Raytheon Company awarded $400.6M FFP contract for KIV-77, with 1021 days duration

Contract Overview

Contract Amount: $40,060,292 ($40.1M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2018-06-14

End Date: 2021-03-31

Contract Duration: 1,021 days

Daily Burn Rate: $39.2K/day

Competition Type: NOT COMPETED

Pricing Type: FIRM FIXED PRICE

Sector: Other

Official Description: FFP, KIV-77, FMS ORDER

Place of Performance

Location: ABERDEEN PROVING GROUND, HARFORD County, MARYLAND, 21005

State: Maryland Government Spending

Plain-Language Summary

Department of Defense obligated $40.1 million to RAYTHEON COMPANY for work described as: FFP, KIV-77, FMS ORDER Key points: 1. Contract awarded as a delivery order under an existing contract. 2. The contract type is Firm Fixed Price, indicating a defined scope and cost. 3. The contract duration is over 1000 days, suggesting a long-term need. 4. The North American Industry Classification System (NAICS) code is 334220, related to wireless communications equipment. 5. The contract was not competed, raising questions about potential cost efficiencies. 6. The award was made by the Department of the Air Force. 7. The contract value is substantial, representing significant federal investment in this area.

Value Assessment

Rating: questionable

The contract value of $400.6 million for KIV-77 equipment over 1021 days is substantial. Without specific details on the KIV-77's capabilities and market comparables, a precise value-for-money assessment is difficult. However, the lack of competition (indicated by 'NOT COMPETED') suggests that the government may not have achieved the most competitive pricing possible. Benchmarking against similar secure communication systems or previous procurements of this nature would be necessary for a more definitive evaluation of its value.

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 typically occurs when a specific product or service is only available from a single source, or for reasons of national security or urgency. The lack of competition limits the government's ability to leverage market forces to drive down prices and potentially explore innovative solutions from a wider range of suppliers.

Taxpayer Impact: Sole-source awards can lead to higher costs for taxpayers as the government may not benefit from competitive bidding processes that typically result in lower prices.

Public Impact

The Department of Defense, specifically the Air Force, is the primary beneficiary, receiving critical wireless communications equipment. The KIV-77 is likely a secure communication device, essential for maintaining operational security and command and control. The contract supports the defense sector's need for advanced and reliable communication technology. The duration of the contract suggests ongoing operational requirements for this equipment within the Air Force's mission.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may have resulted in a higher price than if it had been competed.
Limited transparency into the justification for a sole-source award.
Potential for vendor lock-in due to the specialized nature of the equipment.

Positive Signals

Firm Fixed Price contract provides cost certainty for the government.
Long-term contract duration indicates a stable and ongoing requirement.
Award to a known entity (Raytheon Company) may suggest a track record with this specific equipment.

Sector Analysis

The contract falls within the Radio and Television Broadcasting and Wireless Communications Equipment Manufacturing sector (NAICS 334220). This sector is crucial for national security, providing the backbone for secure and reliable communication systems. The market for such specialized defense-related communication equipment is often characterized by high barriers to entry due to technological complexity and stringent security requirements. Spending in this area is driven by the need for advanced, interoperable, and secure communication capabilities for military operations.

Small Business Impact

There is no indication of small business set-asides or subcontracting requirements associated with this contract based on the provided data. As a sole-source award to a large prime contractor, the direct impact on small businesses is likely minimal unless Raytheon Company engages them for specific components or services not detailed here.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Defense's contracting and financial management regulations. The Air Force contracting office responsible for this award would have oversight mechanisms in place. Transparency regarding the justification for the sole-source award and the pricing structure would be key aspects of accountability. Inspector General investigations could be initiated if any irregularities or fraud were suspected.

Related Government Programs

Secure Communications Equipment Procurement
Department of Defense Wireless Communications
Air Force Command and Control Systems
Radio and Wireless Equipment Manufacturing

Risk Flags

Sole-source award
Lack of competition
Potential for inflated pricing

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $40.1 million to RAYTHEON COMPANY. FFP, KIV-77, FMS ORDER

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 Air Force).

What is the total obligated amount?

The obligated amount is $40.1 million.

What is the period of performance?

Start: 2018-06-14. End: 2021-03-31.

What is the specific function and criticality of the KIV-77 equipment being procured?

The KIV-77 is a cryptographic module used for secure voice and data communications. Its criticality lies in its ability to protect sensitive military information from interception and unauthorized access, ensuring the integrity and confidentiality of command and control channels. This type of equipment is fundamental to maintaining operational security in various military environments, from tactical field operations to strategic command centers. The specific version and capabilities of the KIV-77 procured would dictate its precise application, but generally, it ensures that communications remain secure even in contested electromagnetic spectrum environments.

What was the justification for awarding this contract on a sole-source basis?

The provided data indicates the contract was 'NOT COMPETED,' implying a sole-source award. Justifications for sole-source procurements typically fall into categories such as: only one responsible source exists, urgent and compelling need, or specific national security requirements that preclude competition. For specialized defense equipment like cryptographic modules, it's common for a particular technology or system to be developed or certified by a single entity. Without further documentation, the exact reason for this sole-source award remains unspecified, but it likely relates to the unique nature or proprietary status of the KIV-77 technology, or potentially a requirement for compatibility with existing fielded systems.

How does the $400.6 million contract value compare to historical spending on similar secure communication systems?

Direct comparison of the $400.6 million contract value to historical spending on 'similar' secure communication systems is challenging without more specific data points. The KIV-77 is a specific type of cryptographic module. Historical spending data would need to be filtered for procurements of comparable cryptographic equipment, considering factors like quantity, technological generation, and security certifications. However, given the substantial value and the duration of over 1000 days, this represents a significant investment. Benchmarking against previous sole-source awards for cryptographic equipment or against the total budget allocated by the Air Force for secure communications would provide a more relevant context for assessing if this expenditure is within expected ranges.

What is Raytheon Company's track record with the Department of Defense for similar communication equipment?

Raytheon Company (now RTX) has a long and extensive track record as a major defense contractor for the Department of Defense, supplying a wide array of systems, including advanced communication, radar, missile, and intelligence technologies. They are known for producing sophisticated electronic warfare systems, secure communication devices, and integrated command and control solutions. Their history with the DoD includes numerous large-scale contracts for critical defense capabilities. While specific details on their past performance related to the KIV-77 are not provided here, their general standing as a primary defense supplier suggests a significant level of experience and established relationships within the DoD for complex technological procurements.

What are the potential risks associated with a sole-source award of this magnitude?

The primary risks associated with a sole-source award of this magnitude ($400.6 million) include potential overpricing due to the lack of competitive pressure, reduced incentive for the contractor to innovate or improve efficiency, and the risk of vendor lock-in. Taxpayers may bear a higher cost than necessary. Furthermore, a sole-source award can limit the government's access to alternative technologies or solutions that might be more cost-effective or technologically advanced. There's also a reduced transparency in the pricing negotiation process compared to a competitive bid, which could mask inefficiencies or excessive profit margins. Ensuring robust oversight and justification for the sole-source determination is crucial to mitigate these risks.

Industry Classification

NAICS: Manufacturing › Communications Equipment Manufacturing › Radio and Television Broadcasting and Wireless Communications Equipment 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: 6260 GUARDIAN GATEWAY, ABERDEEN PROVING GROUND, MD, 21005

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: $40,060,292

Exercised Options: $40,060,292

Current Obligation: $40,060,292

Subaward Activity

Number of Subawards: 4

Total Subaward Amount: $632,111

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: FA830717D0015

IDV Type: IDC

Timeline