. Services delivered include technical development, modification, and preparation of prototype systems for naval platforms. The geographic impact is primarily within the District of Columbia, where the contractor is located, and potentially at naval evaluation sites. This contract supports specialized engineering and R&D roles, contributing to the high-tech defense sector workforce.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition, potentially increasing costs for taxpayers.
CPFF contract type can incentivize cost increases if not rigorously managed.
Prototype development inherently carries technical and schedule risks.
Lack of transparency in the sole-source justification could mask other contracting issues.

Positive Signals

Awardee is likely a specialized provider with unique capabilities for naval systems.
Focus on prototype development supports innovation and future naval technology advancement.
Contract duration suggests a significant and potentially impactful development effort.

Sector Analysis

This contract falls under the Research and Development (R&D) sector, specifically NAICS code 541715, which covers R&D in the Physical, Engineering, and Life Sciences. This sector is characterized by innovation, specialized expertise, and often long development cycles. The total federal spending in this category is substantial, with many contracts awarded on a competitive basis. However, R&D contracts, particularly those involving novel technologies or prototypes, can sometimes be sole-sourced due to the unique nature of the required work.

Small Business Impact

This contract does not appear to have a small business set-aside (ss=false, sb=false). Given the specialized nature of prototype development for naval systems, it is likely that the prime contractor possesses unique technical capabilities. There is no explicit information provided regarding subcontracting plans for small businesses, which could be a missed opportunity to engage the small business defense industrial base.

Oversight & Accountability

Oversight for this contract will be managed by the Department of the Navy. As a Cost Plus Fixed Fee contract, rigorous financial oversight and performance monitoring will be crucial to ensure costs remain within acceptable limits and that development milestones are met. Transparency regarding the justification for the sole-source award and regular reporting on progress will be key accountability measures. Specific Inspector General jurisdiction would typically fall under the Department of Defense's IG.

Related Government Programs

Naval Systems Development
Advanced Technology Prototypes
Defense Research and Development
Engineering Services
Prototype Modification and Production

Risk Flags

Sole-source award
Cost Plus Fixed Fee contract type
Prototype development risks
Limited public information on justification

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $32.0 million to L3HARRIS NEXGEN COMMUNICATIONS LLC. TECHNICAL DEVELOPMENT OF NAVY PROTOTYPE UNITS INCLUDING PROTOTYPE MODIFICATION, ENGINEERING DEVELOPMENT MODEL (EDM) EMBARKABLE PROTOTYPE SYSTEM (EPS) PREPARATION AND PRODUCTION, AND PROTOTYPE INSTALLATION ON EVALUATION PLATFORMS.

Who is the contractor on this award?

The obligated recipient is L3HARRIS NEXGEN COMMUNICATIONS LLC.

Which agency awarded this contract?

Awarding agency: Department of Defense (Department of the Navy).

What is the total obligated amount?

The obligated amount is $32.0 million.

What is the period of performance?

Start: 2023-11-01. End: 2026-01-30.

What is the specific technical capability L3HARRIS NEXGEN COMMUNICATIONS LLC possesses that justified a sole-source award for this naval prototype development?

The provided data does not detail the specific technical capability that justified the sole-source award. Typically, sole-source justifications are based on factors such as the existence of a unique capability, proprietary technology, or the need for compatibility with existing systems where only one source can meet the requirement. For this contract, the Navy likely determined that L3HARRIS NEXGEN COMMUNICATIONS LLC was the only responsible source capable of performing the technical development of prototype units, including modification, EDM, EPS preparation, and installation on evaluation platforms, within the required timeframe and specifications. A formal justification document (e.g., a Justification and Approval or J&A) would normally contain these specifics, but it is not included in the provided data.

How does the Cost Plus Fixed Fee (CPFF) contract type compare to other R&D contract types in terms of cost control for the government?

The Cost Plus Fixed Fee (CPFF) contract type is common for research and development efforts where the scope of work is not precisely defined at the outset, making it difficult to establish a firm fixed price. In a CPFF contract, the contractor is reimbursed for all allowable costs incurred, plus a fixed fee representing profit. While the fee is fixed, the total cost to the government can vary significantly depending on the contractor's efficiency and the actual costs incurred. Compared to a Firm-Fixed-Price (FFP) contract, CPFF offers less cost certainty for the government but provides greater flexibility for the contractor to adapt to evolving R&D requirements. However, it requires robust government oversight to manage costs effectively and prevent potential overruns. Other R&D contract types, like Cost-Plus-Incentive-Fee (CPIF), aim to incentivize contractor performance by adjusting the fee based on achieving certain cost or performance targets, potentially offering better cost control than CPFF.

What are the potential risks associated with the 'prototype modification, engineering development model (EDM) embarkable prototype system (EPS) preparation and production, and prototype installation'

The contract involves several stages of prototype development, each carrying inherent risks. 'Prototype modification' suggests existing designs may need significant changes, introducing uncertainty in timelines and costs. 'Engineering Development Model (EDM) preparation and production' implies creating functional prototypes that may encounter unforeseen technical challenges during design, manufacturing, or testing, potentially leading to delays or increased costs. 'Prototype installation on evaluation platforms' carries risks related to integration, compatibility issues with existing naval systems, and the performance of the prototype in a real-world or simulated environment. Furthermore, the 'embarkable' nature suggests the prototypes must be suitable for deployment on vessels, adding complexity related to size, weight, power, and environmental resilience. These technical risks can impact schedule, budget, and the ultimate success of the prototype in meeting its intended objectives.

What is the historical spending trend for NAICS code 541715 (Research and Development in the Physical, Engineering, and Life Sciences) by the Department of the Navy?

Historical spending data for NAICS code 541715 by the Department of the Navy shows a consistent and significant investment in research and development. While specific year-over-year figures fluctuate based on strategic priorities and budget allocations, the Navy generally allocates billions of dollars annually to R&D activities within this sector. This spending supports a wide range of initiatives, from basic scientific research to the development of advanced technological prototypes and systems. The trend indicates a sustained commitment to maintaining technological superiority and addressing future defense challenges through innovation. Contracts within this NAICS code often involve complex, long-term projects requiring specialized expertise, contributing to the overall substantial expenditure.

Given the $32 million award value and the 821-day duration, what is the approximate monthly burn rate for this contract?

To estimate the approximate monthly burn rate, we divide the total award amount by the contract duration in months. The contract duration is 821 days. Assuming an average of 30.44 days per month (365.25 days/year / 12 months/year), the duration in months is approximately 821 / 30.44 = 26.97 months. Therefore, the approximate monthly burn rate is $32,049,761.61 / 26.97 months = approximately $1,188,386 per month. This figure represents the average monthly expenditure required to fund the contract activities over its lifespan. It's important to note that actual spending may vary month-to-month based on the pace of work and incurred costs.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Scientific Research and Development Services › Research and Development in the Physical, Engineering, and Life Sciences (except Nanotechnology and Biotechnology)

Product/Service Code: RESEARCH AND DEVELOPMENT › General Science and Technology R&D Services

Competition & Pricing

Extent Competed: NOT AVAILABLE FOR COMPETITION

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0017323RDH03

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: L3harris Technologies, Inc

Address: 44965 AVIATION DR, DULLES, VA, 20166

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

Financial Breakdown

Contract Ceiling: $32,157,975

Exercised Options: $32,157,975

Current Obligation: $32,049,762

Actual Outlays: $554,837

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: N0017322D2001

IDV Type: IDC

Timeline