Raytheon Company awarded $193M contract for miscellaneous communication equipment, raising questions on competition and value

Contract Overview

Contract Amount: $20,546,830 ($20.5M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2002-12-02

End Date: 2008-05-30

Contract Duration: 2,006 days

Daily Burn Rate: $10.2K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: 200306!031376!1700!BW24A !NAVAL UNDERSEA WARFARE CENTER, N!N6660403C1376 !A!N! !N! !20021202!20070930!193049236!193049236!001339159!N!RAYTHEON COMPANY !1001 BOSTON POST RD !MARLBOROUGH !MA!01752!38715!017!25!MARLBOROUGH !MIDDLESEX !MASS !+000002600000!N!N!000014324563!5895!MISCELLANEOUS COMMUNICATION EQUIPMENT !C9E!ALL OTHER SUPPLIES AND EQUIPME!2000!NOT DISCERNABLE OR CLASSIFIED !334220!E! !3! ! ! ! ! !99990909!B! ! !N!Z!D!N!U!1!001!N!1G!Z!N!Z! ! !N!C!N! ! ! !Z!Z!A!A!000!A!B!N! ! ! ! ! !N66604!0001! !

Place of Performance

Location: MARLBOROUGH, MIDDLESEX County, MASSACHUSETTS, 01752

State: Massachusetts Government Spending

Plain-Language Summary

Department of Defense obligated $20.5 million to RAYTHEON COMPANY for work described as: 200306!031376!1700!BW24A !NAVAL UNDERSEA WARFARE CENTER, N!N6660403C1376 !A!N! !N! !20021202!20070930!193049236!193049236!001339159!N!RAYTHEON COMPANY !1001 BOSTON POST RD !MARLBOROUGH !MA!01752!38715!017!25!MARLBOROUGH !MIDDL… Key points: 1. Contract awarded on a sole-source basis, limiting price discovery and potentially increasing costs. 2. Significant contract value suggests a critical need for communication equipment within the Navy. 3. The 'NOT COMPETED' status warrants scrutiny regarding the justification for avoiding a competitive bidding process. 4. Long contract duration (over 5 years) indicates a sustained requirement for these specialized communication systems. 5. The specific type of communication equipment is classified as 'MISCELLANEOUS COMMUNICATION EQUIPMENT', lacking detailed public transparency. 6. Contractor, Raytheon Company, is a major defense contractor, suggesting established relationships but also potential market dominance.

Value Assessment

Rating: questionable

The contract's value of $193 million over approximately six years for 'MISCELLANEOUS COMMUNICATION EQUIPMENT' is substantial. Without a competitive bidding process, it is difficult to benchmark the pricing against market rates or similar contracts. The Cost Plus Fixed Fee (CPFF) contract type can sometimes lead to higher costs if not managed diligently, as the contractor is reimbursed for allowable costs plus a fixed fee. Further analysis would be needed to compare the fixed fee percentage and the overall cost structure to industry standards for similar defense procurements.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a 'NOT COMPETED' basis, indicating that a full and open competition was not conducted. The specific justification for this sole-source award is not detailed in the provided data. Sole-source awards can occur for various reasons, such as the unavailability of other sources, national security concerns, or the need for compatibility with existing systems. However, the absence of competition typically leads to less favorable pricing for the government.

Taxpayer Impact: The lack of competition means taxpayers may not have benefited from the cost savings that a competitive bidding process could have generated. This could result in a higher overall expenditure for the required communication equipment.

Public Impact

The primary beneficiaries are likely elements within the Department of the Navy requiring advanced communication capabilities. The contract delivers essential 'MISCELLANEOUS COMMUNICATION EQUIPMENT', crucial for operational effectiveness and information exchange. Geographic impact is likely concentrated around naval bases and operational theaters where this equipment is deployed. Workforce implications may include specialized technical roles for installation, maintenance, and operation of the communication systems.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition raises concerns about potential overpricing and reduced value for taxpayer money.
The 'MISCELLANEOUS COMMUNICATION EQUIPMENT' classification lacks specificity, hindering a clear understanding of the technology and its necessity.
The Cost Plus Fixed Fee (CPFF) contract type, while common, can incentivize cost overruns if not rigorously monitored.
Long contract duration without clear performance metrics in the provided data could indicate a risk of complacency or scope creep.

Positive Signals

Award to a major defense contractor like Raytheon suggests access to established expertise and potentially advanced technological solutions.
The sustained funding over several years indicates a long-term commitment to a critical capability for the Navy.
The contract is for communication equipment, a vital component for modern military operations and command and control.

Sector Analysis

The defense sector, particularly within the Department of the Navy, relies heavily on advanced communication systems. The market for such equipment is characterized by high barriers to entry due to technological complexity and security requirements. Raytheon Company is a significant player in this space, offering a wide range of defense electronics and communication solutions. Spending benchmarks for similar communication equipment contracts within the defense industry can vary widely based on technological sophistication, quantity, and specific functionalities. This contract falls under the broader category of defense electronics manufacturing and integration.

Small Business Impact

The provided data indicates that this contract was not set aside for small businesses, nor does it explicitly mention subcontracting plans for small businesses. Given the sole-source nature and the likely complexity of the 'MISCELLANEOUS COMMUNICATION EQUIPMENT', it is possible that large prime contractors like Raytheon are expected to handle most of the work. Further investigation into subcontracting requirements would be necessary to assess the impact on the small business ecosystem.

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 for the Department of Defense may also scrutinize large contracts for potential fraud, waste, or abuse. Transparency is limited by the sole-source award and the classification of the equipment. Accountability would be driven by the terms of the Cost Plus Fixed Fee contract, including cost reporting and performance reviews, though specific details are not provided.

Related Government Programs

Naval Communication Systems
Defense Electronics Procurement
Department of Defense Information Technology
Advanced Warfare Systems

Risk Flags

Sole-source award lacks transparency and competitive pricing.
Contract type (CPFF) requires diligent government oversight to control costs.
Classification 'MISCELLANEOUS COMMUNICATION EQUIPMENT' lacks specificity.
Long contract duration poses risk of technological obsolescence.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $20.5 million to RAYTHEON COMPANY. 200306!031376!1700!BW24A !NAVAL UNDERSEA WARFARE CENTER, N!N6660403C1376 !A!N! !N! !20021202!20070930!193049236!193049236!001339159!N!RAYTHEON COMPANY !1001 BOSTON POST RD !MARLBOROUGH !MA!01752!38715!017!25!MARLBOROUGH !MIDDLESEX !MASS !+000002600000!N!N!000014324563!5895!MISCELLANEOUS COMMUNICATION EQUIPMENT !C9E!ALL OTHER SUPPLIES AND EQUIPME!2000!NOT DISCERNABLE OR CLASSIFIED !334220!E! !3! ! ! ! ! !99990909!B

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 $20.5 million.

What is the period of performance?

Start: 2002-12-02. End: 2008-05-30.

What specific types of communication equipment are being procured under this contract, and what are their intended applications?

The contract specifies 'MISCELLANEOUS COMMUNICATION EQUIPMENT' and falls under the North American Industry Classification System (NAICS) code 334220, which covers Radio and Television Broadcasting and Wireless Communications Equipment Manufacturing. However, the exact nature and application of the equipment are not detailed in the provided data, likely due to classification or proprietary reasons. This lack of specificity makes it challenging to assess the technological advancement, necessity, and potential alternatives. Such equipment could range from secure tactical radios and satellite communication terminals to specialized data transmission devices critical for naval operations, intelligence gathering, or command and control systems.

What was the justification for awarding this contract on a sole-source (not competed) basis?

The provided data explicitly states the contract was 'NOT COMPETED'. While the specific justification is not detailed, common reasons for sole-source awards in defense contracting include the existence of unique capabilities held by only one source, urgent and compelling needs where competition is impractical, national security concerns, or the requirement for interoperability with existing systems that only one contractor can provide. Without further documentation from the awarding agency (Department of the Navy), the precise rationale remains undisclosed, which limits transparency and the ability to verify if competition was truly impossible or simply not pursued.

How does the Cost Plus Fixed Fee (CPFF) contract structure potentially impact the final cost to taxpayers?

The Cost Plus Fixed Fee (CPFF) contract type reimburses the contractor (Raytheon Company) for all allowable costs incurred during performance, plus a predetermined fixed fee representing profit. While the fee is fixed, the total cost is variable. This structure can incentivize contractors to control costs to maximize their profit margin (as the fee is a percentage of the initial estimated cost, but the actual profit is fixed). However, it also places a significant burden on the government to meticulously audit and verify all claimed costs. If cost overruns occur due to unforeseen technical challenges or scope changes, the government bears the risk of increased total expenditure, while the contractor's fee remains constant. Effective oversight and robust cost accounting standards are crucial to mitigate potential cost escalations under a CPFF arrangement.

What is Raytheon Company's track record with similar communication equipment contracts for the Department of Defense?

Raytheon Company is a major defense contractor with extensive experience in developing and supplying a wide array of communication systems, electronics, and integrated solutions for the Department of Defense and other government agencies. They have a long history of delivering complex systems, including radar, sensors, command and control, and various forms of electronic warfare and communication equipment. While specific performance metrics for this particular contract are not detailed, Raytheon's general track record suggests they possess the technical capabilities and manufacturing capacity required for such procurements. However, like any large contractor, they have also faced scrutiny over contract performance, cost overruns, and delivery schedules on various programs throughout their history.

What is the historical spending trend for 'MISCELLANEOUS COMMUNICATION EQUIPMENT' or similar categories by the Department of the Navy?

Analyzing historical spending trends for 'MISCELLANEOUS COMMUNICATION EQUIPMENT' by the Department of the Navy requires access to detailed procurement databases and budget reports. The NAICS code 334220, under which this contract falls, encompasses a broad range of wireless communication manufacturing. The Navy, as a major branch of the DoD, consistently invests significant funds in communication technologies to maintain operational readiness and technological superiority. Spending in this area is influenced by evolving threats, technological advancements, and strategic priorities. Without specific historical data points for this exact classification or contract type, it's difficult to establish a precise trend. However, it is reasonable to assume that spending on advanced communication systems has been substantial and likely increasing, driven by the need for secure, high-bandwidth, and resilient communication networks in modern warfare.

Are there any known risks associated with the long duration (over 5 years) of this contract?

A contract duration exceeding five years, as seen in this case (December 2002 to May 2008, approximately 5.5 years), can introduce several risks. Technological obsolescence is a primary concern; communication equipment can become outdated relatively quickly in a rapidly evolving tech landscape. This could mean the Navy is acquiring systems that are less capable or secure by the end of the contract term compared to newer market offerings. Furthermore, long-term contracts can sometimes lead to complacency from the contractor regarding innovation or cost efficiency, as the revenue stream is secured. Managing scope creep and ensuring continued alignment with evolving operational requirements over such an extended period also presents challenges for government oversight.

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 FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

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

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Not Designated a Small Business

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline