Army awards $38.1M for NASAMS sustainment, Raytheon Company sole-source provider

Contract Overview

Contract Amount: $38,148,611 ($38.1M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2007-05-30

End Date: 2013-03-31

Contract Duration: 2,132 days

Daily Burn Rate: $17.9K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Official Description: NORWEGIAN ADVANCED SURFACE TO AIR MISSILE SYSTEMS (NASAMS) SUSTAINMENT AND MAINTENANCE OF SURFACE LAUNCHERS, FIRE DIRECTION CENTERS, TRUCKS AND ASSOCIATED EQUIPMENT.

Place of Performance

Location: TEWKSBURY, MIDDLESEX County, MASSACHUSETTS, 01876

State: Massachusetts Government Spending

Plain-Language Summary

Department of Defense obligated $38.1 million to RAYTHEON COMPANY for work described as: NORWEGIAN ADVANCED SURFACE TO AIR MISSILE SYSTEMS (NASAMS) SUSTAINMENT AND MAINTENANCE OF SURFACE LAUNCHERS, FIRE DIRECTION CENTERS, TRUCKS AND ASSOCIATED EQUIPMENT. Key points: 1. Contract focuses on sustainment and maintenance of critical air defense systems. 2. Sole-source award raises questions about competitive pricing and value. 3. Long contract duration (2132 days) may indicate potential for cost overruns. 4. The contract type (Cost Plus Incentive Fee) can incentivize cost control but also carries inherent risk. 5. This contract supports the Army's air defense capabilities, a key strategic asset. 6. The specific nature of the equipment suggests a limited pool of qualified providers.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to its sole-source nature and specialized equipment. The total award of $38.1 million over its duration needs to be assessed against the operational readiness and lifespan extension it provides for the NASAMS system. Without competitive bids, it's difficult to ascertain if the pricing reflects market rates or if there's an opportunity for cost savings through competition. The Cost Plus Incentive Fee structure aims to balance contractor profit with cost efficiency, but its effectiveness is contingent on robust oversight and clear performance metrics.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one vendor, Raytheon Company, was solicited. This approach is typically used when a unique product or service is required, or when only one responsible source is available. The lack of competition means that the Army did not benefit from the price discovery and potential cost reductions that typically arise from a competitive bidding process. This can lead to higher prices for the government.

Taxpayer Impact: Taxpayers may be paying a premium for this sustainment service due to the absence of competitive pressure. The government's ability to negotiate favorable terms is diminished in a sole-source scenario.

Public Impact

The U.S. Army benefits from the continued operational readiness of its Norwegian Advanced Surface to Air Missile Systems (NASAMS). Services include sustainment and maintenance for launchers, fire direction centers, trucks, and associated equipment. This contract directly supports national defense and air sovereignty missions. The contract's duration implies a long-term commitment to maintaining these advanced air defense capabilities.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition and potentially increases costs for taxpayers.
Cost Plus Incentive Fee contract type requires careful monitoring to ensure cost efficiency.
Long contract duration increases the risk of scope creep and cost overruns if not managed effectively.
Specialized nature of NASAMS sustainment may limit future competition, creating ongoing reliance on a single provider.

Positive Signals

Ensures continued operational readiness of critical air defense systems.
Raytheon Company is likely a highly specialized provider with unique expertise for NASAMS.
The contract aims to maintain complex and vital military equipment.

Sector Analysis

The defense sector, particularly air and missile defense, is characterized by high technological complexity and significant government investment. Contracts for sustainment and maintenance of advanced systems like NASAMS are crucial for ensuring national security. The market for such specialized services is often concentrated among a few prime defense contractors. Benchmarking spending in this area requires comparing sustainment costs across similar advanced air defense platforms, which are often proprietary and difficult to access.

Small Business Impact

This contract does not appear to have a small business set-aside. Given the specialized nature of maintaining advanced missile systems, it is unlikely that small businesses would be primary contractors. However, Raytheon Company may engage small businesses as subcontractors for specific components or services, though this is not explicitly detailed in the provided data.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Army's contracting and program management offices. The Cost Plus Incentive Fee structure necessitates close monitoring of costs and performance against established targets. Transparency would be enhanced through regular reporting from the contractor and potential audits by the Defense Contract Audit Agency (DCAA) or the Inspector General. The effectiveness of oversight depends on the rigor of these processes.

Related Government Programs

Air and Missile Defense Systems
Ground Support Equipment Maintenance
Defense Logistics and Sustainment
Advanced Weapon Systems

Risk Flags

Sole-source award
Cost Plus Incentive Fee contract type
Long contract duration
Specialized defense equipment sustainment

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $38.1 million to RAYTHEON COMPANY. NORWEGIAN ADVANCED SURFACE TO AIR MISSILE SYSTEMS (NASAMS) SUSTAINMENT AND MAINTENANCE OF SURFACE LAUNCHERS, FIRE DIRECTION CENTERS, TRUCKS AND ASSOCIATED EQUIPMENT.

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 $38.1 million.

What is the period of performance?

Start: 2007-05-30. End: 2013-03-31.

What is Raytheon Company's track record with NASAMS sustainment and similar defense contracts?

Raytheon Company, now part of RTX, has a long history as a prime contractor for advanced defense systems, including the NASAMS program. Their track record with NASAMS sustainment would involve providing maintenance, repair, and logistical support for the system's components, such as launchers, fire direction centers, and associated vehicles. Assessing their broader track record involves reviewing past performance evaluations on similar complex weapon system sustainment contracts. This includes examining their history of meeting delivery schedules, managing costs effectively, and adhering to technical specifications. Publicly available data on past performance can be limited, but contract award histories and any reported issues or successes provide insights into their capabilities and reliability in supporting critical defense assets.

How does the $38.1 million award compare to other NASAMS sustainment contracts or similar air defense system maintenance contracts?

Direct comparison of the $38.1 million award for NASAMS sustainment is challenging without access to detailed contract histories for similar systems and specific sustainment periods. However, the total value suggests a significant, long-term commitment to maintaining a critical defense asset. Sustainment costs for advanced air defense systems can vary widely based on system complexity, age, operational tempo, and the scope of services required (e.g., depot-level maintenance vs. field support). Contracts for comparable systems, such as Patriot missile system sustainment or THAAD support, often run into hundreds of millions or even billions of dollars over their lifecycles. The $38.1 million figure for this specific contract, spanning over 2000 days, indicates a substantial investment, but its 'value for money' is best assessed internally by the Army against operational needs and alternative solutions.

What are the primary risks associated with a sole-source, Cost Plus Incentive Fee (CPIF) contract for defense sustainment?

A sole-source award for defense sustainment carries the primary risk of inflated costs due to the absence of competitive bidding. The government loses the leverage that competition provides in negotiating prices and terms. Coupled with a Cost Plus Incentive Fee (CPIF) structure, there's a risk that the contractor may not be sufficiently incentivized to control costs if the incentive targets are not well-defined or rigorously monitored. CPIF contracts aim to share cost savings or overruns between the government and contractor, but if the baseline cost estimates are inaccurate or the incentive metrics are weak, the government could end up paying more than necessary. Furthermore, long-term sole-source arrangements can foster complacency and reduce innovation from the contractor.

How effective are the oversight mechanisms for ensuring performance and cost control on this NASAMS sustainment contract?

The effectiveness of oversight mechanisms for this NASAMS sustainment contract hinges on the Department of the Army's program management and contracting personnel. For a CPIF contract, robust oversight requires meticulous tracking of incurred costs against the estimated cost baseline and diligent monitoring of performance against established incentive targets. This includes regular contractor reporting, site visits, technical reviews, and potentially audits by agencies like the Defense Contract Audit Agency (DCAA). The quality of the contract's Statement of Work (SOW) and the clarity of the incentive fee structure are critical. If these elements are well-defined and consistently enforced, oversight can be effective in promoting both performance and cost control. Conversely, weak SOWs or lax monitoring can undermine these efforts.

What is the historical spending pattern for NASAMS sustainment and maintenance by the Department of the Army?

Historical spending patterns for NASAMS sustainment by the Department of the Army are not detailed in the provided data snippet. However, the award of this $38.1 million contract, spanning from May 2007 to March 2013 (duration of 2132 days), represents a significant investment over that period. To understand broader historical spending, one would need to examine previous contracts for NASAMS sustainment, potentially including earlier versions or different components of the system, as well as any follow-on contracts awarded after March 2013. Analyzing these patterns would reveal trends in annual spending, the average cost per year for sustainment, and how spending has evolved with system upgrades or changes in operational requirements. Such analysis is crucial for budget forecasting and identifying potential cost efficiencies over time.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Architectural, Engineering, and Related Services › Engineering Services

Product/Service Code: MAINT/REPAIR SHOP EQPT

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: W31P4Q07R0057

Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE (V)

Evaluated Preference: NONE

Contractor Details

Address: 50 APPLE HILL DR, TEWKSBURY, MA, 01876

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $38,825,558

Exercised Options: $38,148,611

Current Obligation: $38,148,611

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline