Raytheon Company awarded $34.9M for Crypto Depot Activation by the Department of Defense

Contract Overview

Contract Amount: $34,906,226 ($34.9M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2023-03-28

End Date: 2027-03-28

Contract Duration: 1,461 days

Daily Burn Rate: $23.9K/day

Competition Type: NOT COMPETED

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: CRYPTO DEPOT ACTIVATION

Place of Performance

Location: MARLBOROUGH, MIDDLESEX County, MASSACHUSETTS, 01752

State: Massachusetts Government Spending

Plain-Language Summary

Department of Defense obligated $34.9 million to RAYTHEON COMPANY for work described as: CRYPTO DEPOT ACTIVATION Key points: 1. Contract awarded on a cost-plus-fixed-fee basis, which can lead to cost overruns if not managed carefully. 2. The contract duration of 1461 days suggests a long-term need for the services or equipment. 3. The lack of competition raises concerns about potential overpricing and limited innovation. 4. This contract falls under 'Other Communications Equipment Manufacturing', indicating a specialized area within defense. 5. The award is a delivery order against a larger contract vehicle, suggesting it's part of an existing framework.

Value Assessment

Rating: questionable

The contract's cost-plus-fixed-fee structure necessitates close monitoring to ensure value for money. Without a competitive bidding process, it's difficult to benchmark the pricing against market rates or similar contracts. The total award amount of $34.9 million over approximately four years requires scrutiny to ensure efficiency and prevent cost creep. Further analysis of the fixed fee component and the direct costs incurred will be crucial for a comprehensive value assessment.

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 among multiple vendors. This approach is typically used when only one vendor possesses the necessary capabilities, technology, or security clearances. The lack of competition limits the government's ability to leverage market forces to achieve the best possible price and terms. It also reduces the incentive for the contractor to offer highly competitive pricing.

Taxpayer Impact: Taxpayers may be paying a premium due to the absence of competitive pressure. Without bids from other companies, there's less assurance that the price reflects true market value, potentially leading to less efficient use of public funds.

Public Impact

The primary beneficiary is the Department of Defense, specifically the Department of the Air Force, which will receive enhanced cryptographic capabilities. The contract supports the activation and maintenance of a crypto depot, crucial for secure communications and data protection. The geographic impact is primarily within the United States, supporting national security infrastructure. This contract likely involves specialized technical personnel, potentially impacting the cybersecurity and communications engineering workforce.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition and potential for cost savings.
Cost-plus-fixed-fee contract type carries inherent risk of cost overruns if not rigorously managed.
Lack of transparency in the justification for sole-source award.
Long contract duration may not adapt well to rapidly evolving technology in the communications sector.

Positive Signals

Award to a known defense contractor (Raytheon) suggests established capabilities and experience.
Delivery order against an existing contract vehicle may indicate streamlined procurement process.
Focus on 'Crypto Depot Activation' addresses a critical national security need.

Sector Analysis

The 'Other Communications Equipment Manufacturing' sector is a niche but vital part of the broader defense industrial base. This contract likely involves specialized hardware and software for secure communications, a critical component for military operations. The market for such specialized equipment is often characterized by high barriers to entry due to technological complexity and security requirements. Comparable spending benchmarks are difficult to establish without more specific details on the technology involved, but defense spending on secure communications systems is substantial.

Small Business Impact

This contract was not set aside for small businesses, nor does it appear to have specific subcontracting requirements mentioned in the provided data. As a sole-source award to a large prime contractor, the direct impact on the small business ecosystem is likely minimal unless Raytheon actively engages small businesses for specialized components or services not detailed here. Further investigation into Raytheon's subcontracting plans would be needed to assess any indirect benefits to small businesses.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Air Force's contracting and program management offices. Given the sole-source nature and cost-plus-fixed-fee structure, rigorous oversight of incurred costs, performance milestones, and adherence to the fixed fee is essential. Transparency regarding the justification for the sole-source award and ongoing performance reporting will be key accountability measures. The Inspector General's office for the Department of Defense may also conduct audits or investigations as deemed necessary.

Related Government Programs

Defense Communications Systems
Cryptographic Equipment Procurement
National Security Systems
Air Force Materiel Command Contracts
Other Communications Equipment Manufacturing

Risk Flags

Sole-source award
Cost-plus-fixed-fee contract type
Potential for cost overruns
Lack of competitive benchmarking

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $34.9 million to RAYTHEON COMPANY. CRYPTO DEPOT ACTIVATION

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 $34.9 million.

What is the period of performance?

Start: 2023-03-28. End: 2027-03-28.

What is the specific justification provided by the Department of Defense for awarding this contract on a sole-source basis to Raytheon Company?

The provided data indicates the contract was 'NOT COMPETED' and is a 'SOLE SOURCE' award. Typically, sole-source justifications are required when only one responsible source is available or capable of meeting the agency's needs. For a contract like 'CRYPTO DEPOT ACTIVATION', this could be due to proprietary technology, unique security clearances, specialized expertise held exclusively by Raytheon, or urgent requirements where competition is not feasible. The specific justification document, often a Justification and Approval (J&A) for Other Than Full and Open Competition, would contain the detailed rationale. Without access to this document, we can only infer potential reasons based on the nature of the work and the contractor.

How does the 'COST PLUS FIXED FEE' (CPFF) contract type compare to other contract types in terms of risk and potential cost efficiency for this type of defense acquisition?

Cost-Plus-Fixed-Fee (CPFF) contracts are used when the extent or nature of the work cannot be precisely defined at the outset, making fixed-price contracts unsuitable. In a CPFF contract, the contractor is reimbursed for all allowable costs plus a predetermined fixed fee representing profit. This structure shifts significant cost risk to the government, as the final price is not capped. While it allows for flexibility in evolving projects, it necessitates robust government oversight to control costs and prevent scope creep. Compared to Firm-Fixed-Price (FFP) contracts, CPFF offers less cost certainty for the government but can be more appropriate for research, development, or complex system integration where requirements are uncertain. Incentive contracts or Cost Plus Incentive Fee (CPIF) contracts might offer better value by linking contractor profit to performance metrics, but CPFF is chosen when defining such metrics is challenging.

What are the potential implications of a $34.9 million contract for 'Crypto Depot Activation' on the Department of the Air Force's cybersecurity posture and operational readiness?

The activation of a crypto depot is fundamental to ensuring secure communications and data integrity within the Department of the Air Force (DAF). This contract directly supports the DAF's cybersecurity posture by providing the infrastructure and potentially the systems necessary for generating, managing, and distributing cryptographic keys and materials. Enhanced cryptographic capabilities are essential for protecting sensitive information, command and control systems, and operational data from adversaries. Improved crypto management can lead to increased operational readiness by ensuring reliable and secure communication channels, which are critical for mission success in contested environments. The successful execution of this contract should bolster the DAF's ability to maintain confidentiality, integrity, and availability of its information systems.

Given the 'Other Communications Equipment Manufacturing' NAICS code, what specific types of equipment or services might be included under this $34.9 million 'CRYPTO DEPOT ACTIVATION' contract?

The NAICS code 334290, 'Other Communications Equipment Manufacturing,' is broad and encompasses a range of products not classified elsewhere. For a 'Crypto Depot Activation' contract, this could include the manufacturing or integration of specialized hardware such as cryptographic key loaders (K K Ls), secure communication devices, network encryption devices, or specialized servers and storage for managing cryptographic keys. It might also involve the development or customization of software for cryptographic management systems, secure operating systems, or key management infrastructure (KMI). The 'activation' aspect suggests not just the hardware but also the setup, testing, integration, and potentially initial operational support of these systems within the Air Force's network infrastructure.

What is Raytheon Company's track record with similar sole-source, cost-plus-fixed-fee contracts within the Department of Defense, particularly concerning cost performance and delivery timeliness?

Raytheon Company, now part of RTX, has an extensive history of performing large, complex sole-source and competed contracts for the Department of Defense (DoD), often utilizing cost-plus contract types for research, development, and specialized systems. Analyzing their specific track record for sole-source CPFF contracts requires deep dives into historical contract data, including contract performance reports (e.g., CPARS), cost overrun trends, and on-time delivery metrics. Generally, large defense contractors like Raytheon possess the infrastructure and experience to manage such contracts, but CPFF awards inherently carry a higher risk of cost growth compared to fixed-price arrangements. Performance can vary significantly based on program complexity, management oversight, and the specific program office's diligence. Without specific performance data for this 'Crypto Depot Activation' contract or closely analogous ones, a definitive assessment of Raytheon's historical performance in this exact scenario is speculative.

Industry Classification

NAICS: Manufacturing › Communications Equipment Manufacturing › Other Communications Equipment Manufacturing

Product/Service Code: COMM/DETECT/COHERENT RADIATION

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: RTX Corp

Address: 1001 BOSTON POST RD E, MARLBOROUGH, MA, 01752

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: $34,906,226

Exercised Options: $34,906,226

Current Obligation: $34,906,226

Subaward Activity

Number of Subawards: 1

Total Subaward Amount: $37,296

Contract Characteristics

Multi-Year Contract: Yes

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: FA873521D0001

IDV Type: IDC

Timeline