Raytheon awarded $964M contract for electronics and communication systems, with a significant portion for R&D

Contract Overview

Contract Amount: $42,031,756 ($42.0M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2001-12-10

End Date: 2006-09-30

Contract Duration: 1,755 days

Daily Burn Rate: $23.9K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS AWARD FEE

Sector: Defense

Official Description: 200204!020631!1700!BZ005 !NAVAL SEA SYSTEMS COMMAND !N0002402C5104 !A!N! !N! !20011210!20030930!964265664!112820840!001339159!N!RAYTHEON TECHNICAL SERVICES CO!8680 BALBOA AVE !SAN DIEGO !CA!92123!66000!073!06!SAN DIEGO !SAN DIEGO !CALIFORNIA!+000000700000!N!N!000000000000!5865!ELCT CNTRMSRS, CNTR-CNTR-MSRS & QCK RCTN CPBLTY EQ!A7 !ELECTRONICS AND COMMUNICATION !2000!NOT DISCERNABLE OR CLASSIFIED !334511!E! !3! ! ! ! ! !99990909!B! ! !A! !D!N!R!1!001!N!1A!Z!N!Z! ! !N!C!N! ! ! !A!A!A!A!000!A!C!Y! ! ! ! ! ! !0001!

Place of Performance

Location: SAN DIEGO, SAN DIEGO County, CALIFORNIA, 92123

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $42.0 million to RAYTHEON COMPANY for work described as: 200204!020631!1700!BZ005 !NAVAL SEA SYSTEMS COMMAND !N0002402C5104 !A!N! !N! !20011210!20030930!964265664!112820840!001339159!N!RAYTHEON TECHNICAL SERVICES CO!8680 BALBOA AVE !SAN DIEGO !CA!92123!66000!073!06!SAN DIEGO !SAN D… Key points: 1. Contract value of $964,265,664 awarded to Raytheon Technical Services Co. 2. Contract duration of 1755 days, spanning from December 2001 to September 2006. 3. Primary focus on 'Electronics and Communication' systems, with specific mention of 'ELCT CNTRMSRS, CNTR-CNTR-MSRS & QCK RCTN CPBLTY EQ'. 4. Contract type is 'Cost Plus Award Fee', indicating performance-based incentives. 5. The contract was not competed, raising questions about potential price discovery. 6. Small business participation is not explicitly detailed but the prime contractor is a large entity. 7. The contract falls under the 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' NAICS code. 8. Awarded by the Naval Sea Systems Command, a key component of the Department of Defense.

Value Assessment

Rating: fair

The total award amount of $964,265,664 for a period of nearly five years suggests a substantial investment in advanced electronics and communication capabilities. While specific performance metrics and award fee payouts are not detailed, the 'Cost Plus Award Fee' structure implies that the government aimed to incentivize contractor performance. Benchmarking this against similar contracts is challenging without more granular data on the specific systems and R&D components. However, the significant R&D allocation within this contract type can sometimes lead to higher costs compared to fixed-price contracts, but may be justified for complex, evolving technological needs.

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 a specific contractor possesses unique capabilities, proprietary technology, or is the only source capable of meeting the requirement. The lack of competition means that the government did not benefit from the price reductions and innovation that can arise from a competitive bidding process. This raises concerns about whether the government secured the best possible price and terms.

Taxpayer Impact: For taxpayers, a sole-source award means there's a higher risk of paying a premium for goods or services, as the competitive pressure to offer lower prices is absent.

Public Impact

The primary beneficiary is the U.S. Navy, which receives advanced electronics and communication systems crucial for its operations. Services delivered include the development, integration, and potentially sustainment of specialized electronic countermeasure systems and quick reaction capabilities. The geographic impact is primarily within the United States, with the contractor based in San Diego, California, and likely supporting naval bases and operations nationwide. Workforce implications include employment for engineers, technicians, and support staff at Raytheon Technical Services Co. and potentially its subcontractors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing and potentially reduces value for money.
Cost Plus Award Fee contracts can lead to cost overruns if not managed tightly.
Lack of detailed performance metrics makes it difficult to assess true value and effectiveness.
Contract duration of nearly five years may not align with rapidly evolving technological needs.
Specific details on R&D investment and outcomes are not publicly available.

Positive Signals

Award to a large, established defense contractor (Raytheon) suggests technical expertise and capacity.
Focus on advanced electronics and communication systems addresses critical defense needs.
Cost Plus Award Fee structure incentivizes contractor performance, potentially leading to higher quality outcomes.
Contract supports technological advancement in a key defense sector.

Sector Analysis

This contract falls within the broader defense electronics and communication systems sector, a critical and highly specialized area of the defense industrial base. The NAICS code 334511 covers a range of instruments for measurement, testing, and control, as well as navigation and guidance systems. The market for such systems is characterized by high barriers to entry due to complex technology, significant R&D investment, and stringent government requirements. Spending in this sector is substantial, driven by the continuous need for technological superiority by military branches. Comparable spending benchmarks would involve analyzing other large-scale contracts for electronic warfare, radar, and communication systems awarded to major defense contractors.

Small Business Impact

This contract was awarded to Raytheon Technical Services Co., a large prime contractor, and there is no indication of a small business set-aside. While the contract details do not specify subcontracting plans, large defense contracts often involve significant subcontracting opportunities for small businesses. However, without explicit set-aside goals or reporting, the direct impact on the small business ecosystem is unclear. It is possible that Raytheon engaged small businesses for specialized components or services, but this information is not readily available from the provided data.

Oversight & Accountability

Oversight for this contract would primarily fall under the Naval Sea Systems Command (NAVSEA) and the Defense Contract Management Agency (DCMA). These agencies are responsible for monitoring contractor performance, ensuring compliance with contract terms, and managing payments. The 'Cost Plus Award Fee' structure necessitates close oversight to validate costs and assess performance against award criteria. Transparency is limited due to the sole-source nature and the classification of some system details. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse.

Related Government Programs

Naval Sea Systems Command Contracts
Department of Defense Electronics Procurement
Raytheon Defense Contracts
Cost Plus Award Fee Contracts
Electronic Warfare Systems
Communication Systems Procurement

Risk Flags

Sole-source award
Lack of detailed performance metrics
Potential for cost overruns in CPAF contracts
Limited transparency on R&D allocation

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $42.0 million to RAYTHEON COMPANY. 200204!020631!1700!BZ005 !NAVAL SEA SYSTEMS COMMAND !N0002402C5104 !A!N! !N! !20011210!20030930!964265664!112820840!001339159!N!RAYTHEON TECHNICAL SERVICES CO!8680 BALBOA AVE !SAN DIEGO !CA!92123!66000!073!06!SAN DIEGO !SAN DIEGO !CALIFORNIA!+000000700000!N!N!000000000000!5865!ELCT CNTRMSRS, CNTR-CNTR-MSRS & QCK RCTN CPBLTY EQ!A7 !ELECTRONICS AND COMMUNICATION !2000!NOT DISCERNABLE OR CLASSIFIED !334511!E! !3! ! ! ! ! !99990909!B

Who is the contractor on this award?

The obligated recipient is RAYTHEON COMPANY.

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Contract Management Agency).

What is the total obligated amount?

The obligated amount is $42.0 million.

What is the period of performance?

Start: 2001-12-10. End: 2006-09-30.

What was the specific breakdown of costs between research and development, production, and sustainment for this contract?

The provided data does not offer a specific breakdown of costs for research and development (R&D), production, and sustainment within the total award of $964,265,664. The contract description mentions 'ELCT CNTRMSRS, CNTR-CNTR-MSRS & QCK RCTN CPBLTY EQ', which implies a significant component related to the development and integration of electronic countermeasure systems and quick reaction capabilities, suggesting a substantial R&D element. However, without access to the detailed contract line item numbers (CLINs) or the contractor's cost proposals, it is impossible to quantify the exact allocation. The 'Cost Plus Award Fee' (CPAF) structure allows for flexibility in cost allocation, but also necessitates detailed government oversight to ensure costs are reasonable and allocable to the contract objectives.

How did the government justify the sole-source award, and what alternatives were considered?

The justification for a sole-source award typically stems from a determination that only one responsible source can provide the required supplies or services. For complex defense systems like advanced electronic countermeasure and quick reaction capability equipment, this could be due to proprietary technology, unique manufacturing capabilities, or extensive prior development by a specific contractor. The Naval Sea Systems Command would have likely conducted market research to confirm the lack of viable alternatives or issued a justification and approval (J&A) document outlining the rationale. Without access to the J&A document, the specific reasons and alternatives considered remain undisclosed. This lack of competition inherently limits the government's ability to leverage market forces for optimal pricing and innovation.

What were the key performance metrics and award fee criteria used to evaluate Raytheon's performance under this contract?

The provided data does not specify the key performance metrics (KPMs) or the award fee criteria established for this 'Cost Plus Award Fee' (CPAF) contract. Under a CPAF structure, the government sets specific performance objectives, and the contractor earns a base fee plus an award fee based on how well they meet or exceed these objectives. These criteria are typically detailed in the contract's Performance Work Statement (PWS) and the Award Fee Plan. For a contract involving advanced electronics and communication systems, KPMs could include factors like system reliability, technical performance, delivery schedules, and effectiveness in operational scenarios. The absence of this information makes it difficult to independently assess the value delivered and the contractor's success.

What is the historical spending trend for similar electronic countermeasure and quick reaction capability systems procured by the Navy?

Analyzing historical spending trends for similar systems requires access to comprehensive contract databases and specific product line information, which is not fully detailed in the provided data snippet. However, the Naval Sea Systems Command (NAVSEA) is a major procurer of advanced electronic warfare (EW) and communication systems. Spending in these areas is generally substantial and tends to increase over time due to the rapid evolution of threats and technologies. Contracts for EW systems, radar, and secure communications often run into hundreds of millions or even billions of dollars over their lifecycle. Factors influencing spending include geopolitical tensions, technological advancements, and platform modernization programs. Without specific identifiers for the 'ELCT CNTRMSRS, CNTR-CNTR-MSRS & QCK RCTN CPBLTY EQ', a precise historical comparison is challenging, but it's safe to assume significant and ongoing investment in this domain by the Navy.

What is the estimated total cost of ownership (TCO) for the systems procured under this contract, including sustainment and upgrades?

The provided data focuses on the initial contract award value ($964,265,664) and its duration (2001-2006). It does not include information regarding the total cost of ownership (TCO), which encompasses sustainment, maintenance, upgrades, training, and disposal costs over the system's entire lifecycle. For complex defense systems, TCO can often be several times the initial procurement cost. Given the nature of electronic systems, which are prone to obsolescence and require continuous updates to counter evolving threats, sustainment and upgrade costs are likely significant. Raytheon, as the contractor, may have been awarded subsequent contracts for sustainment and upgrades, but these are not reflected in the initial award data. A comprehensive TCO analysis would require tracking all related contracts and expenditures over the system's lifespan.

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

Offers Received: 1

Pricing Type: COST PLUS AWARD FEE (R)

Evaluated Preference: NONE

Contractor Details

Address: 8650 BALBOA AVE, SAN DIEGO, CA, 92123

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Manufacturer of Goods, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline