DoD's $61.8M Raytheon contract for B-2 radar components lacked competition, raising value concerns

Contract Overview

Contract Amount: $61,834,848 ($61.8M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2017-09-22

End Date: 2022-09-23

Contract Duration: 1,827 days

Daily Burn Rate: $33.8K/day

Competition Type: NOT COMPETED

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: B-2 RADAR COMPONENT REPAIR AND BUILD

Place of Performance

Location: EL SEGUNDO, LOS ANGELES County, CALIFORNIA, 90245

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $61.8 million to RAYTHEON COMPANY for work described as: B-2 RADAR COMPONENT REPAIR AND BUILD Key points: 1. The contract's value, exceeding $61 million, was awarded without a competitive bidding process. 2. Sole-source awards can lead to inflated pricing and reduced innovation. 3. The extended duration of nearly five years suggests a long-term need for these specialized components. 4. Performance context is limited due to the lack of competitive benchmarking. 5. This contract falls within the 'Other Aircraft Parts and Auxiliary Equipment Manufacturing' sector. 6. The absence of competition is a significant risk indicator for cost-effectiveness.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to its sole-source nature. Without competing offers, it's difficult to ascertain if the pricing reflects fair market value or if Raytheon Company was able to command a premium. The Cost Plus Fixed Fee (CPFF) contract type, while common for complex procurements, can also incentivize cost overruns if not closely monitored. A comparison to similar sole-source contracts for specialized aerospace components would be necessary for a more robust value assessment, but such data is not readily available.

Cost Per Unit: N/A

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 bypasses the standard competitive bidding process, which typically involves multiple interested parties submitting proposals. The lack of competition means there was no direct price pressure from alternative suppliers, potentially impacting the final cost to the government.

Taxpayer Impact: Taxpayers may have paid a higher price than they would have in a competitive environment. The absence of multiple bids limits the government's ability to negotiate the best possible terms and pricing.

Public Impact

The primary beneficiaries are the U.S. Air Force and the B-2 bomber program, ensuring the continued operational readiness of this strategic asset. The contract delivers essential repair and build services for critical radar components, vital for the B-2's electronic warfare and targeting capabilities. The geographic impact is primarily within the United States, likely at defense facilities and Raytheon's manufacturing sites. Workforce implications include the employment of skilled technicians, engineers, and manufacturing personnel at Raytheon.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price discovery and potentially increases costs for taxpayers.
Lack of competition may stifle innovation and reduce the incentive for cost efficiency.
CPFF contract type carries inherent risks of cost escalation if not rigorously managed.
Limited public information on performance metrics makes it hard to assess effectiveness.
The extended duration without competitive re-evaluation raises questions about ongoing value.

Positive Signals

Ensures continued availability of critical components for a vital national defense asset (B-2 bomber).
Leverages the specialized expertise of a known contractor (Raytheon) with existing knowledge of the B-2 system.
Provides a stable, long-term solution for maintaining the radar systems' operational readiness.
The fixed fee component of the CPFF contract provides some cost certainty for the government.

Sector Analysis

This contract operates within the aerospace and defense manufacturing sector, specifically focusing on aircraft parts and auxiliary equipment. The market for specialized components for legacy platforms like the B-2 is often concentrated among a few key manufacturers due to high barriers to entry, including proprietary technology and extensive qualification processes. Spending in this niche can be substantial, but often lacks the broad competition seen in more commoditized defense supply chains. Benchmarking is difficult without access to proprietary cost data or comparable sole-source awards.

Small Business Impact

This contract does not appear to involve small business set-asides, as indicated by the 'sb': false field. Furthermore, the 'ss': false field suggests it was not a small business prime award. While Raytheon, as a large prime contractor, may engage small businesses as subcontractors, the primary award mechanism here does not prioritize small business participation. The lack of specific subcontracting plans or goals in the provided data makes it difficult to assess the direct impact on the small business ecosystem for this particular contract.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Air Force and the Department of Defense's contracting and program management offices. Given the sole-source nature and CPFF structure, rigorous oversight of costs, performance, and adherence to contract terms would be crucial. Inspector General investigations could be initiated if specific concerns regarding fraud, waste, or abuse arise. Transparency is limited by the non-competitive award, making public scrutiny of the decision-making process and pricing difficult.

Related Government Programs

B-2 Spirit Bomber Sustainment
Aerospace Component Manufacturing
Defense Electronics Procurement
Aircraft Radar Systems
Sole-Source Defense Contracts

Risk Flags

Sole-Source Award
Lack of Competition
Cost Plus Fixed Fee Contract Type
Extended Contract Duration
Limited Transparency

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $61.8 million to RAYTHEON COMPANY. B-2 RADAR COMPONENT REPAIR AND BUILD

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 Air Force).

What is the total obligated amount?

The obligated amount is $61.8 million.

What is the period of performance?

Start: 2017-09-22. End: 2022-09-23.

What is Raytheon Company's track record with the B-2 program and similar sole-source contracts?

Raytheon Company, now part of RTX, has a long-standing relationship with the B-2 program, providing various systems and components. Their extensive experience with the platform suggests a deep understanding of its requirements. However, specific details regarding their performance on this particular radar component contract, especially concerning cost control and delivery timelines under the CPFF structure, are not publicly detailed. Their history with sole-source awards in defense is extensive, reflecting the specialized nature of many defense systems where only one or a few companies possess the necessary expertise and technology. Analyzing past performance on similar sole-source contracts would require access to government performance reports and cost audits, which are typically not public.

How does the $61.8 million cost compare to similar radar component repair and build contracts?

Direct comparison of the $61.8 million cost is difficult without knowing the specific scope of work, the exact components involved, and the duration of the contract. As this was a sole-source award, there's no competitive baseline to assess if the price is favorable. Generally, sole-source contracts for highly specialized, low-volume components for legacy aircraft like the B-2 tend to be more expensive per unit than components produced in higher volumes or through competitive processes. Benchmarking would ideally involve comparing this contract's total value and estimated unit costs against other sole-source awards for similar complex defense electronics, or against Raytheon's own internal cost estimates if they were available. The CPFF structure also means the final cost could vary based on actual labor and material expenses incurred.

What are the primary risks associated with this sole-source, Cost Plus Fixed Fee contract?

The primary risks are twofold. Firstly, the sole-source nature eliminates competitive pressure, potentially leading to higher prices than might be achieved through bidding. The government lacks the leverage that multiple bidders provide. Secondly, the Cost Plus Fixed Fee (CPFF) structure carries inherent risks. While the 'fixed fee' provides some predictability for the contractor's profit, the 'cost plus' element means the government bears the risk of cost overruns. If Raytheon incurs higher-than-expected labor or material costs, the government pays for them, up to the contract's ceiling. Effective oversight is critical to mitigate these risks, ensuring costs are reasonable and allocable, and that the fixed fee remains appropriate for the effort involved.

How effective is the Department of the Air Force in managing sole-source contracts for critical components?

The Department of the Air Force, like other defense agencies, utilizes sole-source contracts when necessary due to the unique nature of certain defense systems, proprietary technology, or lack of viable alternatives. Effectiveness hinges on robust internal processes for justifying sole-source awards, conducting thorough price and cost analyses, and implementing stringent oversight. When managed well, these contracts can ensure the sustainment of critical assets. However, challenges include ensuring fair pricing without competition and preventing potential contractor inefficiencies from driving up costs. The effectiveness can vary significantly based on the specific program, the contracting team's expertise, and the level of available data for benchmarking and negotiation.

What are the historical spending patterns for B-2 radar component maintenance and procurement?

Historical spending on B-2 radar components would likely show a pattern of sustained, high-value investment due to the aircraft's advanced and complex nature, coupled with its long service life. Early procurement costs would have been significant, followed by ongoing sustainment spending for repairs, upgrades, and component replacements. Given the B-2's strategic importance and limited fleet size, contracts for its specialized systems, including radar, are often sole-sourced or awarded to a very limited number of vendors possessing unique expertise. Spending would likely fluctuate based on maintenance cycles, component obsolescence, and any planned upgrades or modernization efforts. Detailed historical data would reveal trends in cost per component, total program spend over time, and the proportion allocated to sustainment versus new procurement.

What are the implications of awarding a nearly 5-year contract without competition?

Awarding a contract of this duration (1827 days, approximately 5 years) without competition has significant implications. It locks the government into a single provider for an extended period, limiting flexibility to seek better pricing or alternative solutions should market conditions change or new technologies emerge. It also reduces the incentive for the incumbent contractor to innovate or aggressively manage costs, as they face no immediate threat from competitors. For taxpayers, this means potentially paying above-market rates for the duration of the contract. Robust justification and oversight are paramount in such long-term, non-competitive awards to ensure continued value and performance.

Industry Classification

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

Product/Service Code: ELECTRICAL/ELECTRONIC EQPT COMPNTS

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: FA811916R0035

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Rockwell Collins Australia PTY Limited

Address: 2000 E EL SEGUNDO BLVD, EL SEGUNDO, CA, 90245

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: $61,834,848

Exercised Options: $61,834,848

Current Obligation: $61,834,848

Subaward Activity

Number of Subawards: 14

Total Subaward Amount: $1,150,290

Contract Characteristics

Multi-Year Contract: Yes

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: FA811917D0015

IDV Type: IDC

Timeline