Raytheon Company awarded $27.8M for Small Diameter Bomb II software maintenance, a sole-source contract

Contract Overview

Contract Amount: $27,807,517 ($27.8M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2018-08-20

End Date: 2022-12-31

Contract Duration: 1,594 days

Daily Burn Rate: $17.4K/day

Competition Type: NOT COMPETED

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: SMALL DIAMETER BOMB INCREMENT II, SOFTWARE MAINTENANCE 2018

Place of Performance

Location: TUCSON, PIMA County, ARIZONA, 85756

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $27.8 million to RAYTHEON COMPANY for work described as: SMALL DIAMETER BOMB INCREMENT II, SOFTWARE MAINTENANCE 2018 Key points: 1. Contract awarded on a sole-source basis, limiting price competition. 2. Software maintenance for a critical defense system, indicating ongoing support needs. 3. Contract duration spans over four years, suggesting long-term reliance on the vendor. 4. The contract type is Cost Plus Fixed Fee, which can lead to cost overruns if not managed carefully. 5. The specific product code suggests a focus on ammunition manufacturing support. 6. The contract is managed by the Defense Contract Management Agency, indicating oversight.

Value Assessment

Rating: fair

Benchmarking the value for this specific software maintenance contract is challenging due to its sole-source nature and specialized application within the Small Diameter Bomb II program. Without competitive bids, it's difficult to ascertain if the Cost Plus Fixed Fee structure yielded optimal pricing. However, the duration and scope suggest a necessary investment for maintaining a key defense capability. Further analysis would require access to detailed cost breakdowns and comparisons with similar maintenance contracts for complex weapon systems.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning there was no open competition. This typically occurs when a single vendor possesses unique capabilities, intellectual property, or is the sole provider of essential services or technology. The lack of competition limits the government's ability to leverage market forces to drive down prices and may result in higher costs compared to a competed procurement.

Taxpayer Impact: Taxpayers may face higher costs due to the absence of competitive bidding. The government cannot be assured it received the best possible price for the software maintenance services.

Public Impact

The primary beneficiaries are the U.S. Department of Defense, ensuring the continued operational readiness of the Small Diameter Bomb II system. Services delivered include essential software maintenance, updates, and potentially technical support for the bomb's guidance and control systems. The geographic impact is primarily within the defense sector, supporting military operations and readiness. Workforce implications may include specialized software engineers and technicians employed by Raytheon Company to perform the maintenance.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price discovery and potentially increases costs for taxpayers.
Cost Plus Fixed Fee contract type carries inherent risk of cost overruns if not rigorously managed.
Lack of competition may reduce incentives for the contractor to innovate or improve efficiency.
The specialized nature of the software may create long-term vendor lock-in.

Positive Signals

Ensures continued operational capability of a critical defense asset (Small Diameter Bomb II).
Provides necessary software maintenance to keep the system functional and secure.
Contract managed by a specialized agency (DCMA) suggesting some level of oversight.
Long-term contract duration indicates a stable and predictable support environment.

Sector Analysis

This contract falls within the defense sector, specifically supporting the maintenance of advanced munitions. The market for specialized software maintenance for defense systems is often characterized by limited competition due to high barriers to entry, proprietary technology, and the need for security clearances. Spending in this area is critical for maintaining military readiness and technological superiority. Comparable spending benchmarks would likely be found within other major defense contractors supporting similar complex weapon systems.

Small Business Impact

This contract does not appear to involve small business set-asides, as indicated by the 'sb': false field. Raytheon Company is a large defense contractor. There is no explicit information regarding subcontracting plans for small businesses within this data. The lack of set-asides means that opportunities for small businesses to participate in this specific contract are likely limited, potentially impacting the small business defense contracting ecosystem.

Oversight & Accountability

Oversight for this contract is likely managed by the Defense Contract Management Agency (DCMA), which is responsible for ensuring contractor performance and compliance. Accountability measures would be embedded within the contract terms, including performance metrics and reporting requirements. Transparency may be limited due to the sole-source nature and the classified aspects of defense systems. Inspector General jurisdiction would apply to investigations of fraud, waste, or abuse related to the contract.

Related Government Programs

Small Diameter Bomb Increment II Program
Ammunition Manufacturing Support
Defense Software Maintenance Contracts
Cost Plus Fixed Fee Contracts
Sole-Source Defense Procurements

Risk Flags

Sole-source award
Cost Plus Fixed Fee contract type
Potential for cost overruns
Lack of competitive pricing

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $27.8 million to RAYTHEON COMPANY. SMALL DIAMETER BOMB INCREMENT II, SOFTWARE MAINTENANCE 2018

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 $27.8 million.

What is the period of performance?

Start: 2018-08-20. End: 2022-12-31.

What is the track record of Raytheon Company in delivering software maintenance for complex defense systems?

Raytheon Company, now RTX, has a long and extensive track record in developing and supporting complex defense systems, including munitions and associated software. They are a prime contractor for numerous U.S. military programs. Their experience with the Small Diameter Bomb II program itself suggests a deep understanding of its specific software requirements. However, like any large defense contractor, they have faced scrutiny over contract performance and costs on various programs. A detailed review of past performance metrics, past performance evaluations, and any contract disputes related to similar software maintenance efforts would provide a more comprehensive picture of their reliability and efficiency in this specific domain.

How does the pricing of this contract compare to similar software maintenance contracts for defense systems?

Direct comparison of pricing for this specific contract is difficult due to its sole-source nature and the unique technical requirements of the Small Diameter Bomb II software. Sole-source contracts inherently lack the price discovery mechanism of competitive bidding, often leading to higher costs. To benchmark effectively, one would need to identify comparable contracts for software maintenance of similarly complex, mission-critical weapon systems, ideally those that were competitively procured. Analyzing the Cost Plus Fixed Fee (CPFF) structure's application, including the fixed fee percentage and the allowable costs, against industry standards for CPFF contracts in the defense sector would also be crucial. Without such comparative data, assessing value for money remains challenging.

What are the primary risks associated with this sole-source, Cost Plus Fixed Fee contract?

The primary risks associated with this contract are multifaceted. Firstly, the sole-source nature eliminates competitive pressure, potentially leading to inflated prices and reduced contractor incentive to optimize costs or innovate. Secondly, the Cost Plus Fixed Fee (CPFF) contract type, while providing flexibility, carries the risk of cost overruns. The government pays the actual costs incurred plus a predetermined fixed fee, meaning that if costs escalate, the government pays more, although the contractor's fee remains constant. Effective oversight and robust cost control measures by the government are critical to mitigate these risks. Additionally, reliance on a single vendor for critical software maintenance can create vendor lock-in and pose supply chain risks.

How effective is the oversight for sole-source contracts like this one?

The effectiveness of oversight for sole-source contracts hinges on the diligence and resources allocated by the contracting agency, in this case, likely the Defense Contract Management Agency (DCMA). Robust oversight involves rigorous auditing of costs, performance monitoring against contract milestones, and proactive risk management. For CPFF contracts, oversight is particularly crucial to ensure that costs are reasonable, allocable, and allowable. The presence of experienced contracting officers, technical representatives, and auditors is vital. While sole-source awards bypass the initial competition phase, ongoing government oversight is the primary mechanism to ensure the contractor delivers required services at a fair price and meets performance expectations.

What are the historical spending patterns for software maintenance related to the Small Diameter Bomb II program?

The provided data only reflects a single contract award for software maintenance totaling $27.8 million from August 2018 to December 2022. To understand historical spending patterns, data from previous contract periods, potential sole-source extensions, or other related software support efforts for the Small Diameter Bomb II program would be necessary. Analyzing trends in spending over time, including the number of contracts, their values, and their durations, would reveal whether spending has been consistent, increasing, or decreasing. Understanding the total lifecycle cost of software maintenance for this system would require a broader dataset encompassing all relevant contracts awarded since the program's inception.

What is the potential impact of vendor lock-in for this critical defense software?

Vendor lock-in presents a significant risk for critical defense software like that used in the Small Diameter Bomb II. Because Raytheon Company developed or has exclusive rights to maintain this specialized software, the government may have limited options for switching vendors or bringing the maintenance in-house without substantial cost and effort. This dependence can reduce negotiating leverage during future contract renewals, potentially leading to sustained higher prices. It also means the government is reliant on Raytheon's continued ability and willingness to provide support, potentially impacting long-term program sustainment if the contractor's strategic priorities shift or if they face financial difficulties. Mitigating vendor lock-in often involves strategies like ensuring access to source code, developing robust technical data packages, and fostering competition where feasible.

Industry Classification

NAICS: Manufacturing › Other Fabricated Metal Product Manufacturing › Ammunition (except Small Arms) Manufacturing

Product/Service Code: AMMUNITION AND EXPLOSIVES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Rockwell Collins Australia PTY Limited

Address: 1151 E HERMANS RD, TUCSON, AZ, 85756

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: $27,983,384

Exercised Options: $27,983,384

Current Obligation: $27,807,517

Actual Outlays: $1,397,036

Subaward Activity

Number of Subawards: 1

Total Subaward Amount: $1,131,309

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: FA867217D0019

IDV Type: IDC

Timeline