Raytheon Company awarded $145.9M contract for Qatar Air Operations Center Upgrade, a sole-source acquisition

Contract Overview

Contract Amount: $145,900,149 ($145.9M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2020-10-30

End Date: 2027-04-30

Contract Duration: 2,373 days

Daily Burn Rate: $61.5K/day

Competition Type: NOT AVAILABLE FOR COMPETITION

Number of Offers Received: 1

Pricing Type: FIXED PRICE INCENTIVE

Sector: Defense

Official Description: QATAR AIR OPERATIONS CENTER UPGRADE

Place of Performance

Location: TEWKSBURY, MIDDLESEX County, MASSACHUSETTS, 01876

State: Massachusetts Government Spending

Plain-Language Summary

Department of Defense obligated $145.9 million to RAYTHEON COMPANY for work described as: QATAR AIR OPERATIONS CENTER UPGRADE Key points: 1. Contract awarded as a sole-source acquisition, limiting competitive pricing benefits. 2. Fixed Price Incentive contract type suggests shared risk between government and contractor. 3. Long contract duration of 2373 days indicates a complex, multi-year project. 4. The upgrade is critical for maintaining operational capabilities in Qatar. 5. No small business set-aside noted, potentially limiting opportunities for smaller firms.

Value Assessment

Rating: fair

The contract value of $145.9 million for an air operations center upgrade appears substantial. Without specific benchmarks for similar upgrades or detailed cost breakdowns, it is difficult to definitively assess value for money. The Fixed Price Incentive (FPI) contract type aims to control costs by incentivizing the contractor to meet certain targets, but the ultimate cost can vary. Further analysis would require comparing this contract's scope and pricing to other air operations center modernization efforts.

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 only one responsible source is available or capable of meeting the requirement. The lack of competition means that the government did not benefit from the price discovery and potential cost savings that a competitive bidding process could have provided. The justification for this sole-source award would need to be reviewed to understand the specific circumstances.

Taxpayer Impact: Sole-source awards can lead to higher costs for taxpayers as competitive pressures are absent. This limits the government's ability to secure the best possible price.

Public Impact

The primary beneficiaries are the U.S. Air Force and its allies operating in the Qatar region, who will receive enhanced air operations capabilities. The contract will deliver upgrades to the Qatar Air Operations Center, improving its functionality and reliability. The geographic impact is focused on U.S. Central Command's area of responsibility in the Middle East. Workforce implications may include specialized technical personnel required for the upgrade and maintenance of the new systems.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing, potentially increasing costs for taxpayers.
Fixed Price Incentive contract type, while aiming for cost control, can still result in significant expenditure if targets are not met efficiently.
Long contract duration increases the risk of cost overruns due to unforeseen economic or technical changes over time.

Positive Signals

Upgrade of critical air operations infrastructure ensures continued operational effectiveness.
Fixed Price Incentive contract structure aligns contractor and government interests in achieving performance objectives.
Award to a large, established contractor like Raytheon suggests a high likelihood of technical capability and successful project execution.

Sector Analysis

This contract falls within the aerospace and defense sector, specifically focusing on command, control, and communications systems. The market for such specialized upgrades is often dominated by a few large, experienced defense contractors. The total addressable market for defense IT and systems integration is substantial, with significant government investment annually. This contract represents a specific investment in maintaining and enhancing critical operational infrastructure within a key strategic location.

Small Business Impact

The contract data indicates that this was not a small business set-aside, and the prime contractor, Raytheon Company, is a large business. There is no explicit information regarding subcontracting plans for small businesses. Without specific subcontracting goals or reporting, the direct impact on the small business ecosystem is unclear, though large prime contracts often involve some level of subcontracting to smaller specialized firms.

Oversight & Accountability

Oversight for this contract would typically be managed by the contracting officer and program management office within the Department of the Air Force. Accountability measures are embedded in the Fixed Price Incentive contract terms, which link payment to performance and cost targets. Transparency may be limited due to the sole-source nature of the award, but contract modifications and performance reports would be subject to internal review and potentially Inspector General oversight.

Related Government Programs

Air Traffic Control Systems
Command and Control Systems
Defense Communications Infrastructure
Aerospace Systems Manufacturing

Risk Flags

Sole-source acquisition
Potential for cost overruns
Long contract duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $145.9 million to RAYTHEON COMPANY. QATAR AIR OPERATIONS CENTER 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 $145.9 million.

What is the period of performance?

Start: 2020-10-30. End: 2027-04-30.

What is Raytheon Company's track record with similar sole-source defense contracts?

Raytheon Company, now part of RTX, has a long history of securing sole-source contracts with the Department of Defense and other government agencies, particularly for complex and specialized systems. These contracts often stem from unique capabilities, existing system integration, or national security requirements where competition is deemed impractical or detrimental. While specific details on past sole-source awards for air operations center upgrades would require deeper research into contract databases and historical awards, Raytheon's extensive experience in defense electronics, radar, and command and control systems suggests a pattern of being a preferred or sole provider for critical defense infrastructure. Analyzing past performance on similar sole-source contracts would involve reviewing contract close-out data, any reported cost variances, and user feedback on system performance to gauge their historical success in delivering on time and within budget under such arrangements.

How does the $145.9 million cost compare to similar air operations center upgrades?

Benchmarking the $145.9 million cost for the Qatar Air Operations Center Upgrade against similar projects is challenging without access to detailed cost breakdowns and specific project scopes. Air operations center upgrades can vary significantly in complexity, encompassing everything from software enhancements and communication system modernizations to complete hardware overhauls and facility integration. Factors such as the age of the existing infrastructure, the specific technologies being implemented, the duration of the upgrade, and the geopolitical context all influence cost. Generally, upgrades to critical command and control infrastructure for military operations can range from tens of millions to hundreds of millions of dollars. Given the sole-source nature and the strategic importance of the Qatar facility, this figure may reflect specialized requirements and limited market options. A comprehensive comparison would necessitate identifying comparable projects, analyzing their scope, and adjusting for differences in scale, technology, and contract type.

What are the primary risks associated with this sole-source contract?

The primary risk associated with this sole-source contract is the potential for inflated costs due to the absence of competitive bidding. Without market pressure, the contractor may not be incentivized to offer the lowest possible price. Another significant risk is the potential for scope creep or schedule delays, as sole-source negotiations might be less rigorous in defining precise requirements and timelines compared to a competitive process. Furthermore, there's a risk of technological obsolescence if the upgrade is not future-proofed adequately, especially given the long contract duration. Dependence on a single contractor also poses a risk if the contractor faces financial instability, technical challenges, or decides to exit the market, potentially disrupting critical operations.

How effective is the Fixed Price Incentive (FPI) contract type in managing costs for this upgrade?

The Fixed Price Incentive (FPI) contract type is designed to provide a middle ground between fixed-price and cost-reimbursement contracts, aiming to control costs while allowing for flexibility. In an FPI contract, the final price is determined by the contractor's performance against target cost and target profit objectives. If the contractor finishes under the target cost, both the government and contractor share in the savings. If costs exceed the target, both share in the overrun, up to a ceiling price. For this Qatar Air Operations Center Upgrade, the FPI type aims to incentivize Raytheon to manage costs efficiently. However, its effectiveness hinges on the accuracy of the initial cost estimates and the negotiation of appropriate sharing ratios. If the target cost is set too high or the sharing ratio is unfavorable to the government, costs could still escalate significantly. The long duration of the contract also introduces uncertainty that can impact cost management.

What is the historical spending pattern for air operations center upgrades by the Department of the Air Force?

Historical spending patterns for air operations center upgrades by the Department of the Air Force reveal a consistent need for modernization to maintain operational superiority and adapt to evolving threats and technologies. These upgrades are often substantial investments, reflecting the critical nature of command and control infrastructure. Spending can fluctuate year-to-year based on strategic priorities, budget allocations, and the lifecycle of existing systems. Contracts for such upgrades are frequently awarded to large, established defense contractors, and can be sole-source or competitively bid depending on the specific requirements and market availability. Analyzing past spending would involve examining contract awards for similar systems, noting the average contract values, durations, and the types of contractors involved. This particular $145.9 million contract for Qatar appears to be a significant, albeit specific, investment within this broader spending context.

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: IT AND TELECOM - COMPUTE

Competition & Pricing

Extent Competed: NOT AVAILABLE FOR COMPETITION

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: FIXED PRICE INCENTIVE (L)

Evaluated Preference: NONE

Contractor Details

Parent Company: RTX Corp

Address: 50 APPLE HILL DR, TEWKSBURY, MA, 01876

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: $149,566,241

Exercised Options: $149,566,241

Current Obligation: $145,900,149

Subaward Activity

Number of Subawards: 120

Total Subaward Amount: $66,052,385

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline