DoD awards $971M for long lead time material for LCAC 109 and 110, with Textron Systems Corp as sole contractor

Contract Overview

Contract Amount: $970,955,030 ($971.0M)

Contractor: Textron Systems Corp

Awarding Agency: Department of Defense

Start Date: 2017-09-01

End Date: 2029-07-31

Contract Duration: 4,351 days

Daily Burn Rate: $223.2K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIXED PRICE INCENTIVE

Sector: Defense

Official Description: LCAC 109 AND 110 LONG LEAD TIME MATERIAL

Place of Performance

Location: NEW ORLEANS, ORLEANS County, LOUISIANA, 70129

State: Louisiana Government Spending

Plain-Language Summary

Department of Defense obligated $971.0 million to TEXTRON SYSTEMS CORP for work described as: LCAC 109 AND 110 LONG LEAD TIME MATERIAL Key points: 1. Contract value represents a significant investment in critical shipbuilding components. 2. Sole-source award raises questions about potential price inflation and limited market exploration. 3. Long contract duration (over 10 years) necessitates careful monitoring of performance and cost overruns. 4. Fixed Price Incentive contract type aims to balance cost control with contractor performance incentives. 5. Focus on long lead time material suggests a strategic approach to managing complex shipbuilding schedules. 6. Geographic concentration in Louisiana for this contract.

Value Assessment

Rating: fair

The contract value of $971 million for long lead time material is substantial. Without comparable sole-source awards for similar complex maritime components, a direct value-for-money assessment is challenging. The fixed-price incentive structure suggests an attempt to manage costs, but the lack of competition inherently limits the government's ability to benchmark pricing against market alternatives. The long duration of the contract also introduces risk for potential cost escalation over time.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one bidder, Textron Systems Corp, was solicited. This approach is typically used when a unique capability or proprietary technology is required, or in cases of urgent need where competition is not feasible. The lack of competition means the government did not benefit from a competitive bidding process, which could have potentially driven down prices and spurred innovation from multiple vendors.

Taxpayer Impact: Taxpayers may have paid a premium due to the absence of competitive pressure. The government's negotiating position is weakened without alternative offers to compare against.

Public Impact

The U.S. Navy benefits from the procurement of essential components for its Landing Craft Air Cushion (LCAC) modernization program. This contract supports the continued operation and modernization of critical amphibious assault capabilities. The contract's execution is primarily located in Louisiana, impacting the regional economy and workforce. It ensures the availability of specialized shipbuilding components, contributing to national defense readiness.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price discovery and potentially increases costs for taxpayers.
Long contract duration (over 10 years) increases exposure to cost escalation and performance risks.
Lack of competition may stifle innovation and reduce future market options.
Fixed Price Incentive contract requires careful oversight to ensure contractor meets targets without excessive cost growth.

Positive Signals

Contract addresses critical long lead time material, essential for shipbuilding schedules.
Fixed Price Incentive contract type includes performance incentives, potentially driving efficiency.
Award supports a key component of the Navy's amphibious capabilities modernization.
Contract duration aligns with the long-term nature of major shipbuilding programs.

Sector Analysis

The shipbuilding and repair industry is a capital-intensive sector characterized by long production cycles and significant government contracts, particularly for defense applications. This contract for long lead time material for LCACs fits within the broader defense shipbuilding and repair market, which is dominated by a few large prime contractors. The market for specialized components like those for LCACs can be niche, potentially justifying sole-source awards in some circumstances, though competition is generally preferred to ensure best value.

Small Business Impact

This contract does not appear to include specific small business set-aside provisions. Given the sole-source nature and the specialized requirements for long lead time material in shipbuilding, it is unlikely that significant subcontracting opportunities for small businesses will be mandated within this specific award. However, the prime contractor, Textron Systems Corp, may engage small businesses in its broader supply chain, but this is not directly evident from the contract details provided.

Oversight & Accountability

Oversight for this contract will likely be managed by the Department of the Navy's contracting and program management offices. The fixed-price incentive structure necessitates close monitoring of cost performance against targets and evaluation of contractor progress. Transparency may be limited due to the sole-source nature, but contract modifications, performance reports, and payment milestones would be subject to review. The Inspector General's office for the Department of Defense would have jurisdiction over potential fraud, waste, or abuse.

Related Government Programs

Naval Ship Systems
Amphibious Warfare Programs
Shipbuilding and Repair Contracts
Defense Logistics and Materiel

Risk Flags

Sole-source award
Long contract duration
Potential for cost overruns
Lack of competitive benchmarking

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $971.0 million to TEXTRON SYSTEMS CORP. LCAC 109 AND 110 LONG LEAD TIME MATERIAL

Who is the contractor on this award?

The obligated recipient is TEXTRON SYSTEMS CORP.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $971.0 million.

What is the period of performance?

Start: 2017-09-01. End: 2029-07-31.

What is the historical spending pattern for LCAC modernization or similar shipbuilding components awarded to Textron Systems Corp?

Analyzing historical spending for Textron Systems Corp on LCAC modernization or comparable shipbuilding components is crucial for context. While specific data for this contract shows an award of $971 million, understanding past contract values, durations, and performance outcomes with the Navy provides insight into Textron's track record and pricing trends. Without access to historical contract databases detailing Textron's prior awards for LCACs or similar vessels, it's difficult to establish a precise spending pattern. However, major shipbuilding programs often involve multi-year, multi-billion dollar contracts. If Textron has been a consistent provider for the Navy's LCAC program, this $971 million award for long lead time material could represent a continuation or expansion of that relationship. A review of historical contract awards would reveal if this amount is consistent with previous investments, or if it represents a significant increase, potentially warranting further scrutiny regarding cost justification.

How does the fixed-price incentive (FPI) contract type typically perform in large shipbuilding programs compared to other contract types?

Fixed-Price Incentive (FPI) contracts are designed to share cost risks and benefits between the government and the contractor. In large shipbuilding programs, FPI contracts aim to incentivize the contractor to control costs while meeting performance specifications. The government sets a target cost, a target profit, and a ceiling price. If the final cost is below the target, both parties share in the savings. If the cost exceeds the target, the contractor bears a portion of the overrun up to the ceiling price. Historically, FPI contracts can be effective when the scope of work is well-defined but cost uncertainties exist. However, they require robust government oversight to ensure accurate cost tracking and to prevent contractors from inflating costs to maximize profit sharing. Compared to Firm-Fixed-Price (FFP) contracts, FPI offers more flexibility for the government if costs escalate unexpectedly, but less cost certainty than FFP. Compared to Cost-Plus contracts, FPI provides greater cost control incentives for the contractor.

What are the primary risks associated with a sole-source award for long lead time material in defense shipbuilding?

The primary risks associated with a sole-source award for long lead time material in defense shipbuilding include: 1. **Higher Costs:** Without competition, the government loses the benefit of price negotiation driven by multiple bids, potentially leading to inflated prices. The contractor has less incentive to offer the lowest possible price. 2. **Reduced Innovation:** A sole-source award can stifle innovation as there is no competitive pressure for alternative solutions or more efficient methods. 3. **Limited Contractor Accountability:** While performance is still monitored, the lack of alternatives can reduce the contractor's urgency to perform optimally, as the government has fewer options if issues arise. 4. **Supply Chain Vulnerability:** Relying on a single source for critical components can create vulnerabilities if that supplier faces production issues, financial instability, or geopolitical disruptions. 5. **Potential for Scope Creep:** In long-term sole-source contracts, there's a risk of scope creep or less rigorous change management, as the government may be more inclined to accept changes from the incumbent.

What is the strategic importance of LCACs and their modernization for the U.S. Navy?

Landing Craft Air Cushion (LCAC) vehicles are a critical component of the U.S. Navy's amphibious assault capabilities, enabling the rapid transport of personnel, equipment, and supplies from ship to shore. Their ability to traverse various terrains, including water, beaches, and land, makes them indispensable for expeditionary warfare and humanitarian assistance operations. Modernizing the LCAC fleet, as indicated by the procurement of long lead time material for LCAC 109 and 110, is strategically vital for maintaining operational readiness and adapting to evolving threats. Modernized LCACs offer improved performance, enhanced payload capacity, greater reliability, and potentially reduced operating costs compared to older variants. This ensures the Navy can effectively project power and respond to crises globally, supporting national security objectives.

How does the geographic location of contract performance (Louisiana) potentially impact the contract's execution and oversight?

The geographic location of contract performance in Louisiana, specifically for shipbuilding and repair, places the contract within a region with established maritime infrastructure and a skilled workforce experienced in naval construction. This can be advantageous for execution, potentially leading to smoother production and access to specialized labor. However, it also means that oversight efforts by the Department of the Navy will need to consider the logistics of monitoring activities in that specific location. Site visits, progress reviews, and quality assurance checks will require travel and coordination. Furthermore, regional economic factors, such as labor costs and availability, and potential impacts from natural disasters common to the Gulf Coast region, could influence contract performance and require specific risk mitigation strategies during oversight.

Industry Classification

NAICS: Manufacturing › Ship and Boat Building › Ship Building and Repairing

Product/Service Code: SHIPS, SMALL CRAFT, PONTOON, DOCKS

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0002417R2464

Offers Received: 1

Pricing Type: FIXED PRICE INCENTIVE (L)

Evaluated Preference: NONE

Contractor Details

Address: 19401 CHEF MENTEUR HWY, NEW ORLEANS, LA, 70129

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $970,955,030

Exercised Options: $970,955,030

Current Obligation: $970,955,030

Actual Outlays: $42,481,695

Subaward Activity

Number of Subawards: 583

Total Subaward Amount: $290,745,286

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline