DoD's $24.7M Raytheon contract for audio infrastructure upgrades lacked competition, raising value concerns

Contract Overview

Contract Amount: $24,680,876 ($24.7M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2013-01-01

End Date: 2021-03-05

Contract Duration: 2,985 days

Daily Burn Rate: $8.3K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: AUDIO INFRASTRUCTURE UPGRADE (AIU) MODERNIZATION INSTALLATION

Place of Performance

Location: OFFUTT AFB, SARPY County, NEBRASKA, 68113

State: Nebraska Government Spending

Plain-Language Summary

Department of Defense obligated $24.7 million to RAYTHEON COMPANY for work described as: AUDIO INFRASTRUCTURE UPGRADE (AIU) MODERNIZATION INSTALLATION Key points: 1. The contract's sole-source nature limits price discovery and potentially inflates costs. 2. A long performance period (2013-2021) suggests a need for ongoing, potentially evolving, support. 3. The 'Other Aircraft Parts' NAICS code seems broad for an audio infrastructure project. 4. Lack of competition raises questions about whether the government received the best value. 5. The contract's cost-plus-fixed-fee structure can incentivize cost overruns. 6. Performance was managed by the Defense Contract Management Agency, indicating significant oversight.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to the lack of competitive bids and the specific nature of 'audio infrastructure upgrades' within a defense context. The cost-plus-fixed-fee (CPFF) contract type, while common for R&D or uncertain scope, can lead to higher costs compared to fixed-price contracts if not managed tightly. Without comparable sole-source contracts or detailed cost breakdowns, it's difficult to definitively assess if the $24.7 million represents fair market value. The long duration of the contract (over 8 years) also suggests significant cumulative spending, further emphasizing the need for strong value assessment.

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 approach is typically used when only one vendor possesses the necessary unique capabilities, or in cases of urgent need where competition is impractical. The absence of competition means that the government did not benefit from the price reductions and innovation that typically arise from a bidding process. This lack of a competitive environment raises concerns about whether the selected contractor, Raytheon Company, offered the most cost-effective solution.

Taxpayer Impact: Taxpayers may have paid a premium for this audio infrastructure upgrade due to the absence of competitive pressure. Without competing bids, there's less assurance that the price reflects the lowest achievable cost for the required services.

Public Impact

The Department of Defense benefits from modernized audio infrastructure, potentially improving communication and operational effectiveness. The contract supports the defense sector's technological capabilities. The geographic impact is likely concentrated within specific DoD facilities, though the exact locations are not specified. The contract supports a workforce skilled in specialized defense contracting and potentially audio engineering.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to higher costs for taxpayers.
Cost-plus-fixed-fee contract type can incentivize increased spending.
The broad NAICS code (336413) might not accurately reflect the specialized nature of audio infrastructure services.
Long contract duration could indicate potential scope creep or evolving requirements without re-competition.

Positive Signals

Awarded to a large, established defense contractor (Raytheon Company) with significant experience.
The contract was managed by the Defense Contract Management Agency, suggesting a level of oversight.
The definitive contract award indicates a clear agreement on terms and scope, albeit sole-source.

Sector Analysis

This contract falls within the broader aerospace and defense manufacturing sector, specifically under NAICS code 336413 (Other Aircraft Parts and Auxiliary Equipment Manufacturing). While the NAICS code is broad, the service involves specialized audio infrastructure upgrades. The defense sector is characterized by long-term, high-value contracts, often with complex requirements and significant R&D components. Spending in this sector is heavily influenced by national security priorities and technological advancements. Comparable spending benchmarks would typically involve other large-scale infrastructure or technology modernization projects within the DoD.

Small Business Impact

This contract does not appear to have involved small business set-asides, as indicated by 'sb': false. The prime contractor, Raytheon Company, is a large corporation. There is no information provided regarding subcontracting plans or actual subcontracting to small businesses. Therefore, the direct impact on the small business ecosystem from this specific contract is likely minimal, unless Raytheon engaged in significant subcontracting with small firms, which is not detailed here.

Oversight & Accountability

The contract was managed by the Defense Contract Management Agency (DCMA), which is responsible for overseeing contract performance and ensuring compliance. The contract type (Cost Plus Fixed Fee) necessitates robust oversight to control costs and ensure the fixed fee remains appropriate. Transparency regarding the specific oversight mechanisms and accountability measures employed by DCMA for this particular contract is limited in the provided data. Inspector General jurisdiction would typically fall under the Department of Defense's oversight framework.

Related Government Programs

Defense Communications Systems
Military Infrastructure Modernization
Aerospace Parts Manufacturing
Department of Defense IT Upgrades

Risk Flags

Sole-source award limits competition.
Cost-plus-fixed-fee contract type can incentivize higher costs.
Unclear NAICS code classification.
Long contract duration without re-competition.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $24.7 million to RAYTHEON COMPANY. AUDIO INFRASTRUCTURE UPGRADE (AIU) MODERNIZATION INSTALLATION

Who is the contractor on this award?

The obligated recipient is RAYTHEON COMPANY.

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Contract Management Agency).

What is the total obligated amount?

The obligated amount is $24.7 million.

What is the period of performance?

Start: 2013-01-01. End: 2021-03-05.

What is the specific nature of the 'audio infrastructure' being upgraded, and why was it classified under 'Other Aircraft Parts and Auxiliary Equipment Manufacturing'?

The provided data does not specify the exact nature of the 'audio infrastructure' upgrades. The classification under NAICS code 336413 (Other Aircraft Parts and Auxiliary Equipment Manufacturing) is unusual for audio systems and suggests a potential misclassification or a highly specialized application integrated within aircraft or related systems. It's possible the audio infrastructure is critical for aircraft communication, mission systems, or ground support equipment unique to aviation platforms. Without further details, it's difficult to ascertain the precise scope and rationale behind this classification, which could impact how the contract's value and performance are assessed against industry norms.

How does the Cost Plus Fixed Fee (CPFF) contract structure potentially impact the final cost and contractor incentives compared to other contract types?

The Cost Plus Fixed Fee (CPFF) structure means the contractor is reimbursed for all allowable costs incurred, plus a predetermined fixed fee representing profit. This structure is often used when the scope of work is not well-defined or involves significant uncertainty, such as research and development. While it ensures the contractor is compensated for unforeseen costs, it can incentivize higher spending, as the contractor's profit (the fixed fee) remains constant regardless of the total cost. This contrasts with fixed-price contracts, where the contractor bears the risk of cost overruns and has a strong incentive to control expenses to maximize profit. For taxpayers, CPFF contracts require diligent oversight from the contracting agency to ensure costs are reasonable and necessary, and that the fixed fee is appropriate for the level of risk and effort involved.

Given the sole-source award, what mechanisms were in place to ensure Raytheon Company provided fair and reasonable pricing?

When a contract is awarded sole-source, the government must still ensure fair and reasonable pricing. This typically involves conducting a thorough price analysis, which may include reviewing historical pricing data for similar items or services, analyzing the contractor's cost proposals, and potentially obtaining independent cost estimates. In some cases, the government may negotiate the price directly with the sole-source provider. The Defense Contract Management Agency (DCMA), which managed this contract, plays a crucial role in this process by auditing costs and verifying the reasonableness of the contractor's proposed expenditures. However, the effectiveness of these mechanisms in achieving optimal value without competition is inherently limited.

What does the long contract duration (2013-2021) imply about the nature of the audio infrastructure upgrades and potential future needs?

A contract duration spanning over eight years (from January 1, 2013, to March 5, 2021) suggests that the audio infrastructure upgrades were either a very long-term project, involved ongoing maintenance and support, or that requirements evolved significantly over time. Such extended periods can be common for large-scale defense modernization efforts where integration, testing, and deployment take considerable time. It might also indicate that the initial scope was broad or that subsequent modifications and additions were incorporated. For taxpayers, a long duration necessitates continuous monitoring to ensure the project remains relevant, cost-effective, and aligned with evolving technological standards and defense needs.

Are there any indications of performance issues or successes associated with this contract, despite the lack of competitive data?

The provided data does not include specific performance metrics, quality assessments, or any formal evaluations of Raytheon Company's performance on this contract. While the contract was awarded and completed, the absence of competitive data makes it difficult to assess whether the performance met or exceeded expectations relative to what could have been achieved in a competitive environment. The fact that it was a sole-source, CPFF contract managed by DCMA suggests a focus on ensuring the work was completed and costs were tracked, but not necessarily on benchmarking performance against market alternatives. Further investigation into contract performance reports or DCMA records would be needed to evaluate specific successes or issues.

Industry Classification

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

Product/Service Code: MAINT, REPAIR, REBUILD EQUIPMENT › MAINT, REPAIR, REBUILD OF EQUIPMENT

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: RTX Corp (UEI: 001344142)

Address: 8333 BRYAN DAIRY RD, LARGO, FL, 33777

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: $24,680,876

Exercised Options: $24,680,876

Current Obligation: $24,680,876

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline