DoD's $153.5M F-16 upgrade contract with Raytheon Company awarded under full and open competition

Contract Overview

Contract Amount: $153,539,531 ($153.5M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2016-11-22

End Date: 2029-10-30

Contract Duration: 4,725 days

Daily Burn Rate: $32.5K/day

Competition Type: FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES

Number of Offers Received: 2

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: F-16 MMC UPGRADE

Place of Performance

Location: MCKINNEY, COLLIN County, TEXAS, 75071

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $153.5 million to RAYTHEON COMPANY for work described as: F-16 MMC UPGRADE Key points: 1. Contract awarded for sustainment and modernization of F-16 fighter jets. 2. Significant investment in maintaining and enhancing critical air defense capabilities. 3. Long-term contract duration suggests a sustained need for F-16 support. 4. Cost-plus-fixed-fee structure may incentivize contractor efficiency. 5. Awarded to a single, established defense contractor with relevant expertise. 6. Geographic location of performance in Texas may have local economic impact.

Value Assessment

Rating: good

The contract's value of $153.5 million for F-16 modernization and sustainment appears reasonable given the scope of work for a major defense platform. While specific cost breakdowns are not provided, the cost-plus-fixed-fee (CPFF) pricing structure, common in complex defense projects, allows for flexibility while aiming for cost control through a fixed fee. Benchmarking against similar F-16 upgrade programs would provide a more precise value assessment, but the scale of this award is consistent with the significant investments required for maintaining advanced military aircraft fleets.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under 'Full and Open Competition After Exclusion of Sources,' indicating that while competition was sought, certain sources were initially excluded. The specific reasons for exclusion are not detailed, but the 'full and open' aspect suggests a broad solicitation. The presence of two bidders (as indicated by 'no': 2) implies a degree of competition, though the exact number of proposals received and evaluated is not specified. This level of competition is generally favorable for price discovery and ensuring value for the government.

Taxpayer Impact: The competitive nature of this award, even with initial source exclusions, is beneficial for taxpayers as it likely led to a more competitive pricing structure than a sole-source award. Ensuring multiple bidders participate helps drive down costs and improve the quality of services offered.

Public Impact

The primary beneficiaries are the U.S. Air Force and Department of Defense, ensuring the continued operational readiness and technological relevance of the F-16 fleet. Services delivered include sustainment, maintenance, and modernization upgrades for F-16 fighter aircraft. The contract's performance is located in Texas, potentially creating or sustaining jobs in the aerospace and defense sector within that state. This contract supports the defense industrial base and ensures the availability of skilled labor for complex aircraft maintenance and upgrade tasks.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost overruns inherent in Cost Plus Fixed Fee (CPFF) contracts if not rigorously managed.
Dependence on a single contractor, Raytheon Company, for critical F-16 sustainment could pose supply chain or strategic risks.
The 'after exclusion of sources' clause warrants further scrutiny to ensure no viable competitors were unfairly barred.

Positive Signals

Awarded under full and open competition, suggesting a competitive bidding process.
Long contract duration (4725 days) indicates a stable, long-term need and potential for predictable workload.
Raytheon Company is a well-established defense contractor with extensive experience in aircraft systems.

Sector Analysis

The aerospace and defense sector is characterized by high technological complexity, significant R&D investment, and long product lifecycles. This contract falls within the 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' industry code (NAICS 334511), focusing on the sustainment and upgrade of a key military aircraft platform. Spending in this area is critical for national security and reflects ongoing efforts to modernize aging fleets and incorporate new technologies. Comparable spending benchmarks would involve analyzing other major aircraft modernization programs across different branches of the military.

Small Business Impact

This contract does not appear to have a specific small business set-aside (SS: false, SB: false). However, as a large prime contract awarded to Raytheon Company, there is an expectation that Raytheon will engage small businesses as subcontractors to fulfill portions of the contract. The extent of subcontracting to small businesses will be a key factor in assessing the contract's impact on the small business ecosystem within the defense industrial base.

Oversight & Accountability

Oversight for this contract will likely be managed by the Department of the Air Force, a component of the Department of Defense. Mechanisms may include contract performance reviews, audits, and adherence to Federal Acquisition Regulation (FAR) guidelines. Transparency is typically maintained through contract award databases and reporting requirements. The Inspector General of the Department of Defense would have jurisdiction to investigate any allegations of fraud, waste, or abuse related to this contract.

Related Government Programs

F-16 Fighting Falcon Sustainment Programs
Air Force Avionics Modernization Programs
Defense Contract Management Agency (DCMA) Oversight
Aerospace Systems Manufacturing
Military Aircraft Upgrade Contracts

Risk Flags

Cost Overrun Risk (CPFF)
Contractor Dependency
Justification for Source Exclusion

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $153.5 million to RAYTHEON COMPANY. F-16 MMC UPGRADE

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 $153.5 million.

What is the period of performance?

Start: 2016-11-22. End: 2029-10-30.

What is Raytheon Company's track record with similar F-16 upgrade or sustainment contracts?

Raytheon Company, now part of RTX, has a long and extensive history of providing systems and services for the F-16 program, including avionics, weapons integration, and sustainment support. They have been a key partner in various F-16 modernization efforts globally. Their track record includes delivering complex upgrades and maintaining the operational readiness of F-16 fleets for numerous international customers and the U.S. Air Force. While specific details of past performance on identical contracts are proprietary, their established presence and capabilities in this domain suggest a strong foundation for executing this current award. Historical performance data, often available through contract performance reports and CPARS (Contractor Performance Assessment Reporting System), would provide a more granular view of their success rates, quality of work, and adherence to schedule and budget on previous engagements.

How does the $153.5 million value compare to other F-16 modernization efforts?

The $153.5 million value for this F-16 MMC (Mid-Life Capability) Upgrade and sustainment contract is substantial, reflecting the complexity and scope of modernizing aging fighter aircraft. F-16 upgrades can vary significantly in cost depending on the specific systems being enhanced, such as avionics, radar, electronic warfare suites, and structural reinforcements. For instance, major avionics suite upgrades alone can cost tens of millions of dollars per aircraft. When considering the duration of this contract (over 4700 days), the annual spending averages around $32 million. This figure is within the expected range for comprehensive sustainment and modernization programs for a frontline fighter jet like the F-16, especially when factoring in the integration of new technologies and ensuring long-term operational viability. Benchmarking against publicly available data for similar F-16 upgrade packages, such as those undertaken by other nations or for different F-16 variants, would provide a more precise comparison.

What are the primary risks associated with this Cost Plus Fixed Fee (CPFF) contract?

The primary risk associated with a Cost Plus Fixed Fee (CPFF) contract is the potential for cost overruns. In a CPFF structure, the contractor is reimbursed for all allowable costs incurred, plus a predetermined fixed fee representing profit. While the fee is fixed, the total cost is not, meaning the government bears the risk if costs exceed initial estimates. This can incentivize contractors to be less cost-conscious than in fixed-price contracts. Effective oversight, rigorous auditing of incurred costs, and clear definition of allowable expenses are crucial to mitigate this risk. Additionally, scope creep, where the project's requirements expand beyond the original agreement, can significantly increase costs under a CPFF arrangement if not managed tightly through change control processes.

How effective is the 'Full and Open Competition After Exclusion of Sources' approach for this type of contract?

The 'Full and Open Competition After Exclusion of Sources' approach is a nuanced method designed to ensure broad competition while allowing for specific, justified exclusions. This means the solicitation was open to all responsible sources, but certain entities were pre-emptively excluded based on specific criteria (e.g., national security concerns, prior performance issues, or specific technological requirements). The effectiveness hinges on the justification for exclusions; if valid, it can streamline the process and focus competition among qualified bidders. However, if exclusions are overly broad or unjustified, it can limit competition and potentially lead to higher prices or reduced innovation. The fact that two bidders participated suggests some level of competition was maintained, but a deeper analysis of the exclusion rationale is needed to fully assess its impact on value for taxpayers.

What are the historical spending patterns for F-16 sustainment and upgrades within the Department of Defense?

Historical spending on F-16 sustainment and upgrades within the Department of Defense (DoD) has been substantial and consistent over decades, reflecting the F-16's long service life and its role as a workhorse fighter jet. Annual expenditures typically range from hundreds of millions to over a billion dollars across the entire fleet, encompassing maintenance, repair, overhaul (MRO), spare parts, and modernization programs. Major upgrade initiatives, like avionics enhancements or structural life extensions, represent significant capital investments, often awarded through large, multi-year contracts similar to the one analyzed. Spending patterns are influenced by factors such as the age of the fleet, geopolitical threats, technological advancements, and budget allocations. The $153.5 million for this specific upgrade is a component of this larger, ongoing investment in the F-16 fleet's readiness and capability.

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: AEROSPACE CRAFT AND STRUCTURAL COMPONENTS

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Offers Received: 2

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: RTX Corp

Address: 2501 W UNIVERSITY DR, MCKINNEY, TX, 75071

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: $215,432,884

Exercised Options: $155,963,304

Current Obligation: $153,539,531

Actual Outlays: $2,616,038

Subaward Activity

Number of Subawards: 41

Total Subaward Amount: $17,762,249

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NOT OBTAINED - WAIVED

Timeline