DoD's $64M Raytheon contract for microcircuits faces scrutiny over limited competition and potential value concerns

Contract Overview

Contract Amount: $64,216,578 ($64.2M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2021-05-18

End Date: 2030-05-17

Contract Duration: 3,286 days

Daily Burn Rate: $19.5K/day

Competition Type: NOT COMPETED

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: 8508163152!MICROCIRCUIT,DIGITA

Place of Performance

Location: COLUMBUS, FRANKLIN County, OHIO, 43218

State: Ohio Government Spending

Plain-Language Summary

Department of Defense obligated $64.2 million to RAYTHEON COMPANY for work described as: 8508163152!MICROCIRCUIT,DIGITA Key points: 1. The contract's value, while substantial, requires careful benchmarking against similar microcircuit procurements. 2. Limited competition raises questions about price discovery and potential overpayment. 3. The long duration of the contract (over 9 years) necessitates ongoing performance monitoring. 4. The reliance on a single contractor, Raytheon, could indicate a lack of market dynamism. 5. The absence of small business set-asides warrants examination of subcontracting opportunities. 6. The contract's focus on specialized navigation and guidance systems highlights its critical defense role.

Value Assessment

Rating: fair

Benchmarking the $64.2 million awarded to Raytheon for microcircuits is challenging without detailed specifications and market data. However, the firm-fixed-price structure suggests cost certainty for the government. Given the specialized nature of navigation and guidance system components, pricing could be influenced by unique technological requirements and limited supplier availability. Further analysis would involve comparing unit costs for similar components, if available, and assessing if the total price reflects a competitive market outcome, which appears unlikely given the procurement method.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded using a sole-source justification, meaning it was not openly competed. This approach is typically employed when only one responsible source can provide the required goods or services, often due to proprietary technology, unique capabilities, or urgent needs. The lack of competition means potential bidders were not solicited, and the government did not benefit from a bidding process that could drive down prices and foster innovation among multiple suppliers.

Taxpayer Impact: Sole-source awards can lead to higher prices for taxpayers as the government lacks the leverage of a competitive bidding process. It also limits opportunities for other companies to secure government contracts and potentially offer more cost-effective solutions.

Public Impact

This contract directly supports the Department of Defense's operational readiness by providing essential microcircuits for navigation and guidance systems. The primary beneficiaries are military branches relying on advanced avionics and guidance technology for aircraft, missiles, and other platforms. The contract's geographic impact is centered in Ohio, where Raytheon's operations are located, potentially supporting local employment and the regional economy. The workforce implications include the need for specialized engineers and technicians involved in the design, manufacturing, and testing of these high-tech components.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may result in suboptimal pricing for taxpayers.
Sole-source awards can stifle innovation by excluding potential new entrants.
Long contract duration increases the risk of technological obsolescence or changing requirements.
Dependence on a single supplier could create supply chain vulnerabilities.

Positive Signals

Firm-fixed-price contract provides cost certainty for the government.
Award to an established contractor like Raytheon suggests a level of confidence in their capability.
Specialized nature of the components indicates advanced technological development.

Sector Analysis

The market for microcircuits, particularly those used in defense applications like navigation and guidance systems, is highly specialized. This sector is characterized by significant research and development investment, stringent quality control, and often, long product lifecycles. The Defense Logistics Agency's procurement falls within the broader 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' industry. Spending in this area is critical for maintaining technological superiority in defense, with contracts often being long-term and awarded to established prime contractors with proven expertise.

Small Business Impact

This contract does not appear to include specific small business set-asides, as indicated by the 'sb' field being false. The sole-source nature of the award further limits the direct inclusion of small businesses as prime contractors. However, Raytheon, as a large prime contractor, may engage small businesses as subcontractors. An analysis of their subcontracting plan would be necessary to determine the extent of small business participation and its impact on the small business ecosystem.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense and the Defense Logistics Agency. Given the firm-fixed-price nature, oversight would focus on ensuring delivery of specified goods according to contract terms and quality standards. Transparency may be limited due to the sole-source award, but contract modifications, performance reports, and payment data would likely be subject to internal DoD review and potentially audits by the Government Accountability Office (GAO) or the DoD Inspector General (IG) if specific concerns arise.

Related Government Programs

Defense Logistics Agency Procurement Data
Department of Defense Microelectronics Spending
Navigation and Guidance System Components
Raytheon Company Contracts
Sole-Source Defense Procurements

Risk Flags

Sole-source award
Lack of competition
Long contract duration
Potential for price inflation
Critical defense component

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $64.2 million to RAYTHEON COMPANY. 8508163152!MICROCIRCUIT,DIGITA

Who is the contractor on this award?

The obligated recipient is RAYTHEON COMPANY.

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Logistics Agency).

What is the total obligated amount?

The obligated amount is $64.2 million.

What is the period of performance?

Start: 2021-05-18. End: 2030-05-17.

What is Raytheon's track record with similar sole-source defense contracts for specialized electronic components?

Raytheon Company has a long history of securing defense contracts, including those awarded on a sole-source basis for specialized electronic components. Their extensive experience in areas like radar, sensors, and guidance systems often positions them as a primary or sole provider for unique technological requirements. Analyzing past sole-source awards to Raytheon for similar microcircuits or related systems would reveal patterns in pricing, contract duration, and performance. Publicly available data often shows large, sole-source awards to major defense contractors like Raytheon, particularly when dealing with advanced or proprietary technologies where few alternatives exist. However, the specific details of their track record on value and performance for such contracts require deeper dives into contract histories and performance reviews, which are not always fully public.

How does the $64.2 million contract value compare to industry benchmarks for similar microcircuits?

Directly comparing the $64.2 million contract value to industry benchmarks for similar microcircuits is challenging without precise technical specifications and volume data. The market for specialized defense microcircuits is not as commoditized as general-purpose electronics. Factors such as radiation hardening, specific performance parameters (speed, power consumption), and miniaturization significantly influence cost. Given this is a sole-source award to Raytheon, a leading defense contractor, the price may reflect unique technological capabilities and R&D investment rather than pure market competition. A comprehensive benchmark would require access to data on comparable sole-source or limited-competition contracts for highly specialized defense-grade microcircuits, which is often proprietary or not readily available in public databases.

What are the primary risks associated with a sole-source award of this magnitude and duration?

The primary risks associated with a sole-source award of this magnitude ($64.2 million) and duration (nearly 10 years) are significant. Firstly, the lack of competition can lead to inflated pricing, as the government does not benefit from the cost-saving pressures of a bidding process. Secondly, there's a reduced incentive for the contractor to innovate or improve efficiency once the contract is secured. Thirdly, the long duration increases the risk of technological obsolescence; the microcircuits specified today might be outdated by the time the contract ends, or requirements may change. Lastly, dependence on a single supplier creates supply chain vulnerability. If Raytheon faces production issues, geopolitical challenges, or financial instability, the DoD's supply of critical components could be jeopardized.

How effective are the Defense Logistics Agency's oversight mechanisms for long-term, sole-source contracts?

The Defense Logistics Agency (DLA) employs various oversight mechanisms for its contracts, including long-term, sole-source agreements. These typically involve contract administration, performance monitoring, and financial reviews. For sole-source contracts, the emphasis is often on ensuring the contractor meets the agreed-upon technical specifications, quality standards, and delivery schedules, as price competition is absent. DLA utilizes contract officers and quality assurance specialists to oversee performance. While internal reviews and audits are standard, the effectiveness can vary. Transparency is often a challenge with sole-source awards. The Government Accountability Office (GAO) and the DoD Inspector General (IG) can provide external oversight if specific issues of waste, fraud, or abuse are identified or alleged, but proactive oversight is primarily an internal DLA function.

What is the historical spending pattern for similar navigation and guidance system components within the DoD?

Historical spending patterns for navigation and guidance system components within the DoD show a consistent and significant investment, driven by the need for advanced military capabilities. These systems are critical across various platforms, including aircraft, missiles, and unmanned vehicles. Spending in this category is often characterized by long-term contracts, high research and development costs, and a reliance on a few key prime contractors capable of meeting stringent military specifications. Procurement data typically reveals substantial annual outlays, often in the hundreds of millions or billions of dollars across the entire DoD, for various sub-components and integrated systems. This specific $64.2 million contract for microcircuits fits within this broader trend of sustained, high-value investment in advanced guidance technologies.

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: ELECTRICAL/ELECTRONIC EQPT COMPNTS

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: SPE7MX20R0145

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Rockwell Collins Australia PTY Limited

Address: 350 LOWELL ST, ANDOVER, MA, 01810

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: $80,853,430

Exercised Options: $64,216,578

Current Obligation: $64,216,578

Actual Outlays: $3,116,374

Subaward Activity

Number of Subawards: 5

Total Subaward Amount: $6,469,598

Contract Characteristics

Consolidated Contract: Yes

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: SPRBL115D0017

IDV Type: IDC

Timeline