Raytheon Company awarded $23.5M for AEGIS Modernization Kits, impacting naval defense systems

Contract Overview

Contract Amount: $23,544,995 ($23.5M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2022-11-18

End Date: 2025-12-31

Contract Duration: 1,139 days

Daily Burn Rate: $20.7K/day

Competition Type: NOT AVAILABLE FOR COMPETITION

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: AEGIS MODERNIZATION KITS

Place of Performance

Location: ANDOVER, ESSEX County, MASSACHUSETTS, 01810

State: Massachusetts Government Spending

Plain-Language Summary

Department of Defense obligated $23.5 million to RAYTHEON COMPANY for work described as: AEGIS MODERNIZATION KITS Key points: 1. Contract value represents a significant investment in maintaining and upgrading critical naval defense capabilities. 2. The sole-source nature of this award warrants scrutiny regarding potential price inflation and limited market engagement. 3. Performance risk is moderate, given the established nature of AEGIS systems and Raytheon's experience. 4. This contract supports the Department of the Navy's ongoing efforts to modernize its fleet's combat systems. 5. The award falls within the broader defense sector, specifically focusing on advanced naval warfare technology. 6. Long-term sustainment and modernization of complex defense platforms are key considerations for future spending.

Value Assessment

Rating: fair

Benchmarking the value of this contract is challenging due to the lack of publicly available comparable sole-source awards for AEGIS modernization kits. The firm-fixed-price structure suggests an attempt to control costs, but without competitive bidding, it's difficult to ascertain if the pricing reflects true market value or represents a premium. The total award amount of $23.5 million over approximately three years indicates a substantial, but not exceptionally large, investment for specialized defense hardware.

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 justified when a specific contractor possesses unique capabilities, intellectual property, or when urgency dictates a rapid award. The lack of competition limits the government's ability to explore alternative solutions or secure the most cost-effective pricing through a bidding process.

Taxpayer Impact: Sole-source awards can potentially lead to higher costs for taxpayers as the government does not benefit from the price reductions typically achieved through competitive bidding. It also reduces the incentive for other companies to develop competing technologies.

Public Impact

The primary beneficiaries are the U.S. Navy personnel operating AEGIS-equipped vessels, who will receive modernized combat systems. This contract delivers essential modernization kits that enhance the capabilities of the AEGIS combat system, crucial for fleet defense. The geographic impact is primarily on naval bases and shipyards where these kits will be installed and integrated. Workforce implications include specialized technical roles for installation, testing, and integration of the modernization kits.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price discovery and potentially increases costs for taxpayers.
Lack of competition may stifle innovation from other defense contractors in this specific niche.
Dependence on a single contractor for critical modernization components raises long-term supply chain risks.

Positive Signals

Award to an established contractor (Raytheon) with a proven track record in defense systems.
Firm-fixed-price contract type provides cost certainty for the government.
Modernization kits are essential for maintaining the operational effectiveness of the U.S. Navy fleet.

Sector Analysis

The defense industry, particularly the segment focused on naval systems and combat electronics, is characterized by high barriers to entry and significant R&D investment. Companies like Raytheon are major players in this sector, providing sophisticated solutions for military applications. Spending on modernization kits for platforms like AEGIS is a consistent part of defense budgets, reflecting the need to keep advanced weapon systems current with evolving threats and technologies. Comparable spending often involves multi-year sustainment and upgrade contracts for major defense platforms.

Small Business Impact

This contract does not appear to involve a small business set-aside. Given the specialized nature of AEGIS modernization, it is unlikely that small businesses would be primary contractors, though they may participate as subcontractors to Raytheon. The impact on the small business ecosystem would be indirect, depending on Raytheon's subcontracting strategy.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of the Navy's contracting and program management offices. Transparency is limited by the sole-source nature of the award. Accountability measures would be tied to the delivery schedule and performance specifications outlined in the contract. The Inspector General's office for the Department of Defense may conduct audits or investigations if specific concerns arise regarding contract execution or pricing.

Related Government Programs

AEGIS Combat System
Naval Surface Warfare
Defense Modernization Programs
Shipboard Electronics
U.S. Navy Procurement

Risk Flags

Sole-source award
Potential for cost overruns due to lack of competition
Long-term contractor dependency

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $23.5 million to RAYTHEON COMPANY. AEGIS MODERNIZATION KITS

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 $23.5 million.

What is the period of performance?

Start: 2022-11-18. End: 2025-12-31.

What is Raytheon Company's track record with AEGIS modernization contracts?

Raytheon Company, through its predecessor companies, has a long-standing and extensive history with the AEGIS Combat System, a cornerstone of U.S. naval defense. They have been a primary contractor for various upgrades, maintenance, and modernization efforts for decades. This includes delivering hardware, software, and integration services for different AEGIS baselines. Their deep involvement means they possess significant institutional knowledge and technical expertise specific to the system's evolution. Past performance data, often detailed in contract award justifications and performance reviews, generally indicates a strong capability in delivering these complex systems, though specific details on cost overruns or schedule delays on individual contracts would require deeper investigation into specific award documents.

How does the $23.5 million award compare to historical spending on AEGIS modernization?

The $23.5 million award for AEGIS modernization kits represents a specific, targeted investment within the broader, multi-billion dollar lifecycle cost of the AEGIS program. Historical spending on AEGIS modernization is substantial and occurs annually, encompassing various upgrade paths, software enhancements, and hardware replacements across the fleet. This particular award appears to be for a specific set of kits delivered over a defined period (2022-2025). To provide a precise comparison, one would need to aggregate similar 'delivery order' or 'modification' awards for AEGIS modernization kits over previous years. However, it is reasonable to assume that total annual spending on AEGIS modernization, including all contracts, significantly exceeds this single award, reflecting the ongoing need to maintain and upgrade a large fleet of technologically advanced warships.

What are the primary risks associated with this sole-source contract?

The primary risks associated with this sole-source contract revolve around cost and competition. Without a competitive bidding process, there is a heightened risk that the government may not be achieving the most favorable pricing, potentially leading to cost overruns or inefficient use of taxpayer funds. Another significant risk is the lack of alternative sourcing; the Navy becomes dependent on Raytheon for these specific modernization kits, which could create vulnerabilities in the supply chain or limit flexibility if issues arise. Furthermore, the absence of competition can reduce the incentive for the contractor to innovate aggressively or to offer cost-saving efficiencies, as there is no direct market pressure from rivals. Finally, sole-source awards can sometimes indicate a lack of readily available alternative solutions or a failure in market research to identify potential competitors.

What is the expected program effectiveness and impact of these AEGIS modernization kits?

The expected program effectiveness of these AEGIS modernization kits is to enhance the operational capabilities and extend the service life of U.S. Navy vessels equipped with the AEGIS Combat System. Modernization typically involves upgrading radar, processing, and weapon control capabilities to counter evolving threats, improve situational awareness, and ensure interoperability with other platforms. This leads to improved fleet readiness and a more robust defense posture. The impact is significant, as AEGIS is a critical component of naval air and missile defense. By keeping these systems up-to-date, the Navy can maintain its technological edge, protect naval assets, and contribute to national security objectives more effectively. The kits are designed to ensure the system remains relevant against advanced adversaries.

How does this contract fit into the broader context of U.S. Navy shipbuilding and modernization spending?

This contract fits into the broader context of U.S. Navy shipbuilding and modernization spending as a crucial element of maintaining the readiness and technological superiority of the existing fleet. While new shipbuilding programs represent significant capital investments, the modernization of current platforms ensures that these assets remain effective and capable throughout their service lives. The Navy's budget consistently allocates substantial funds towards upgrades and sustainment for major systems like AEGIS, which are central to its combat capabilities. This specific award for modernization kits is one component of a larger strategy to address obsolescence, incorporate new technologies, and counter emerging threats, thereby maximizing the return on investment for the extensive naval assets already in service.

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 AVAILABLE FOR COMPETITION

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0002422R5301

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Rockwell Collins Australia PTY Limited

Address: 1001 BOSTON POST RD E, MARLBOROUGH, MA, 01752

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: $23,860,830

Exercised Options: $23,584,995

Current Obligation: $23,544,995

Actual Outlays: $642,275

Subaward Activity

Number of Subawards: 77

Total Subaward Amount: $15,934,853

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: N0002422G5311

IDV Type: BOA

Timeline