Raytheon Company awarded $385M for DAS-4 production and upgrades, a sole-source contract with a long performance period

Contract Overview

Contract Amount: $385,330,878 ($385.3M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2018-08-31

End Date: 2022-11-21

Contract Duration: 1,543 days

Daily Burn Rate: $249.7K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: FY17/18/19 DAS-4 PRODUCTION&UPGRADES

Place of Performance

Location: MCKINNEY, COLLIN County, TEXAS, 75071

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $385.3 million to RAYTHEON COMPANY for work described as: FY17/18/19 DAS-4 PRODUCTION&UPGRADES Key points: 1. Contract value of $385M over a 4-year period suggests significant investment in aircraft systems. 2. Sole-source award indicates a lack of competitive bidding, potentially impacting price efficiency. 3. Long contract duration (1543 days) may present risks related to technological obsolescence or changing requirements. 4. The contract is for production and upgrades, implying ongoing support and development for existing systems. 5. Awarded by the Department of the Air Force, this contract aligns with defense modernization priorities. 6. The fixed-price nature of the contract shifts some risk to the contractor regarding cost overruns.

Value Assessment

Rating: fair

Benchmarking the value of this contract is challenging without comparable sole-source awards for similar complex aircraft systems. The total value of over $385 million spread across more than four years suggests a substantial investment. However, the absence of competition means there's no direct market comparison to assess if the pricing is optimal. The firm fixed-price structure provides some cost certainty, but the overall value proposition is difficult to ascertain without a competitive baseline.

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. This typically occurs when only one responsible source is available or when a compelling justification for other than full and open competition exists. The lack of multiple bidders limits the opportunity for price discovery through competitive negotiation, potentially leading to higher costs for the government compared to a competed procurement.

Taxpayer Impact: Taxpayers may face higher costs due to the absence of competitive pressure to drive down prices. Without a bidding process, the government has less leverage to negotiate the most favorable terms and pricing.

Public Impact

The primary beneficiaries are the Department of the Air Force and its operational units relying on the DAS-4 system. The contract delivers essential production and upgrade services for critical aircraft systems. The geographic impact is primarily within the United States, supporting Air Force operations and maintenance. Workforce implications include continued employment for engineers, technicians, and manufacturing personnel at Raytheon and its subcontractors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition and potentially increases costs.
Long contract duration increases risk of technological obsolescence and requirement changes.
Lack of transparency in sole-source justification requires careful review.
Potential for contractor lock-in due to specialized nature of the system.

Positive Signals

Firm fixed-price contract provides cost certainty for the government.
Award to an established contractor with a track record in defense systems.
Contract addresses production and upgrades, ensuring system sustainment and modernization.
Long performance period allows for stable planning and execution of complex tasks.

Sector Analysis

The aerospace and defense sector is characterized by high R&D costs, long product lifecycles, and significant government procurement. Contracts for aircraft systems like the DAS-4 are crucial for maintaining military readiness and technological superiority. The market is often dominated by a few large prime contractors, with sole-source procurements being common for specialized or legacy systems where only one vendor possesses the necessary expertise or intellectual property. Spending in this sub-sector is substantial, reflecting the high cost of advanced military hardware.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. There is no explicit information on subcontracting plans for small businesses. Without specific set-aside goals or reporting requirements, the direct impact on the small business ecosystem is unclear, though large prime contractors often utilize small businesses in their supply chains.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Defense's contracting and program management offices. Accountability measures are embedded in the contract terms, including performance requirements and payment schedules tied to milestones. Transparency is limited due to the sole-source nature, but contract awards and basic details are publicly available. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Aircraft Production
Avionics Systems
Defense Electronics
Air Force Procurement
DAS Systems

Risk Flags

Sole-source award
Long contract duration
Lack of competitive bidding

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $385.3 million to RAYTHEON COMPANY. FY17/18/19 DAS-4 PRODUCTION&UPGRADES

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 $385.3 million.

What is the period of performance?

Start: 2018-08-31. End: 2022-11-21.

What is Raytheon Company's track record with the Department of Defense for similar aircraft systems?

Raytheon Company, now part of RTX Corporation, has a long and extensive history of contracting with the Department of Defense, particularly for advanced electronics, avionics, and weapons systems. They are a major prime contractor for numerous aircraft platforms and associated support systems. Their track record includes delivering complex technological solutions, often under firm fixed-price contracts. While specific performance metrics for individual contracts are not always publicly detailed, their sustained role as a key defense supplier suggests a generally reliable performance history. However, like any large defense contractor, they have faced scrutiny and reviews on specific programs regarding cost, schedule, and performance, necessitating ongoing oversight from the DoD.

How does the $385 million contract value compare to other DAS-4 related procurements or similar aircraft system contracts?

Without access to a comprehensive database of all DAS-4 related procurements and comparable sole-source contracts for similar advanced aircraft systems, a precise comparison is difficult. However, $385 million over approximately four years for production and upgrades of a sophisticated system like DAS-4 is substantial. It suggests a significant investment in either a large quantity of units or highly complex technological enhancements. Generally, contracts for major avionics or mission systems on military aircraft can range from tens to hundreds of millions of dollars, depending on the system's complexity, the platform it's integrated with, and the scope of work (e.g., initial production vs. sustainment and upgrades). The sole-source nature here prevents a direct market-based comparison of value.

What are the primary risks associated with a sole-source award for a long-duration contract like this?

The primary risks associated with a sole-source award for a long-duration contract are twofold. Firstly, the lack of competition means the government does not benefit from the price reductions and innovation that typically arise from a competitive bidding process. This can lead to higher costs for taxpayers. Secondly, a long duration (1543 days, over 4 years) increases the risk of technological obsolescence, as defense technology evolves rapidly. Requirements may also change due to shifting geopolitical landscapes or operational needs, making the originally contracted system less relevant or requiring costly modifications. Contractor performance risk is also present, although mitigated by the firm fixed-price structure, as the contractor may face challenges in meeting specifications over an extended period.

How effective is the firm fixed-price (FFP) contract type in managing costs for complex defense systems?

The Firm Fixed-Price (FFP) contract type is generally considered effective in managing costs for well-defined projects where risks are understood and can be reasonably estimated by the contractor. For complex defense systems, FFP shifts the risk of cost overruns to the contractor. This incentivizes the contractor to control costs efficiently and deliver the product within the agreed-upon price. However, if the scope of work is not perfectly defined or if unforeseen technical challenges arise, the contractor may face significant losses, potentially leading to requests for contract changes or disputes. In such cases, the government might end up paying more through change orders than it would have under a cost-reimbursement contract with appropriate oversight. For production and upgrades where requirements are relatively stable, FFP can be a good choice for cost control.

What does the contract's 'Other Aircraft Parts and Auxiliary Equipment Manufacturing' (NAICS code 336413) classification imply about the spending?

The NAICS code 336413, 'Other Aircraft Parts and Auxiliary Equipment Manufacturing,' indicates that this contract is for the production or modification of components and auxiliary equipment for aircraft, rather than the complete assembly of aircraft. This could include items like avionics, structural components, landing gear, or specialized support equipment. Spending under this classification often supports the sustainment, modernization, and operational readiness of existing aircraft fleets by providing necessary parts and upgrades. It signifies a focus on the intricate systems and sub-assemblies that enable aircraft functionality and performance, rather than the airframe itself.

What are the implications of the contract being awarded in Texas (ST: TX, SN: TEXAS)?

The indication that the contract is associated with Texas (ST: TX, SN: TEXAS) likely means that Raytheon Company's facility performing the work, or a significant portion of it, is located in Texas. This has implications for the regional economy, potentially supporting jobs in manufacturing, engineering, and related fields within the state. It also means that state and local tax revenues may be generated from the contract's activities. For the Department of Defense, having a key supplier located in Texas could be part of a broader strategy for geographic distribution of defense industrial capacity or simply a reflection of where the contractor has its relevant manufacturing and R&D capabilities.

Industry Classification

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

Product/Service Code: COMM/DETECT/COHERENT RADIATION

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: FA862018R2001

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Rockwell Collins Australia PTY Limited

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: $385,330,878

Exercised Options: $385,330,878

Current Obligation: $385,330,878

Actual Outlays: $10,986,506

Subaward Activity

Number of Subawards: 116

Total Subaward Amount: $42,011,517

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline