DoD's $53.7M Raytheon contract for advanced voice terminals lacks competition, raising value concerns

Contract Overview

Contract Amount: $53,712,522 ($53.7M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2019-01-31

End Date: 2021-04-30

Contract Duration: 820 days

Daily Burn Rate: $65.5K/day

Competition Type: NOT COMPETED

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: VINSON/ADVANCED NARROWBAND DIGITAL VOICE TERMINAL CRYPTOGRAPHIC MODERNIZATION PROGRAM FISCAL YEAR 2019 ORDER

Place of Performance

Location: FORT WAYNE, ALLEN County, INDIANA, 46808

State: Indiana Government Spending

Plain-Language Summary

Department of Defense obligated $53.7 million to RAYTHEON COMPANY for work described as: VINSON/ADVANCED NARROWBAND DIGITAL VOICE TERMINAL CRYPTOGRAPHIC MODERNIZATION PROGRAM FISCAL YEAR 2019 ORDER Key points: 1. Contract awarded on a sole-source basis, limiting price discovery and potentially increasing costs. 2. Significant investment in cryptographic modernization suggests a critical need for secure communications. 3. Long contract duration of 820 days indicates a substantial, ongoing requirement. 4. The firm-fixed-price structure provides some cost certainty for the government. 5. Awarded to a single, large defense contractor, potentially excluding smaller, innovative firms. 6. Focus on digital voice terminals highlights a shift towards modern, secure communication systems.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to its sole-source nature. Without competitive bids, it's difficult to ascertain if the $53.7 million price reflects a fair market value. The lack of competition means there's no direct comparison to other vendors' pricing for similar advanced cryptographic voice terminals. While the firm-fixed-price contract offers some cost predictability, the absence of a competitive process raises questions about whether the government secured the best possible price and overall value for this critical modernization effort.

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 capabilities, technology, or security clearances required for the specific need. The lack of competition means there were no other bidders to compare against, which can limit the government's ability to negotiate the most favorable pricing and terms.

Taxpayer Impact: Sole-source awards mean taxpayers do not benefit from the price reductions typically driven by competitive bidding. This can lead to higher overall spending for essential government procurements.

Public Impact

The Department of the Air Force benefits from modernized, secure voice communication capabilities. This contract supports the enhancement of cryptographic systems crucial for national security. Personnel within the Department of Defense will utilize these advanced voice terminals. The contract contributes to the technological advancement of military communication infrastructure. Work is likely performed by Raytheon Company, a major defense contractor, impacting its workforce and operations.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition and potential value for taxpayer dollars.
Lack of transparency in the procurement process due to non-competitive nature.
Reliance on a single large contractor may create vendor lock-in.
Potential for higher costs compared to a competitively bid contract.

Positive Signals

Addresses a critical need for cryptographic modernization in defense communications.
Firm-fixed-price contract provides cost certainty once awarded.
Awarded to a known, established defense contractor with relevant expertise.

Sector Analysis

This contract falls within the Radio and Television Broadcasting and Wireless Communications Equipment Manufacturing sector, specifically focusing on advanced communication hardware. The market for secure, encrypted communication systems is a specialized segment within the broader defense industrial base. Spending in this area is driven by national security requirements and the constant need to upgrade technology to counter evolving threats. Comparable spending benchmarks would typically involve other sole-source or limited-competition awards for similar high-security communication equipment within defense agencies.

Small Business Impact

This contract was awarded to Raytheon Company, a large defense contractor, and there is no indication of small business set-asides or subcontracting requirements mentioned in the provided data. The sole-source nature of the award further suggests that opportunities for small businesses to participate directly as prime contractors were likely limited. Without specific subcontracting plans, the direct impact on the small business ecosystem for this particular award appears minimal.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contracting and financial management oversight mechanisms. As a sole-source award, the justification and approval process would be subject to review. Accountability measures would be tied to the delivery order terms and conditions, ensuring Raytheon meets the specified requirements within the firm-fixed-price structure. Transparency is limited due to the non-competitive nature, but contract modifications and performance reports would likely be subject to internal DoD review and potentially Inspector General oversight if performance issues arise.

Related Government Programs

Defense Communications Systems
Cryptographic Modernization Programs
Secure Voice Communication Systems
Radio and Wireless Equipment Procurement
Department of the Air Force IT and Communications

Risk Flags

Sole-source award
Lack of competition
Potential for overpricing
Limited transparency

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $53.7 million to RAYTHEON COMPANY. VINSON/ADVANCED NARROWBAND DIGITAL VOICE TERMINAL CRYPTOGRAPHIC MODERNIZATION PROGRAM FISCAL YEAR 2019 ORDER

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 $53.7 million.

What is the period of performance?

Start: 2019-01-31. End: 2021-04-30.

What is the specific cryptographic technology being modernized, and what are the key security enhancements?

The provided data does not specify the exact cryptographic technology being modernized or the precise security enhancements. However, the contract title 'ADVANCED NARROWBAND DIGITAL VOICE TERMINAL CRYPTOGRAPHIC MODERNIZATION PROGRAM' suggests a focus on upgrading the encryption algorithms and security protocols used in digital voice communication terminals. This likely involves transitioning to more robust, current-generation encryption standards to protect against advanced eavesdropping and cyber threats, ensuring the confidentiality and integrity of sensitive voice communications within the Department of Defense.

Why was this contract awarded on a sole-source basis instead of being competed?

The data indicates the contract was 'NOT COMPETED,' classifying it as sole-source. While the specific justification is not provided, sole-source awards are typically made when only one responsible source is available or capable of meeting the government's needs. This could be due to proprietary technology, unique capabilities held by Raytheon Company, urgent requirements where competition is not feasible, or specific security clearances and infrastructure necessary for handling classified cryptographic modernization. Without a competitive process, the government must have determined that Raytheon was the only viable option.

How does the $53.7 million cost compare to similar cryptographic modernization efforts?

Direct cost comparison is difficult due to the sole-source nature of this award and the lack of specific details on the scope of work. However, $53.7 million represents a significant investment. In the defense sector, modernization of critical communication and cryptographic systems often involves substantial costs, especially when dealing with advanced technology and stringent security requirements. Without competitive bids, it's challenging to benchmark this figure against market rates or other similar programs that may have undergone competitive procurement, making it hard to definitively assess value for money.

What is Raytheon Company's track record with similar defense communication contracts?

Raytheon Company is a major defense contractor with extensive experience in developing and supplying advanced communication systems, including those involving cryptography and secure networks. They have a long history of working with the Department of Defense on various platforms and technologies. While specific details of past performance on identical programs are not in the provided data, Raytheon's established presence and capabilities in the defense sector suggest they possess the technical expertise and infrastructure required for such complex modernization efforts.

What are the potential risks associated with a sole-source award for this type of technology?

The primary risks associated with a sole-source award include a lack of price competition, which can lead to higher costs for the government and taxpayers. There's also a reduced incentive for the contractor to innovate or offer the most cost-effective solutions once the contract is secured. Furthermore, reliance on a single vendor can create vendor lock-in, making it difficult to switch providers or integrate solutions from other companies in the future. This can also limit opportunities for smaller, innovative businesses to enter the market.

What is the expected impact of this modernization on the Air Force's overall communication security posture?

The modernization of advanced narrowband digital voice terminals with updated cryptography is expected to significantly enhance the Air Force's communication security posture. By implementing more advanced encryption standards, the program aims to protect sensitive voice communications from interception, exploitation, and interference by adversaries. This upgrade is crucial for maintaining secure command and control, operational effectiveness, and safeguarding classified information in an increasingly complex threat environment. It represents a proactive step towards ensuring the integrity and confidentiality of critical military dialogues.

Industry Classification

NAICS: Manufacturing › Communications Equipment Manufacturing › Radio and Television Broadcasting and Wireless Communications Equipment Manufacturing

Product/Service Code: COMM/DETECT/COHERENT RADIATION

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: RTX Corp

Address: 1010 PRODUCTION RD, FORT WAYNE, IN, 46808

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

Financial Breakdown

Contract Ceiling: $53,712,522

Exercised Options: $53,712,522

Current Obligation: $53,712,522

Actual Outlays: $9,517,561

Subaward Activity

Number of Subawards: 1

Total Subaward Amount: $27,037

Contract Characteristics

Multi-Year Contract: Yes

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: FA830717D0017

IDV Type: IDC

Timeline