DoD awards $403M for M734A1 and M783 fuzes, with L3Harris securing the firm-fixed-price contract

Contract Overview

Contract Amount: $403,364,288 ($403.4M)

Contractor: L3harris Fuzing and Ordnance Systems, Inc.

Awarding Agency: Department of Defense

Start Date: 2009-11-02

End Date: 2021-09-30

Contract Duration: 4,350 days

Daily Burn Rate: $92.7K/day

Competition Type: FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: CONTRACT IS FOR THE PRODUCTION OF THE M734A1 MOF AND M783 PD/DLY FUZES. THIS ACQUISITION ENCOMPASSES THESE TWO FUZES AND ANY VARIANTS THEREOF. THE CONTRACT IS A FIRM FIXED PRICE CONTRACT IN WHICH CONSISTS OF A BASE YEAR, WITH 4 OPTION YEARS.

Place of Performance

Location: CINCINNATI, CLERMONT County, OHIO, 45245

State: Ohio Government Spending

Plain-Language Summary

Department of Defense obligated $403.4 million to L3HARRIS FUZING AND ORDNANCE SYSTEMS, INC. for work described as: CONTRACT IS FOR THE PRODUCTION OF THE M734A1 MOF AND M783 PD/DLY FUZES. THIS ACQUISITION ENCOMPASSES THESE TWO FUZES AND ANY VARIANTS THEREOF. THE CONTRACT IS A FIRM FIXED PRICE CONTRACT IN WHICH CONSISTS OF A BASE YEAR, WITH 4 OPTION YEARS. Key points: 1. The contract value of $403M over its potential duration indicates significant investment in critical ordnance components. 2. L3Harris's role as the sole awardee suggests a concentrated market for these specific fuzes or a highly specialized manufacturing capability. 3. The firm-fixed-price structure shifts cost risk to the contractor, potentially leading to greater price certainty for the government. 4. The contract's duration, spanning from 2009 to 2021, reflects a long-term need for these fuzes within the Department of Defense. 5. The 'Full and Open Competition After Exclusion of Sources' designation warrants further investigation into the rationale for excluding other potential bidders. 6. The absence of small business set-asides suggests the contract's scale or technical requirements may not have been conducive to such provisions.

Value Assessment

Rating: fair

The total contract value of $403 million for M734A1 and M783 fuzes represents a substantial investment. Benchmarking this against similar ordnance production contracts is challenging without more specific data on unit volumes and technical specifications. The firm-fixed-price nature provides some cost control, but the absence of detailed cost breakdowns or comparisons to market rates makes a definitive value-for-money assessment difficult. The contract's long duration suggests a stable, albeit potentially less competitive, pricing environment over time.

Cost Per Unit: N/A

Competition Analysis

Competition Level: limited

The contract was awarded under 'Full and Open Competition After Exclusion of Sources.' This specific designation implies that while the initial intent may have been broad competition, certain sources were excluded, leading to a limited competitive field. The number of bidders is not explicitly stated, but the exclusion of sources suggests that the competition was not entirely open, potentially impacting price discovery and the government's ability to secure the lowest possible price.

Taxpayer Impact: The limited competition may have resulted in a higher price for taxpayers than if all potential sources had been allowed to bid. It raises questions about whether the exclusion of sources was justified and if it truly served the government's best interest in terms of cost savings.

Public Impact

The primary beneficiaries are the U.S. Army and potentially other branches of the Department of Defense, ensuring a supply of critical fuzes for munitions. The contract delivers essential components for artillery and mortar rounds, directly supporting military readiness and operational capabilities. The geographic impact is primarily centered in Ohio, where L3Harris Fuzing and Ordnance Systems, Inc. is located, potentially supporting local employment and the defense industrial base in that region. The contract sustains specialized manufacturing jobs within the defense sector, requiring skilled labor in ordnance production.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

The 'Full and Open Competition After Exclusion of Sources' raises concerns about the breadth of competition and potential for higher costs.
Lack of transparency regarding the reasons for excluding other sources makes it difficult to assess if the government received the best possible value.
The long contract duration could lead to complacency in pricing if not actively managed and re-competed.

Positive Signals

The firm-fixed-price contract structure effectively transfers cost overrun risk to the contractor.
L3Harris Fuzing and Ordnance Systems, Inc. is an established entity in defense manufacturing, suggesting a degree of reliability.
The sustained award indicates a consistent need for these specific fuzes, highlighting their importance to military operations.

Sector Analysis

This contract falls within the Ammunition (except Small Arms) Manufacturing sector, a critical component of the defense industrial base. The market for specialized fuzes is often concentrated among a few key manufacturers due to high technical barriers to entry and stringent quality control requirements. Spending in this sector is directly tied to military procurement cycles and geopolitical demands. Comparable spending benchmarks would typically involve analyzing the total value of similar ordnance contracts awarded across the DoD over specific periods.

Small Business Impact

The data indicates that this contract was not set aside for small businesses (ss: false, sb: false). The nature of specialized ordnance manufacturing, requiring significant capital investment, advanced technology, and rigorous quality assurance, often favors larger, established prime contractors. While there might be subcontracting opportunities for small businesses within the supply chain, the prime contract itself does not appear to have been structured to directly benefit the small business ecosystem.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Army's contracting and program management offices. Accountability measures are inherent in the firm-fixed-price structure, which obligates the contractor to deliver specified goods at an agreed-upon price. Transparency is limited by the 'exclusion of sources' designation, making it difficult for the public to fully assess the competitive process. Inspector General jurisdiction would apply to investigations of fraud, waste, or abuse related to the contract.

Related Government Programs

Department of Defense Ammunition Procurement
Artillery and Mortar Fuze Production
Ordnance Manufacturing Contracts
L3Harris Defense Contracts
Long-Term Defense Supply Contracts

Risk Flags

Limited competition due to source exclusion
Potential for uncompetitive pricing
Lack of transparency in procurement process

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $403.4 million to L3HARRIS FUZING AND ORDNANCE SYSTEMS, INC.. CONTRACT IS FOR THE PRODUCTION OF THE M734A1 MOF AND M783 PD/DLY FUZES. THIS ACQUISITION ENCOMPASSES THESE TWO FUZES AND ANY VARIANTS THEREOF. THE CONTRACT IS A FIRM FIXED PRICE CONTRACT IN WHICH CONSISTS OF A BASE YEAR, WITH 4 OPTION YEARS.

Who is the contractor on this award?

The obligated recipient is L3HARRIS FUZING AND ORDNANCE SYSTEMS, INC..

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $403.4 million.

What is the period of performance?

Start: 2009-11-02. End: 2021-09-30.

What specific technical capabilities or historical performance led to L3Harris Fuzing and Ordnance Systems, Inc. being the sole awardee under this contract, especially given the 'Full and Open Competi

The designation 'Full and Open Competition After Exclusion of Sources' suggests that while the contract was intended to be competed, certain potential bidders were disqualified or excluded from the process. This exclusion could be based on various factors, such as failure to meet stringent technical specifications, inability to pass security clearances, lack of specific manufacturing certifications, or proprietary technology limitations. L3Harris Fuzing and Ordnance Systems, Inc. likely possesses unique capabilities, patents, or a proven track record in producing these specific M734A1 and M783 fuzes that met or exceeded the government's requirements. Without access to the specific justification for excluding other sources, it's difficult to pinpoint the exact reasons, but it implies a high barrier to entry for competitors in this specialized area of ordnance manufacturing.

How does the total contract value of $403 million compare to historical spending on similar fuzes or ordnance components by the Department of Defense?

The total contract value of $403,364,288.20 for the M734A1 and M783 fuzes represents a significant, long-term investment by the Department of Defense. To provide a precise comparison, one would need to analyze historical spending data for similar fuze types (e.g., point detonating, delay fuzes) and ordnance components across different DoD branches and contract vehicles. However, given the duration of this contract (base year plus four option years, spanning potentially over a decade), this annual expenditure likely falls within a typical range for critical, specialized munitions components. Factors influencing this value include production volume, material costs, inflation over the contract period, and the specialized nature of the manufacturing process. Without direct comparative contract data, it's challenging to definitively state if this represents high or low spending, but it underscores the consistent demand for these essential military supplies.

What are the primary risks associated with a firm-fixed-price contract of this magnitude and duration, and what mitigation strategies are typically employed?

The primary risks associated with a firm-fixed-price (FFP) contract of this magnitude ($403M) and duration (up to 5 years) include potential contractor underperformance, quality issues, and the risk of the government paying a premium if market conditions change favorably for the contractor. For the government, the main risk is that the contractor may cut corners on quality to maximize profit, or that the fixed price becomes uncompetitive if material costs decrease significantly. Mitigation strategies typically involve robust government oversight, including quality assurance inspections, performance metrics, and clear contract terms. The government also relies on the contractor's reputation and the potential for future contract awards as incentives for good performance. Furthermore, contract clauses may allow for price adjustments under specific, pre-defined circumstances, though this is less common in pure FFP agreements. Regular performance reviews and communication channels are crucial for identifying and addressing potential issues early.

Can the 'Full and Open Competition After Exclusion of Sources' designation be further investigated to understand the rationale and its impact on price competition?

Yes, the 'Full and Open Competition After Exclusion of Sources' designation warrants further investigation. This specific contracting method implies that the government initially intended to solicit offers from all responsible sources but subsequently excluded certain ones. The rationale for exclusion typically needs to be documented and justified, often citing reasons such as the unique capabilities of a sole source, national security concerns, or the inability of other potential sources to meet highly specialized requirements. Investigating the justification documents (e.g., Justification and Approval - J&A) would reveal why other sources were excluded. The impact on price competition is generally negative; excluding potential bidders inherently limits the competitive pool, which can lead to higher prices for the government compared to a scenario with broader participation. Understanding the specific exclusions is key to assessing whether the government truly received the best value.

What is the typical lifecycle and obsolescence risk for fuzes like the M734A1 and M783, and how might this influence long-term contract strategies?

The lifecycle and obsolescence risk for military fuzes like the M734A1 and M783 are significant considerations. These components are critical for munitions, and their reliability is paramount. While designed for durability, the underlying technologies, materials, and manufacturing processes can become outdated. Obsolescence risk is managed through rigorous testing, potential technology refresh programs, and careful supply chain management. For long-term contract strategies, the DoD must balance the need for a stable supply of current fuzes with the potential for future upgrades or replacements. Contracts like this one, with option years, allow for sustained production while providing opportunities to incorporate design improvements or adapt to evolving threats. However, the DoD also needs to plan for eventual replacement or modernization, which might involve developing new fuze designs or seeking alternative suppliers as technology advances or existing ones become obsolete.

Industry Classification

NAICS: Manufacturing › Other Fabricated Metal Product Manufacturing › Ammunition (except Small Arms) Manufacturing

Product/Service Code: SPECIAL INDUSTRY MACHINERY

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: W15QKN08R0352

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: L3harris Technologies, Inc

Address: 3975 MCMANN RD, CINCINNATI, OH, 45245

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $403,364,288

Exercised Options: $403,364,288

Current Obligation: $403,364,288

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline