DoD's $21M contract with Raytheon Company for broadcasting equipment shows questionable value and limited competition

Contract Overview

Contract Amount: $21,167,652 ($21.2M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2005-09-20

End Date: 2010-09-19

Contract Duration: 1,825 days

Daily Burn Rate: $11.6K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS INCENTIVE

Sector: Other

Place of Performance

Location: MARLBOROUGH, MIDDLESEX County, MASSACHUSETTS, 01752

State: Massachusetts Government Spending

Plain-Language Summary

Department of Defense obligated $21.2 million to RAYTHEON COMPANY for work described as: Key points: 1. The contract's cost-plus-incentive structure may lead to cost overruns. 2. Limited competition raises concerns about price discovery and potential overpayment. 3. The contract duration of five years suggests a long-term need for these services. 4. The lack of small business set-aside indicates a focus on large prime contractors. 5. The contract's value, while significant, needs benchmarking against similar procurements. 6. The specific nature of the equipment manufactured warrants further investigation into its necessity and alternatives.

Value Assessment

Rating: questionable

The contract's cost-plus-incentive fee (CPIF) structure, while allowing for shared risk, can incentivize contractors to increase costs to achieve higher fee percentages. Without detailed cost breakdowns and performance metrics, it is difficult to definitively assess value for money. Benchmarking this $21.17 million contract against similar procurements for specialized broadcasting equipment is challenging due to the unique nature of defense-related technology. However, the extended duration and the CPIF model suggest a potential for costs to escalate beyond initial estimates.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, indicating that the Department of the Navy did not conduct a competitive bidding process. This could be due to the specialized nature of the required equipment or a lack of available vendors capable of meeting the specific requirements. The absence of competition limits the government's ability to secure the best possible price and terms, as there was no market pressure to drive down costs.

Taxpayer Impact: Sole-source awards mean taxpayers may not be getting the most competitive pricing. The lack of competition prevents market forces from ensuring cost efficiency, potentially leading to higher overall expenditures for the government.

Public Impact

The primary beneficiaries are the Department of Defense, specifically the Navy, receiving specialized broadcasting equipment. The services delivered include the manufacturing and potentially maintenance of radio and television broadcasting and wireless communications equipment. The geographic impact is likely concentrated around the contractor's facilities and the operational areas of the Navy units utilizing the equipment. Workforce implications include employment opportunities at Raytheon Company and its subcontractors within the manufacturing and technology sectors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing and potentially increases costs for taxpayers.
Cost-plus-incentive fee structure can incentivize higher spending if not closely monitored.
Lack of transparency in the justification for sole-source procurement.
The specific use and necessity of this specialized equipment could be questioned without further context.
Long contract duration (5 years) increases exposure to potential cost escalations.

Positive Signals

Award to a large, established defense contractor like Raytheon suggests a level of trust and proven capability.
The incentive fee structure, if managed well, can align contractor and government interests towards performance.
The contract addresses a specific, likely critical, need within the Department of Defense's communication infrastructure.
The contract is for equipment manufacturing, contributing to the defense industrial base.

Sector Analysis

The contract falls within the Radio and Television Broadcasting and Wireless Communications Equipment Manufacturing sector (NAICS 334220). This sector is characterized by the production of equipment used for transmitting and receiving audio and video signals, as well as wireless communication devices. The defense industry often requires highly specialized and secure communication equipment, which can command premium pricing due to stringent performance and reliability standards. Comparable spending benchmarks are difficult to establish without knowing the exact specifications of the equipment, but defense-related electronics manufacturing is a significant segment of the broader industrial base.

Small Business Impact

This contract does not appear to have a small business set-aside (SB is false). The award to Raytheon Company, a large prime contractor, suggests that small businesses are unlikely to be direct recipients of this prime contract. However, Raytheon may engage small businesses as subcontractors for specific components or services, though this is not explicitly detailed in the provided data. The absence of a set-aside means opportunities for small businesses to compete directly for this significant portion of defense spending are limited.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of the Navy's contracting and program management offices. Inspector General (IG) reports and audits could be initiated to review cost efficiency and performance, especially given the CPIF structure. Transparency is limited by the sole-source nature of the award and the proprietary information often associated with defense contracting. Accountability would be measured against the contract's performance metrics and cost targets.

Related Government Programs

Department of Defense Communications Systems
Navy Radio and Signal Equipment Procurement
Wireless Communications Manufacturing Contracts
Defense Broadcasting Technology

Risk Flags

Sole Source Justification
Cost Plus Incentive Fee Structure
Long Contract Duration
Lack of Competition

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $21.2 million to RAYTHEON COMPANY. See the official description on USAspending.

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 $21.2 million.

What is the period of performance?

Start: 2005-09-20. End: 2010-09-19.

What specific type of broadcasting and wireless communications equipment was procured under this contract, and what is its intended use within the Department of the Navy?

The provided data indicates the contract falls under NAICS code 334220, which covers Radio and Television Broadcasting and Wireless Communications Equipment Manufacturing. While the exact specifications are not detailed, this typically includes equipment such as transmitters, receivers, antennas, and related systems used for communication. For the Department of the Navy, such equipment could be used for tactical communications, intelligence gathering, broadcasting operational information, or maintaining command and control networks. The specific application would dictate the technical requirements, security protocols, and performance standards, influencing the cost and complexity of the procured items.

What was the justification for awarding this contract on a sole-source basis to Raytheon Company?

The justification for a sole-source award typically stems from unique capabilities, proprietary technology, or the lack of other responsible sources capable of meeting the government's requirements within the necessary timeframe. For a defense contractor like Raytheon, this could involve specialized expertise in secure communications, integration with existing military systems, or specific technological advancements that only they possess. The Department of the Navy would have had to document this justification, often through a Justification and Approval (J&A) document, to comply with federal acquisition regulations. Without access to the J&A, the precise reasons remain speculative but likely relate to specialized defense needs.

How does the Cost Plus Incentive Fee (CPIF) structure of this contract typically influence contractor behavior and final costs compared to other contract types?

A Cost Plus Incentive Fee (CPIF) contract aims to share the risk and reward between the government and the contractor. The target cost is established, and the target fee is set. If the final cost is below the target, both parties share in the savings according to a pre-negotiated formula. Conversely, if the final cost exceeds the target, both share in the overruns. This structure incentivizes the contractor to control costs and improve performance to achieve a higher fee. However, it can also lead to increased administrative burden for the government in monitoring costs and performance. Compared to fixed-price contracts, CPIF offers more flexibility for complex or uncertain projects but carries a higher risk of cost escalation if not managed diligently.

What is the historical spending pattern for similar broadcasting and wireless communications equipment by the Department of the Navy or other defense agencies?

Historical spending on similar equipment by the Department of the Navy and other defense agencies can vary significantly based on technological advancements, strategic priorities, and specific operational needs. Defense spending in this category often involves substantial investments in secure, resilient, and high-performance communication systems. Trends may show increased spending on networked systems, satellite communications, and advanced encryption technologies. Analyzing past contracts, particularly those awarded competitively, can provide benchmarks for pricing and performance. However, specific data on historical spending for equipment directly comparable to this sole-source award is not readily available in the provided snippet, making direct historical comparison difficult.

What are the potential risks associated with a five-year contract duration for specialized defense equipment, particularly under a CPIF arrangement?

A five-year contract duration for specialized defense equipment, especially under a CPIF arrangement, presents several risks. Firstly, technology can rapidly become obsolete, meaning the equipment procured might be outdated before the contract ends, requiring costly upgrades or replacements. Secondly, the extended period increases the potential for cost overruns, as unforeseen issues, material price fluctuations, or changes in scope can significantly impact the final price under a CPIF model. Thirdly, a long-term commitment to a single contractor, particularly if sole-sourced, can reduce flexibility and the government's ability to adapt to evolving threats or requirements. Robust oversight and clear performance metrics are crucial to mitigate these risks.

Industry Classification

NAICS: Manufacturing › Communications Equipment Manufacturing › Radio and Television Broadcasting and Wireless Communications Equipment 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 INCENTIVE (V)

Evaluated Preference: NONE

Contractor Details

Address: 1001 BOSTON POST RD, MARLBOROUGH, MA, 03

Business Categories: Category Business, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Contract Characteristics

Cost or Pricing Data: YES

Timeline