DoD awards Raytheon $147M for AN/TPY-2 radar sustainment, a sole-source contract

Contract Overview

Contract Amount: $146,887,677 ($146.9M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2018-11-01

End Date: 2024-03-29

Contract Duration: 1,975 days

Daily Burn Rate: $74.4K/day

Competition Type: NOT COMPETED

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Official Description: FY19 AN/TPY-2 O&S INFRASTRUCTURE IGF::OT::IGF

Place of Performance

Location: WOBURN, MIDDLESEX County, MASSACHUSETTS, 01801

State: Massachusetts Government Spending

Plain-Language Summary

Department of Defense obligated $146.9 million to RAYTHEON COMPANY for work described as: FY19 AN/TPY-2 O&S INFRASTRUCTURE IGF::OT::IGF Key points: 1. Contract awarded to Raytheon Company for sustainment of AN/TPY-2 radar infrastructure. 2. The contract has a long performance period, extending over five years. 3. Awarded as a sole-source contract, limiting competitive pricing opportunities. 4. The contract type is Cost Plus Incentive Fee (CPIF), which can lead to cost overruns if not managed carefully. 5. The contract value is substantial, indicating critical support for a key defense system. 6. The Missile Defense Agency is the primary procuring agency for this contract. 7. The contract is for repair and maintenance of electronic and precision equipment.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to its sole-source nature and specific technical requirements for the AN/TPY-2 radar system. However, the Cost Plus Incentive Fee (CPIF) contract type introduces inherent risk for cost control. Without competitive bids, it's difficult to ascertain if the pricing reflects optimal value for money. The long duration and significant total value suggest a critical need, but the lack of competition raises concerns about potential inefficiencies and higher-than-market costs.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one bidder, Raytheon Company, was solicited. This approach is typically used when a specific contractor possesses unique capabilities or proprietary technology essential for the requirement, or in cases of urgent need where competition is not feasible. The lack of competition limits the government's ability to leverage market forces to achieve the best possible price and terms.

Taxpayer Impact: Taxpayers may face higher costs due to the absence of competitive pressure, as the government cannot guarantee the most cost-effective solution was secured.

Public Impact

The primary beneficiaries are the Department of Defense and the Missile Defense Agency, ensuring the operational readiness of the AN/TPY-2 radar system. Services delivered include sustainment, repair, and maintenance of critical radar infrastructure. The geographic impact is likely global, as AN/TPY-2 radars are deployed in various strategic locations for missile defense. Workforce implications include continued employment for specialized technical personnel at Raytheon and potentially government oversight roles.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition, potentially leading to higher costs for taxpayers.
Cost Plus Incentive Fee (CPIF) contract type can incentivize cost growth if not rigorously managed.
Long contract duration increases the risk of cost escalation over time.
Lack of transparency in pricing due to sole-source nature makes independent value assessment difficult.

Positive Signals

Ensures continued operational readiness of a critical missile defense asset.
Leverages Raytheon's established expertise and proprietary knowledge of the AN/TPY-2 system.
Provides long-term stability for sustainment operations, crucial for national security.

Sector Analysis

The AN/TPY-2 radar is a key component of the Ballistic Missile Defense System. Its sustainment falls within the broader defense electronics and aerospace sector, characterized by high R&D costs, long product lifecycles, and significant government procurement. This contract represents ongoing support for a specialized, high-value defense asset, fitting within the 'Other Electronic and Precision Equipment Repair and Maintenance' NAICS code. Comparable spending benchmarks are difficult to establish due to the unique nature of the system and sole-source award.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'ss': false and 'sb': false. The prime contractor, Raytheon Company, is a large defense corporation. There is no explicit information regarding subcontracting plans for small businesses within this award. Therefore, the direct impact on the small business ecosystem from this specific contract is likely minimal, though Raytheon may engage small businesses in its broader supply chain.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense and the Missile Defense Agency. As a Cost Plus Incentive Fee (CPIF) contract, rigorous financial oversight is crucial to monitor costs and ensure performance incentives are met. Transparency is limited due to the sole-source nature. Inspector General jurisdiction would apply for any investigations into fraud, waste, or abuse related to the contract.

Related Government Programs

Ballistic Missile Defense System (BMDS)
Ground-based Midcourse Defense (GMD)
Aegis Ballistic Missile Defense System
Patriot Missile System
AN/TPQ-53 Radar Sustainment

Risk Flags

Sole-source award
Cost Plus Incentive Fee contract type
Long contract duration
Lack of competitive benchmarking

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $146.9 million to RAYTHEON COMPANY. FY19 AN/TPY-2 O&S INFRASTRUCTURE IGF::OT::IGF

Who is the contractor on this award?

The obligated recipient is RAYTHEON COMPANY.

Which agency awarded this contract?

Awarding agency: Department of Defense (Missile Defense Agency).

What is the total obligated amount?

The obligated amount is $146.9 million.

What is the period of performance?

Start: 2018-11-01. End: 2024-03-29.

What is Raytheon Company's track record with AN/TPY-2 radar sustainment contracts?

Raytheon Company, now RTX, has been the primary developer and sustainment provider for the AN/TPY-2 radar system since its inception. Their track record includes development, production, and ongoing sustainment efforts for various configurations of the radar, including those used in the Ground-based Midcourse Defense (GMD) and Aegis Ballistic Missile Defense (BMD) programs, as well as forward-deployed variants. Historically, Raytheon has been awarded numerous contracts for the sustainment, upgrade, and operational support of these complex systems. While specific performance metrics for past sustainment contracts are often not publicly detailed, the continued sole-source awards suggest a perceived necessity of their expertise and established infrastructure for maintaining the system's readiness and technological relevance.

How does the Cost Plus Incentive Fee (CPIF) structure impact cost control for this contract?

The Cost Plus Incentive Fee (CPIF) contract structure aims to incentivize the contractor to control costs while meeting performance targets. Under CPIF, the final profit is adjusted based on the relationship between the final costs and the target costs established at the outset. If the contractor achieves lower-than-target costs and meets performance objectives, they earn a higher profit. Conversely, if costs exceed the target, their profit is reduced. This structure requires robust government oversight to establish realistic target costs and monitor expenditures closely. Without effective management and negotiation of targets, CPIF contracts can still lead to significant cost growth, especially for complex, long-duration sustainment efforts where unforeseen technical challenges may arise.

What are the primary risks associated with a sole-source award for critical defense infrastructure sustainment?

The primary risks associated with a sole-source award for critical defense infrastructure sustainment include a lack of competitive pricing, which can lead to higher costs for the government and taxpayers. Without competing bids, there is less pressure on the contractor to innovate or offer the most cost-effective solutions. Furthermore, sole-source contracts can create vendor lock-in, making it difficult and expensive to transition to alternative providers or technologies in the future. There's also a potential risk of complacency from the awarded contractor, assuming continued awards regardless of efficiency. Effective risk mitigation requires strong contract management, clear performance metrics, and regular re-evaluation of the necessity for sole-source justification.

What is the historical spending pattern for AN/TPY-2 radar sustainment by the Department of Defense?

Historical spending on AN/TPY-2 radar sustainment by the Department of Defense has been substantial, reflecting the critical nature and complexity of the system. While precise figures for sustainment alone are often embedded within larger program budgets or contract vehicles, the cumulative value of contracts awarded to Raytheon (now RTX) for the AN/TPY-2 and related systems runs into billions of dollars over the system's lifecycle. This includes research, development, production, fielding, and ongoing sustainment. The recurring nature of sustainment needs, coupled with upgrades and modernization efforts, indicates a consistent and significant annual expenditure. The current $147 million award is indicative of the ongoing investment required to maintain the operational readiness of these advanced radar systems.

How does the geographic deployment of AN/TPY-2 radars influence sustainment requirements and costs?

The AN/TPY-2 radar is designed for strategic deployment, including fixed sites and mobile configurations (e.g., on ships or ground vehicles), often in remote or austere environments globally. This geographic dispersion significantly influences sustainment requirements and costs. It necessitates robust logistics chains for spare parts, specialized tools, and technical support personnel to reach diverse locations. Maintenance may need to be performed under challenging conditions, requiring specialized training and equipment. Furthermore, the need for rapid deployment and operational readiness in potential conflict zones adds complexity and urgency to sustainment efforts, potentially increasing costs associated with travel, expedited shipping, and on-site support personnel. The global footprint ensures the system's effectiveness but also magnifies the logistical and operational challenges of its upkeep.

Industry Classification

NAICS: Other Services (except Public Administration) › Electronic and Precision Equipment Repair and Maintenance › Other Electronic and Precision Equipment Repair and Maintenance

Product/Service Code: MAINT, REPAIR, REBUILD EQUIPMENT › MAINT, REPAIR, REBUILD OF EQUIPMENT

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: HQ014718R0001

Pricing Type: COST PLUS INCENTIVE FEE (V)

Evaluated Preference: NONE

Contractor Details

Parent Company: Rockwell Collins Australia PTY Limited

Address: 225 PRESIDENTIAL WAY, WOBURN, MA, 01801

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: $154,132,680

Exercised Options: $154,132,680

Current Obligation: $146,887,677

Actual Outlays: $4,138,194

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: HQ014718D0001

IDV Type: IDC

Timeline