Raytheon Company awarded $42.2M for AEGIS Modernization Kits, a sole-source contract with a 5-year performance period

Contract Overview

Contract Amount: $42,257,861 ($42.3M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2024-02-20

End Date: 2028-03-15

Contract Duration: 1,485 days

Daily Burn Rate: $28.5K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: AEGIS MODERNIZATION KIT

Place of Performance

Location: ANDOVER, ESSEX County, MASSACHUSETTS, 01810

State: Massachusetts Government Spending

Plain-Language Summary

Department of Defense obligated $42.3 million to RAYTHEON COMPANY for work described as: AEGIS MODERNIZATION KIT Key points: 1. Contract awarded on a sole-source basis, limiting price competition. 2. The contract is for modernization kits, suggesting ongoing system sustainment and upgrades. 3. Performance period extends over 5 years, indicating a long-term need. 4. The contract type is Firm Fixed Price, which shifts cost risk to the contractor. 5. The award is a delivery order under a larger contract vehicle. 6. The specific product is AEGIS Modernization Kits, critical for naval defense systems.

Value Assessment

Rating: fair

Benchmarking the value of this specific modernization kit is challenging without detailed cost breakdowns or comparable sole-source awards. The firm fixed-price structure provides some cost certainty, but the lack of competition inherently limits the government's ability to secure the lowest possible price. The total award amount of $42.2 million over nearly five years suggests a significant investment in maintaining and upgrading critical naval defense capabilities.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was not competed, indicating a sole-source award. This typically occurs when only one responsible source can provide the required supplies or services, or when there is a compelling justification for other than full and open competition. The lack of competition means potential savings from a competitive bidding process were not realized.

Taxpayer Impact: Taxpayers may have paid a premium due to the absence of competitive pressure to drive down costs.

Public Impact

The U.S. Navy benefits from the modernization of its AEGIS combat system, enhancing its operational capabilities. Services delivered include the provision of critical modernization kits for naval platforms. The geographic impact is primarily related to naval operations and maintenance facilities. Workforce implications include specialized technical roles for installation, testing, and support of the AEGIS system.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source nature limits competitive pricing, potentially increasing costs for taxpayers.
Lack of competition raises questions about whether the government obtained the best value.
Long performance period could lead to price increases if market conditions change significantly.

Positive Signals

Firm Fixed Price contract shifts cost overrun risk to the contractor.
Modernization kits ensure the continued effectiveness and relevance of a critical defense system.
Delivery order structure suggests efficient use of an existing contract vehicle.

Sector Analysis

The AEGIS Combat System is a cornerstone of modern naval warfare, providing integrated air and missile defense. The market for such specialized defense systems is highly concentrated, often dominated by a few prime contractors with deep technical expertise and established relationships with the Department of Defense. Spending on modernization kits reflects the ongoing need to keep advanced systems current with evolving threats and technological advancements. Comparable spending benchmarks would likely involve other major platform upgrades within the naval sector.

Small Business Impact

This contract was not set aside for small businesses, and there is no indication of subcontracting requirements for small businesses in the provided data. The prime contractor, Raytheon Company, is a large defense corporation. The absence of small business set-asides or explicit subcontracting goals means that the direct economic benefit to the small business ecosystem from this specific award is likely minimal.

Oversight & Accountability

Oversight for this contract would fall under the Department of the Navy's contracting and program management offices. As a delivery order under a larger contract, existing oversight mechanisms for that contract vehicle would apply. Transparency is limited by the sole-source nature of the award, but contract modifications and performance reports would be subject to internal review and potentially Inspector General oversight if performance issues arise.

Related Government Programs

AEGIS Combat System
Naval Surface Warfare
Defense Procurement
Ship Modernization Programs

Risk Flags

Sole-source award limits price competition.
Potential for cost overruns without competitive benchmarking.
Long-term contract duration requires careful monitoring of market conditions.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $42.3 million to RAYTHEON COMPANY. AEGIS MODERNIZATION KIT

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 $42.3 million.

What is the period of performance?

Start: 2024-02-20. End: 2028-03-15.

What is the historical spending trend for AEGIS Modernization Kits awarded to Raytheon Company?

Analyzing historical spending requires access to a broader dataset of past contracts. However, the current award of $42.2 million for AEGIS Modernization Kits from 2024 to 2028 suggests a sustained investment in this area. Without prior contract data, it's difficult to establish a trend, but the multi-year duration and significant value indicate this is a recurring and important procurement for the Navy. Future analysis could involve tracking the number and value of similar awards over time to identify patterns in modernization spending.

How does the per-unit cost of these AEGIS Modernization Kits compare to similar systems or previous procurements?

Determining the per-unit cost is not feasible with the provided data, as the total award amount covers an unspecified quantity of kits and potentially associated services over a five-year period. Furthermore, the sole-source nature of the award makes direct comparison to competitively procured systems difficult. To assess value, one would need to know the number of kits procured, their specific capabilities, and compare this to the cost of similar kits or previous AEGIS modernization efforts, ideally from competitively bid contracts to establish a market baseline.

What are the specific risks associated with a sole-source award for critical defense systems like AEGIS modernization kits?

The primary risk of a sole-source award is the potential for inflated pricing due to the lack of competitive pressure. This can lead to the government paying more than necessary. Another risk is reduced innovation, as the contractor may have less incentive to develop more cost-effective or advanced solutions when competition is absent. Furthermore, reliance on a single source can create supply chain vulnerabilities and limit the government's leverage if performance issues arise or if the contractor's business situation changes.

What is the track record of Raytheon Company in delivering complex defense modernization programs?

Raytheon Company (now RTX) has a long and extensive track record in delivering complex defense systems, including the AEGIS Combat System itself and various modernization programs for military platforms. They are a major defense contractor with significant experience in areas such as radar, missile defense, and command and control systems. While specific performance metrics for this particular contract are not yet available, Raytheon's overall history suggests a high capability to execute such programs, though like any large contractor, they may have faced challenges on specific projects.

What is the strategic importance of AEGIS modernization kits to the U.S. Navy's overall defense posture?

AEGIS modernization kits are strategically vital as they ensure the continued effectiveness and relevance of the AEGIS Combat System, which is the backbone of the U.S. Navy's fleet air and missile defense capabilities. Modernization addresses evolving threats, such as advanced ballistic missiles and hypersonic weapons, and incorporates new technologies to enhance detection, tracking, and engagement. Maintaining the AEGIS system's cutting-edge performance is crucial for protecting naval assets, supporting joint operations, and projecting power globally. Failure to modernize would significantly degrade the Navy's ability to conduct its missions safely and effectively.

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: N0002423R5302

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: $42,257,861

Exercised Options: $42,257,861

Current Obligation: $42,257,861

Subaward Activity

Number of Subawards: 61

Total Subaward Amount: $20,743,027

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