DoD awards $32M for semiconductor manufacturing, raising questions on competition and value

Contract Overview

Contract Amount: $32,048,440 ($32.0M)

Contractor: Teledyne Scientific & Imaging, LLC

Awarding Agency: Department of Defense

Start Date: 2016-07-22

End Date: 2020-09-07

Contract Duration: 1,508 days

Daily Burn Rate: $21.3K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Other

Official Description: ACAT III, AFLCMC/WNUK, ALEP BLOCK 2 FOLLOW-ON PRODUCTION

Place of Performance

Location: THOUSAND OAKS, VENTURA County, CALIFORNIA, 91360

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $32.0 million to TELEDYNE SCIENTIFIC & IMAGING, LLC for work described as: ACAT III, AFLCMC/WNUK, ALEP BLOCK 2 FOLLOW-ON PRODUCTION Key points: 1. Contract awarded on a sole-source basis, limiting price discovery and potentially increasing costs. 2. The firm-fixed-price contract type shifts risk to the contractor, but the lack of competition is a concern. 3. Performance period of over 4 years suggests a long-term need for these specialized manufacturing capabilities. 4. The award falls within the semiconductor manufacturing sector, critical for defense and technology supply chains. 5. No small business set-aside was utilized, indicating potential missed opportunities for smaller firms. 6. The contract's value, while significant, needs benchmarking against similar sole-source awards in the defense sector.

Value Assessment

Rating: questionable

Benchmarking the value of this $32 million contract is challenging due to its sole-source nature. Without competitive bids, it's difficult to ascertain if the pricing reflects fair market value. The firm-fixed-price structure is generally favorable for cost control, but the absence of competition means the government cannot leverage market forces to ensure optimal pricing. Further analysis would require comparing this award to similar sole-source contracts for specialized semiconductor manufacturing services, if available, to identify any significant deviations.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded using a sole-source justification, meaning it was not competed. This approach is typically used when only one responsible source can provide the required goods or services. The lack of competition means that the government did not solicit bids from multiple vendors, which can limit price negotiation and potentially lead to higher costs than if the contract had been competed. The government must have determined that Teledyne Scientific & Imaging, LLC was the only viable option for this specific requirement.

Taxpayer Impact: Taxpayers may have paid a premium due to the absence of competitive bidding. Without multiple offers, the government's leverage to negotiate the lowest possible price is diminished, potentially resulting in less value for the allocated funds.

Public Impact

The primary beneficiary is the Department of Defense, specifically the Air Force, which requires advanced semiconductor manufacturing capabilities. The contract supports the production of specialized semiconductor devices essential for defense systems. The geographic impact is concentrated in California, where Teledyne Scientific & Imaging, LLC is located. This contract likely supports a specialized workforce within the semiconductor manufacturing industry, requiring high-skilled labor.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing and potentially increases cost to taxpayers.
Lack of small business participation may exclude innovative smaller firms from contributing to critical defense needs.
The specific nature of semiconductor manufacturing can lead to high barriers to entry for new competitors.
Long performance period without competition raises concerns about sustained value for money.

Positive Signals

Firm-fixed-price contract shifts performance risk to the contractor.
Awarding to an established entity like Teledyne Scientific & Imaging, LLC may ensure continuity of supply for critical components.
Specialized capabilities in semiconductor manufacturing are vital for national security and technological advancement.

Sector Analysis

The semiconductor manufacturing sector is a critical component of the defense industrial base, providing essential materials for advanced weapon systems and electronics. This contract falls under NAICS code 334413 (Semiconductor and Related Device Manufacturing). The market is characterized by high capital investment, complex technological processes, and significant barriers to entry. Given the specialized nature of defense-related semiconductor needs, sole-source awards are not uncommon, but they necessitate careful justification and oversight to ensure fair pricing and value.

Small Business Impact

This contract was not set aside for small businesses, nor does it appear to have specific subcontracting requirements for small businesses mentioned in the provided data. The sole-source nature of the award further limits opportunities for small businesses to participate unless they are the sole provider or a subcontractor to the prime. This could represent a missed opportunity to foster innovation and competition within the small business defense industrial base.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Air Force's contracting and program management offices. As a sole-source award, the justification for this procurement method would be subject to review. Transparency regarding the specific reasons for the sole-source designation and the pricing structure would be key to assessing accountability. Inspector General involvement would typically be triggered by allegations of fraud, waste, or abuse.

Related Government Programs

Defense Production Act Investments
Semiconductor Manufacturing Initiatives
Air Force Research and Development Contracts
Advanced Materials Procurement

Risk Flags

Sole-source award without clear justification
Potential for overpricing due to lack of competition
Limited visibility into specific technological requirements
Absence of small business participation

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $32.0 million to TELEDYNE SCIENTIFIC & IMAGING, LLC. ACAT III, AFLCMC/WNUK, ALEP BLOCK 2 FOLLOW-ON PRODUCTION

Who is the contractor on this award?

The obligated recipient is TELEDYNE SCIENTIFIC & IMAGING, LLC.

Which agency awarded this contract?

Awarding agency: Department of Defense (Department of the Air Force).

What is the total obligated amount?

The obligated amount is $32.0 million.

What is the period of performance?

Start: 2016-07-22. End: 2020-09-07.

What specific semiconductor devices are being manufactured under this contract, and why is Teledyne Scientific & Imaging, LLC the sole provider?

The provided data does not specify the exact type of semiconductor devices. However, the contract designation 'ALEP BLOCK 2 FOLLOW-ON PRODUCTION' suggests it relates to a specific Air Force program requiring specialized production capabilities. Teledyne Scientific & Imaging, LLC is likely the sole provider due to unique technological expertise, proprietary processes, or existing integration with specific defense systems that cannot be replicated by other manufacturers within the required timeframe or specifications. A sole-source justification would detail these reasons, often citing factors like unique technical qualifications, prior development work, or the need for compatibility with existing government-furnished equipment.

How does the $32 million contract value compare to similar sole-source semiconductor manufacturing contracts awarded by the DoD?

Direct comparison of this $32 million contract value to similar sole-source semiconductor manufacturing contracts is difficult without access to a broader database of classified or proprietary sole-source awards. However, in the context of specialized defense-related semiconductor production, $32 million over approximately four years (based on the duration) represents a significant but not extraordinary investment. The value is highly dependent on the complexity, volume, and technological sophistication of the semiconductors required. Without specific benchmarks for comparable sole-source awards for similar technologies, assessing whether this represents good or poor value is challenging. It is crucial to examine the detailed justification for the sole-source award and the specific technical requirements to understand the cost drivers.

What are the primary risks associated with this sole-source contract, and what mitigation strategies are in place?

The primary risk is the potential for inflated pricing due to the lack of competition, leading to reduced value for taxpayer money. Another risk is vendor lock-in, where the government becomes overly reliant on a single supplier, potentially limiting future flexibility and innovation. Additionally, if Teledyne Scientific & Imaging, LLC faces production issues or financial instability, it could disrupt the supply chain for critical defense components. Mitigation strategies typically involve rigorous price analysis (even for sole-source), detailed contract surveillance, clear performance metrics, and potentially exploring alternative sources or technologies for future procurements to foster competition.

What is the historical spending pattern for Teledyne Scientific & Imaging, LLC with the Department of Defense, particularly in semiconductor manufacturing?

The provided data does not include historical spending patterns for Teledyne Scientific & Imaging, LLC. To assess this, one would need to query federal procurement databases (like FPDS or USASpending) for previous contracts awarded to this entity by the DoD. Analyzing past awards would reveal the volume, types of services/products procured, contract types, and competition levels. This historical context is vital for understanding the contractor's track record, pricing consistency, and overall relationship with the government in the semiconductor manufacturing domain.

What is the strategic importance of this contract for the Air Force's ACAT III program (ALEP BLOCK 2)?

ACAT III programs are typically lower in acquisition category, suggesting this contract supports a less critical or lower-tier defense system compared to ACAT I or II programs. However, the 'ALEP BLOCK 2 FOLLOW-ON PRODUCTION' designation indicates it's a continuation of an existing effort. The strategic importance lies in ensuring the continued production and availability of essential semiconductor components for this specific Air Force program. Even for ACAT III, reliable access to specialized semiconductors is crucial for maintaining the operational readiness and technological edge of the assigned defense systems. This contract ensures that the necessary components are manufactured to support the program's lifecycle.

Industry Classification

NAICS: Manufacturing › Semiconductor and Other Electronic Component Manufacturing › Semiconductor and Related Device Manufacturing

Product/Service Code: CLOTHING, INDIVIDUAL EQUIPMENT, INSIGNA, AND JEWELRY

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: Teledyne Technologies Incorporated

Address: 1049 CAMINO DOS RIOS, THOUSAND OAKS, CA, 91360

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: $32,048,440

Exercised Options: $32,048,440

Current Obligation: $32,048,440

Subaward Activity

Number of Subawards: 11

Total Subaward Amount: $1,238,091

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline