Raytheon Company awarded $79.5M for CIWS system support, a sole-source contract with a 2-year duration

Contract Overview

Contract Amount: $79,460,482 ($79.5M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2018-02-28

End Date: 2020-04-30

Contract Duration: 792 days

Daily Burn Rate: $100.3K/day

Competition Type: NOT COMPETED

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: PERFORMANCE BASED LOGISTICS CONTRACT SUPPORT FOR CIWS SYSTEM.

Place of Performance

Location: LOUISVILLE, JEFFERSON County, KENTUCKY, 40214

State: Kentucky Government Spending

Plain-Language Summary

Department of Defense obligated $79.5 million to RAYTHEON COMPANY for work described as: PERFORMANCE BASED LOGISTICS CONTRACT SUPPORT FOR CIWS SYSTEM. Key points: 1. The contract's value of $79.5 million for two years of support suggests a significant investment in maintaining critical defense systems. 2. As a sole-source award, the absence of competition may limit price negotiation leverage and potentially lead to higher costs. 3. The fixed-price contract type shifts performance risk to the contractor, but the lack of competition could still inflate the base price. 4. Performance-based logistics implies a focus on outcomes and readiness, which is crucial for the Continuous Improvement Workstation System (CIWS). 5. The contract's duration of approximately two years provides a stable support period but may require future competitive procurements for long-term sustainment. 6. The specific NAICS code 334419 indicates a focus on electronic component manufacturing, suggesting the support involves complex hardware and software elements.

Value Assessment

Rating: fair

Benchmarking the value of this contract is challenging without comparable sole-source awards for similar defense systems. However, a $79.5 million price tag over two years for specialized logistics support indicates a substantial commitment. The firm fixed-price structure is generally favorable for cost control, but the lack of competition means there's no direct market comparison to assess if the pricing is optimal. Further analysis would require understanding the specific services rendered and the criticality of the CIWS system.

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 typically occurs when a single source is deemed uniquely capable of fulfilling the requirement, often due to proprietary technology, specialized expertise, or urgent needs. The absence of a competitive bidding process limits the opportunity for price discovery and potentially reduces the incentive for the contractor to offer the lowest possible price.

Taxpayer Impact: Taxpayers may face higher costs due to the lack of competitive pressure to drive down prices. Without competing offers, it's harder to ensure the government is receiving the best value for its investment.

Public Impact

The primary beneficiaries are the U.S. Navy personnel who rely on the operational readiness of the CIWS system for defense. The contract delivers essential logistics support, including maintenance, repair, and potentially spare parts for the CIWS. The geographic impact is likely concentrated around naval bases and operational areas where the CIWS is deployed. Workforce implications include the potential for specialized technical jobs related to maintaining and supporting the CIWS, both within the contractor's organization and potentially at Navy facilities.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition, potentially leading to inflated costs for taxpayers.
Lack of transparency in the sole-source justification process could obscure potential alternatives.
Firm fixed-price contracts can still be costly if the baseline price is not competitive.
Long-term sustainment costs are not addressed by this two-year contract, requiring future potentially competitive procurements.
The specific nature of 'performance-based logistics' needs detailed scrutiny to ensure it translates to measurable improvements and value.

Positive Signals

Performance-based logistics aims to ensure system readiness and reduce lifecycle costs through outcome-oriented support.
Firm fixed-price contract shifts risk to the contractor, incentivizing efficient service delivery.
The contract supports a critical defense system (CIWS), ensuring operational capability.
A defined two-year period provides stability for planning and execution of support services.

Sector Analysis

The defense logistics and support sector is a significant segment of the federal contracting market, characterized by complex supply chains and specialized technical requirements. Contracts like this, supporting critical weapon systems, are common within the Department of Defense. The market for such specialized support is often concentrated among a few large defense contractors due to the high barriers to entry, including technical expertise, security clearances, and established relationships. Spending benchmarks for similar system sustainment can vary widely based on the system's complexity, age, and operational tempo.

Small Business Impact

This contract does not appear to involve a small business set-aside, as indicated by 'sb': false. The prime contractor, Raytheon Company, is a large defense corporation. While there might be subcontracting opportunities for small businesses within the performance of this contract, the primary award is not directed towards the small business sector. Analysis of subcontracting plans would be necessary to determine the extent of small business participation.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy's contracting and program management offices. As a sole-source award, the justification and approval process would be subject to specific regulations and potentially higher levels of review to ensure necessity and fairness. Transparency might be limited due to the non-competitive nature, but contract performance metrics and financial expenditures would typically be tracked. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Naval Sea Systems Command (NAVSEA) Contracts
Defense Logistics Agency (DLA) Support Contracts
Weapon System Sustainment Programs
Combat Systems Maintenance Contracts

Risk Flags

Sole-source award may indicate limited competition, potentially impacting cost-effectiveness.
Contract duration of two years requires future procurement actions for long-term sustainment.
Performance-based logistics requires clear metrics and oversight to ensure value realization.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $79.5 million to RAYTHEON COMPANY. PERFORMANCE BASED LOGISTICS CONTRACT SUPPORT FOR CIWS SYSTEM.

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 $79.5 million.

What is the period of performance?

Start: 2018-02-28. End: 2020-04-30.

What is the specific nature of the 'performance-based logistics' support provided for the CIWS system?

Performance-based logistics (PBL) for the CIWS system likely entails a comprehensive support package focused on achieving specific performance outcomes rather than simply providing discrete services. This could include guaranteed system availability rates, reduced turnaround times for repairs, proactive maintenance scheduling, and integrated supply chain management for spare parts. The goal of PBL is to shift the focus from transactional support to a long-term partnership aimed at optimizing system readiness and reducing the total ownership cost over its lifecycle. The specific metrics and deliverables would be detailed in the contract's Performance Work Statement (PWS), outlining the expected performance standards and the contractor's responsibilities in meeting them.

How does the $79.5 million contract value compare to historical spending on CIWS system support?

Without access to historical spending data specifically for CIWS system support, a direct comparison is not possible. However, the $79.5 million awarded over approximately two years suggests a significant annual investment in the range of $39.75 million. This figure should be evaluated in the context of the CIWS system's criticality, operational tempo, and the complexity of its maintenance requirements. If this represents a substantial increase or decrease compared to previous support contracts, it would warrant further investigation into the reasons, such as changes in system reliability, scope of support, or market pricing dynamics. A trend analysis over several years would provide a more robust understanding of the government's investment in this area.

What are the key risks associated with a sole-source award for critical defense system support?

The primary risk of a sole-source award for critical defense system support is the lack of competitive pressure, which can lead to inflated pricing and reduced incentive for the contractor to innovate or improve efficiency. Without competing bids, the government may not be securing the best possible value for its investment. There's also a risk of vendor lock-in, where the government becomes overly reliant on a single provider, making it difficult and costly to switch suppliers in the future. Furthermore, the absence of a competitive process can sometimes obscure potential risks related to the contractor's capability, financial stability, or past performance, as these factors are not rigorously vetted against competing offers.

What is Raytheon Company's track record with performance-based logistics contracts and defense system support?

Raytheon Company, now part of RTX, has a long and extensive history of providing defense systems and support services to the U.S. military and international allies. They are a major defense contractor with significant experience in areas relevant to performance-based logistics (PBL), including complex weapon systems, electronics, and aerospace. While specific details on their PBL contracts for the CIWS system are not provided here, Raytheon has been involved in various sustainment and readiness programs that often incorporate PBL principles. Their track record generally includes delivering complex technological solutions and support, though like any large contractor, specific contract performance can vary. A deeper dive into their contract history, including past performance evaluations and any reported issues, would be necessary for a comprehensive assessment.

How does the 'Other Electronic Component Manufacturing' NAICS code relate to the CIWS system support?

The NAICS code 334419, 'Other Electronic Component Manufacturing,' suggests that the support provided under this contract is heavily focused on the electronic aspects of the CIWS (Close-In Weapon System). This could encompass a wide range of activities, including the manufacturing, repair, overhaul, or sustainment of electronic components, sub-assemblies, circuit boards, sensors, processors, and control systems integral to the CIWS. Given that modern weapon systems are highly reliant on sophisticated electronics for targeting, guidance, and operation, this NAICS code indicates that the contract likely involves specialized technical expertise in electronics engineering, diagnostics, and component lifecycle management to ensure the CIWS remains operational and effective.

Industry Classification

NAICS: Manufacturing › Semiconductor and Other Electronic Component Manufacturing › Other Electronic Component Manufacturing

Product/Service Code: MAINT/REPAIR SHOP EQPT

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 1151 E HERMANS RD, TUCSON, AZ, 85756

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: $79,460,482

Exercised Options: $79,460,482

Current Obligation: $79,460,482

Subaward Activity

Number of Subawards: 1

Total Subaward Amount: $49,894

Contract Characteristics

Multi-Year Contract: Yes

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: N0010411DZD43

IDV Type: IDC

Timeline