DoD's $999M Raytheon contract for U-2 and DCGS CFSR support awarded without competition

Contract Overview

Contract Amount: $999,233,174 ($999.2M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2009-10-01

End Date: 2015-09-30

Contract Duration: 2,190 days

Daily Burn Rate: $456.3K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIXED PRICE AWARD FEE

Sector: Defense

Official Description: U-2 AND DCGS CFSR SUPPORT (CR)

Place of Performance

Location: STERLING, LOUDOUN County, VIRGINIA, 20166

State: Virginia Government Spending

Plain-Language Summary

Department of Defense obligated $999.2 million to RAYTHEON COMPANY for work described as: U-2 AND DCGS CFSR SUPPORT (CR) Key points: 1. Contract awarded on a sole-source basis, raising questions about potential overpayment and lack of competitive pressure. 2. Significant contract value suggests a critical role in supporting intelligence, surveillance, and reconnaissance (ISR) capabilities. 3. Long duration (2190 days) indicates a sustained need for these specialized engineering services. 4. Fixed Price Award Fee (FPAF) contract type can incentivize performance but also introduces complexity in cost control. 5. The contract's focus on engineering services for complex ISR platforms highlights the specialized nature of defense contracting. 6. Lack of small business participation noted, suggesting prime contractor reliance on large-scale capabilities.

Value Assessment

Rating: questionable

The contract's total value of nearly $1 billion over six years is substantial. Without competitive bidding, it's difficult to benchmark the value for money. The Fixed Price Award Fee structure implies performance incentives, but the absence of competition means there's no market-driven price discovery to assess if the awarded price is reasonable compared to alternative providers. The $456,271 in modifications suggests some adjustments were made, but their impact on overall value is unclear without further detail.

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 only one responsible source is available or when a compelling justification exists for excluding competition. The lack of multiple bidders means there was no opportunity for price negotiation or comparison among different providers, potentially leading to higher costs for the government.

Taxpayer Impact: Sole-source awards limit the government's ability to secure the best possible pricing through competitive negotiation, potentially resulting in taxpayer funds being used less efficiently.

Public Impact

The primary beneficiaries are the Department of Defense, specifically the Air Force, which receives critical engineering support for its U-2 and DCGS intelligence, surveillance, and reconnaissance (ISR) platforms. Services delivered include engineering support essential for the operation and maintenance of advanced ISR systems, crucial for national security. The geographic impact is likely concentrated around facilities where these platforms are based and maintained, primarily within the United States. Workforce implications include the employment of highly skilled engineers and technical personnel by Raytheon to fulfill the contract requirements.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition and potential savings.
Contract duration and value suggest high criticality and potential for cost overruns if not managed tightly.
Fixed Price Award Fee structure can be complex to administer and may not always yield optimal cost efficiency.
Lack of transparency in the justification for sole-source award.
No indication of small business subcontracting goals or achievements.

Positive Signals

Contract supports critical national security ISR capabilities (U-2 and DCGS).
Raytheon is a major defense contractor with established expertise in this domain.
Award fee mechanism provides some incentive for performance.
Long-term contract indicates a stable and predictable need for these services.
Contract modifications suggest ongoing adaptation to evolving requirements.

Sector Analysis

This contract falls within the Engineering Services sector, specifically supporting advanced aerospace and defense systems. The market for such specialized engineering support is dominated by a few large, established defense contractors. The total value of this single contract represents a significant portion of spending within this niche, highlighting the high cost associated with maintaining and upgrading complex intelligence, surveillance, and reconnaissance (ISR) platforms like the U-2 and DCGS. Comparable spending benchmarks would typically involve other large-scale, sole-source or limited-competition contracts for similar defense system support.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb: false'. The prime contractor, Raytheon, is a large corporation, suggesting that the work is likely performed by its own employees or potentially subcontracted to other large businesses. There is no explicit information provided regarding subcontracting plans or goals for small businesses, which could mean limited opportunities for the small business ecosystem on this particular award.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Air Force and the Department of Defense's contracting and program management offices. The 'st: VA' designation might indicate oversight by the VA's Federal Procurement Data System (FPDS) or related systems, though the agency is DoD. Accountability measures are embedded in the contract type (Fixed Price Award Fee), which links payment to performance. Transparency is limited due to the sole-source nature and lack of detailed public justification. Inspector General jurisdiction would apply for investigations into fraud, waste, or abuse.

Related Government Programs

Intelligence, Surveillance, and Reconnaissance (ISR) Systems Support
Aerospace Engineering Services
Department of Defense Major Weapon Systems Support
Air Force Logistics and Maintenance Contracts
Unmanned Aerial Vehicle (UAV) Support Contracts

Risk Flags

Sole-source award increases risk of non-competitive pricing.
Contract complexity due to FPAF structure requires diligent oversight.
Potential for cost overruns given the long duration and high value.
Dependence on a single contractor for critical ISR platform support.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $999.2 million to RAYTHEON COMPANY. U-2 AND DCGS CFSR SUPPORT (CR)

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 $999.2 million.

What is the period of performance?

Start: 2009-10-01. End: 2015-09-30.

What is the specific justification provided for awarding this contract on a sole-source basis?

The provided data does not include the specific justification for the sole-source award. Typically, sole-source contracts are justified under circumstances such as only one responsible source being available, or when a national security emergency requires immediate action. For defense contracts of this magnitude, justifications often cite unique capabilities, proprietary technology, or the need for seamless integration with existing systems that only a specific contractor can provide. Without the official justification document, it's impossible to ascertain the precise rationale, but it likely relates to Raytheon's unique position or expertise concerning the U-2 and DCGS platforms.

How does the Fixed Price Award Fee (FPAF) structure influence contractor performance and cost control in this contract?

The Fixed Price Award Fee (FPAF) structure aims to balance cost certainty with performance incentives. The 'Fixed Price' component establishes a ceiling cost, providing the government with some predictability. The 'Award Fee' portion allows the contractor to earn additional profit or fee based on performance metrics defined in the contract. This incentivizes Raytheon to meet or exceed specific performance standards related to the U-2 and DCGS CFSR support. However, effective administration of the award fee criteria is crucial; if poorly defined or managed, it can lead to disputes or fail to drive desired outcomes. It also requires robust government oversight to objectively assess performance and determine the appropriate award fee.

What are the historical spending patterns for U-2 and DCGS support contracts with Raytheon or its predecessors?

The provided data only details this specific contract (ID: U-2 AND DCGS CFSR SUPPORT (CR)) valued at $999,233,174.39, awarded from 2009 to 2015. To understand historical spending patterns, one would need to analyze prior contracts for U-2 and DCGS support awarded to Raytheon (or its acquired entities like Hughes Aircraft or General Dynamics' defense divisions, depending on the timeline) and subsequent contracts. This would involve searching federal procurement databases for related contract actions over a longer period. Without access to that broader dataset, it's impossible to establish a trend or compare this contract's value against historical norms for these specific platforms.

What is the assessed risk level associated with this contract, considering its sole-source nature and technical complexity?

The assessed risk level for this contract can be considered moderate to high. The sole-source award inherently carries a risk of reduced value for money due to the lack of competition. The technical complexity of supporting advanced ISR platforms like the U-2 and DCGS introduces performance risks, where failures or delays could impact critical national security operations. Furthermore, the long duration and substantial value increase the financial risk and the potential impact of any contractor performance issues. The Fixed Price Award Fee structure attempts to mitigate performance risk by incentivizing the contractor, but effective oversight is paramount to managing these risks.

How does this contract compare to other engineering services contracts awarded by the Department of Defense in terms of value and competition?

This contract, valued at nearly $1 billion over six years and awarded sole-source, is substantial. Compared to other engineering services contracts within the DoD, its value places it among the larger awards. However, its sole-source nature is a key differentiator. Many large DoD engineering contracts are competed, albeit sometimes through limited sources, allowing for price discovery. Sole-source awards, especially for such significant amounts, are less common and typically require strong justification. Benchmarking against similar sole-source contracts for highly specialized defense systems would be the most relevant comparison, highlighting the premium often associated with unique capabilities and lack of alternatives.

Industry Classification

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

Product/Service Code: SUPPORT SVCS (PROF, ADMIN, MGMT) › PROFESSIONAL SERVICES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: FIXED PRICE AWARD FEE (M)

Evaluated Preference: NONE

Contractor Details

Address: 7700 ARLINGTON BLVD, FALLS CHURCH, VA, 22042

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: $999,233,175

Exercised Options: $999,233,175

Current Obligation: $999,233,174

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline