Navy awards Raytheon $62.6M contract for CIWS long-term support, raising value-for-money questions

Contract Overview

Contract Amount: $62,598,427 ($62.6M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2021-10-01

End Date: 2026-12-31

Contract Duration: 1,917 days

Daily Burn Rate: $32.7K/day

Competition Type: NOT COMPETED

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: CIWS LONG TERM CONTRACT

Place of Performance

Location: TUCSON, PIMA County, ARIZONA, 85756

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $62.6 million to RAYTHEON COMPANY for work described as: CIWS LONG TERM CONTRACT Key points: 1. Contract value of $62.6M over five years suggests significant investment in Close-In Weapon System sustainment. 2. Sole-source award to Raytheon Company indicates a lack of competitive bidding, potentially impacting price. 3. The contract duration of nearly five years allows for long-term planning but also locks in a single provider. 4. Focus on optical instrument and lens manufacturing highlights a critical component of the CIWS system. 5. The contract's fixed-price nature aims to control costs, but without competition, cost efficiency is harder to verify. 6. Performance context is limited without specific delivery order details or performance metrics.

Value Assessment

Rating: questionable

The $62.6 million contract value for long-term support of the CIWS system appears substantial. Without comparable sole-source contracts for similar systems or detailed breakdowns of the services provided, it is difficult to benchmark the value effectively. The lack of competition inherently limits the ability to assess if the pricing reflects market rates or represents a fair value for the taxpayer. The fixed-price nature is a positive control, but the absence of competitive pressure means the government may not be achieving the most cost-effective solution.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one bidder, Raytheon Company, was considered. This approach is typically used when a specific capability is only available from a single source or when urgency precludes a competitive process. The lack of competition means there was no opportunity for other companies to offer alternative solutions or potentially lower prices, which can lead to higher costs for the government.

Taxpayer Impact: Sole-source awards limit price discovery and can result in taxpayers paying a premium for goods and services, as there is no competitive pressure to drive down costs.

Public Impact

The primary beneficiaries are the U.S. Navy, ensuring the continued operational readiness of its Close-In Weapon Systems. Services delivered include long-term support, likely encompassing maintenance, repair, and potentially upgrades for CIWS. The geographic impact is national, supporting naval operations across various deployments and bases. Workforce implications may include continued employment for specialized technicians and engineers at Raytheon.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing and potential cost savings for taxpayers.
Lack of transparency in the justification for sole-source procurement.
Long contract duration without competitive re-evaluation could lead to complacency or price creep.
Potential for vendor lock-in, making future transitions to alternative solutions more difficult and costly.

Positive Signals

Contract ensures continued availability of critical defense systems, supporting national security.
Fixed-price contract structure provides some cost certainty for the government.
Raytheon's established expertise in CIWS technology suggests a high likelihood of successful execution.

Sector Analysis

The defense sector, particularly within naval systems, relies heavily on specialized contractors for sustainment and upgrades. The Close-In Weapon System (CIWS) is a critical component for ship defense. Contracts for such systems often involve significant research, development, and long-term support due to their complexity and strategic importance. Spending in this area is driven by defense readiness requirements and technological advancements. Comparable spending benchmarks are difficult to ascertain without specific details on the scope of work and system configuration.

Small Business Impact

This contract does not appear to involve a small business set-aside, as it was awarded to Raytheon Company, a large defense contractor. There is no explicit information regarding subcontracting plans for small businesses within this award. The lack of a set-aside or clear subcontracting requirements could limit opportunities for small businesses to participate in this significant defense contract.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy's contracting and program management offices. Accountability measures are typically embedded within the contract terms, including delivery schedules and performance standards. Transparency is limited due to the sole-source nature and the absence of public justification details. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Naval Surface Warfare
Weapon Systems Maintenance
Defense Logistics Agency
Naval Air Systems Command
Tactical Missile Systems

Risk Flags

Sole-source award
Lack of competition
Potential for cost overruns
Limited transparency

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $62.6 million to RAYTHEON COMPANY. CIWS LONG TERM CONTRACT

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 $62.6 million.

What is the period of performance?

Start: 2021-10-01. End: 2026-12-31.

What is the specific justification provided by the Department of the Navy for awarding this contract on a sole-source basis to Raytheon Company?

The provided data does not include the specific justification for the sole-source award. Typically, sole-source procurements are justified under circumstances such as only one responsible source being available, or when the agency determines that a competitive bidding process is not feasible or in the government's best interest due to urgency, unique capabilities, or proprietary technology. Without the official justification document (e.g., a Justification and Approval or J&A), it is impossible to ascertain the precise rationale. This lack of transparency is a common concern with sole-source contracts, as it limits public understanding of why competitive alternatives were not pursued.

How does the $62.6 million contract value compare to historical spending on CIWS long-term support or similar defense systems?

The provided data does not offer historical spending figures for CIWS long-term support or comparable defense systems, making a direct comparison difficult. However, a $62.6 million contract over approximately five years (October 2021 to December 2026) suggests an average annual expenditure of roughly $12.5 million. This figure needs to be contextualized against the complexity and criticality of the CIWS, as well as the specific services included (e.g., maintenance, spare parts, engineering support, software updates). Without historical data or details on the scope of work, it's challenging to determine if this represents an increase, decrease, or stable level of investment compared to previous periods or similar systems.

What are the key performance indicators (KPIs) or service level agreements (SLAs) associated with this contract, and how will Raytheon's performance be measured?

The provided data does not specify the key performance indicators (KPIs) or service level agreements (SLAs) for this contract. Typically, long-term support contracts for defense systems include metrics related to system availability, response times for maintenance, repair turnaround times, quality of repairs, and adherence to delivery schedules for parts or services. Performance measurement is crucial for ensuring the government receives the expected value and that the CIWS remains operational. Without these details, assessing the effectiveness of Raytheon's performance and the overall value derived from the contract is not possible.

What is Raytheon Company's track record with the Department of Defense and specifically with the CIWS program?

Raytheon Company (now RTX) has a long and established history as a prime contractor for the U.S. Department of Defense, including extensive involvement with the Close-In Weapon System (CIWS). Raytheon has been the primary developer and manufacturer of the Phalanx CIWS, the system this contract likely supports. Their track record includes decades of production, upgrades, and sustainment for this critical naval defense capability. While specific performance metrics for past contracts are not detailed here, Raytheon's continued role as the incumbent provider suggests a generally satisfactory performance history and deep institutional knowledge of the CIWS.

Are there any identified risks associated with this contract, such as technical obsolescence, supply chain disruptions, or contractor performance issues?

Potential risks associated with this contract include technical obsolescence, as the CIWS technology, while continuously upgraded, is not new. Supply chain disruptions are a general risk in defense contracting, potentially impacting the availability of specialized components for repair or maintenance. Contractor performance is always a consideration, although Raytheon's long-standing role suggests a degree of reliability. Given the sole-source nature, there's also a risk of complacency or less aggressive cost management compared to a competitive environment. The data does not explicitly detail these risks, but they are inherent considerations for long-term defense sustainment contracts.

Industry Classification

NAICS: Manufacturing › Commercial and Service Industry Machinery Manufacturing › Optical Instrument and Lens Manufacturing

Product/Service Code: AEROSPACE CRAFT COMPONENTS AND ACCESSORIES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: RTX Corp

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: $62,598,427

Exercised Options: $62,598,427

Current Obligation: $62,598,427

Subaward Activity

Number of Subawards: 8

Total Subaward Amount: $2,533,013

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: N0038321DZM01

IDV Type: IDC

Timeline