DoD's $404M Raytheon Contract for SPY-1D(V) Equipment Faces Scrutiny Over Competition and Pricing

Contract Overview

Contract Amount: $404,306,921 ($404.3M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2013-09-27

End Date: 2023-04-30

Contract Duration: 3,502 days

Daily Burn Rate: $115.5K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: SPY-1D(V) EQUIPMENT

Place of Performance

Location: SUDBURY, MIDDLESEX County, MASSACHUSETTS, 01776

State: Massachusetts Government Spending

Plain-Language Summary

Department of Defense obligated $404.3 million to RAYTHEON COMPANY for work described as: SPY-1D(V) EQUIPMENT Key points: 1. Significant contract value of over $404 million awarded to a single large business. 2. Lack of competition raises concerns about potential overpricing and reduced innovation. 3. Long contract duration (2013-2023) suggests potential for cost overruns and evolving needs. 4. The sector is critical for national defense, but specialized equipment can limit competitive options.

Value Assessment

Rating: questionable

The contract type is Cost Plus Fixed Fee, which can incentivize contractors to increase costs to achieve a higher fee. Benchmarking is difficult without specific unit cost data, but the overall value suggests a need for rigorous cost oversight.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was not competed, indicating a sole-source or limited competition award. This significantly impacts price discovery, as there was no market pressure to drive down costs or encourage innovative solutions from multiple bidders.

Taxpayer Impact: The lack of competition may lead to taxpayers paying a premium for this specialized defense equipment, as cost efficiencies are less likely to be realized.

Public Impact

Taxpayers may be overpaying for critical naval defense systems due to the absence of competitive bidding. The long-term nature of the contract could mean outdated technology is being procured at inflated prices. Lack of transparency in the sole-source award process hinders public trust and accountability.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award
Cost Plus Fixed Fee contract type
Long contract duration
Lack of small business participation

Positive Signals

Essential defense equipment procured
Awarded to a major defense contractor with proven capabilities

Sector Analysis

This contract falls within the 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' sector, a critical component of national defense. Spending in this specialized area is often high due to technological complexity and limited suppliers, making competitive sourcing challenging but essential.

Small Business Impact

The data indicates no small business participation in this contract (sb: false). This is common for large, complex defense systems awarded to prime contractors, but it represents a missed opportunity to foster innovation and economic growth within the small business sector.

Oversight & Accountability

The 'NOT COMPETED' status and sole-source nature of this large contract warrant close oversight. The Department of Defense should ensure robust justification for the lack of competition and rigorous monitoring of costs and performance under the Cost Plus Fixed Fee structure.

Related Government Programs

Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing
Department of Defense Contracting
Department of the Navy Programs

Risk Flags

Potential for overpricing due to lack of competition.
Cost Plus Fixed Fee structure may incentivize higher costs.
Long contract duration could lead to outdated technology or cost overruns.
No small business participation.
Lack of transparency in sole-source award.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $404.3 million to RAYTHEON COMPANY. SPY-1D(V) EQUIPMENT

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 $404.3 million.

What is the period of performance?

Start: 2013-09-27. End: 2023-04-30.

What specific justifications were provided for not competing this $404 million contract, and do they align with federal procurement regulations for sole-source awards?

Federal regulations allow for sole-source awards under specific circumstances, such as when only one responsible source can provide the required supplies or services. For a contract of this magnitude, the justification would need to be exceptionally strong, likely citing unique technical capabilities, proprietary technology, or urgent national security needs that preclude competition. A thorough review of the justification documentation is crucial to ensure compliance and prevent potential misuse of sole-source authority.

How does the Cost Plus Fixed Fee (CPFF) structure for this contract ensure cost control and value for money, especially given the lack of competition?

The CPFF structure aims to provide the contractor with cost reimbursement plus a predetermined fixed fee. While the fee is fixed, the contractor is incentivized to control costs to maximize their profit margin. However, without competition, the baseline cost estimates might be inflated, and the government's ability to negotiate favorable terms is diminished. Robust government oversight, including detailed cost audits and performance monitoring, is essential to mitigate risks associated with CPFF contracts, particularly when awarded sole-source.

What is the long-term strategic value of continuing to invest in the SPY-1D(V) system, and has the Department of the Navy explored more cost-effective or technologically advanced alternatives?

The SPY-1D(V) is a critical component of Aegis combat systems, vital for naval defense. However, given the contract's long duration and the rapid pace of technological advancement, it's imperative to assess its ongoing strategic value and explore alternatives. The Navy should be actively researching and potentially prototyping next-generation systems that offer improved capabilities, greater efficiency, or lower lifecycle costs to ensure future investments provide the best possible return and maintain technological superiority.

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: FIRE CONTROL EQPT.

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0002412R5115

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Rockwell Collins Australia PTY Limited

Address: 528 BOSTON POST RD, SUDBURY, MA, 01776

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: $406,228,920

Exercised Options: $406,228,920

Current Obligation: $404,306,921

Actual Outlays: $386,790

Subaward Activity

Number of Subawards: 2393

Total Subaward Amount: $337,261,423

Contract Characteristics

Multi-Year Contract: Yes

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline