Raytheon Company awarded $79M for Abrams tank hardware, a sole-source contract for critical components

Contract Overview

Contract Amount: $78,995,520 ($79.0M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2019-08-29

End Date: 2021-04-30

Contract Duration: 610 days

Daily Burn Rate: $129.5K/day

Competition Type: NOT COMPETED

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: DELIVERY ORDER W909MY-19-F-0082 UNDER IDIQ W909MY-19-D-0015 FOR 2GF B-KIT TO PROCURE CITV HARDWARE COMPONENTS FOR PM ABRAMS.

Place of Performance

Location: MCKINNEY, COLLIN County, TEXAS, 75071

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $79.0 million to RAYTHEON COMPANY for work described as: DELIVERY ORDER W909MY-19-F-0082 UNDER IDIQ W909MY-19-D-0015 FOR 2GF B-KIT TO PROCURE CITV HARDWARE COMPONENTS FOR PM ABRAMS. Key points: 1. Contract awarded to Raytheon Company for CITV hardware components for the Abrams tank program. 2. This contract was not competed, raising questions about potential price discovery and value for money. 3. The duration of the contract is 610 days, indicating a medium-term supply need. 4. The contract type is Firm Fixed Price, which shifts cost risk to the contractor. 5. The primary location for performance is Texas. 6. The North American Industry Classification System (NAICS) code is 334511, related to instrument manufacturing.

Value Assessment

Rating: questionable

The contract value of approximately $79 million for CITV hardware components for the Abrams tank program is significant. Without competitive bidding, it is difficult to benchmark this price against market rates or similar contracts. The lack of competition suggests potential for overpayment, as there was no mechanism to drive down costs through bidding. Further analysis would be needed to compare the unit cost of these components to industry standards or previous procurements.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was not competed, meaning it was awarded directly to Raytheon Company without offering other potential suppliers an opportunity to bid. Sole-source awards are typically justified when only one responsible source can provide the required supplies or services. However, the lack of competition limits price discovery and may result in higher costs for the government compared to a fully competed procurement.

Taxpayer Impact: Taxpayers may be paying a premium due to the absence of competitive pressure. Without multiple bids, the government lacks assurance that the price reflects the best possible value.

Public Impact

The primary beneficiaries are the U.S. Army's armored vehicle programs, specifically the M1 Abrams tank fleet. The contract delivers critical hardware components essential for the Command, Control, Communications, Computers, and Intelligence (C4I) systems of the tanks. The geographic impact is concentrated in Texas, where the contractor is located and likely where the components will be manufactured or assembled. This contract supports jobs within Raytheon Company and its supply chain, particularly in the defense manufacturing sector.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to higher costs for taxpayers.
Sole-source awards can reduce the incentive for contractors to offer the lowest possible price.
Limited transparency into the pricing justification due to non-competitive nature.

Positive Signals

Firm Fixed Price contract shifts cost overrun risk to the contractor.
Award to an established defense contractor like Raytheon suggests potential for reliable delivery of specialized components.
Contract supports critical military hardware, ensuring operational readiness.

Sector Analysis

This contract falls within the defense manufacturing sector, specifically focusing on electronic and navigational equipment for military vehicles. The market for such specialized components is often dominated by a few key players due to high barriers to entry, including technological expertise, security clearances, and established relationships with defense agencies. Spending in this sub-sector is driven by military modernization efforts and the need to maintain existing fleets of advanced weaponry.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. Given the sole-source nature and the specialized components required for advanced military hardware, it is unlikely that significant subcontracting opportunities for small businesses were mandated or actively sought through this specific award. Further investigation into Raytheon's overall subcontracting plan for this program would be necessary to assess small business impact.

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, the justification and negotiation process would be subject to internal review and potentially oversight by the Government Accountability Office (GAO) if protested. Transparency is limited due to the non-competitive nature, but contract performance and payment would be monitored by the contracting officer's representative (COR).

Related Government Programs

M1 Abrams Tank Modernization Programs
Department of Defense Command, Control, Communications, Computers, and Intelligence (C4I) Systems
Defense Industrial Base - Electronic and Navigation Systems Manufacturing

Risk Flags

Sole-source award lacks competitive pricing.
Potential for overpayment due to lack of competition.
Limited transparency on cost justification.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $79.0 million to RAYTHEON COMPANY. DELIVERY ORDER W909MY-19-F-0082 UNDER IDIQ W909MY-19-D-0015 FOR 2GF B-KIT TO PROCURE CITV HARDWARE COMPONENTS FOR PM ABRAMS.

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 $79.0 million.

What is the period of performance?

Start: 2019-08-29. End: 2021-04-30.

What is the specific role of the 2GF B-KIT within the CITV system for the Abrams tank?

The 2GF B-KIT refers to a specific hardware component package for the Commander's Independent Thermal Viewer (CITV) system on the M1 Abrams tank. The CITV provides the tank commander with a stabilized, independent sight that allows them to scan for targets and threats without moving the main gun turret. The '2GF' likely denotes a specific generation or configuration of this kit, and the 'B-KIT' suggests it is a sub-assembly or a particular set of components within the larger CITV system. These hardware components are crucial for the thermal imaging and target acquisition capabilities, directly impacting the tank's situational awareness and combat effectiveness.

Why was this contract awarded on a sole-source basis instead of being competed?

Sole-source awards are typically justified when only one responsible source can provide the required supplies or services. For specialized defense components like the CITV hardware, this could be due to proprietary technology, unique manufacturing capabilities held exclusively by Raytheon Company, or the need for seamless integration with existing Abrams tank systems where modification by another vendor could compromise performance or introduce unacceptable risks. The government must have documented a compelling reason, such as the unavailability of alternatives or urgent and compelling circumstances, to bypass the standard competitive procurement process. Without this justification, the award could be seen as a missed opportunity for cost savings through competition.

How does the Firm Fixed Price (FFP) contract type benefit the government in this scenario?

A Firm Fixed Price (FFP) contract is generally advantageous for the government when the scope of work is well-defined and the risks associated with cost overruns can be reasonably estimated. In this case, by awarding an FFP contract for the 2GF B-KIT, the government has locked in the price for the specified hardware components. This means that Raytheon Company bears the primary financial risk if their costs to produce these components increase beyond what was anticipated during the negotiation. This structure protects the government from unexpected cost escalations, providing budget certainty, which is particularly important for large-value defense procurements.

What are the potential risks associated with awarding a $79 million contract without competition?

The primary risk of awarding a contract of this magnitude without competition is the potential for paying a higher price than would have been achieved in a competitive environment. Without competing bids, there is less pressure on the contractor to offer the most cost-effective solution. This can lead to reduced value for taxpayer money. Additionally, sole-source awards can sometimes stifle innovation from other potential suppliers who might have developed alternative or more efficient solutions. There's also a risk of complacency from the awarded contractor, as they face no direct competitive threat for this specific contract.

Can we compare the unit cost of these components to similar procurements or market rates?

Directly comparing the unit cost of the 2GF B-KIT components is challenging without more granular data on the specific items included in the 'B-KIT' and their quantities. The total contract value of $79 million spread over the delivery period (2019-2021) does not easily translate to a per-unit cost without knowing the number of units procured. Furthermore, as this was a sole-source award, there isn't a readily available competitive benchmark. To perform such a comparison, one would need access to detailed Bills of Materials, historical pricing data for similar components (if available from other sources), and potentially industry cost models for defense electronics manufacturing.

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: COMM/DETECT/COHERENT RADIATION

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: RTX Corp (UEI: 001344142)

Address: 2501 W UNIVERSITY DR, MCKINNEY, TX, 75071

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: $78,995,520

Exercised Options: $78,995,520

Current Obligation: $78,995,520

Subaward Activity

Number of Subawards: 6

Total Subaward Amount: $2,562,411

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: W909MY19D0015

IDV Type: IDC

Timeline