DoD's $45.5M SATCOM sustainment contract awarded to L3Harris without competition raises value questions

Contract Overview

Contract Amount: $45,503,671 ($45.5M)

Contractor: L3harris Technologies, Inc.

Awarding Agency: Department of Defense

Start Date: 2012-06-06

End Date: 2014-06-04

Contract Duration: 728 days

Daily Burn Rate: $62.5K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: SUSTAINMENT AND SUPPORT SERVICES FOR THE AN/GSC-52 MODERNIZATION (52 MOD) PROGRAM'S FAMILY OF SATELLITE COMMUNICATIONS (SATCOM) EARTH TERMINALS AND ASSOCIATED EQUIPMENT

Place of Performance

Location: PALM BAY, BREVARD County, FLORIDA, 32905

State: Florida Government Spending

Plain-Language Summary

Department of Defense obligated $45.5 million to L3HARRIS TECHNOLOGIES, INC. for work described as: SUSTAINMENT AND SUPPORT SERVICES FOR THE AN/GSC-52 MODERNIZATION (52 MOD) PROGRAM'S FAMILY OF SATELLITE COMMUNICATIONS (SATCOM) EARTH TERMINALS AND ASSOCIATED EQUIPMENT Key points: 1. Contract awarded on a sole-source basis, limiting price discovery and potentially increasing costs. 2. The contract's cost-plus-fixed-fee structure may incentivize cost overruns. 3. Limited competition raises concerns about overall value for taxpayer dollars. 4. The contract duration of 728 days (2 years) is relatively short for sustainment services. 5. Performance context is limited due to the lack of competitive bidding. 6. Sector positioning: This contract falls within the broader defense communications and satellite technology market.

Value Assessment

Rating: questionable

Benchmarking the value of this sole-source contract is challenging due to the absence of competitive bids. The cost-plus-fixed-fee (CPFF) pricing structure, while common in complex defense procurements, can lead to higher costs if not managed rigorously. Without comparable contracts or market data, it's difficult to definitively assess if the $45.5 million represents a fair price for the sustainment and support services provided. The lack of competition suggests potential for inflated pricing.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning L3Harris Technologies, Inc. was the only bidder. This approach bypasses the standard competitive bidding process, which typically involves multiple companies vying for the contract. While sole-source awards can be justified under specific circumstances (e.g., unique capabilities, urgent needs), they inherently limit price discovery and can reduce the government's leverage in negotiating favorable terms.

Taxpayer Impact: Sole-source awards mean taxpayers do not benefit from the cost savings that typically arise from a competitive bidding environment. This can lead to higher overall spending for the same level of service.

Public Impact

The primary beneficiaries are the Department of the Army and L3Harris Technologies, Inc. Services delivered include sustainment and support for satellite communications earth terminals and associated equipment. Geographic impact is likely concentrated where these SATCOM terminals are deployed, primarily within Florida based on the contract's solicitation notes. Workforce implications include employment for technical staff at L3Harris involved in maintaining and supporting the specified equipment.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure on pricing.
Cost-plus-fixed-fee structure may not provide sufficient incentive for cost control.
Lack of transparency in the procurement process due to sole-source nature.
Limited data available to assess contractor performance against alternatives.

Positive Signals

L3Harris is an established defense contractor with experience in SATCOM.
The contract addresses critical sustainment needs for essential communication equipment.
The fixed fee component provides some cost certainty for the government.

Sector Analysis

The defense communications sector is characterized by high technological complexity and significant government investment. Contracts for sustainment and support of satellite communications equipment are crucial for maintaining operational readiness. The market includes a few large, established prime contractors like L3Harris, alongside specialized subcontractors. Spending in this area is driven by the need for reliable, secure global communication capabilities, with contracts often being long-term and high-value.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb: false'. Furthermore, the 'co' field lists L3Harris Technologies, Inc., a large prime contractor. There is no explicit information regarding subcontracting plans for small businesses within the provided data. Without a set-aside or clear subcontracting goals, the direct impact on the small business ecosystem for this specific award is likely minimal, though L3Harris may engage small businesses in its supply chain.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Defense's contracting and financial management regulations. As a sole-source award, scrutiny might be higher to ensure fair pricing and necessity. Accountability measures would be tied to the contract's performance clauses and the fixed fee. Transparency is limited due to the non-competitive nature of the award. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Department of Defense Satellite Communications Programs
Army Tactical Communications Systems
Defense Information Systems Agency (DISA) Contracts
Satellite Ground Station Operations
Communication Equipment Maintenance Services

Risk Flags

Sole-source award
Cost-plus pricing structure
Lack of competitive bidding
Limited performance data available

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $45.5 million to L3HARRIS TECHNOLOGIES, INC.. SUSTAINMENT AND SUPPORT SERVICES FOR THE AN/GSC-52 MODERNIZATION (52 MOD) PROGRAM'S FAMILY OF SATELLITE COMMUNICATIONS (SATCOM) EARTH TERMINALS AND ASSOCIATED EQUIPMENT

Who is the contractor on this award?

The obligated recipient is L3HARRIS TECHNOLOGIES, INC..

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $45.5 million.

What is the period of performance?

Start: 2012-06-06. End: 2014-06-04.

What is L3Harris Technologies, Inc.'s track record with similar sole-source sustainment contracts for DoD SATCOM equipment?

L3Harris Technologies, Inc. (and its predecessor companies) has a significant history of performing work on various Department of Defense (DoD) satellite communications (SATCOM) programs. While specific details on sole-source sustainment contracts for the AN/GSC-52 Modernization (52 MOD) program are not publicly detailed in this data snippet, the company's extensive experience in developing, manufacturing, and supporting complex communication systems suggests a capacity to handle such requirements. Historical performance data from other DoD contracts, if available through public databases like FPDS or SAM.gov, would provide a more granular view of their track record, including on-time delivery, quality of service, and cost performance. However, the sole-source nature of this particular award limits direct comparison to competitive outcomes.

How does the pricing structure (Cost Plus Fixed Fee) compare to industry standards for SATCOM sustainment, and what are the potential risks?

The Cost Plus Fixed Fee (CPFF) pricing structure is common in defense contracting, particularly for services where the scope of work can be difficult to define precisely upfront or involves evolving technical requirements, such as sustainment. The 'cost plus' component means the contractor is reimbursed for allowable costs incurred, while the 'fixed fee' represents the contractor's profit, negotiated at the outset. This structure shifts some risk to the government, as costs can exceed initial estimates, although the fee itself is fixed. Compared to fixed-price contracts, CPFF can lead to higher overall costs if not managed diligently. Risks include potential for contractor inefficiencies driving up costs (as profit is guaranteed on top of costs) and less incentive for the contractor to find the most cost-effective solutions, although the fixed fee does provide some incentive to complete the work efficiently to realize that profit.

What are the primary risks associated with awarding a $45.5 million sustainment contract on a sole-source basis?

The primary risk associated with a sole-source award of this magnitude is the lack of competitive pressure, which can lead to inflated pricing and reduced value for taxpayer money. Without competing bids, the government has less leverage to negotiate the best possible price and terms. There's also a risk that the chosen contractor may not be the most innovative or efficient provider available in the market. Furthermore, sole-source awards can sometimes indicate a lack of market research or an over-reliance on a single vendor, potentially creating vendor lock-in. This lack of competition limits transparency and makes it harder to benchmark performance and cost against potential alternatives, increasing the risk of suboptimal outcomes.

What is the historical spending pattern for sustainment and support services for the AN/GSC-52 Modernization program or similar SATCOM equipment?

The provided data covers a single contract for sustainment and support services for the AN/GSC-52 Modernization (52 MOD) program, valued at approximately $45.5 million, running from June 2012 to June 2014. This represents spending over a two-year period. To understand historical spending patterns, one would need to examine contract data for this specific program across different timeframes and potentially for similar SATCOM terminal families within the Department of Defense (DoD) or Department of the Army. Analyzing trends in contract values, durations, pricing structures (e.g., CPFF vs. fixed-price), and competition levels over several years would reveal whether spending has increased, decreased, or remained stable, and whether it has been driven by modernization efforts, increased operational tempo, or changes in procurement strategies.

How does the contract's duration (728 days) align with typical sustainment contracts for complex defense systems?

A duration of 728 days, equivalent to two years, for a sustainment and support services contract valued at $45.5 million is relatively short for complex defense systems, especially those involving satellite communications (SATCOM) equipment. Sustainment contracts often span multiple years, sometimes with options for extension, to ensure continuous support and leverage economies of scale. Shorter durations can sometimes indicate a contract awarded to bridge a gap, pending a larger competitive procurement, or that the scope of services is limited. However, it could also mean that the government intends to re-evaluate the requirement and contractor performance more frequently. Without further context on the specific needs of the AN/GSC-52 MOD program during that period, it's difficult to definitively assess if this duration was appropriate or a potential indicator of short-term planning.

Industry Classification

NAICS: Other Services (except Public Administration) › Electronic and Precision Equipment Repair and Maintenance › Communication Equipment Repair and Maintenance

Product/Service Code: SUPPORT SVCS (PROF, ADMIN, MGMT) › MANAGEMENT SUPPORT SERVICES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: W91QUZ12R0014

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: L3harris Technologies, Inc

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

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

Financial Breakdown

Contract Ceiling: $78,162,307

Exercised Options: $63,324,122

Current Obligation: $45,503,671

Subaward Activity

Number of Subawards: 56

Total Subaward Amount: $8,192,892

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline