DoD awards $34M for EMARSS-M aircraft modification, a sole-source contract with fixed-price incentive terms

Contract Overview

Contract Amount: $34,054,488 ($34.1M)

Contractor: L3harris Technologies Integrated Systems L.P.

Awarding Agency: Department of Defense

Start Date: 2015-03-31

End Date: 2021-05-01

Contract Duration: 2,223 days

Daily Burn Rate: $15.3K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIXED PRICE INCENTIVE

Sector: Defense

Official Description: AWARD OF LETTER CONTRACT FOR MODIFICATION OF ONE GOVERNMENT OWNED QUICK REACTION CAPABILITY LIBERTY PROJECT AIRCRAFT TO AN ENHANCED MEDIUM ALTITUDE RECONNAISSANCE AND SURVEILLANCE SYSTEM - MULTI-INTELLIGENCE (EMARSS-M) AIRCRAFT.

Place of Performance

Location: HUNTSVILLE, MADISON County, ALABAMA, 35898

State: Alabama Government Spending

Plain-Language Summary

Department of Defense obligated $34.1 million to L3HARRIS TECHNOLOGIES INTEGRATED SYSTEMS L.P. for work described as: AWARD OF LETTER CONTRACT FOR MODIFICATION OF ONE GOVERNMENT OWNED QUICK REACTION CAPABILITY LIBERTY PROJECT AIRCRAFT TO AN ENHANCED MEDIUM ALTITUDE RECONNAISSANCE AND SURVEILLANCE SYSTEM - MULTI-INTELLIGENCE (EMARSS-M) AIRCRAFT. Key points: 1. The contract's fixed-price incentive structure aims to balance cost control with performance incentives. 2. Sole-source award suggests limited market availability or specialized capabilities required for the modification. 3. The extended performance period indicates a complex and potentially evolving modification process. 4. The contract's value is significant within the specialized aircraft modification sector. 5. Performance context is critical given the nature of intelligence, surveillance, and reconnaissance systems.

Value Assessment

Rating: fair

Benchmarking the value of this sole-source contract is challenging without comparable sole-source awards for similar specialized aircraft modifications. The fixed-price incentive (FPI) contract type suggests an attempt to control costs while incentivizing performance, but the final cost can vary based on target and ceiling prices. Without access to the specific incentive targets and cost breakdowns, a definitive value-for-money assessment is difficult. The significant duration of the contract (over 2200 days) also implies substantial work, making a per-year cost comparison more relevant if available.

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 a specific contractor possesses unique capabilities, intellectual property, or is the only source capable of meeting the government's requirements. The lack of competition means the government did not benefit from a price discovery process driven by multiple bids, potentially leading to higher costs than if it had been competed.

Taxpayer Impact: For taxpayers, a sole-source award means the absence of competitive pressure to drive down prices. This necessitates strong government oversight to ensure fair pricing and prevent cost overruns.

Public Impact

The primary beneficiaries are the Department of the Army and its intelligence, surveillance, and reconnaissance (ISR) operations. The contract delivers enhanced medium altitude reconnaissance and surveillance system (EMARSS-M) aircraft capabilities. Geographic impact is likely global, supporting military operations wherever ISR assets are deployed. Workforce implications include specialized engineering, manufacturing, and technical support roles at the contractor's facility.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source nature limits competitive pricing and potential for innovation from a broader market.
Fixed-price incentive contracts can lead to cost growth if targets are not well-defined or if incentives are not structured effectively.
Long contract duration increases the risk of scope creep or evolving requirements not being adequately managed.
Lack of transparency in sole-source justifications can obscure true market value.
Dependence on a single contractor for critical ISR system modifications poses a long-term strategic risk.

Positive Signals

Fixed-price incentive contract type aims to align contractor and government interests for cost and performance.
Award to a known entity (L3Harris) suggests a level of trust and established relationship for critical systems.
Modification of existing platforms can be more cost-effective than developing entirely new systems.
Focus on enhancing ISR capabilities directly supports national security objectives.

Sector Analysis

The aerospace and defense sector, particularly the segment focused on aircraft modification and specialized systems, is characterized by high barriers to entry, significant R&D investment, and long product development cycles. Contracts for intelligence, surveillance, and reconnaissance (ISR) platforms are critical for military readiness and intelligence gathering. Spending in this area is often driven by evolving threats and technological advancements. Comparable spending benchmarks would typically involve other major aircraft modification programs or upgrades to complex defense systems, often awarded through competitive processes or sole-source arrangements for unique capabilities.

Small Business Impact

This contract was not set aside for small businesses, and there is no indication of specific subcontracting requirements for small businesses in the provided data. As a sole-source award to a large prime contractor, the direct impact on the small business ecosystem is likely minimal unless L3Harris Technologies voluntarily engages small businesses for specific components or services. The absence of a small business set-aside suggests that the specialized nature of the modification may not lend itself to being broken down into smaller, more accessible contracts for small enterprises.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contracting and program management offices. The fixed-price incentive (FPI) contract type requires careful monitoring of costs, performance metrics, and the achievement of incentive targets. Transparency is limited due to the sole-source nature. Accountability measures would be embedded in the contract's terms and conditions, including performance standards and delivery schedules. Inspector General jurisdiction would apply to investigations of fraud, waste, or abuse related to the contract.

Related Government Programs

EMARSS Program
Intelligence, Surveillance, and Reconnaissance (ISR) Aircraft
Military Aircraft Modification
Department of the Army Procurement

Risk Flags

Sole-source award
Potential for cost growth in FPI contracts
Long contract duration
Lack of competitive benchmarking

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $34.1 million to L3HARRIS TECHNOLOGIES INTEGRATED SYSTEMS L.P.. AWARD OF LETTER CONTRACT FOR MODIFICATION OF ONE GOVERNMENT OWNED QUICK REACTION CAPABILITY LIBERTY PROJECT AIRCRAFT TO AN ENHANCED MEDIUM ALTITUDE RECONNAISSANCE AND SURVEILLANCE SYSTEM - MULTI-INTELLIGENCE (EMARSS-M) AIRCRAFT.

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 Army).

What is the total obligated amount?

The obligated amount is $34.1 million.

What is the period of performance?

Start: 2015-03-31. End: 2021-05-01.

What is the track record of L3Harris Technologies Integrated Systems L.P. with similar sole-source ISR aircraft modification contracts?

L3Harris Technologies, and its predecessor companies, have a significant history of performing complex modifications and upgrades on military aircraft, including those for intelligence, surveillance, and reconnaissance (ISR) missions. They have been involved in various programs requiring specialized sensor integration, communication systems, and platform enhancements. While specific details on past sole-source awards for ISR modifications are proprietary, the company's extensive experience in the defense sector suggests a capability to execute such contracts. However, the government's justification for awarding this specific contract on a sole-source basis would be crucial to understanding if it aligns with a pattern of unique capability provision or a lack of competitive alternatives for this particular EMARSS-M enhancement.

How does the $34 million award compare to the cost of similar ISR aircraft modifications, considering it's a sole-source contract?

Direct comparison of this $34 million award to 'similar' ISR aircraft modifications is inherently difficult due to the sole-source nature of this contract and the specialized requirements of the EMARSS-M system. Sole-source contracts often command a premium because they lack the price competition that typically drives down costs in open markets. To assess value, one would need to compare the scope of work, the specific enhancements (e.g., sensor upgrades, avionics, structural changes), and the platform's baseline capabilities against other modification programs. If comparable sole-source awards exist for similar complexity, they would provide a benchmark. Alternatively, if the government had a cost estimate based on independent research or previous similar work, that would offer insight. Without such data, it's challenging to definitively state if $34 million represents a fair price, though the absence of competition raises a flag for potential overpricing.

What are the primary risks associated with a sole-source award for critical ISR system modifications like EMARSS-M?

The primary risks associated with a sole-source award for critical ISR system modifications like EMARSS-M include: 1. **Cost Overruns:** Without competitive pressure, the contractor may have less incentive to control costs, potentially leading to prices higher than in a competed scenario. 2. **Reduced Innovation:** A single source may not be pushed to explore the most innovative or cost-effective solutions available in the broader market. 3. **Contractor Lock-in:** The government becomes dependent on the sole-source provider, potentially limiting future flexibility and increasing switching costs if performance issues arise or better alternatives emerge. 4. **Quality Concerns:** While not inherent, the lack of competitive benchmarking can sometimes mask potential quality issues that might be more readily identified in a multi-bidder environment. 5. **Limited Transparency:** Sole-source justifications can sometimes obscure the true market landscape and the availability of alternative solutions.

What does the fixed-price incentive (FPI) contract type imply about the program's cost and performance objectives?

A Fixed-Price Incentive (FPI) contract type signifies that both the government and the contractor have agreed upon target cost, target profit, and a price ceiling. The final contract price is determined by the final negotiated cost, with adjustments to profit based on how the final cost compares to the target cost. If the final cost is below the target, the contractor's profit increases (and the government's price decreases) according to a pre-defined sharing formula. Conversely, if the final cost exceeds the target, the contractor's profit decreases, and the government's price increases, up to the ceiling. This structure aims to incentivize the contractor to control costs while ensuring the government does not pay an unlimited amount. It implies that while cost certainty is desired, there is an acknowledgment of potential cost fluctuations inherent in the modification work.

How has historical spending on EMARSS or similar ISR aircraft modifications by the Department of Defense trended over the past five years?

Analyzing historical spending trends for the EMARSS program or very similar ISR aircraft modifications requires access to detailed federal procurement databases beyond the scope of this single award. However, generally, spending on ISR capabilities within the Department of Defense has remained robust, driven by persistent global security challenges and the increasing reliance on advanced surveillance and intelligence gathering. Programs involving the modification and upgrade of existing platforms like EMARSS are common as they offer a more cost-effective path to enhanced capabilities compared to developing entirely new systems. Trends likely show consistent investment in upgrading sensor suites, communication systems, and platform endurance for ISR aircraft. Specific year-over-year spending figures for EMARSS would reveal fluctuations based on program milestones, funding allocations, and the award of subsequent contract actions.

Industry Classification

NAICS: Manufacturing › Aerospace Product and Parts Manufacturing › Aircraft Manufacturing

Product/Service Code: AEROSPACE CRAFT AND STRUCTURAL COMPONENTS

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: W58RGZ15R0039

Offers Received: 1

Pricing Type: FIXED PRICE INCENTIVE (L)

Evaluated Preference: NONE

Contractor Details

Parent Company: L3harris Technologies, Inc

Address: 10001 JACK FINNEY BLVD, GREENVILLE, TX, 75402

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: $34,054,488

Exercised Options: $34,054,488

Current Obligation: $34,054,488

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline