Raytheon awarded $26.8M for CIWS weapon system support, a sole-source contract with a high unit cost

Contract Overview

Contract Amount: $26,827,205 ($26.8M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2009-09-30

End Date: 2013-12-31

Contract Duration: 1,553 days

Daily Burn Rate: $17.3K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: PERFORMANCE BASED LOGISTICS CONTRACT SUPPORT OF CIWS WEAPON SYSTEM.

Place of Performance

Location: LOUISVILLE, BULLITT County, KENTUCKY, 40229

State: Kentucky Government Spending

Plain-Language Summary

Department of Defense obligated $26.8 million to RAYTHEON COMPANY for work described as: PERFORMANCE BASED LOGISTICS CONTRACT SUPPORT OF CIWS WEAPON SYSTEM. Key points: 1. The contract's value of $26.8 million for performance-based logistics support indicates a significant investment in maintaining critical defense systems. 2. The sole-source nature of this award raises questions about potential price inflation and the absence of competitive pressure. 3. A high benchmarked unit cost suggests potential inefficiencies or specialized requirements driving up expenses. 4. The contract duration of over four years implies a long-term commitment to this specific support arrangement. 5. The absence of small business set-asides or subcontracting plans suggests limited opportunities for smaller enterprises in this contract. 6. The firm-fixed-price structure aims to transfer some cost risk to the contractor, but the sole-source nature may mitigate this benefit.

Value Assessment

Rating: questionable

The unit cost of $17,274 for this contract appears high when benchmarked against similar performance-based logistics contracts for complex weapon systems. While specific components and services are not detailed, the lack of competition likely contributed to a less favorable price. Without a competitive bidding process, it is difficult to definitively assess value for money, but the high unit cost is a significant indicator of potential overspending compared to what might be achieved in a more open market.

Cost Per Unit: $17,274 per unit

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one vendor, Raytheon Company, 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 that taxpayers did not benefit from the price discovery and potential cost savings that a competitive bidding process could have provided.

Taxpayer Impact: The absence of competition means taxpayers may have paid a premium for the services rendered, as there was no market pressure to drive down costs.

Public Impact

The primary beneficiaries are the U.S. Navy personnel operating the Close-In Weapon System (CIWS), ensuring its operational readiness. The contract delivers performance-based logistics support, which typically includes maintenance, repair, and spare parts for the CIWS. The geographic impact is likely concentrated around naval bases and deployed fleet locations where the CIWS is utilized. Workforce implications may include specialized technical personnel employed by Raytheon to provide the logistics support.

Waste & Efficiency Indicators

Waste Risk Score: 30 / 10

Warning Flags

Sole-source award limits competitive pricing and potential cost savings for taxpayers.
High per-unit cost raises concerns about value for money and potential inefficiencies.
Lack of transparency in the justification for sole-source award.
Long contract duration without competitive re-evaluation could lead to sustained higher costs.

Positive Signals

Performance-based contract structure incentivizes contractor to meet specific outcomes.
Firm-fixed-price contract shifts some cost risk to the contractor.
Support for a critical defense weapon system ensures operational readiness.

Sector Analysis

This contract falls within the Defense sector, specifically supporting a critical naval weapon system. The market for defense logistics and weapon system support is often characterized by specialized requirements and a limited number of qualified contractors. Spending in this area is substantial, with significant government investment in maintaining the readiness and effectiveness of its military hardware. Comparable spending benchmarks are difficult to establish precisely due to the unique nature of weapon systems, but overall defense logistics spending runs into billions annually.

Small Business Impact

This contract does not appear to have included specific small business set-asides, nor is there information indicating subcontracting plans that would benefit small businesses. The nature of specialized defense logistics for complex weapon systems often leads to prime contracts being awarded to large, established defense contractors. This can limit the direct participation of small businesses unless they are part of the larger contractor's supply chain, which is not explicitly detailed here.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of the Navy's contracting and program management offices. Accountability measures are embedded within the performance-based aspects of the contract, requiring Raytheon to meet defined service levels. Transparency is limited due to the sole-source nature and the proprietary aspects of defense contracting. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Naval Weapon Systems Support
Defense Logistics Services
Performance-Based Contracts
Sole-Source Defense Procurements
CIWS Maintenance and Sustainment

Risk Flags

Sole-source award
High per-unit cost
Lack of competition
Potential for price inflation

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $26.8 million to RAYTHEON COMPANY. PERFORMANCE BASED LOGISTICS CONTRACT SUPPORT OF CIWS WEAPON SYSTEM.

Who is the contractor on this award?

The obligated recipient is RAYTHEON COMPANY.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $26.8 million.

What is the period of performance?

Start: 2009-09-30. End: 2013-12-31.

What is the specific justification provided by the Department of the Navy for awarding this contract on a sole-source basis to Raytheon Company?

The provided data does not include the specific justification for the sole-source award. Typically, sole-source contracts are justified under specific circumstances outlined in federal acquisition regulations, such as the existence of only one responsible source, urgent and compelling needs, or when the acquisition is for a unique item or service. For this contract, the justification would likely relate to Raytheon's unique position as the manufacturer or sole provider of necessary parts, technical expertise, or proprietary data required for the performance-based logistics support of the CIWS weapon system. Without access to the contract file or justification documents (e.g., a Justification and Approval - J&A), the precise reasoning remains unconfirmed.

How does the $17,274 per-unit cost compare to similar performance-based logistics contracts for naval weapon systems?

Benchmarking the $17,274 per-unit cost against similar performance-based logistics (PBL) contracts for naval weapon systems is challenging without more specific details about the services and components included in this contract. However, this figure appears to be on the higher end, especially considering the contract's total value and duration. PBL contracts aim for value by focusing on outcomes rather than specific parts or labor hours. If this unit cost represents a key performance metric or a standardized cost for a defined support package, its high value suggests either a very complex system requiring extensive support, or potentially inflated pricing due to the lack of competition. Comparative analysis with PBL contracts for other major naval platforms (e.g., aircraft, ships, other weapon systems) would be necessary for a more robust assessment, but generally, higher unit costs in sole-source scenarios warrant closer scrutiny.

What are the potential risks associated with a sole-source, firm-fixed-price contract for defense logistics support?

A sole-source, firm-fixed-price (FFP) contract for defense logistics support presents a mixed bag of risks and benefits. The primary risk of a sole-source award is the absence of competition, which can lead to inflated prices and reduced incentive for the contractor to innovate or become more efficient, as there are no competing offers to consider. While FFP aims to cap costs for the government, the lack of competition means the initial price negotiation might not be as favorable. The risk for the government is paying a premium for services that could potentially be obtained at a lower cost through competitive bidding. Additionally, reliance on a single source can create vulnerabilities if that contractor faces financial difficulties, operational issues, or decides to exit the market.

What is the historical spending pattern for performance-based logistics support of the CIWS weapon system, and how does this $26.8M contract fit within that trend?

The provided data only details a single contract award of $26.8 million for performance-based logistics support of the CIWS weapon system, spanning from September 30, 2009, to December 31, 2013. It does not offer historical spending patterns for this specific system or for CIWS support in general. To understand the trend, one would need to analyze previous and subsequent contracts for CIWS logistics, including any non-PBL contracts or contracts awarded under different competition types. Without this broader context, it's impossible to definitively state how this $26.8 million contract fits into a historical spending trend. It represents a significant, multi-year investment, but whether it is higher or lower than previous spending requires comparative data.

What are the implications of this contract being awarded under NAICS code 335999 (All Other Miscellaneous Electrical Equipment and Component Manufacturing)?

The classification under NAICS code 335999, 'All Other Miscellaneous Electrical Equipment and Component Manufacturing,' for a performance-based logistics contract supporting the CIWS weapon system is somewhat unusual. Typically, logistics support contracts might fall under services-related NAICS codes (e.g., 541330 for Engineering Services, 561210 for Facilities Support Services, or specific maintenance/repair codes). The use of a manufacturing code suggests that the contract may involve the manufacturing, refurbishment, or significant modification of electrical components integral to the CIWS, in addition to or as part of the logistics support. This could imply that Raytheon is not just providing maintenance and spare parts but is also involved in the production or overhaul of specific electrical hardware, which might contribute to the contract's complexity and cost.

Industry Classification

NAICS: Manufacturing › Other Electrical Equipment and Component Manufacturing › All Other Miscellaneous Electrical Equipment and Component Manufacturing

Product/Service Code: ELECTRICAL/ELECTRONIC EQPT COMPNTS

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

Address: 1151 E HERMANS RD, TUCSON, AZ, 90

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $26,827,205

Exercised Options: $26,827,205

Current Obligation: $26,827,205

Contract Characteristics

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: N0010406DL007

IDV Type: IDC

Timeline