Textron Systems awarded $337.7M for Shadow logistics support, raising questions on competition and value

Contract Overview

Contract Amount: $337,663,991 ($337.7M)

Contractor: Textron Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2012-03-01

End Date: 2017-07-12

Contract Duration: 1,959 days

Daily Burn Rate: $172.4K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Official Description: THIS LETTER CONTRACT IS TO PROVIDED FISCAL YEAR 2012 SHADOW PERFORMANCE BASED LOGISTICS AND OPERATIONAL SUPPORT FOR ARMY AND USMC SHADOW SYSTEMS.

Place of Performance

Location: COCKEYSVILLE, BALTIMORE County, MARYLAND, 21030

State: Maryland Government Spending

Plain-Language Summary

Department of Defense obligated $337.7 million to TEXTRON SYSTEMS CORPORATION for work described as: THIS LETTER CONTRACT IS TO PROVIDED FISCAL YEAR 2012 SHADOW PERFORMANCE BASED LOGISTICS AND OPERATIONAL SUPPORT FOR ARMY AND USMC SHADOW SYSTEMS. Key points: 1. Contract awarded on a sole-source basis, limiting price discovery and potentially increasing costs. 2. Significant duration of nearly 6 years suggests a long-term need for these specialized services. 3. The contract type (Cost Plus Incentive Fee) can incentivize cost control but also carries inherent risks. 4. Performance period spans multiple fiscal years, indicating a sustained requirement for operational support. 5. Focus on logistics and operational support for a specific military system highlights niche expertise. 6. Lack of competition raises concerns about whether the government secured the best possible value.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to its sole-source nature and the specific, niche services provided for the Shadow system. Without competitive bids, it's difficult to ascertain if the $337.7 million price tag represents fair market value. The Cost Plus Incentive Fee structure aims to align contractor and government interests, but its effectiveness in ensuring optimal value for money depends heavily on robust oversight and realistic target setting. Further analysis would require comparing the cost of similar logistics support for other unmanned aerial systems, if available.

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. This approach is typically used when only one vendor possesses the necessary capabilities, technology, or security clearances. The lack of competition means that the government did not benefit from the price reductions and innovation that can arise from a competitive bidding process. This limits the government's ability to explore alternative solutions or negotiate more favorable terms.

Taxpayer Impact: Taxpayers may have paid a premium due to the absence of competitive pressure. Without competing offers, there is a reduced likelihood of achieving the lowest possible price for the required services.

Public Impact

The U.S. Army and Marine Corps benefit from continued operational readiness of their Shadow drone systems. Essential logistics and operational support services are delivered to maintain critical military assets. The contract's impact is primarily national, supporting defense operations rather than specific geographic regions. Specialized technical and logistical workforce skills are maintained and utilized through this contract.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing and potential cost savings for taxpayers.
Cost Plus Incentive Fee contracts require diligent oversight to ensure cost efficiency and prevent overruns.
The long duration of the contract could lead to complacency or reduced urgency in performance if not managed effectively.
Lack of transparency in the sole-source justification process can obscure potential alternatives.

Positive Signals

Contract addresses a critical need for specialized support of military unmanned aerial systems.
The Cost Plus Incentive Fee structure, if managed well, can align contractor performance with government objectives.
Textron Systems' established role as a provider for this system suggests continuity and potentially deep expertise.
The contract duration indicates a stable, long-term commitment to supporting vital defense capabilities.

Sector Analysis

This contract falls within the Defense sector, specifically supporting unmanned aerial vehicle (UAV) operations. The market for UAV logistics and support is specialized, with a limited number of prime contractors possessing the required expertise and security clearances. Spending in this area is driven by the military's increasing reliance on UAVs for intelligence, surveillance, reconnaissance, and other missions. Comparable spending benchmarks would likely involve contracts for the maintenance, repair, and operational support of other complex military platforms.

Small Business Impact

This contract does not appear to include specific small business set-asides. Given the specialized nature of supporting military aircraft systems and the sole-source award, it is less likely that small businesses would be primary recipients of the prime contract. However, Textron Systems may engage small businesses as subcontractors, though this information is not detailed in the provided data. The impact on the small business ecosystem is likely minimal for the prime contract itself, but potential subcontracting opportunities could exist.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contracting and program management structures. The Cost Plus Incentive Fee (CPIF) structure necessitates rigorous financial and performance monitoring by the contracting officer and their representatives to ensure costs are reasonable and performance targets are met. Transparency may be limited due to the sole-source nature, but contract modifications, performance reports, and payment data are typically subject to review by oversight bodies like the Government Accountability Office (GAO) and the Inspector General (IG) if specific concerns arise.

Related Government Programs

Unmanned Aerial Vehicle (UAV) Support Contracts
Defense Logistics and Maintenance Services
Aircraft Manufacturing and Support
Department of Defense Procurement
Cost Plus Incentive Fee Contracts

Risk Flags

Sole-source award
Lack of competition
Potential for cost overruns (CPIF)
Limited transparency in pricing

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $337.7 million to TEXTRON SYSTEMS CORPORATION. THIS LETTER CONTRACT IS TO PROVIDED FISCAL YEAR 2012 SHADOW PERFORMANCE BASED LOGISTICS AND OPERATIONAL SUPPORT FOR ARMY AND USMC SHADOW SYSTEMS.

Who is the contractor on this award?

The obligated recipient is TEXTRON SYSTEMS CORPORATION.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $337.7 million.

What is the period of performance?

Start: 2012-03-01. End: 2017-07-12.

What is Textron Systems Corporation's track record with the Shadow system and similar defense contracts?

Textron Systems Corporation has a significant history with the Shadow Tactical Unmanned Aircraft System (TUAS), being the original manufacturer and a long-term provider of support. Their experience includes development, production, and sustainment services for various iterations of the Shadow system. This deep involvement suggests a strong understanding of the platform's technical requirements and operational needs. The company also holds numerous other contracts with the Department of Defense and allied nations for a range of defense systems, including other unmanned aircraft, armored vehicles, and precision weapons. Their track record indicates a capacity to handle complex, long-term defense sustainment programs, though the specifics of performance metrics and cost-effectiveness on individual contracts would require deeper investigation.

How does the $337.7 million contract value compare to similar logistics support contracts for unmanned aerial systems?

Direct comparison of this $337.7 million contract value to similar logistics support contracts for unmanned aerial systems (UAS) is challenging due to several factors. Firstly, the contract was sole-sourced, meaning competitive market forces did not influence its price. Secondly, the Shadow system is a specific type of tactical UAS, and its support requirements may differ significantly from larger, more complex intelligence, surveillance, and reconnaissance (ISR) platforms or smaller drones. Thirdly, the contract duration of nearly six years (from March 2012 to July 2017) means the annual cost is approximately $56 million. While this figure provides a baseline, without knowing the exact scope of services (e.g., depot-level maintenance, field support, spare parts provisioning, training), it's difficult to benchmark against other contracts. Generally, sustainment costs for complex military systems can represent a substantial portion of the total lifecycle cost.

What are the primary risks associated with a sole-source, Cost Plus Incentive Fee (CPIF) contract of this magnitude?

The primary risks associated with a sole-source, CPIF contract of this magnitude are twofold. For a sole-source award, the principal risk is the lack of competition, which can lead to inflated prices and reduced incentive for the contractor to innovate or operate efficiently, as there are no alternative providers to compare against. The government may not achieve the best possible value. For a CPIF contract, the risks revolve around cost control and oversight. While CPIF aims to incentivize cost efficiency by sharing savings or overruns between the government and contractor based on achieving target costs and performance metrics, it requires robust government oversight. If targets are set too high or too low, or if oversight is insufficient, the incentive structure can be undermined, potentially leading to cost overruns or suboptimal performance. There's also a risk that the contractor may focus on achieving incentive targets at the expense of other critical, non-incentivized aspects of performance.

How effective is the Cost Plus Incentive Fee (CPIF) structure likely to be in managing costs for this Shadow system support contract?

The effectiveness of the Cost Plus Incentive Fee (CPIF) structure in managing costs for this Shadow system support contract hinges critically on the specific details of the contract's incentive targets, cost ceilings, and the government's oversight capabilities. CPIF is designed to motivate the contractor to control costs by sharing in any savings achieved below a target cost or sharing in any overruns above the target cost, often with a ceiling on total government liability. If the target cost was set realistically based on thorough analysis and historical data, and if the incentive-sharing ratio appropriately balances risk and reward, it can be an effective tool. However, if the targets are poorly defined, or if the government lacks the expertise or resources to diligently monitor costs and performance against those targets, the incentive can be weakened or even counterproductive. The sole-source nature of the award adds a layer of complexity, as the baseline 'target cost' might be less rigorously validated than in a competitive scenario.

What does the contract duration of nearly 6 years imply about the expected lifespan and operational tempo of the Shadow system?

A contract duration of nearly six years (1,959 days) for logistics and operational support of the Shadow system implies a significant and sustained operational requirement for this platform. It suggests that the Shadow system is considered a vital asset with a projected long service life within the Army and Marine Corps inventories during the contract period (FY2012-FY2017). Such a long-term support contract indicates that the systems are expected to be actively deployed and utilized, necessitating ongoing maintenance, repair, spare parts, and potentially upgrades or modifications. This duration also points to the complexity and specialized nature of the support required, which likely involves extensive technical expertise and infrastructure that a single contractor, Textron Systems, is uniquely positioned to provide, further justifying the sole-source award in the eyes of the procuring agency.

What is the significance of the contract being awarded in Fiscal Year 2012 and ending in Fiscal Year 2017?

The contract's timeframe, initiated in FY2012 and concluding in FY2017, places it within a period of significant military operations and evolving defense strategies. Awarded in FY2012, it reflects the ongoing demand for intelligence, surveillance, and reconnaissance (ISR) capabilities provided by systems like the Shadow drone during a time when U.S. forces were heavily engaged in conflicts abroad, particularly in Afghanistan. The conclusion in FY2017 suggests that the system's support needs were projected to continue through that period, and potentially beyond, as defense planners assessed its long-term utility. This timeframe also overlaps with periods of fluctuating defense budgets and shifts towards optimizing efficiency and readiness, making the contract's value and execution particularly relevant for assessing resource allocation within the Department of Defense.

Industry Classification

NAICS: Manufacturing › Aerospace Product and Parts Manufacturing › Aircraft Manufacturing

Product/Service Code: AEROSPACE CRAFT AND STRUCTURAL COMPONENTS

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE (V)

Evaluated Preference: NONE

Contractor Details

Parent Company: Textron Inc

Address: 124 INDUSTRY LN, HUNT VALLEY, MD, 21030

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: $337,663,991

Exercised Options: $337,663,991

Current Obligation: $337,663,991

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline