DoD's $37.4M Submarine Fiber Optic Cable System contract awarded to XTERA INC. raises value concerns

Contract Overview

Contract Amount: $37,369,174 ($37.4M)

Contractor: Xtera Inc

Awarding Agency: Department of Defense

Start Date: 2017-08-24

End Date: 2024-08-23

Contract Duration: 2,556 days

Daily Burn Rate: $14.6K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: IGF::CT::IGF SUBMARINE FIBER OPTIC CABLE SYSTEM

Place of Performance

Location: ALLEN, COLLIN County, TEXAS, 75013

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $37.4 million to XTERA INC for work described as: IGF::CT::IGF SUBMARINE FIBER OPTIC CABLE SYSTEM Key points: 1. The contract's value proposition is questionable given the lack of competition and the absence of detailed performance metrics. 2. Competition dynamics are severely limited, with a sole-source award suggesting potential for inflated pricing. 3. Risk indicators include the sole-source nature of the award and the long duration of the contract. 4. Performance context is unclear, as specific deliverables and success metrics are not readily available. 5. This contract positions XTERA INC. as a key provider for specialized undersea communication infrastructure within the Defense sector.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to the sole-source award and limited public data on comparable submarine fiber optic cable systems. The fixed-price nature provides some cost certainty, but without competitive bids, it's difficult to ascertain if the $37.4 million represents a fair market price. Further analysis of the scope of work and the specific technological requirements would be needed to provide a more definitive value assessment.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning XTERA INC. was the only vendor considered. This significantly limits price discovery and competitive pressure, which typically drives down costs for the government. The rationale for a sole-source award, such as unique capabilities or urgent need, would need to be thoroughly documented to justify the lack of broader competition.

Taxpayer Impact: The absence of competition means taxpayers may not have received the best possible price for this critical infrastructure. Without a competitive bidding process, there's a risk that the awarded amount is higher than it would have been in a more open market.

Public Impact

This contract directly benefits the Department of Defense by providing essential communication infrastructure for submarine operations. The services delivered include the installation and maintenance of a submarine fiber optic cable system, crucial for secure and high-bandwidth data transmission. The geographic impact is likely focused on areas supporting naval operations, potentially involving undersea routes. Workforce implications may include specialized technical roles for installation, maintenance, and project management within XTERA INC. and potentially its subcontractors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing and taxpayer value.
Lack of detailed performance metrics makes assessing contractor effectiveness difficult.
Long contract duration (approx. 7 years) could lead to cost overruns if not managed tightly.
Limited public information on the specific technical requirements and justification for sole-source award.

Positive Signals

Fixed-price contract provides cost certainty for the government.
XTERA INC. is likely providing specialized expertise in undersea cable systems.
Contract supports critical national defense communication needs.

Sector Analysis

The telecommunications industry, particularly the segment focused on undersea cable systems, is highly specialized and capital-intensive. This contract falls within the Wired Telecommunications Carriers sub-sector. The market for such specialized infrastructure is often characterized by a limited number of qualified providers due to the technical expertise and logistical challenges involved. Comparable spending benchmarks are difficult to establish without more specific details on the cable length, capacity, and geographic deployment.

Small Business Impact

There is no indication that this contract included a small business set-aside. Given the specialized nature of submarine fiber optic cable systems, it is unlikely that small businesses would be primary contractors, though they may participate as subcontractors to XTERA INC. The impact on the small business ecosystem would depend on XTERA's subcontracting practices.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense and the Defense Information Systems Agency (DISA). Accountability measures would be defined by the contract terms, including delivery schedules and performance standards. Transparency is limited due to the sole-source nature and the sensitive operational requirements of defense communications. Inspector General jurisdiction would apply to any allegations of fraud, waste, or abuse.

Related Government Programs

Defense Information Systems Agency (DISA) Contracts
Undersea Communication Systems
Department of Defense Infrastructure Projects
Wired Telecommunications Services

Risk Flags

Sole-source award
Lack of competition
Limited performance data
High contract value

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $37.4 million to XTERA INC. IGF::CT::IGF SUBMARINE FIBER OPTIC CABLE SYSTEM

Who is the contractor on this award?

The obligated recipient is XTERA INC.

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Information Systems Agency).

What is the total obligated amount?

The obligated amount is $37.4 million.

What is the period of performance?

Start: 2017-08-24. End: 2024-08-23.

What specific technical capabilities does XTERA INC. possess that justified a sole-source award for this submarine fiber optic cable system?

The justification for a sole-source award typically rests on unique capabilities, specialized knowledge, or urgent requirements that only one contractor can meet. For a submarine fiber optic cable system, this could involve proprietary technology for cable laying, deep-sea deployment expertise, specific security clearances, or existing infrastructure integration that makes switching providers impractical or prohibitively expensive. Without access to the specific documentation supporting the sole-source determination (e.g., a Justification and Approval document), it is difficult to ascertain the precise reasons. However, the complexity and criticality of undersea communication networks often lead to situations where only a few entities possess the requisite experience and resources.

How does the $37.4 million contract value compare to similar submarine fiber optic cable system deployments by the government or commercial entities?

Directly comparing the $37.4 million contract value to similar projects is challenging due to several factors. Firstly, the specifics of the system—such as cable length, data capacity, depth of deployment, geographic location, and the inclusion of maintenance or operational services—significantly influence cost. Secondly, commercial deployments often have different cost structures and objectives than government contracts, especially those for defense purposes which may prioritize security and reliability over pure cost minimization. Lastly, the sole-source nature of this award means the price may not reflect competitive market rates. Generally, large-scale submarine cable projects can range from tens of millions to hundreds of millions of dollars, depending on scale and complexity. Without more granular data on the scope of this specific contract, a precise benchmark is not feasible.

What are the key performance indicators (KPIs) or deliverables associated with this contract, and how is XTERA INC.'s performance being measured?

The provided data does not detail the specific Key Performance Indicators (KPIs) or deliverables for this contract. Typically, for a submarine fiber optic cable system, KPIs might include installation timelines, cable integrity metrics (e.g., signal loss, latency), system uptime, bandwidth capacity achieved, and successful integration with existing networks. Performance measurement would likely involve regular reporting from XTERA INC., site inspections, testing and validation of the system's functionality, and adherence to contractual milestones. The absence of readily available performance metrics in public databases makes it difficult to assess the contractor's effectiveness and the overall success of the project from a public perspective.

What is the historical spending pattern for submarine fiber optic cable systems by the Department of Defense or DISA?

Historical spending data for submarine fiber optic cable systems by the Department of Defense (DoD) or the Defense Information Systems Agency (DISA) is not explicitly detailed in the provided information. However, it is understood that the DoD relies on robust and secure communication networks, including undersea cables, for global operations. Such projects are typically large, infrequent, and highly specialized, often awarded through competitive processes or, as in this case, sole-source contracts when specific requirements dictate. Analyzing past spending would require a broader search across federal procurement databases for similar contract actions, potentially identifying trends in technology adoption, vendor choices, and average contract values over time. The significant investment in this specific contract suggests a continued strategic focus on maintaining and enhancing secure undersea communication capabilities.

What are the potential risks associated with a sole-source award for critical defense communication infrastructure like a submarine fiber optic cable system?

Sole-source awards for critical defense infrastructure present several potential risks. Firstly, the lack of competition can lead to higher costs for taxpayers, as the government may not benefit from the price reductions typically achieved through competitive bidding. Secondly, it can reduce the incentive for the sole provider to innovate or maintain high service levels, as there is no direct market pressure from competitors. Thirdly, it creates a dependency on a single vendor, which can be a vulnerability if the vendor experiences financial difficulties, operational issues, or decides to exit the market. Finally, without a competitive process, it can be more challenging to ensure that the chosen solution is the most technologically advanced or cost-effective available, potentially leading to suboptimal outcomes for the defense mission.

Industry Classification

NAICS: Information › Wired and Wireless Telecommunications (except Satellite) › Wired Telecommunications Carriers

Product/Service Code: IT AND TELECOM - INFORMATION TECHNOLOGY AND TELECOMMUNICATIONS › ADP AND TELECOMMUNICATIONS

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: HC101317R0033

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 500 W BETHANY DR STE 100, ALLEN, TX, 75013

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Foreign Owned, Foreign-Owned and U.S.-Incorporated Business, Manufacturer of Goods, Not Designated a Small Business, Special Designations

Financial Breakdown

Contract Ceiling: $42,718,750

Exercised Options: $37,516,616

Current Obligation: $37,369,174

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline