DoD's $27.4M Raytheon contract for missile software support lacked competition, raising value concerns

Contract Overview

Contract Amount: $27,413,416 ($27.4M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2012-06-06

End Date: 2014-04-18

Contract Duration: 681 days

Daily Burn Rate: $40.3K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS INCENTIVE

Sector: Defense

Official Description: BLOCK 2 VERSION L SOFTWARE SUPPORT

Place of Performance

Location: STERLING, LOUDOUN County, VIRGINIA, 20166

State: Virginia Government Spending

Plain-Language Summary

Department of Defense obligated $27.4 million to RAYTHEON COMPANY for work described as: BLOCK 2 VERSION L SOFTWARE SUPPORT Key points: 1. The contract was awarded on a sole-source basis, limiting price discovery and potentially increasing costs. 2. Performance was rated as 'satisfactory', but the lack of competition makes it difficult to benchmark value. 3. The contract duration of 681 days suggests a need for ongoing support for critical systems. 4. The 'cost plus incentive' pricing structure aims to align contractor and government interests but requires careful oversight. 5. This spending falls under Guided Missile and Space Vehicle Manufacturing, a specialized defense sector. 6. The absence of small business participation is noted, with no set-aside or subcontracting requirements mentioned.

Value Assessment

Rating: questionable

Benchmarking the value of this $27.4 million contract is challenging due to its sole-source nature. Without competitive bids, it's difficult to ascertain if the pricing reflects fair market value or if alternative, more cost-effective solutions were overlooked. The 'satisfactory' performance rating provides a baseline, but the lack of comparative data prevents a robust assessment of cost-effectiveness. The 'cost plus incentive' contract type, while designed to incentivize efficiency, can lead to cost overruns if not managed diligently.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded using a sole-source justification, meaning it was not competed among multiple vendors. This approach is typically reserved for situations where only one vendor possesses the necessary capabilities or proprietary technology. The lack of competition means that taxpayers did not benefit from the price reductions and innovation that typically arise from a competitive bidding process.

Taxpayer Impact: The absence of competition for this $27.4 million contract means taxpayers may have paid a premium. Without competing offers, there is less pressure on the contractor to offer the lowest possible price.

Public Impact

The Department of the Navy benefits from continued software support for its guided missile and space vehicle systems. This contract ensures the operational readiness of critical defense assets. The primary beneficiaries are the military personnel who rely on these systems for national security. The contract supports specialized technical expertise within the defense industrial base.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to higher costs for taxpayers.
Sole-source award limits opportunities for other qualified vendors.
Performance rating of 'satisfactory' indicates room for improvement.
Cost-plus contracts require rigorous oversight to prevent overspending.

Positive Signals

Contract ensures continued support for critical defense systems.
Raytheon Company is a known entity in defense contracting.
The 'cost plus incentive' structure aims to control costs.

Sector Analysis

This contract falls within the Guided Missile and Space Vehicle Manufacturing sector, a highly specialized area of the defense industry. This sector is characterized by high barriers to entry, significant R&D investment, and a limited number of prime contractors capable of producing complex weapon systems. Spending in this area is driven by national security requirements and technological advancements. Comparable spending benchmarks are difficult to establish due to the unique nature of each system, but overall defense spending on missile technology represents a significant portion of the defense budget.

Small Business Impact

This contract does not appear to have involved small business set-asides or subcontracting requirements. The sole-source nature of the award and the specialized technical requirements likely favored large, established defense contractors. This limits opportunities for small businesses to participate in this specific contract, although they may be involved further down the supply chain.

Oversight & Accountability

Oversight for this contract would fall under the Department of the Navy's contracting and program management offices. The 'cost plus incentive' pricing structure necessitates close monitoring of expenditures and performance against targets. Transparency is generally maintained through contract reporting mechanisms, though the sole-source nature limits public insight into the negotiation process. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Department of Defense Software Development Contracts
Guided Missile Manufacturing
Space Vehicle Support Services
Raytheon Company Defense Contracts
Cost Plus Incentive Fee Contracts

Risk Flags

Sole-source award
Lack of competition
Potential for cost overruns (CPIF)
Satisfactory performance rating

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $27.4 million to RAYTHEON COMPANY. BLOCK 2 VERSION L SOFTWARE SUPPORT

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 Navy).

What is the total obligated amount?

The obligated amount is $27.4 million.

What is the period of performance?

Start: 2012-06-06. End: 2014-04-18.

What is Raytheon Company's track record with the Department of Defense, particularly on similar software support contracts?

Raytheon Company, now part of RTX, has a long and extensive history of contracting with the Department of Defense across various platforms and services. They are a major defense contractor known for producing a wide range of defense systems, including missiles, radar, and aircraft components. Regarding software support, Raytheon has consistently been awarded contracts for the development, maintenance, and sustainment of complex defense systems. Their track record typically involves large, multi-year contracts often awarded on a sole-source or limited-competition basis due to the specialized nature of the technology. While specific performance metrics for individual contracts vary, the company generally maintains a 'satisfactory' or 'good' performance rating, reflecting their ability to deliver on complex technical requirements. However, like many large defense contractors, they have also faced scrutiny regarding contract costs and pricing on certain programs.

How does the 'cost plus incentive' (CPIF) pricing structure typically perform in terms of cost control compared to other contract types for software support?

The 'Cost Plus Incentive Fee' (CPIF) contract type is designed to provide a middle ground between cost-reimbursement and fixed-price contracts, aiming to incentivize both the contractor and the government. In a CPIF contract, the final price is determined by the actual costs incurred plus a fee that is adjusted based on the contractor's performance against pre-determined targets (e.g., cost, schedule, performance). If the contractor performs better than the target (e.g., comes in under budget), they receive a higher fee, up to a ceiling. If they perform worse, the fee is reduced, potentially down to a minimum. For software support, CPIF can be effective when the scope of work is not fully defined or is subject to change, as it allows for flexibility. However, its effectiveness hinges on the realism of the targets set and the rigor of government oversight. If targets are too easily achievable or oversight is lax, costs can still escalate. Compared to 'Cost Plus Fixed Fee' (CPFF), CPIF offers a stronger incentive for cost reduction. Compared to fixed-price contracts, CPIF provides more flexibility for evolving requirements but carries a higher risk of cost growth if not managed properly.

What are the potential risks associated with awarding a $27.4 million software support contract on a sole-source basis?

Awarding a significant contract like this $27.4 million software support agreement on a sole-source basis carries several potential risks. The most prominent risk is the lack of price competition, which can lead to inflated costs for the government. Without competing bids, there is no market pressure to drive down prices, and the contractor may not feel compelled to offer the most cost-effective solution. This can result in taxpayers paying more than necessary for the services rendered. Another risk is the potential for reduced innovation. When a contract is not competed, alternative approaches or technologies that other vendors might offer are not explored. Furthermore, sole-source awards can create a perception of favoritism or a lack of transparency, potentially undermining public trust. It also limits opportunities for new or smaller businesses to enter the market and demonstrate their capabilities, potentially hindering the development of a more robust and competitive industrial base in the long run.

How does the 'satisfactory' performance rating impact the assessment of value for money in this contract?

A 'satisfactory' performance rating indicates that the contractor met the minimum requirements of the contract but did not necessarily exceed expectations or deliver exceptional value. In the context of assessing value for money, a satisfactory rating suggests that the government received the services it paid for, but it raises questions about whether a higher level of performance could have been achieved at the same cost, or if the same level of performance could have been obtained at a lower cost through a more competitive process or a different contractor. For a sole-source contract, a satisfactory rating is the baseline expectation; anything less would be a clear indicator of poor value. However, without competitive benchmarks, it's difficult to determine if the $27.4 million price tag aligns with a 'satisfactory' outcome in the broader market. Ideally, value for money is maximized when high performance is achieved at a competitive price. A satisfactory rating, especially in a sole-source context, suggests that while the contract objectives were met, the potential for greater value may have been missed.

What are the historical spending patterns for Guided Missile and Space Vehicle Manufacturing software support within the Department of the Navy?

Historical spending patterns for Guided Missile and Space Vehicle Manufacturing software support within the Department of the Navy are characterized by significant, long-term investments in specialized technologies. This category typically involves substantial budgets due to the complexity, criticality, and long lifecycle of defense systems. Contracts are often awarded on a sole-source or limited-competition basis to incumbent contractors who possess unique knowledge of proprietary systems, such as Raytheon in this case. Spending tends to be consistent, reflecting the ongoing need for maintenance, upgrades, and sustainment of existing platforms, as well as development of new capabilities. The Department of the Navy, like other branches of the DoD, prioritizes maintaining the operational readiness of its strategic assets, which translates into sustained funding for software support. While specific dollar amounts fluctuate based on program needs and budget allocations, the overall trend indicates a continuous and substantial financial commitment to this sector.

Industry Classification

NAICS: Manufacturing › Aerospace Product and Parts Manufacturing › Guided Missile and Space Vehicle Manufacturing

Product/Service Code: RESEARCH AND DEVELOPMENT › C – National Defense R&D Services

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0001912R0028

Offers Received: 1

Pricing Type: COST PLUS INCENTIVE (V)

Evaluated Preference: NONE

Contractor Details

Address: 22260 PACIFIC BLVD, DULLES, VA, 10

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: $28,121,534

Exercised Options: $28,121,534

Current Obligation: $27,413,416

Subaward Activity

Number of Subawards: 13

Total Subaward Amount: $10,321,759

Contract Characteristics

Cost or Pricing Data: YES

Timeline