L3Harris Technologies awarded $1.3B contract for electronic components, raising value-for-money questions

Contract Overview

Contract Amount: $13,032,533 ($13.0M)

Contractor: L3harris Technologies, Inc.

Awarding Agency: Department of Defense

Start Date: 2007-08-30

End Date: 2014-04-30

Contract Duration: 2,435 days

Daily Burn Rate: $5.4K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: EGADS

Place of Performance

Location: PALM BAY, BREVARD County, FLORIDA, 32905

State: Florida Government Spending

Plain-Language Summary

Department of Defense obligated $13.0 million to L3HARRIS TECHNOLOGIES, INC. for work described as: EGADS Key points: 1. Contract awarded on a cost-plus-fixed-fee basis, which can incentivize higher spending. 2. Long contract duration of 2435 days suggests potential for cost overruns. 3. Lack of competition raises concerns about price discovery and potential overpayment. 4. Contractor's extensive tenure on this award may indicate a lack of market alternatives or a strategic relationship. 5. The specific nature of 'Other Electronic Component Manufacturing' warrants further scrutiny for potential commercial off-the-shelf alternatives. 6. Fixed fee component may not adequately incentivize cost control given the cost-plus structure.

Value Assessment

Rating: questionable

The contract's cost-plus-fixed-fee structure, combined with a lack of competitive bidding, makes a definitive value assessment challenging. While the fixed fee provides some cost certainty for the contractor, it does not inherently guarantee the government receives the best possible price. Benchmarking this contract against similar sole-source awards for electronic components would be crucial to determine if the $1.3 billion expenditure represents a fair market price. The extended duration also increases the risk of cost escalation beyond initial projections.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning there was no open competition. This significantly limits the government's ability to leverage market forces to achieve the lowest possible price. Without multiple bidders, it is difficult to ascertain the true market value of the goods or services provided. The justification for a sole-source award would need to be exceptionally strong to ensure taxpayer funds are used efficiently.

Taxpayer Impact: Sole-source awards mean taxpayers may be paying a premium due to the absence of competitive pressure to reduce costs.

Public Impact

The primary beneficiary is L3Harris Technologies, Inc., a major defense contractor. The contract supports the production and delivery of essential electronic components for defense applications. The geographic impact is primarily in Florida, where the contractor is located. This contract likely supports a specialized workforce within the defense manufacturing sector.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition increases risk of inflated pricing.
Cost-plus-fixed-fee structure may disincentivize cost savings.
Long contract duration presents risks of schedule delays and cost overruns.
Limited transparency due to sole-source award.

Positive Signals

Contract awarded to an established entity, potentially ensuring continuity of supply.
Fixed fee provides a degree of cost predictability for the government.

Sector Analysis

This contract falls within the broader 'Other Electronic Component Manufacturing' sector, a critical but often specialized area within the defense industrial base. The market for such components can be highly concentrated, with few suppliers capable of meeting stringent defense requirements. The $1.3 billion value positions this as a significant award within its niche, potentially representing a substantial portion of the available market for these specific components.

Small Business Impact

The data indicates this contract was not set aside for small businesses (ss: false, sb: false). As a sole-source award to a large corporation, there are likely limited direct subcontracting opportunities for small businesses unless L3Harris Technologies voluntarily includes them in its supply chain. This contract does not appear to actively contribute to the small business ecosystem.

Oversight & Accountability

Oversight for this contract would typically be managed by the Defense Contract Management Agency (DCMA), which is responsible for ensuring contractor performance and compliance. However, the sole-source nature and cost-plus structure necessitate rigorous oversight to scrutinize costs and prevent potential waste. Transparency is limited due to the lack of competitive bidding, making independent assessment of value more challenging.

Related Government Programs

Defense Procurement
Electronic Component Manufacturing
Sole-Source Contracts
Cost-Plus Contracts

Risk Flags

Sole-source award lacks competition
Cost-plus contract type may lead to higher costs
Long contract duration increases risk
Lack of transparency in pricing

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $13.0 million to L3HARRIS TECHNOLOGIES, INC.. EGADS

Who is the contractor on this award?

The obligated recipient is L3HARRIS TECHNOLOGIES, INC..

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Contract Management Agency).

What is the total obligated amount?

The obligated amount is $13.0 million.

What is the period of performance?

Start: 2007-08-30. End: 2014-04-30.

What is the specific justification for awarding this contract on a sole-source basis?

The provided data does not include the specific justification for the sole-source award. Typically, sole-source contracts are justified when only one responsible source can provide the required supplies or services, or in cases of urgent and compelling need. For a contract valued at $1.3 billion over several years, the justification would likely involve highly specialized technology, unique manufacturing capabilities, or critical national security requirements that cannot be met by other vendors. Without this documentation, it is impossible to fully assess the necessity of bypassing the competitive bidding process.

How does the cost-plus-fixed-fee structure compare to other contract types for similar electronic components?

Cost-plus-fixed-fee (CPFF) contracts are often used when the scope of work is not precisely defined or when there is significant uncertainty in the costs. The government agrees to pay the contractor's actual costs plus a fixed fee representing profit. While this provides flexibility, it carries a higher risk of cost overruns compared to fixed-price contracts, where the contractor bears more of the cost risk. For standardized electronic components, fixed-price contracts are generally preferred for better price control. The use of CPFF here suggests a complex or developmental aspect to the components, or a lack of readily available market pricing data, which warrants scrutiny.

What are the potential risks associated with the long contract duration of 2435 days?

A contract duration of 2435 days (approximately 6.7 years) introduces several risks. Firstly, the longer the period, the greater the chance of unforeseen economic fluctuations, such as inflation, impacting the actual costs incurred by the contractor, potentially exceeding initial estimates even with a fixed fee. Secondly, technological obsolescence is a significant concern; electronic components can become outdated rapidly. If the components are for systems with a long lifecycle, this may be less of an issue, but if they are for rapidly evolving technologies, the government might end up procuring outdated hardware. Lastly, extended durations can lead to contractor complacency and reduced urgency in performance or cost management.

What is L3Harris Technologies' track record with similar sole-source, cost-plus contracts?

Assessing L3Harris Technologies' track record with similar sole-source, cost-plus contracts would require access to historical contract data and performance reviews. Generally, large defense contractors like L3Harris have extensive experience with various contract types, including sole-source and cost-plus. However, the key concern is not just their experience, but the outcomes of such contracts. Analyzing past performance on similar awards would reveal patterns of cost overruns, schedule adherence, and overall value delivered to the government. Without specific data on L3Harris's history with these contract types, it's difficult to provide a definitive assessment, but the inherent risks of sole-source CPFF contracts remain.

How does the $1.3 billion total award value compare to annual spending in the 'Other Electronic Component Manufacturing' sector?

The total award value of $1.3 billion for this single contract is substantial. To contextualize it, one would need to compare it against the total annual government spending or the total market size for 'Other Electronic Component Manufacturing.' If this sector represents a niche market with limited players, $1.3 billion could be a significant portion of the total addressable market. Conversely, if it's a broad category with billions in annual spending, this contract might represent a smaller, albeit still significant, slice. Without broader market data, it's hard to definitively say if this value is high or low relative to the sector's overall economic activity.

Industry Classification

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

Product/Service Code: RESEARCH AND DEVELOPMENT › C – National Defense R&D Services

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: L3harris Technologies, Inc (UEI: 004203337)

Address: 2400 PALM BAY RD NE, PALM BAY, FL, 32905

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $16,187,571

Exercised Options: $16,187,571

Current Obligation: $13,032,533

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline