Raytheon Company awarded $12.1M contract for Integrated Shipboard Electronics, facing limited competition

Contract Overview

Contract Amount: $12,135,732 ($12.1M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2020-01-01

End Date: 2026-12-31

Contract Duration: 2,556 days

Daily Burn Rate: $4.7K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: INTEGRATED SHIPBOARD ELECTRONICS (ISE)

Place of Performance

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

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $12.1 million to RAYTHEON COMPANY for work described as: INTEGRATED SHIPBOARD ELECTRONICS (ISE) Key points: 1. Contract awarded to a single, large defense contractor, suggesting potential for higher costs due to lack of competitive pressure. 2. The 'NOT COMPETED' status raises questions about whether alternative solutions or providers were adequately considered. 3. Long contract duration of 2556 days (7 years) may indicate a need for ongoing, specialized support, but also limits future opportunities for other firms. 4. The cost-plus-fixed-fee (CPFF) contract type can incentivize cost overruns, as the contractor is reimbursed for allowable costs plus a fixed fee. 5. This contract falls within the Engineering Services sector, a critical area for defense modernization and maintenance. 6. The significant contract value indicates a substantial investment in shipboard electronics, likely for advanced naval capabilities.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging without detailed cost breakdowns and comparisons to similar Integrated Shipboard Electronics (ISE) systems. However, the 'NOT COMPETED' award and CPFF structure raise concerns about potential overpricing. The absence of competitive bids means there was no market validation of Raytheon's proposed costs. Further analysis would be needed to compare the fixed fee and estimated costs against industry standards for similar engineering services and complex electronic systems integration.

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. This typically occurs when only one source is capable of meeting the agency's needs, often due to proprietary technology, unique expertise, or urgent requirements. The lack of competition limits the government's ability to leverage market forces to achieve the best possible price and value.

Taxpayer Impact: Taxpayers may be paying a premium for this system due to the absence of competitive bidding. Without competing the requirement, the Department of the Navy did not have the opportunity to solicit multiple proposals and select the most cost-effective solution.

Public Impact

The primary beneficiaries are the U.S. Navy, receiving advanced integrated electronics for its vessels, enhancing operational capabilities. Services delivered include the development, integration, and potentially maintenance of complex electronic systems essential for modern naval operations. The geographic impact is likely concentrated within naval bases and shipyards where these systems are installed and maintained, primarily in California. This contract supports highly skilled engineering and technical jobs within the defense industry, contributing to the specialized workforce.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price discovery and potentially leads to higher costs for taxpayers.
Cost-plus-fixed-fee contract type can incentivize cost overruns and lacks strong cost control mechanisms.
Long contract duration may not adapt well to rapidly evolving electronic technologies.
Lack of competition raises concerns about the government receiving the best value for its investment.
Absence of small business subcontracting goals in the provided data.

Positive Signals

Awarded to a major defense contractor with established expertise in complex electronic systems.
Contract addresses critical naval operational needs for integrated shipboard electronics.
Long-term nature of the contract suggests a stable, ongoing requirement for specialized support.
The fixed fee component provides some level of cost predictability for the government.

Sector Analysis

The defense electronics sector is characterized by high barriers to entry, significant R&D investment, and long product development cycles. Contracts like this, for Integrated Shipboard Electronics (ISE), are crucial for maintaining and modernizing naval fleets. The market is dominated by a few large prime contractors capable of handling the complexity and scale of such programs. Spending in this area is driven by national security priorities and technological advancements in areas like radar, communications, and combat systems. Comparable spending benchmarks are difficult to ascertain without specific system details, but large-scale naval electronics integration contracts can range from tens to hundreds of millions of dollars.

Small Business Impact

The provided data indicates that this contract was not set aside for small businesses (ss: false, sb: false). As a sole-source award to a large prime contractor, it is unlikely that significant subcontracting opportunities for small businesses were mandated or actively pursued through competitive set-asides. While large prime contractors often engage small businesses as subcontractors, the absence of specific set-aside requirements or explicit subcontracting goals in the award details suggests that the direct impact on the small business ecosystem for this specific contract may be limited.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy's contracting and program management offices. The Inspector General for the Department of Defense would have jurisdiction to investigate potential fraud, waste, or abuse. Transparency is limited due to the sole-source nature and the proprietary aspects of defense electronics. Accountability measures would be embedded within the contract's performance clauses and reporting requirements, focusing on meeting technical specifications and delivery schedules.

Related Government Programs

Naval Ship Systems Engineering
Defense Electronics Integration
Shipboard Combat Systems
Naval C4ISR Systems
Electronic Warfare Systems

Risk Flags

Sole-source award
Cost-plus contract type
Lack of competition
Long contract duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $12.1 million to RAYTHEON COMPANY. INTEGRATED SHIPBOARD ELECTRONICS (ISE)

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 $12.1 million.

What is the period of performance?

Start: 2020-01-01. End: 2026-12-31.

What is Raytheon Company's track record with similar sole-source defense contracts?

Raytheon Company, now part of RTX, has a long history of securing large, often sole-source, contracts with the Department of Defense for complex defense systems, including integrated electronics. Their track record includes numerous awards for naval platforms, aircraft, and missile systems. While this expertise is often cited as justification for sole-source awards, it also means the company has frequently operated in environments with limited competitive pressure. Analyzing past performance on similar sole-source contracts, including any cost overruns or schedule delays, would provide further context on the potential risks and value associated with this specific award.

How does the Cost Plus Fixed Fee (CPFF) contract type compare to other pricing arrangements in terms of value for money?

Cost Plus Fixed Fee (CPFF) contracts reimburse the contractor for allowable costs plus a predetermined fixed fee. While this structure provides cost certainty for the fee component, it can incentivize cost overruns because the contractor's profit (the fee) is not directly tied to cost savings. Compared to fixed-price contracts, where the contractor bears the risk of cost overruns, CPFF can be less advantageous for the government in terms of achieving the lowest possible price, especially for well-defined requirements. However, CPFF is often used for research and development or complex services where costs are difficult to estimate upfront, aiming to balance risk between the government and contractor.

What are the primary risks associated with a sole-source award for integrated shipboard electronics?

The primary risks associated with a sole-source award for integrated shipboard electronics include a lack of competitive pricing, potentially leading to higher costs for the government. Without competing the requirement, there's less incentive for the contractor to innovate or reduce costs aggressively. There's also a risk of vendor lock-in, where the government becomes dependent on a single supplier for critical systems, potentially limiting future flexibility and interoperability. Furthermore, the absence of multiple bids means less market intelligence is gathered regarding available technologies and pricing, potentially resulting in a suboptimal solution or overpayment.

What is the typical duration for contracts involving the integration of complex shipboard electronic systems?

Contracts for the integration of complex shipboard electronic systems often have long durations, frequently spanning several years, due to the intricate nature of design, development, installation, testing, and potential sustainment. Durations of 5-10 years are not uncommon, especially when encompassing multiple phases of a program, such as initial integration, upgrades, and initial operational support. The 7-year duration (2556 days) for this Raytheon contract aligns with this pattern, suggesting a comprehensive scope of work that extends beyond initial installation to potentially include ongoing modifications, upgrades, and sustainment activities critical for maintaining the effectiveness of naval platforms.

How does the $12.1 million contract value compare to overall Department of the Navy spending on electronics?

The $12.1 million contract value for Integrated Shipboard Electronics (ISE) represents a specific investment within the broader Department of the Navy's budget for electronics and combat systems. While significant for a single contract, it is a relatively small portion of the Navy's total annual spending, which often runs into the tens or hundreds of billions of dollars. The Navy invests heavily in a wide array of electronic systems, including communications, radar, navigation, electronic warfare, and weapons control. This contract likely focuses on a particular platform or set of capabilities, and its true significance is best understood in the context of the specific program it supports rather than overall Navy electronics procurement.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Architectural, Engineering, and Related Services › Engineering Services

Product/Service Code: MODIFICATION OF EQUIPMENT › MODIFICATION OF EQUIPMENT

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0002419R2422

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: RTX Corp

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

Financial Breakdown

Contract Ceiling: $29,327,967

Exercised Options: $29,327,967

Current Obligation: $12,135,732

Actual Outlays: $335,304

Subaward Activity

Number of Subawards: 7

Total Subaward Amount: $413,274

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline