DoD's $75M APU A-Kit contract to L3Harris faces scrutiny over sole-source award and lack of competition

Contract Overview

Contract Amount: $74,946,005 ($74.9M)

Contractor: L3harris Technologies Integrated Systems L.P.

Awarding Agency: Department of Defense

Start Date: 2015-03-30

End Date: 2023-06-30

Contract Duration: 3,014 days

Daily Burn Rate: $24.9K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: AUXILIARY POWER UNIT (APU) A-KIT

Place of Performance

Location: WACO, MCLENNAN County, TEXAS, 76705

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $74.9 million to L3HARRIS TECHNOLOGIES INTEGRATED SYSTEMS L.P. for work described as: AUXILIARY POWER UNIT (APU) A-KIT Key points: 1. The contract's value of $75 million over 8 years raises questions about cost-effectiveness given the sole-source nature. 2. Limited competition dynamics suggest potential for inflated pricing and reduced innovation. 3. The long duration and sole-source award present significant risk indicators for future performance and value. 4. Performance context is difficult to assess without comparative data due to the lack of competitive bidding. 5. This contract falls within the 'Other Aircraft Parts and Auxiliary Equipment Manufacturing' sector, a niche area. 6. The absence of small business set-asides or subcontracting requirements is noted.

Value Assessment

Rating: questionable

Benchmarking the value of this $75 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 or if taxpayers received the best possible deal. The lack of comparison to similar contracts awarded through open competition makes a definitive value-for-money assessment problematic. The long duration of the contract (over 8 years) further complicates value assessment, as market conditions and technological needs can change significantly over such periods.

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 typically occurs when only one vendor possesses the necessary capabilities, technology, or is deemed essential for national security reasons. The lack of competition means there were no other bidders to compare against, limiting price discovery and potentially leading to higher costs for the government.

Taxpayer Impact: The sole-source award means taxpayers did not benefit from the price reductions and innovation that typically arise from a competitive bidding process. This could translate to a higher overall expenditure for the same goods or services.

Public Impact

The primary beneficiaries are the Department of the Navy and potentially other Department of Defense branches requiring auxiliary power units. The contract delivers essential aircraft parts and auxiliary equipment, crucial for maintaining operational readiness of military aircraft. The geographic impact is primarily centered in Texas, where L3Harris Technologies Integrated Systems L.P. is located. Workforce implications include job retention and potential growth within L3Harris's facilities in Texas.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition and potential for cost savings.
Long contract duration (over 8 years) increases risk of price escalation and technological obsolescence.
Lack of transparency in the justification for sole-source award.
Absence of small business subcontracting requirements may limit opportunities for smaller firms.

Positive Signals

Ensures a consistent supply of critical aircraft components for the Department of the Navy.
Leverages established capabilities of a known contractor, potentially reducing initial setup risks.
Long-term relationship may foster deeper collaboration and understanding of specific DoD needs.

Sector Analysis

This contract falls under the 'Other Aircraft Parts and Auxiliary Equipment Manufacturing' industry (NAICS 336413). This sector is characterized by specialized manufacturing for aerospace applications. The total market size for aircraft parts manufacturing is substantial, with government contracts forming a significant portion. This specific contract for Auxiliary Power Units (APUs) addresses a critical component for aircraft operation, fitting within the broader defense aerospace supply chain.

Small Business Impact

This contract does not appear to have any small business set-aside provisions, nor is there explicit mention of subcontracting goals for small businesses. The sole-source nature of the award further limits opportunities for small businesses to participate in this specific contract. This could mean that the benefits of this large contract are concentrated within the prime contractor, L3Harris Technologies, rather than being distributed across a wider ecosystem of suppliers, including small businesses.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy's contracting and program management offices. Accountability measures would be dictated by the terms of the firm-fixed-price definitive contract. Transparency is limited due to the sole-source nature, with justifications for this award likely held within agency records. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Aircraft Component Procurement
Defense Logistics and Sustainment
Aerospace Manufacturing Contracts
Sole-Source Defense Acquisitions
Naval Aviation Support Equipment

Risk Flags

Sole-source award
Lack of competition
Long contract duration
Potential for cost overruns
Limited transparency

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $74.9 million to L3HARRIS TECHNOLOGIES INTEGRATED SYSTEMS L.P.. AUXILIARY POWER UNIT (APU) A-KIT

Who is the contractor on this award?

The obligated recipient is L3HARRIS TECHNOLOGIES INTEGRATED SYSTEMS L.P..

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $74.9 million.

What is the period of performance?

Start: 2015-03-30. End: 2023-06-30.

What was the specific justification provided by the Department of the Navy for awarding this contract on a sole-source basis to L3Harris Technologies?

The provided data does not include the specific justification for the sole-source award. Typically, sole-source contracts are justified under circumstances such as "only one responsible source and no other supplies or services will satisfy agency requirements" (FAR 6.302-1) or "national security" (FAR 6.302-1). For this contract, the justification likely relates to unique technical capabilities, proprietary technology, or a critical need that only L3Harris could fulfill within the required timeframe. Without access to the official justification documentation (e.g., a Justification for Other Than Full and Open Competition - JOFOC), a definitive reason cannot be provided. This lack of transparency is a common concern with sole-source awards.

How does the $75 million contract value compare to historical spending on Auxiliary Power Units (APUs) by the Department of the Navy or other defense agencies?

Comparing this $75 million contract value to historical spending on APUs is challenging without specific historical data for this particular component or similar contracts. However, given the contract's duration of over 8 years (3014 days), the average annual value is approximately $9.4 million ($75M / 8 years). This figure needs to be contextualized against the complexity and specific requirements of the APU model being procured. If this APU is a highly specialized or technologically advanced unit, the annual cost might be within a reasonable range for a sole-source provider. Conversely, if simpler APUs are involved, this annual expenditure could be considered high, especially without competitive pressure to drive down costs. Further analysis would require access to historical procurement data for APUs across the DoD.

What are the potential risks associated with a sole-source contract of this magnitude and duration for critical aircraft components?

Sole-source contracts, particularly those of significant value and long duration like this $75 million, carry several inherent risks. Firstly, the lack of competition can lead to inflated pricing, as the contractor faces no pressure to offer the most cost-effective solution. Secondly, there's a reduced incentive for innovation; without competitors pushing boundaries, the contractor may be less motivated to develop more efficient or advanced versions of the product. Thirdly, the government's negotiating position is weakened, potentially resulting in less favorable terms and conditions. Lastly, the long duration increases the risk of technological obsolescence if the APU technology becomes outdated during the contract period, or if market conditions shift, making the sole-source provider's offering less competitive globally. Dependence on a single supplier also creates a vulnerability if that supplier experiences financial difficulties or operational disruptions.

What performance metrics or oversight mechanisms are likely in place to ensure L3Harris meets the requirements of this contract?

While specific performance metrics are not detailed in the provided data, standard government contracting practices for firm-fixed-price contracts typically include clauses for quality assurance, delivery schedules, and technical performance. The Department of the Navy would likely have designated contracting officers' representatives (CORs) responsible for monitoring contractor performance on-site or through regular reporting. Oversight mechanisms would include periodic reviews of technical data, inspection of delivered goods, and audits of compliance with contract terms. Failure to meet these requirements could result in contract remedies, such as withholding payments, requiring corrective actions, or even termination for default. However, the effectiveness of these mechanisms can be somewhat diminished in a sole-source context where alternative options are limited.

Has L3Harris Technologies Integrated Systems L.P. had previous issues or a history of performance problems with Department of Defense contracts, particularly sole-source awards?

Assessing L3Harris Technologies Integrated Systems L.P.'s track record requires access to comprehensive contract performance databases and historical award data, which is not provided here. Generally, large defense contractors like L3Harris have extensive portfolios of contracts, both competed and sole-source. While they are typically experienced in meeting DoD requirements, like any major corporation, they may have faced performance challenges or disputes on specific contracts in the past. Information regarding past performance issues, such as contract disputes, quality control problems, or delivery delays, would typically be available through sources like the Federal Awardee Performance and Integrity Information System (FAPIIS) or agency-specific performance evaluations. Without consulting these resources, it's impossible to definitively state their historical performance context for sole-source awards.

What is the market size and competitive landscape for Auxiliary Power Unit (APU) manufacturing within the defense sector?

The market for Auxiliary Power Units (APUs) within the defense sector is a specialized segment of the broader aerospace manufacturing industry. While precise market size figures for defense-specific APUs are not readily available in public domain, the overall aerospace components market is valued in the tens of billions of dollars annually. The competitive landscape for APUs is typically dominated by a few key players who possess the advanced engineering, certification, and manufacturing capabilities required for military applications. These players often develop proprietary technologies, leading to situations where specific APU models or upgrades might only be available from a single source or a very limited number of qualified vendors. This inherent market structure can sometimes necessitate sole-source or limited-competition procurements for specialized defense needs.

Industry Classification

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

Product/Service Code: ENGINE ACCESSORIES

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: L3harris Technologies, Inc

Address: 7500 MAEHR RD, WACO, TX, 76705

Business Categories: Category Business, Manufacturer of Goods, Not Designated a Small Business, Partnership or Limited Liability Partnership, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $94,728,561

Exercised Options: $77,455,732

Current Obligation: $74,946,005

Actual Outlays: $4,684,809

Subaward Activity

Number of Subawards: 32

Total Subaward Amount: $18,819,857

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline