Raytheon Company awarded $71.9M for ASARS 2B Phase II by the Department of the Air Force

Contract Overview

Contract Amount: $71,904,000 ($71.9M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2016-03-01

End Date: 2020-10-09

Contract Duration: 1,683 days

Daily Burn Rate: $42.7K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Official Description: ASARS 2B PHASE II

Place of Performance

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

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $71.9 million to RAYTHEON COMPANY for work described as: ASARS 2B PHASE II Key points: 1. Contract awarded as a sole-source definitive contract, raising questions about competitive pricing. 2. The cost-plus-incentive-fee structure aims to control costs while incentivizing performance. 3. Long contract duration of 1683 days suggests a complex and potentially evolving project. 4. The contract falls under the 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' NAICS code. 5. Significant value indicates a critical need for the ASARS 2B system. 6. The absence of small business set-aside raises concerns about broader economic participation.

Value Assessment

Rating: fair

The contract value of $71.9 million over approximately 4.5 years represents a substantial investment. Without comparable sole-source contracts for similar advanced sensor systems, a precise value-for-money assessment is challenging. The cost-plus-incentive-fee (CPIF) pricing structure suggests an attempt to balance contractor profit with cost control, but the ultimate cost-effectiveness depends heavily on the incentive clauses and the contractor's ability to manage expenses. Benchmarking against industry standards for similar R&D and manufacturing efforts would be necessary for a more definitive valuation.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning it was not openly competed. This typically occurs when a specific contractor possesses unique capabilities, proprietary technology, or is the only source capable of meeting the requirement. The lack of competition means that the government did not benefit from the price discovery mechanisms inherent in a competitive bidding process, potentially leading to higher costs than if multiple vendors had vied for the contract.

Taxpayer Impact: Sole-source awards limit the government's ability to secure the best possible price through competition, potentially resulting in taxpayer funds being used less efficiently. This approach bypasses the cost-saving benefits that open competition usually provides.

Public Impact

The primary beneficiaries are the Department of the Air Force, which receives advanced sensor technology. The contract supports the development and potential fielding of the ASARS 2B system, crucial for intelligence, surveillance, and reconnaissance (ISR) missions. The geographic impact is primarily within California, where Raytheon Company is located, but the system's operational use will be global. The contract supports a highly skilled workforce in advanced manufacturing and aerospace engineering.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition and potential cost savings for taxpayers.
Long contract duration may indicate potential for scope creep or unforeseen challenges.
Cost-plus-incentive-fee contracts can sometimes lead to higher final costs if incentives are not structured effectively.
Absence of small business participation may limit opportunities for smaller innovative firms.

Positive Signals

Award to a major defense contractor like Raytheon suggests access to advanced technological capabilities.
The CPIF structure aims to align contractor incentives with government objectives, potentially improving performance.
The contract addresses a critical need for advanced sensor systems within the Department of Defense.

Sector Analysis

This contract falls within the aerospace and defense sector, specifically focusing on advanced sensor systems for military applications. The market for such specialized equipment is characterized by high barriers to entry due to technological complexity and significant R&D investment. Spending in this area is driven by national security requirements and technological advancements in surveillance and reconnaissance. Comparable spending benchmarks would typically involve other large-scale defense contracts for similar ISR platforms or components.

Small Business Impact

This contract does not appear to include a small business set-aside, nor is there an indication of significant subcontracting opportunities for small businesses in the provided data. The award to a large prime contractor like Raytheon suggests that the primary focus is on leveraging established capabilities. This lack of direct small business involvement means that the contract may not contribute to the growth or innovation within the small business defense ecosystem for this specific procurement.

Oversight & Accountability

Oversight for this definitive contract would primarily fall under the Department of the Air Force's contracting and program management offices. The cost-plus-incentive-fee structure necessitates close monitoring of costs and performance against established milestones and targets. Transparency may be limited due to the sole-source nature and the classified or sensitive aspects of advanced defense systems. Inspector General jurisdiction would apply to investigations of fraud, waste, or abuse.

Related Government Programs

Advanced Reconnaissance Systems
Intelligence, Surveillance, and Reconnaissance (ISR) Platforms
Aerospace Electronics Manufacturing
Defense Sensor Technology Development

Risk Flags

Sole-source award
Cost-plus contract type
Long contract duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $71.9 million to RAYTHEON COMPANY. ASARS 2B PHASE II

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 $71.9 million.

What is the period of performance?

Start: 2016-03-01. End: 2020-10-09.

What is the specific capability of the ASARS 2B system and its importance to Air Force operations?

The ASARS 2B (Advanced Synthetic Aperture Radar System) is a sophisticated airborne radar system designed for intelligence, surveillance, and reconnaissance (ISR) missions. It provides high-resolution imagery and data, enabling the detection, identification, and tracking of targets from a standoff distance, even in adverse weather conditions or at night. Its importance to Air Force operations lies in its ability to deliver critical real-time battlefield awareness, support targeting decisions, and provide persistent monitoring of areas of interest. This capability is vital for mission success and force protection in complex operational environments.

How does the Cost Plus Incentive Fee (CPIF) structure work in this contract and what are its potential benefits and drawbacks?

A Cost Plus Incentive Fee (CPIF) contract is a type of cost-reimbursement contract where the contractor is reimbursed for allowable costs and also receives a fee that is adjusted based on performance against pre-determined targets. In this contract, the fee would likely be tied to factors such as meeting delivery schedules, achieving specific performance metrics for the ASARS 2B system, or controlling costs below a target. The benefit is that it incentivizes the contractor to perform efficiently and effectively, potentially leading to better outcomes and cost savings compared to a simple cost-plus contract. However, the drawback is the complexity in establishing appropriate targets and the potential for disputes over performance metrics. It also requires robust government oversight to ensure the incentive structure is fair and effective.

Given the sole-source nature, what mechanisms were likely in place to ensure fair pricing and prevent excessive costs?

Even in sole-source procurements, agencies employ various mechanisms to ensure fair and reasonable pricing. This often involves conducting thorough price and cost analyses. The government likely reviewed the contractor's proposed costs, including labor, materials, and overhead, comparing them against historical data, independent cost estimates, or industry benchmarks where available. For a sole-source award, the procuring agency must document why competition is not feasible. The CPIF structure itself, by linking a portion of the contractor's profit to performance and cost targets, serves as a form of cost control. Additionally, negotiation strategies and the leverage of existing relationships or past performance data can influence the final agreed-upon price.

What is the typical lifecycle and sustainment cost associated with advanced radar systems like ASARS 2B?

Advanced radar systems like the ASARS 2B typically have a long lifecycle, often spanning 15-30 years or more, reflecting the significant investment in their development and the lengthy procurement cycles for major defense platforms. The initial acquisition cost, represented by this $71.9 million contract, is only one part of the total ownership cost. Sustainment costs, which include maintenance, repairs, upgrades, software updates, training, and personnel, can often exceed the initial acquisition cost over the system's lifespan. These ongoing costs are critical for ensuring the system remains operational, effective, and relevant against evolving threats and technological advancements.

How does the $71.9 million contract value compare to historical spending on similar radar systems or Raytheon's defense contracts?

The $71.9 million contract value for the ASARS 2B Phase II represents a significant, but not extraordinary, investment for a major defense system component awarded to a large prime contractor like Raytheon. Without specific data on comparable sole-source awards for similar radar systems, direct benchmarking is difficult. However, Raytheon is a major defense contractor with numerous contracts often valued in the tens or hundreds of millions, and sometimes billions, of dollars for complex systems. This particular award appears to be for a specific phase of development or production, suggesting it's part of a larger program. Its value should be assessed within the context of the system's technological sophistication and its role in the broader defense architecture.

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: COMM/DETECT/COHERENT RADIATION

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE (V)

Evaluated Preference: NONE

Contractor Details

Parent Company: RTX Corp (UEI: 001344142)

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: $71,904,000

Exercised Options: $71,904,000

Current Obligation: $71,904,000

Actual Outlays: $681,833

Subaward Activity

Number of Subawards: 1

Total Subaward Amount: $22

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline