Raytheon Company awarded $20.6M for Tactical Control System, a sole-source contract with a high unit cost

Contract Overview

Contract Amount: $20,648,267 ($20.6M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2014-04-24

End Date: 2016-06-24

Contract Duration: 792 days

Daily Burn Rate: $26.1K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Official Description: TACTICAL CONTROL SYSTEM (TCS)

Place of Performance

Location: STERLING, LOUDOUN County, VIRGINIA, 20166

State: Virginia Government Spending

Plain-Language Summary

Department of Defense obligated $20.6 million to RAYTHEON COMPANY for work described as: TACTICAL CONTROL SYSTEM (TCS) Key points: 1. The contract's cost-plus-incentive fee structure suggests potential for cost overruns if not managed closely. 2. As a sole-source award, the lack of competition raises concerns about price reasonableness and potential for inflated costs. 3. The contract duration of 792 days indicates a significant, long-term need for the Tactical Control System. 4. The high average unit cost of $260,710 warrants further investigation into the components and complexity of the system. 5. This contract falls under 'Other Aircraft Parts and Auxiliary Equipment Manufacturing,' suggesting a specialized niche within the defense sector. 6. The absence of small business involvement indicates a focus on large prime contractors for this specific requirement.

Value Assessment

Rating: questionable

The average unit cost of $260,710 for the Tactical Control System appears high when compared to similar complex electronic systems. Without detailed breakdowns of the system's components and labor, it is difficult to definitively benchmark the value. However, the sole-source nature of the award limits the ability to assess competitive pricing and may have contributed to a less favorable price than could have been achieved through open competition.

Cost Per Unit: $260,710

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one vendor, Raytheon Company, was solicited. This approach is typically used when a unique capability or proprietary technology is required, or in cases of urgent need where competition is not feasible. The lack of multiple bidders means there was no direct price comparison or negotiation leverage that could drive down costs for the government.

Taxpayer Impact: Taxpayers may have paid a premium for this system due to the absence of competitive bidding, potentially funding higher profit margins for the sole contractor.

Public Impact

The primary beneficiaries are the Department of the Navy and its operational units requiring the Tactical Control System. The contract delivers critical components and services for the Tactical Control System, enhancing military operational capabilities. The geographic impact is likely concentrated within Navy facilities and operational theaters where the system is deployed. Workforce implications may include specialized engineering, manufacturing, and support roles at Raytheon Company and its subcontractors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition and potentially increases costs for taxpayers.
Cost-plus-incentive fee contract requires diligent oversight to prevent cost overruns.
High average unit cost suggests potential for overpricing or complex, expensive components.
Lack of small business participation limits opportunities for smaller firms in the defense supply chain.

Positive Signals

Contract awarded to a known defense contractor (Raytheon Company) with established capabilities.
The Tactical Control System likely addresses a critical military requirement, ensuring operational readiness.
The cost-plus-incentive fee structure, if managed well, can incentivize contractor efficiency.

Sector Analysis

The defense electronics sector is characterized by high research and development costs, complex supply chains, and significant government procurement. Contracts for systems like the Tactical Control System are vital for maintaining technological superiority. Comparable spending benchmarks are difficult to establish without specific system details, but large-scale defense electronics contracts often run into tens or hundreds of millions of dollars. Raytheon Company is a major player in this sector, known for its advanced defense systems.

Small Business Impact

This contract was not set aside for small businesses, and there is no indication of significant subcontracting opportunities for small businesses. The award to a large prime contractor like Raytheon Company suggests that the scope of work or the required expertise was beyond the typical capabilities of small businesses in this specific domain. This limits the direct economic benefit to the small business ecosystem for this particular contract.

Oversight & Accountability

Oversight for this contract would fall under the Department of the Navy's contracting and program management offices. Accountability measures are typically embedded within the cost-plus-incentive fee structure, which links contractor profit to performance and cost targets. Transparency is limited due to the sole-source nature and the proprietary aspects of defense systems. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Tactical Data Links
Command and Control Systems
Avionics Systems
Defense Electronics Manufacturing
Naval Warfare Systems

Risk Flags

Sole-source award
High unit cost
Cost-plus-incentive fee structure

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $20.6 million to RAYTHEON COMPANY. TACTICAL CONTROL SYSTEM (TCS)

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 $20.6 million.

What is the period of performance?

Start: 2014-04-24. End: 2016-06-24.

What specific capabilities does the Tactical Control System (TCS) provide to the Department of the Navy?

The Tactical Control System (TCS) is a critical component within naval aviation and other platforms, designed to manage and disseminate tactical information among various assets. It likely facilitates real-time situational awareness by integrating data from sensors, communication systems, and other platforms. This enables commanders to make informed decisions, coordinate operations effectively, and enhance the overall combat effectiveness of naval forces. The specific functionalities would include data fusion, communication relay, and potentially command and control interfaces, supporting missions ranging from air defense to strike operations.

How does the cost-plus-incentive fee (CPIF) structure impact the government's financial risk and the contractor's performance incentives?

A Cost-Plus-Incentive Fee (CPIF) contract allows the contractor to incur costs up to a ceiling, with the final fee determined by a formula based on actual costs and target costs. The government bears the risk of cost overruns up to the ceiling, but the incentive fee structure aims to motivate the contractor to control costs and meet performance targets. If the contractor achieves lower-than-target costs or exceeds performance goals, they receive a higher fee, up to a maximum. Conversely, if costs exceed targets, the contractor's fee is reduced, potentially below the target fee, but they still receive reimbursement for allowable costs. This structure requires robust government oversight to ensure costs are reasonable and performance is achieved.

What are the potential risks associated with a sole-source contract for a critical defense system like the TCS?

Sole-source contracts, while sometimes necessary for unique capabilities, carry significant risks. The primary risk is the lack of price competition, which can lead to inflated costs for the government as the contractor faces no pressure to offer the lowest possible price. There's also a reduced incentive for the contractor to innovate or improve efficiency beyond what is contractually required. Furthermore, reliance on a single supplier can create supply chain vulnerabilities and make it difficult to switch providers if performance issues arise or if a more cost-effective solution becomes available elsewhere. This can result in long-term financial disadvantages for the government.

Can the high average unit cost of $260,710 be justified by the complexity and technological sophistication of the TCS?

The average unit cost of $260,710 for the Tactical Control System is substantial and requires careful justification. Such a high cost could be attributed to several factors, including the integration of advanced technologies, specialized software development, stringent reliability and performance requirements, and the use of high-cost, specialized components. If the TCS incorporates cutting-edge processing, secure communication modules, and sophisticated data fusion algorithms, the unit cost might be justifiable within the defense sector. However, without a detailed breakdown of the system's architecture, components, and development effort, it remains a point of concern that warrants further scrutiny to ensure value for money.

What is Raytheon Company's track record with similar defense electronics contracts awarded by the Department of Defense?

Raytheon Company, now part of RTX Corporation, has a long and extensive track record of delivering complex defense systems and electronics to the Department of Defense. They are a major prime contractor involved in numerous programs across various military branches, including radar systems, missile defense, command and control, and avionics. Their history includes both highly successful program deliveries and instances of cost overruns or schedule delays, which are not uncommon in large, complex defense procurements. A thorough review of their performance on specific, comparable contracts would be necessary to fully assess their reliability and cost-effectiveness for the TCS program.

How does this $20.6 million contract compare to overall Department of the Navy spending on similar 'Other Aircraft Parts and Auxiliary Equipment Manufacturing' categories?

This $20.6 million contract represents a significant, but not exceptionally large, investment within the broader context of Department of the Navy (DoN) procurement. The 'Other Aircraft Parts and Auxiliary Equipment Manufacturing' (NAICS 336413) category encompasses a wide array of components and systems. While $20.6 million is substantial for a single contract, the DoN's annual spending across all defense-related manufacturing, including aircraft parts, often runs into billions of dollars. This specific contract likely addresses a niche but critical requirement, and its relative size would depend on the total annual budget allocated to this specific NAICS code by the Navy.

Industry Classification

NAICS: Manufacturing › Aerospace Product and Parts Manufacturing › Other Aircraft Parts and Auxiliary Equipment 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: N0001914R0027

Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE (V)

Evaluated Preference: NONE

Contractor Details

Address: 22260 PACIFIC BLVD, DULLES, VA, 20166

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: $20,722,417

Exercised Options: $20,722,417

Current Obligation: $20,648,267

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline