Raytheon Company awarded $45M for crypto modification kits, raising questions on competition and value

Contract Overview

Contract Amount: $45,035,798 ($45.0M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2015-09-30

End Date: 2018-10-31

Contract Duration: 1,127 days

Daily Burn Rate: $40.0K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: CRYPTO MOD KIT&SPARES UCA

Place of Performance

Location: ANDOVER, ESSEX County, MASSACHUSETTS, 01810

State: Massachusetts Government Spending

Plain-Language Summary

Department of Defense obligated $45.0 million to RAYTHEON COMPANY for work described as: CRYPTO MOD KIT&SPARES UCA Key points: 1. Contract awarded on a non-competitive basis, limiting price discovery. 2. Firm Fixed Price contract type suggests defined scope, but value needs benchmarking. 3. Long duration of 1127 days indicates a sustained need for these specialized kits. 4. Semiconductor manufacturing NAICS code suggests a focus on hardware components. 5. High dollar value warrants scrutiny for cost-effectiveness and market alternatives. 6. Awarded by the Department of the Army, indicating a defense-specific application.

Value Assessment

Rating: questionable

The contract's value of $45 million for crypto modification kits and spares is substantial. Without competitive bidding, it is difficult to benchmark the pricing against market rates or similar contracts. The firm fixed-price structure provides cost certainty for the government, but the absence of competition raises concerns about whether the government received the best possible value. Further analysis would require comparing the unit costs or overall price to industry benchmarks for similar cryptographic hardware modifications.

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. This limits the opportunity for multiple vendors to bid, which typically drives down prices and fosters innovation. The lack of competition suggests either a unique capability held by Raytheon Company or a potential gap in the procurement process that did not explore alternative sources. This approach can lead to higher costs for the government compared to a fully competed contract.

Taxpayer Impact: Taxpayers may have paid a premium due to the lack of competitive pressure. Without multiple bids, there's less assurance that the price reflects the lowest reasonable cost for the required goods and services.

Public Impact

The primary beneficiaries are the Department of the Army, receiving critical cryptographic modification kits. These kits are essential for maintaining the security and functionality of defense communication systems. The contract supports the operational readiness of military units relying on secure data transmission. Workforce implications are likely within Raytheon's manufacturing and engineering divisions, particularly in Massachusetts.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to inflated pricing.
Sole-source award raises concerns about potential vendor lock-in.
Limited transparency into the justification for sole-source procurement.
Long contract duration without competitive review could mask inefficiencies.

Positive Signals

Firm Fixed Price contract provides cost certainty for the government.
Award to a known defense contractor like Raytheon suggests established capabilities.
Contract addresses a critical need for cryptographic security in defense operations.

Sector Analysis

This contract falls within the semiconductor and related device manufacturing sector (NAICS 334413), specifically related to specialized hardware for cryptographic applications. The defense sector heavily relies on secure communication technologies, making this a critical niche. The market for such specialized components is often concentrated among a few key defense contractors with the necessary security clearances and technical expertise. Benchmarking would involve looking at similar sole-source awards for specialized defense electronics or cryptographic hardware.

Small Business Impact

The contract details indicate that small business participation was not a primary consideration, as the award was made to Raytheon Company and there is no indication of a small business set-aside. Subcontracting opportunities for small businesses may exist within Raytheon's supply chain, but this is not explicitly detailed in the provided data. The overall impact on the small business ecosystem for this specific contract appears minimal based on the available information.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Army's contracting and program management offices. Accountability measures are inherent in the firm fixed-price structure, which obligates the contractor to deliver specified goods at an agreed-upon price. Transparency regarding the justification for the sole-source award and the specific performance metrics would be crucial for a thorough assessment, though this level of detail is not provided. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Defense Communications Systems
Cryptographic Hardware Procurement
Semiconductor Manufacturing Contracts
Department of the Army Major Contracts
Sole-Source Defense Acquisitions

Risk Flags

Sole-source award lacks competitive justification.
Potential for overpayment due to lack of competition.
Long contract duration without competitive review.
Limited transparency on specific performance metrics and justification.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $45.0 million to RAYTHEON COMPANY. CRYPTO MOD KIT&SPARES UCA

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 $45.0 million.

What is the period of performance?

Start: 2015-09-30. End: 2018-10-31.

What is the specific justification provided by the Department of the Army 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 contracts are justified under circumstances such as unique capabilities, urgent needs, or when only one responsible source can provide the required supplies or services. For this contract, the justification would likely detail why Raytheon was the only viable option for providing these specific crypto modification kits and spares, potentially due to proprietary technology, existing system integration, or specialized manufacturing processes. Without the official justification document, it's impossible to definitively state the reasoning, but it would be a critical piece of information for assessing the procurement's fairness and necessity.

How does the $45 million contract value compare to historical spending on similar cryptographic modification kits by the Department of the Army or other defense agencies?

Comparing the $45 million contract value requires access to historical spending data for similar cryptographic modification kits across defense agencies. Without this comparative data, it's challenging to determine if this award represents a fair market price or an outlier. Factors influencing historical spending include technological advancements, inflation, changes in threat landscapes, and the scale of deployment. If similar kits were procured competitively in the past, their pricing could serve as a benchmark. However, the specialized nature of cryptographic hardware and potential sole-source awards can make direct comparisons difficult. Further research into defense procurement databases and trend analyses would be necessary to establish a robust comparison.

What are the key performance indicators (KPIs) or deliverables associated with this contract, and how was Raytheon's performance assessed?

The provided data does not specify the key performance indicators (KPIs) or detailed deliverables for this contract. As a firm fixed-price contract for 'CRYPTO MOD KIT&SPARES UCA,' the primary deliverable would be the modification kits and spare parts meeting defined technical specifications. Performance assessment would typically involve government acceptance of these delivered items based on quality, timeliness, and adherence to specifications. Without access to the contract's statement of work (SOW) or performance reports, it's impossible to detail the specific KPIs or how Raytheon's performance was formally evaluated. However, the contract's duration and value suggest a significant scope of work requiring diligent oversight.

What is Raytheon Company's track record with the Department of the Army, particularly concerning sole-source contracts for defense electronics or cryptographic equipment?

Raytheon Company, now part of RTX, has a long-standing and extensive track record as a major defense contractor for the Department of the Army and other military branches. They are known for producing a wide range of defense systems, including radar, missiles, and electronic warfare capabilities, which often involve complex cryptographic components for secure communications and operations. While specific data on their sole-source awards for cryptographic modification kits isn't provided here, their history suggests they possess the technical expertise and manufacturing capacity required for such specialized equipment. Sole-source awards to large, established contractors like Raytheon are not uncommon in the defense sector when specific technological capabilities or integration requirements are involved, though they always warrant scrutiny regarding competition.

Are there any known risks associated with the semiconductor and related device manufacturing sector that could impact the delivery or performance of these crypto modification kits?

Yes, the semiconductor and related device manufacturing sector faces several inherent risks that could impact the delivery and performance of cryptographic modification kits. These include supply chain vulnerabilities, particularly reliance on global sources for raw materials and manufacturing, which can be subject to geopolitical instability or disruptions. Rapid technological obsolescence is another risk; cryptographic standards and hardware capabilities evolve quickly, potentially making delivered kits outdated sooner than anticipated. Furthermore, the manufacturing process itself is complex and sensitive to quality control issues, which could affect the reliability and security of the cryptographic functions. Ensuring the integrity and security of the supply chain, from chip fabrication to final assembly, is paramount for defense applications.

Industry Classification

NAICS: Manufacturing › Semiconductor and Other Electronic Component Manufacturing › Semiconductor and Related Device Manufacturing

Product/Service Code: ELECTRICAL/ELECTRONIC EQPT COMPNTS

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: W31P4Q13R0144

Offers Received: 1

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: $45,035,798

Exercised Options: $45,035,798

Current Obligation: $45,035,798

Subaward Activity

Number of Subawards: 8

Total Subaward Amount: $36,109,381

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline