DoD awards Raytheon $205M for APY-10 Radar Systems, a sole-source, firm-fixed-price contract

Contract Overview

Contract Amount: $205,329,221 ($205.3M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2021-02-19

End Date: 2027-10-31

Contract Duration: 2,445 days

Daily Burn Rate: $84.0K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: PROCUREMENT OF APY-10 RADAR SYSTEMS.

Place of Performance

Location: MCKINNEY, COLLIN County, TEXAS, 75071

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $205.3 million to RAYTHEON COMPANY for work described as: PROCUREMENT OF APY-10 RADAR SYSTEMS. Key points: 1. This contract represents a significant investment in advanced radar technology for national security. 2. The sole-source nature of this award warrants scrutiny regarding potential price inflation and limited market engagement. 3. A firm-fixed-price structure aims to control costs, but the absence of competition may hinder optimal value. 4. The long duration of the contract (over 6 years) suggests a critical, ongoing need for these systems. 5. Performance will be key, as delays or technical issues could have substantial operational impacts. 6. The geographic location of performance in Texas may indicate specialized manufacturing or testing facilities.

Value Assessment

Rating: fair

Benchmarking the value of this sole-source contract is challenging without competitive data. The $205 million award over approximately 6.8 years suggests an average annual value of roughly $30 million. While the firm-fixed-price (FFP) type contract aims to provide cost certainty, the lack of competition means there's no direct market comparison to assess if this price represents optimal value for money. Without insights into the specific technological advancements and unique capabilities of the APY-10 system, it's difficult to definitively state if the price is aligned with industry standards for comparable advanced radar systems.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning the Department of the Navy did not conduct a competitive bidding process. This typically occurs when a specific contractor possesses unique capabilities, proprietary technology, or is the only source capable of meeting the requirement. The absence of competition limits the Navy's ability to leverage market forces to drive down prices and potentially explore alternative solutions. While justified in certain circumstances, sole-source awards generally result in higher costs compared to competitively procured contracts.

Taxpayer Impact: Taxpayers may be paying a premium for this radar system due to the lack of competition. Without a bidding process, there is less pressure on the contractor to offer the most cost-effective solution, potentially leading to higher overall expenditures.

Public Impact

The primary beneficiaries are the Department of Defense and the U.S. Navy, who will receive advanced radar systems crucial for surveillance, detection, and navigation. These systems are expected to enhance operational capabilities in areas such as search and detection, potentially improving situational awareness and mission effectiveness. The contract's performance in Texas could have implications for the local economy and the specialized workforce in that region. The procurement supports the development and sustainment of critical defense technology, contributing to national security infrastructure.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price discovery and potentially inflates costs for taxpayers.
Long contract duration increases exposure to potential cost overruns or performance issues over time.
Lack of competition may stifle innovation and prevent the adoption of potentially superior alternative technologies.
Firm-fixed-price contracts can still be subject to change orders or claims that increase the total cost.
Dependence on a single supplier for critical defense technology poses a long-term strategic risk.

Positive Signals

Firm-fixed-price contract structure provides cost certainty for the government, assuming no significant change orders.
The award to Raytheon, a major defense contractor, suggests a reliance on established expertise and proven technology.
The APY-10 radar system likely incorporates advanced capabilities essential for current and future defense needs.
The long-term nature of the contract indicates a sustained commitment to equipping naval forces with necessary technology.

Sector Analysis

The market for advanced radar systems is a specialized segment within the broader aerospace and defense industry. This sector is characterized by high research and development costs, stringent performance requirements, and significant government procurement. Companies like Raytheon operate in a landscape where technological innovation and established relationships with defense agencies are critical for success. The total addressable market for such systems is substantial, driven by global defense spending, but dominated by a few key players due to the complexity and capital intensity involved. This contract fits within the 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' NAICS code.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. Furthermore, the prime contractor, Raytheon Company, is a large aerospace and defense firm. While large prime contractors are often required to subcontract a portion of their work to small businesses, the specific subcontracting plan for this contract is not detailed here. The absence of a direct set-aside means that small businesses were not the primary target for this specific procurement, though they may participate indirectly through subcontracting opportunities.

Oversight & Accountability

Oversight for this contract will primarily fall under the Department of the Navy's contracting and program management offices. As a Department of Defense contract, it is also subject to oversight by the Department of Defense Inspector General (DoDIG) for potential fraud, waste, and abuse. Transparency is facilitated through contract databases like FPDS, which provide basic award details. However, the sole-source nature of the award limits the transparency typically gained through a competitive process, where proposals and evaluation criteria are often scrutinized. Accountability will be measured by the contractor's adherence to the firm-fixed-price terms and delivery schedules.

Related Government Programs

Airborne Radar Systems
Naval Surveillance Technology
Defense Electronics Procurement
Advanced Sensor Technology
Military Aircraft Systems

Risk Flags

Sole-source award
Lack of competition
Potential for cost overruns
Long contract duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $205.3 million to RAYTHEON COMPANY. PROCUREMENT OF APY-10 RADAR SYSTEMS.

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 $205.3 million.

What is the period of performance?

Start: 2021-02-19. End: 2027-10-31.

What is the specific technological advantage of the APY-10 radar system that justifies a sole-source award?

The justification for a sole-source award typically stems from unique technological capabilities, proprietary designs, or specialized expertise that only one contractor can provide. For the APY-10 radar system, this could involve advanced signal processing, specific detection ranges or resolutions, integration with existing naval platforms, or unique electronic warfare countermeasures. Without access to the specific justification documentation (e.g., a Justification and Approval for Other Than Full and Open Competition - J&A), it's difficult to pinpoint the exact technological advantage. However, such systems are critical for modern naval operations, providing enhanced situational awareness, target tracking, and intelligence gathering, often in complex electromagnetic environments where off-the-shelf solutions are insufficient.

How does the firm-fixed-price (FFP) contract type mitigate risks for the government in a sole-source scenario?

A firm-fixed-price (FFP) contract type is generally preferred by the government as it shifts the majority of the cost risk to the contractor. Under an FFP agreement, the contractor is obligated to complete the work for a predetermined price, regardless of their actual costs. This provides the government with cost certainty and predictability, which is particularly valuable in sole-source situations where competitive benchmarking is absent. While FFP contracts aim to cap costs, risks remain. The government must ensure the initial price is fair and reasonable, and the contract must clearly define the scope of work to prevent costly change orders or scope creep. The contractor bears the risk of cost overruns, but conversely, may achieve higher profit margins if they manage costs efficiently.

What are the potential long-term implications of relying on Raytheon for this critical radar technology?

The long-term implications of relying on Raytheon for the APY-10 radar system involve both strategic advantages and potential risks. On the positive side, it ensures continuity of supply and leverages Raytheon's established expertise, potentially leading to reliable performance and ongoing support. This can streamline maintenance, upgrades, and training. However, a sole-source dependency also creates strategic risks. It can reduce bargaining power in future negotiations, potentially leading to higher prices over time. Furthermore, it limits opportunities for innovation from other potential suppliers and could make the Navy vulnerable if Raytheon faces production issues, financial instability, or shifts its strategic focus. Diversifying suppliers or fostering competition for future iterations of the technology could mitigate these risks.

What is the historical spending trend for similar radar systems within the Department of Defense?

Historical spending on similar radar systems within the Department of Defense is substantial and varies widely based on system complexity, capabilities, and quantity. Major radar programs, especially those for naval platforms, often involve multi-year contracts with values in the hundreds of millions, or even billions, of dollars. For instance, programs like the AN/SPY-6 or AN/SPY-1 radar systems for Aegis destroyers have seen significant investment. The specific APY-10 system's value of approximately $205 million over nearly seven years places it in the mid-to-high range for a single system procurement, reflecting its advanced nature. Trends show a continuous investment in upgrading radar capabilities to counter evolving threats, with a focus on multi-functionality, increased range, improved target discrimination, and resistance to jamming.

How does the performance context in Texas influence the contract's execution and oversight?

The performance location in Texas (ST: TX) can influence the contract's execution and oversight in several ways. Texas has a significant aerospace and defense industry presence, potentially offering access to a skilled workforce and specialized manufacturing facilities. This could facilitate efficient production and integration. Oversight might involve coordination with local Navy contracting offices or quality assurance representatives stationed in Texas. The state's business environment and regulatory landscape could also play a role. Furthermore, the geographic concentration of performance might simplify logistics and oversight compared to a contract spread across multiple distant locations, although it also concentrates risk in one area.

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: COMM/DETECT/COHERENT RADIATION

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0001920R0018

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: RTX Corp

Address: 2501 W UNIVERSITY DR, MCKINNEY, TX, 75071

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: $206,541,466

Exercised Options: $205,472,270

Current Obligation: $205,329,221

Subaward Activity

Number of Subawards: 132

Total Subaward Amount: $23,172,474

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline