DoD's $28M Raytheon contract for AN/USC-28 radio repair lacked competition, raising value concerns

Contract Overview

Contract Amount: $28,235,799 ($28.2M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2006-10-31

End Date: 2012-09-30

Contract Duration: 2,161 days

Daily Burn Rate: $13.1K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: REPAIR SERVICES FOR THE AN/USC-28 RADIO SYSTEM

Place of Performance

Location: FULLERTON, ORANGE County, CALIFORNIA, 92833

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $28.2 million to RAYTHEON COMPANY for work described as: REPAIR SERVICES FOR THE AN/USC-28 RADIO SYSTEM Key points: 1. The contract's sole-source nature limits price discovery and potentially inflates costs. 2. Performance duration of over 5 years suggests a long-term need for these services. 3. The 'not competed' award type is a significant risk indicator for value for money. 4. Repair and maintenance services for specialized communication equipment are critical for military operations. 5. The contract falls within the broader category of communication equipment repair and maintenance. 6. A lack of competitive bidding may obscure opportunities for more cost-effective solutions.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to its sole-source nature and the specialized equipment involved. Without competitive bids, it's difficult to assess if the $28.2 million awarded represents a fair market price. The cost-plus-fixed-fee (CPFF) contract type can sometimes lead to higher costs if not closely managed, as contractor incentives may not always align perfectly with cost savings. Comparing this to similar sole-source repair contracts for niche military hardware would be necessary for a more robust assessment.

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 approach is typically used when only one vendor possesses the necessary capabilities, proprietary knowledge, or when urgency dictates a direct award. The lack of competition means there was no opportunity for multiple companies to bid, which could have driven down prices through a competitive bidding process. This limits the government's ability to explore alternative solutions or secure the best possible pricing.

Taxpayer Impact: Taxpayers may have paid a premium due to the absence of competitive pressure. Without competing the award, the government missed an opportunity to leverage market forces to achieve a lower price for these essential repair services.

Public Impact

The Department of the Army benefits from the continued operational readiness of its AN/USC-28 radio systems. This contract ensures the availability of critical communication equipment for military personnel. The services provided are essential for maintaining secure and reliable communication networks. Personnel in the California region may be involved in the execution of these repair services.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to inflated costs.
Sole-source awards can reduce transparency in pricing.
Cost-plus-fixed-fee contracts require diligent oversight to manage costs effectively.
The long contract duration could indicate potential for cost overruns if not managed.

Positive Signals

Ensures continued operational capability of critical communication systems.
Raytheon Company is a known entity in defense contracting, suggesting some level of established capability.
The contract addresses a specific and necessary maintenance requirement for military hardware.

Sector Analysis

This contract falls within the broader defense sector, specifically focusing on the maintenance and repair of specialized communication equipment. The market for military communications hardware and its associated support services is often characterized by high barriers to entry due to technological complexity and security requirements. Spending in this area is driven by the need for reliable and advanced communication systems to support global military operations. Comparable spending benchmarks would likely involve other sole-source or limited-competition contracts for similar niche military electronic systems.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. Furthermore, the 'ss': false flag suggests it was not a small business prime award. This means that opportunities for small businesses to directly participate as prime contractors were likely limited. While Raytheon Company may engage small businesses as subcontractors, the primary award structure does not prioritize small business participation.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Army's contracting and program management offices. As a sole-source award, rigorous oversight is crucial to ensure fair pricing and effective service delivery. Transparency is limited by the lack of competitive bidding. Inspector General jurisdiction would apply if any allegations of fraud, waste, or abuse arise during the contract's performance or close-out.

Related Government Programs

Defense Communications Systems
Military Radio Equipment Maintenance
Specialized Electronic Repair Services
Department of the Army Procurement

Risk Flags

Lack of Competition
Potential for Inflated Costs
Limited Transparency
Reliance on Single Vendor

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $28.2 million to RAYTHEON COMPANY. REPAIR SERVICES FOR THE AN/USC-28 RADIO 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 Army).

What is the total obligated amount?

The obligated amount is $28.2 million.

What is the period of performance?

Start: 2006-10-31. End: 2012-09-30.

What is Raytheon Company's track record with sole-source defense contracts for communication equipment repair?

Raytheon Company, now part of RTX, has a long history of securing defense contracts, including those for communication systems. While specific data on their sole-source repair contracts for the AN/USC-28 system is not detailed here, their extensive experience in the defense sector suggests they possess the technical capabilities. However, sole-source awards, by their nature, limit public visibility into the competitive landscape and pricing negotiations. A deeper dive into historical contract awards for similar systems and Raytheon's performance on those would be needed to fully assess their track record in this specific context. The 'st': 'CA' indicates the contract was administered in California, which might point to specific Raytheon facilities or regional operations involved.

How does the $28.2 million cost compare to similar communication equipment repair contracts?

Direct comparison of the $28.2 million cost is difficult without knowing the specific scope of work, the number of units repaired, and the duration of service for other contracts. However, the fact that this was a sole-source award for a specialized system suggests that the pricing might be higher than if it had been competitively bid. The cost-plus-fixed-fee (CPFF) structure also means that the final cost could fluctuate based on actual labor and material costs incurred by Raytheon, plus a predetermined profit. Benchmarking would require identifying contracts for similar AN/USC-28 components or comparable advanced military communication systems, ideally those awarded competitively, to establish a price-per-unit or price-per-service-hour baseline.

What are the primary risks associated with a sole-source award for critical military communication repair?

The primary risk associated with a sole-source award for critical military communication repair is the potential for inflated costs due to the lack of competitive pressure. Without multiple bidders vying for the contract, the government may not achieve the best possible pricing. Another risk is reduced innovation, as there's less incentive for the sole provider to develop more cost-effective or technologically superior repair methods. Furthermore, sole-source awards can sometimes indicate a lack of market competition or a reliance on a single vendor, which can create supply chain vulnerabilities. Effective oversight and robust negotiation are critical to mitigate these risks.

How effective is the Cost Plus Fixed Fee (CPFF) contract type in ensuring value for money for specialized repair services?

The Cost Plus Fixed Fee (CPFF) contract type aims to provide value by allowing the contractor to be reimbursed for all allowable costs incurred, plus a fixed fee representing profit. This structure can be effective for specialized repair services where the exact costs are difficult to predict upfront, such as with aging or complex military equipment. It incentivizes the contractor to control costs to maximize their profit margin, as the fee is fixed. However, it requires diligent government oversight to ensure that all costs claimed are reasonable and allocable. If oversight is weak, or if the initial cost estimates are inaccurate, CPFF contracts can sometimes lead to higher overall expenditures compared to fixed-price contracts.

What does the contract duration of over 5 years (2161 days) imply about the AN/USC-28 radio system's lifecycle and support needs?

A contract duration of over five years for repair services suggests that the AN/USC-28 radio system is a long-term asset within the Department of Defense's inventory. This extended period indicates a sustained need for maintenance and support, implying the system is not nearing obsolescence and is expected to remain in operational use for the foreseeable future. Such long-term contracts often reflect the complexity and specialized nature of the equipment, where finding alternative support or replacement systems might be challenging or prohibitively expensive. It also highlights the importance of reliable sustainment for critical communication capabilities.

Industry Classification

NAICS: Other Services (except Public Administration) › Electronic and Precision Equipment Repair and Maintenance › Communication Equipment Repair and Maintenance

Product/Service Code: MAINT, REPAIR, REBUILD EQUIPMENT › MAINT, REPAIR, REBUILD OF EQUIPMENT

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: 1801 HUGHES DR, FULLERTON, CA, 92833

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $58,647,599

Exercised Options: $28,235,906

Current Obligation: $28,235,799

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline