DoD's $32M Apache IHADSS contract awarded to Elbit America lacked competition, raising value concerns

Contract Overview

Contract Amount: $32,072,520 ($32.1M)

Contractor: Elbitamerica, Inc.

Awarding Agency: Department of Defense

Start Date: 2007-12-19

End Date: 2012-02-28

Contract Duration: 1,532 days

Daily Burn Rate: $20.9K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: IHADSS 21 EQUIPMENT SHIPSETS AND SPARES FOR AH-64 APACHE

Place of Performance

Location: FORT WORTH, TARRANT County, TEXAS, 76179

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $32.1 million to ELBITAMERICA, INC. for work described as: IHADSS 21 EQUIPMENT SHIPSETS AND SPARES FOR AH-64 APACHE Key points: 1. The contract's value of $32 million for IHADSS equipment and spares for the AH-64 Apache raises questions about cost-effectiveness due to the absence of competitive bidding. 2. Sole-source awards can limit price discovery and potentially lead to higher costs for taxpayers compared to a competitive environment. 3. The duration of the contract (over 4 years) suggests a long-term need for these specialized components. 4. The lack of small business participation (ss: false, sb: false) indicates this award did not prioritize small business set-asides. 5. The contract falls under the 'Other Aircraft Parts and Auxiliary Equipment Manufacturing' NAICS code, suggesting a niche but critical component for military aviation. 6. The firm-fixed-price contract type aims to transfer risk to the contractor, but without competition, the baseline price is less certain.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging without comparable sole-source awards or detailed cost breakdowns. The $32 million price tag for specialized aviation equipment, while potentially justified by unique technical requirements, warrants scrutiny given the lack of competitive pressure to ensure optimal pricing. Without a competitive process, it's difficult to definitively assess if this represents a fair market value or if taxpayers paid a premium.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one bidder, Elbit America, Inc., was considered. This approach bypasses the standard competitive bidding process, which typically involves multiple companies vying for the contract. The lack of competition means there was no opportunity for price negotiation or comparison against alternative suppliers, potentially impacting the final cost to the government.

Taxpayer Impact: Sole-source awards mean taxpayers do not benefit from the cost savings that often arise from competitive bidding. This can result in higher overall spending for the same goods or services.

Public Impact

The primary beneficiaries are the Department of the Army and the AH-64 Apache helicopter fleet, ensuring operational readiness. The contract delivers critical Integrated Helmet And Display Sight System (IHADSS) equipment and necessary spare parts. The geographic impact is primarily within the United States, with potential deployment of Apache helicopters globally. The contract supports specialized manufacturing roles within the aerospace and defense sector.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to inflated prices.
Sole-source awards can reduce transparency in pricing.
Potential for vendor lock-in if alternatives are not explored.
Limited opportunities for small businesses in this specific award.

Positive Signals

Firm-fixed-price contract type provides cost certainty to the government.
Ensures availability of critical components for a key military platform.
Award to an established contractor may imply reliability in delivery.

Sector Analysis

This contract falls within the 'Other Aircraft Parts and Auxiliary Equipment Manufacturing' sector, a specialized segment of the broader aerospace and defense industry. This sector is characterized by high technological barriers to entry and stringent quality requirements. The market size for such specialized components is often driven by defense spending and the lifecycle of specific military platforms like the AH-64 Apache. Comparable spending benchmarks are difficult to establish due to the niche nature of IHADSS equipment and the sole-source award.

Small Business Impact

This contract was not awarded as a small business set-aside, nor does it appear to have specific subcontracting requirements for small businesses mentioned in the provided data. The absence of small business participation in this sole-source award means that opportunities within this specific contract are not being directed towards the small business ecosystem. This could limit the growth and revenue potential for small businesses that might otherwise compete for or supply components for such defense contracts.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Defense's contracting and procurement regulations, managed by the Department of the Army. 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 due to the sole-source nature of the award, making detailed public scrutiny of the pricing justification challenging. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse.

Related Government Programs

AH-64 Apache Helicopter Procurement
Military Aviation Parts and Components
Defense Logistics and Sustainment
Aerospace Manufacturing Contracts

Risk Flags

Sole-source award lacks competition
Potential for inflated pricing due to lack of competition
Limited transparency in cost justification
No small business participation noted

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $32.1 million to ELBITAMERICA, INC.. IHADSS 21 EQUIPMENT SHIPSETS AND SPARES FOR AH-64 APACHE

Who is the contractor on this award?

The obligated recipient is ELBITAMERICA, 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 $32.1 million.

What is the period of performance?

Start: 2007-12-19. End: 2012-02-28.

What is the specific function and importance of the IHADSS system on the AH-64 Apache?

The Integrated Helmet And Display Sight System (IHADSS) is a critical component of the AH-64 Apache attack helicopter, providing pilots with essential flight and targeting information directly within their field of view. It integrates various data streams, including flight symbology, navigation cues, and weapon system status, onto the pilot's helmet-mounted display. This allows the pilot to maintain situational awareness and effectively employ the aircraft's weaponry without needing to divert their gaze to cockpit instruments. The IHADSS is crucial for the Apache's effectiveness in complex combat environments, enabling precise targeting and maneuvering, especially during night operations or adverse weather conditions.

Why was this contract awarded on a sole-source basis instead of through full and open competition?

The provided data indicates the contract was 'NOT COMPETED,' suggesting a sole-source award. While the specific justification is not detailed, sole-source awards are typically granted when only one responsible source is available or capable of meeting the government's needs. This could be due to proprietary technology, unique manufacturing capabilities, urgent requirements where competition would cause unacceptable delays, or if the item is a critical component for which only one supplier exists. Without further documentation, the precise rationale for bypassing competition for the IHADSS equipment remains unclear but likely relates to specialized technical requirements or existing sole-source justifications within the DoD's procurement regulations.

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

A Firm-Fixed-Price (FFP) contract type generally shifts the majority of risk to the contractor, as the price is set and not subject to adjustment based on the contractor's cost experience. In this sole-source scenario, the FFP structure provides the government with a degree of cost certainty, meaning they know the total amount they will pay for the IHADSS equipment and spares, assuming the contractor meets all contract terms. However, the primary risk mitigation benefit of FFP—ensuring the government doesn't overpay due to contractor cost overruns—is somewhat diminished without the competitive pressure that would normally help establish a more accurate baseline price. The government still benefits from a predictable total cost, but the initial price negotiation is crucial.

What are the potential long-term implications of relying on a single supplier for critical Apache components?

Relying on a single supplier for critical components like the IHADSS system can create several long-term implications. Firstly, it can lead to vendor lock-in, making it difficult and potentially costly to switch suppliers in the future, even if better alternatives emerge. Secondly, the sole supplier may have significant leverage in price negotiations, potentially leading to price increases over time as the government's dependence grows. Thirdly, supply chain disruptions at the single source, whether due to financial instability, production issues, or geopolitical factors, could directly impact the operational readiness of the entire AH-64 Apache fleet. This underscores the importance of robust contract management and contingency planning.

What is Elbit America's track record with the Department of Defense, particularly concerning Apache helicopter systems?

Elbit America, Inc. is a significant defense contractor with a history of providing various systems and components to the U.S. military, including those for rotorcraft platforms. While specific details on their track record solely for IHADSS on the AH-64 Apache require deeper investigation into contract databases, Elbit Systems (the parent company) is known for its expertise in avionics, electro-optics, and helmet-mounted displays. Their involvement suggests a capability to produce such specialized equipment. However, the sole-source nature of this particular award means that Elbit America was likely the only entity deemed capable or available to fulfill this specific requirement at the time of award, rather than necessarily being selected through a competitive process based on superior past performance compared to multiple bidders.

Industry Classification

NAICS: Manufacturing › Aerospace Product and Parts Manufacturing › Other Aircraft Parts and Auxiliary Equipment Manufacturing

Product/Service Code: FIRE CONTROL EQPT.

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Elbit Systems Ltd (UEI: 514421098)

Address: 4700 MARINE CREEK PKWY, FORT WORTH, TX, 76179

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: $32,072,520

Exercised Options: $32,072,520

Current Obligation: $32,072,520

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline