Raytheon Company awarded $160.8M for Predator Reaper sensor sustainment, a sole-source contract

Contract Overview

Contract Amount: $160,760,525 ($160.8M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2016-01-01

End Date: 2020-10-31

Contract Duration: 1,765 days

Daily Burn Rate: $91.1K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: IGF::OT::IGF CONTRACTOR LOGISTICS SUPPORT AND SUSTAINMENT (CLS) FOR MTS A/B AND ACES HY SENSORS FOR PREDATOR REAPER PROGRAM

Place of Performance

Location: MCKINNEY, COLLIN County, TEXAS, 75071

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $160.8 million to RAYTHEON COMPANY for work described as: IGF::OT::IGF CONTRACTOR LOGISTICS SUPPORT AND SUSTAINMENT (CLS) FOR MTS A/B AND ACES HY SENSORS FOR PREDATOR REAPER PROGRAM Key points: 1. Contract awarded for sustainment of critical sensor systems for the Predator Reaper program. 2. Sole-source award raises questions about price discovery and potential for cost overruns. 3. Contract duration of nearly five years suggests a long-term need for these services. 4. Fixed-price contract type offers some cost certainty, but initial pricing needs scrutiny. 5. Texas-based award may have implications for regional economic impact and workforce. 6. Lack of competition indicates potential risks related to contractor performance and innovation.

Value Assessment

Rating: questionable

The contract value of $160.8 million for logistics support and sustainment of MTS A/B and ACES II sensors for the Predator Reaper program appears substantial. Without comparable sole-source contracts for similar sensor sustainment, it is difficult to benchmark the value for money. The firm fixed-price nature provides some cost control, but the absence of competition means there's no market pressure to ensure the most competitive pricing. Further analysis of the specific services rendered and the contractor's historical performance on similar programs would be necessary to fully assess value.

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 proprietary knowledge to fulfill the requirement. The lack of competition limits the government's ability to leverage market forces to achieve the best possible price and terms. It also raises concerns about potential lock-in with a single provider.

Taxpayer Impact: Taxpayers may be paying a premium due to the absence of competitive bidding. Without competing offers, there is less assurance that the price reflects true market value, potentially leading to higher overall program costs.

Public Impact

The primary beneficiaries are the Department of Defense, specifically units operating the Predator Reaper surveillance and attack aircraft. The contract ensures the continued operational readiness and effectiveness of critical sensor systems essential for intelligence, surveillance, and reconnaissance (ISR) missions. Services delivered include sustainment, logistics support, and maintenance for the MTS A/B and ACES II sensors. The geographic impact is primarily tied to the operational deployment of the Predator Reaper fleet, which is global, though the contractor is based in Texas. Workforce implications may include specialized technical roles for maintenance and support personnel within Raytheon Company.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition, potentially increasing costs for taxpayers.
Lack of competition could reduce incentives for the contractor to innovate or improve service quality.
Dependence on a single contractor for critical sustainment creates program risk if performance falters.
The specific nature of the sensors and platform may create barriers to entry for potential competitors.
Long contract duration without re-competition could lead to complacency or price creep over time.

Positive Signals

Firm fixed-price contract type provides a degree of cost certainty for the government.
Sustainment contract ensures continued operational capability of vital ISR assets.
Contractor (Raytheon) is a major defense contractor with established experience in sensor systems.
Awarding to an incumbent provider can ensure continuity of operations and minimize disruption.
Texas location may offer economic benefits to the state and its workforce.

Sector Analysis

This contract falls within the aerospace and defense sector, specifically focusing on the sustainment and support of advanced sensor systems for unmanned aerial vehicles (UAVs). The market for UAV technology and its associated support services is significant and growing, driven by increasing global demand for ISR capabilities. Comparable spending benchmarks would involve looking at other sustainment contracts for complex defense systems, particularly those involving specialized electronics and optics.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. Furthermore, the contractor, Raytheon Company, is a large defense prime. While large primes often have subcontracting plans that include small businesses, the absence of a specific set-aside for this particular contract suggests that the primary award was not directed towards small business participation. The implications for the small business ecosystem would depend on Raytheon's subcontracting strategy, which is not detailed here.

Oversight & Accountability

Oversight for this contract would typically be managed by the Defense Contract Management Agency (DCMA), which is responsible for ensuring contractor compliance with contract terms and conditions. Accountability measures are embedded within the contract's performance requirements and payment terms. Transparency is generally limited for sole-source defense contracts, though contract awards are publicly reported. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

MQ-9 Reaper Program
Intelligence, Surveillance, and Reconnaissance (ISR) Systems
Defense Logistics Support Contracts
Aerospace Sensor Manufacturing
Unmanned Aerial Vehicle (UAV) Support

Risk Flags

Sole Source Award
Lack of Competition
Potential for Cost Overruns
Contractor Performance Risk
Critical System Dependency

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $160.8 million to RAYTHEON COMPANY. IGF::OT::IGF CONTRACTOR LOGISTICS SUPPORT AND SUSTAINMENT (CLS) FOR MTS A/B AND ACES HY SENSORS FOR PREDATOR REAPER PROGRAM

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 $160.8 million.

What is the period of performance?

Start: 2016-01-01. End: 2020-10-31.

What is Raytheon Company's track record with the Predator Reaper program and similar sensor sustainment contracts?

Raytheon Company, now part of RTX, has a long history of providing advanced sensor systems and support to the Department of Defense, including for the Predator and Reaper platforms. They are a major defense contractor with extensive experience in developing, manufacturing, and sustaining complex electronic systems. Their track record with similar ISR sensor sustainment contracts would likely involve managing long-term support agreements, ensuring system availability, and providing technical expertise. Specific performance metrics and past issues related to this particular contract or similar ones would require deeper access to performance reports and historical contract data. However, as a prime contractor on numerous high-value defense programs, Raytheon generally possesses the infrastructure and expertise to handle such requirements, though specific program performance can vary.

How does the $160.8 million contract value compare to industry benchmarks for similar sensor sustainment services?

Benchmarking this $160.8 million contract value is challenging without more specific details on the scope of work, the exact sensor models (MTS A/B and ACES II), and the duration of the sustainment services provided. However, sustainment contracts for complex defense systems, especially those involving advanced optics and electronics for platforms like the Predator Reaper, are typically high-value due to the specialized nature of the technology and the need for continuous operational readiness. Industry benchmarks often consider factors like the number of systems supported, the required uptime, the complexity of maintenance, and the level of technical support. Given the critical role of these sensors in ISR missions, the cost reflects the advanced technology and the necessity of maintaining high availability. A sole-source award, however, inherently removes competitive pricing pressure, making direct comparison to market rates difficult.

What are the primary risks associated with a sole-source award for critical sensor sustainment?

The primary risks associated with a sole-source award for critical sensor sustainment include potential overpricing due to the lack of competitive bidding, reduced incentive for the contractor to innovate or improve efficiency, and increased vulnerability to performance issues or disruptions if the sole provider faces financial or operational challenges. There's also a risk of vendor lock-in, making it difficult and costly to switch providers in the future. For critical systems like those on the Predator Reaper, a failure in sustainment could directly impact mission effectiveness and national security. The government must rely heavily on robust contract oversight and performance management to mitigate these risks.

How effective is the firm fixed-price contract type in managing costs for this type of sustainment service?

The firm fixed-price (FFP) contract type is generally considered effective in managing costs for sustainment services because it shifts the risk of cost overruns to the contractor. The contractor is obligated to perform the work for the agreed-upon price, regardless of their actual costs. This incentivizes the contractor to control their expenses and operate efficiently. For sustainment, where the scope of work can be relatively well-defined (e.g., maintenance, repair, spare parts), FFP provides a high degree of cost certainty for the government. However, the initial price must be set appropriately, and for sole-source contracts, this relies heavily on negotiation and cost analysis by the government to ensure fairness.

What are the historical spending patterns for Predator Reaper sensor sustainment, and how does this contract fit?

Historical spending patterns for Predator Reaper sensor sustainment would likely show consistent, significant investment over the life cycle of the platform, reflecting the ongoing need for maintenance, upgrades, and operational support of its advanced sensor suites. Contracts for such sustainment are typically long-term and awarded to the original equipment manufacturers or specialized defense support companies. This $160.8 million contract, awarded as a definitive contract with a duration of nearly five years, fits within this pattern of sustained, high-value support. It represents a continuation of the government's commitment to ensuring the operational readiness of these critical ISR assets. Analyzing past contract awards for similar services would reveal trends in cost, duration, and contractor selection.

What are the implications of this contract being awarded in Texas?

The implication of this contract being awarded to a contractor based in Texas (ST: TX) is primarily economic. It suggests that Raytheon Company has facilities or operations in Texas that will be involved in fulfilling the contract requirements. This could lead to job creation, investment, and economic activity within the state, particularly in specialized technical fields related to defense contracting. For the Department of Defense, the geographic location of the contractor is usually secondary to capability and cost, but state-based economic impacts are a consideration in defense spending.

Industry Classification

NAICS: Manufacturing › Navigational, Measuring, Electromedical, and Control Instruments Manufacturing › Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing

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

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

Parent Company: RTX Corp

Address: 2501 W UNIVERSITY DR, MCKINNEY, TX, 75070

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: $162,263,824

Exercised Options: $161,970,577

Current Obligation: $160,760,525

Actual Outlays: $277,506

Subaward Activity

Number of Subawards: 82

Total Subaward Amount: $7,011,585

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline