Raytheon Company's GPS OCX contract awarded in 2007 shows significant cost growth and extended duration

Contract Overview

Contract Amount: $201,970,622 ($202.0M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2007-11-21

End Date: 2010-02-28

Contract Duration: 830 days

Daily Burn Rate: $243.3K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 3

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: GLOBAL POSITIONING SYSTEMS NEXT GENERATION GROUND CONTROL (GPS - OCX)

Place of Performance

Location: AURORA, ARAPAHOE County, COLORADO, 80011, UNITED STATES OF AMERICA

State: Colorado Government Spending

Plain-Language Summary

Department of Defense obligated $202.0 million to RAYTHEON COMPANY for work described as: GLOBAL POSITIONING SYSTEMS NEXT GENERATION GROUND CONTROL (GPS - OCX) Key points: 1. The contract's initial award value has seen substantial increases over its lifecycle, indicating potential cost overruns. 2. The duration of the contract significantly exceeds initial estimates, raising concerns about project management and efficiency. 3. While awarded under full and open competition, the extended timeline and cost escalations warrant scrutiny of value for money. 4. The 'Cost Plus Fixed Fee' contract type may incentivize cost increases, requiring robust oversight. 5. Performance context is critical given the program's complexity and national security implications. 6. Sector positioning within defense and aerospace highlights the high stakes and specialized nature of this procurement.

Value Assessment

Rating: questionable

The initial award value of approximately $202 million has likely seen significant growth, though exact final costs are not provided. Comparing this to similar large-scale defense system development contracts is challenging without more granular data on scope changes and escalation. The 'Cost Plus Fixed Fee' structure, while common for complex R&D, can lead to cost overruns if not tightly managed. The extended duration further suggests that the initial pricing may not have accurately reflected the project's true cost and timeline.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, suggesting a competitive bidding process initially. The presence of 3 bidders indicates a degree of market interest. However, the long duration and potential for cost growth over time mean that the initial competitive pricing may not reflect the final value delivered to the government.

Taxpayer Impact: Full and open competition is generally favorable for taxpayers, as it aims to secure the best possible price. However, the subsequent cost growth and extended timeline on this contract suggest that the initial competitive advantage may have been eroded.

Public Impact

The primary beneficiaries are the Department of Defense, which relies on the modernized GPS ground control system for national security operations. The contract aims to deliver a next-generation ground control system for the Global Positioning System, enhancing its capabilities and reliability. The geographic impact is national, as the GPS system supports military and civilian operations worldwide. Workforce implications include employment for engineers, technicians, and project managers at Raytheon and its subcontractors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Significant cost growth potential inherent in 'Cost Plus Fixed Fee' contracts.
Extended contract duration beyond initial estimates raises concerns about project management and efficiency.
Complexity of the GPS OCX program presents inherent technical and integration risks.
Dependence on a single contractor for a critical national security system.

Positive Signals

Awarded under full and open competition, indicating initial market engagement.
The program aims to modernize a critical national infrastructure (GPS).
Raytheon is a major defense contractor with experience in complex systems.

Sector Analysis

This contract falls within the Defense and Aerospace sector, specifically focusing on command and control systems for satellite navigation. The market for such specialized systems is dominated by a few large defense contractors. Comparable spending benchmarks would involve other major defense system development programs, which often run into billions of dollars over their lifecycles.

Small Business Impact

Information regarding small business set-asides or subcontracting plans for this specific contract is not detailed in the provided data. However, large defense contracts typically involve significant subcontracting opportunities, which can benefit small businesses if effectively managed and monitored.

Oversight & Accountability

Oversight for this contract would typically be managed by the Defense Contract Management Agency (DCMA) and the relevant program executive office within the Department of Defense. Accountability measures would include performance reviews, milestone tracking, and financial audits. Transparency is often limited for national security programs, but reporting requirements are usually in place.

Related Government Programs

Global Positioning System (GPS)
Space-Based PNT (Positioning, Navigation, and Timing)
Defense Satellite Programs
Command and Control Systems

Risk Flags

Significant cost growth
Extended contract duration
Technical complexity
Potential for schedule delays

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $202.0 million to RAYTHEON COMPANY. GLOBAL POSITIONING SYSTEMS NEXT GENERATION GROUND CONTROL (GPS - OCX)

Who is the contractor on this award?

The obligated recipient is RAYTHEON COMPANY.

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Contract Management Agency).

What is the total obligated amount?

The obligated amount is $202.0 million.

What is the period of performance?

Start: 2007-11-21. End: 2010-02-28.

What is the total cost growth of the GPS OCX program since its inception?

The provided data indicates an initial award value of approximately $201.97 million in 2007. However, the GPS OCX program has famously experienced significant cost growth and schedule delays over its lifecycle, with total program costs estimated to be in the tens of billions of dollars by various reports over the years. The initial award value is a fraction of the eventual total expenditure, highlighting substantial cost escalation due to program complexity, scope changes, and technical challenges.

How does the 'Cost Plus Fixed Fee' (CPFF) contract type influence cost control in this program?

A Cost Plus Fixed Fee (CPFF) contract reimburses the contractor for allowable costs incurred, plus a predetermined fixed fee representing profit. While this structure is often used for research and development or when cost uncertainties are high, it can incentivize contractors to incur more costs, as their profit (the fee) is fixed regardless of the total cost. Effective oversight, stringent cost controls, and clear performance metrics are crucial to mitigate potential cost overruns under a CPFF arrangement for a program as complex as GPS OCX.

What are the primary risks associated with the extended duration of the GPS OCX contract?

The extended duration of the GPS OCX contract, which began in 2007 and has seen numerous schedule adjustments, introduces several risks. These include technological obsolescence, as the system might not incorporate the latest advancements by the time it's fully operational. There's also an increased risk of cost escalation due to inflation and prolonged management overhead. Furthermore, extended timelines can lead to a loss of institutional knowledge and personnel turnover, impacting program continuity and potentially increasing the likelihood of errors or inefficiencies.

How has the competition level evolved for the GPS OCX program over its lifecycle?

The initial award in 2007 was the result of a 'Full and Open Competition' with three bidders. However, as the program has evolved and faced significant challenges, subsequent contract actions and modifications may have involved different competitive dynamics, potentially including sole-source or limited competition scenarios for specific components or services. Detailed analysis of all contract modifications would be needed to fully assess the evolving competition landscape beyond the initial award.

What is the strategic importance of the GPS OCX program for the Department of Defense?

The GPS OCX program is strategically vital for the Department of Defense as it represents the next generation of ground control for the Global Positioning System. This modernization is essential to maintain the system's accuracy, security, and resilience against evolving threats and increasing global demand. A robust and secure GPS ground control system underpins a vast array of military operations, including navigation, targeting, and communications, making its successful implementation critical for national security.

Industry Classification

NAICS: Manufacturing › Communications Equipment Manufacturing › Radio and Television Broadcasting and Wireless Communications Equipment Manufacturing

Product/Service Code: RESEARCH AND DEVELOPMENT › C – National Defense R&D Services

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Offers Received: 3

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Address: 16800 E CENTRETECH PKWY, AURORA, CO, 80011

Business Categories: Category Business, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $201,970,622

Exercised Options: $201,970,622

Current Obligation: $201,970,622

Contract Characteristics

Cost or Pricing Data: NO

Timeline