DoD's $250M Next Gen Operational Control System Contract Awarded to Raytheon Company

Contract Overview

Contract Amount: $250,512,687 ($250.5M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2021-04-29

End Date: 2026-01-05

Contract Duration: 1,712 days

Daily Burn Rate: $146.3K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Official Description: NEXT GENERATION OPERATIONAL CONTROL SYSTEM BLOCK 3 FOLLOW-ON.

Place of Performance

Location: AURORA, ARAPAHOE County, COLORADO, 80011

State: Colorado Government Spending

Plain-Language Summary

Department of Defense obligated $250.5 million to RAYTHEON COMPANY for work described as: NEXT GENERATION OPERATIONAL CONTROL SYSTEM BLOCK 3 FOLLOW-ON. Key points: 1. Contract awarded on a sole-source basis, raising questions about potential cost efficiencies. 2. Significant duration of over 1700 days suggests a long-term strategic investment. 3. Cost-plus incentive fee structure may incentivize performance but also carries inherent cost risks. 4. The contract falls under Space Research and Technology, a critical but complex sector. 5. No indication of small business participation or set-asides. 6. The award value of $250.5M warrants close scrutiny for value for money. 7. High dollar value and sole-source nature present potential risks if not managed effectively.

Value Assessment

Rating: questionable

The contract's value of $250.5 million over approximately 4.7 years (1712 days) requires careful benchmarking against similar systems. Without competitive bids, it is difficult to assess if the pricing is fair and reasonable. The cost-plus incentive fee (CPIF) structure, while designed to motivate performance, can lead to cost overruns if not rigorously managed and if the incentive targets are not well-defined. The absence of comparative contract data makes a definitive value assessment challenging, but the significant investment necessitates robust oversight.

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 approach is typically used when only one vendor possesses the necessary capabilities, technology, or when urgency dictates. The lack of competition limits the government's ability to leverage market forces to drive down costs and ensure the best possible value. It also raises questions about whether alternative solutions were adequately explored.

Taxpayer Impact: For taxpayers, a sole-source award means there is a reduced likelihood of achieving the lowest possible price compared to a competitive procurement. This can result in higher overall spending for the government and, consequently, for taxpayers.

Public Impact

The primary beneficiary is the Department of the Air Force, which will receive the Next Generation Operational Control System. The system is intended to enhance operational control capabilities, likely for space-based assets or related command and control functions. The contract's geographic impact is centered in Colorado, indicated by the 'SN' field, suggesting a significant presence or base of operations there. Workforce implications may include specialized engineering, software development, and program management roles, primarily within Raytheon Company and potentially its subcontractors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition and potential for cost savings.
Cost-plus incentive fee structure carries inherent risk of cost escalation if not tightly managed.
Long contract duration increases exposure to potential scope creep or evolving requirements.
Lack of transparency in the justification for sole-source award.
Potential for vendor lock-in due to specialized nature of the system.

Positive Signals

Award to a major defense contractor (Raytheon) suggests access to established expertise and technology.
Cost-plus incentive fee structure aims to align contractor performance with government objectives.
Definitive contract type provides a clear framework for the agreement.
Long duration may indicate a critical, long-term need for the system.

Sector Analysis

The Next Generation Operational Control System falls within the broader Defense sector, specifically related to space operations and command and control technologies. This market is characterized by high barriers to entry, significant R&D investment, and a limited number of prime contractors capable of delivering complex systems. Spending in this area is driven by national security priorities and the need to maintain technological superiority in space. Comparable spending benchmarks are difficult to establish without more specific details on the system's functionalities, but large-scale defense systems often run into hundreds of millions or billions of dollars.

Small Business Impact

The data indicates that small business participation was not a stated factor in this award ('sb': false, 'ss': false). As a sole-source contract awarded to a large prime contractor, there is a low likelihood of significant subcontracting opportunities flowing down to small businesses unless explicitly mandated or pursued by the prime. This contract does not appear to contribute to the small business ecosystem or set-aside goals.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Air Force's contracting and program management offices. Given the sole-source nature and significant value, enhanced oversight is crucial. Accountability measures would be tied to the performance metrics and fee structure within the Cost Plus Incentive Fee (CPIF) arrangement. Transparency is limited due to the sole-source justification, but contract modifications and performance reports would be subject to internal review and potentially Inspector General oversight if issues arise.

Related Government Programs

Space Command and Control Systems
Satellite Operations Support
Defense Information Systems
Next Generation Air Force Systems
DoD Command and Control Modernization

Risk Flags

Sole-source award may limit competition and potentially increase costs.
Cost-plus contract types can lead to cost overruns if not managed diligently.
Long contract duration increases risk exposure.
Lack of public information on specific system capabilities and justification for sole-source award.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $250.5 million to RAYTHEON COMPANY. NEXT GENERATION OPERATIONAL CONTROL SYSTEM BLOCK 3 FOLLOW-ON.

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 $250.5 million.

What is the period of performance?

Start: 2021-04-29. End: 2026-01-05.

What specific capabilities does the 'NEXT GENERATION OPERATIONAL CONTROL SYSTEM BLOCK 3 FOLLOW-ON' provide, and how do these capabilities justify a sole-source award?

The provided data does not detail the specific capabilities of the 'NEXT GENERATION OPERATIONAL CONTROL SYSTEM BLOCK 3 FOLLOW-ON.' However, sole-source awards are typically justified when a unique capability exists, intellectual property rights are restricted, or there is an urgent need that cannot be met through competition. For this system, the justification likely centers on proprietary technology developed by Raytheon, integration with existing unique systems, or a critical operational requirement where only Raytheon could provide the necessary solution within the required timeframe. Without access to the official justification documentation (e.g., Justification and Approval for Other Than Full and Open Competition - J&A), the precise reasons remain speculative but would need to demonstrate that competition is not feasible or not in the government's best interest.

How does the Cost Plus Incentive Fee (CPIF) structure compare to other contract types for similar defense systems, and what are the potential risks and benefits?

Cost Plus Incentive Fee (CPIF) contracts are used when the government wants to encourage contractor efficiency and cost control while acknowledging that precise cost estimation is difficult. In a CPIF contract, the final profit is adjusted based on the contractor's performance against pre-defined cost, schedule, or performance targets. Compared to fixed-price contracts, CPIF offers more flexibility for complex, R&D-intensive projects where costs are uncertain, potentially leading to better technical outcomes. However, compared to Cost Plus Fixed Fee (CPFF), the incentive element adds complexity in target setting and monitoring. The primary risk is that poorly defined targets or excessive profit potential could still lead to cost overruns, while the benefit is the potential for the government to achieve better performance or lower costs than with a less performance-driven contract type, provided the incentives are well-structured and monitored.

What is the historical spending pattern for the 'Operational Control System' program or its predecessors, and how does this $250.5M award fit within that trend?

The provided data identifies this contract as 'NEXT GENERATION OPERATIONAL CONTROL SYSTEM BLOCK 3 FOLLOW-ON,' implying previous blocks or iterations of this system. However, specific historical spending data for this program or its predecessors is not included in the provided snippet. To analyze the trend, one would need to examine prior contract awards related to 'Operational Control System' (or similar designations) from the Department of the Air Force or Department of Defense. This would involve searching contract databases for awards to Raytheon or other relevant contractors over previous years. Understanding the cumulative investment in this system family is crucial to contextualize the $250.5 million award and assess whether it represents a significant increase, a continuation of established spending levels, or a decrease in investment for this capability.

What are the key performance indicators (KPIs) or metrics used in the Cost Plus Incentive Fee (CPIF) for this contract, and how are they measured?

The specific Key Performance Indicators (KPIs) or metrics for the Cost Plus Incentive Fee (CPIF) on this 'NEXT GENERATION OPERATIONAL CONTROL SYSTEM BLOCK 3 FOLLOW-ON' contract are not detailed in the provided data. Typically, for a system like this, KPIs could relate to system uptime/availability, processing speed, data accuracy, successful command execution rates, cybersecurity compliance, or integration success with other platforms. The measurement methods would be defined in the contract's Statement of Work (SOW) and Performance Requirements Document. These could include objective testing, operational performance monitoring, user feedback, or milestone achievement. The incentive fee would then be calculated based on how well Raytheon meets or exceeds these pre-defined targets, influencing their final profit margin.

Given the sole-source nature and significant value, what specific oversight mechanisms are in place to ensure accountability and prevent potential contractor overreach?

While specific oversight mechanisms are not detailed, standard DoD practices for sole-source, high-value contracts like this involve multiple layers of oversight. Program Management Offices (PMOs) within the Air Force are responsible for day-to-day monitoring of performance, cost, and schedule. Contract specialists and financial managers track expenditures and compliance. For CPIF contracts, rigorous oversight of cost accounting and performance metric validation is essential to ensure fair incentive application. Additionally, the Defense Contract Audit Agency (DCAA) may perform audits of contractor costs. The Inspector General's office can also initiate investigations if fraud, waste, or abuse is suspected. Transparency is often enhanced through regular reporting requirements mandated by the contract.

Industry Classification

NAICS: Public Administration › Space Research and Technology › Space Research and Technology

Product/Service Code: AEROSPACE CRAFT COMPONENTS AND ACCESSORIES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE (V)

Evaluated Preference: NONE

Contractor Details

Parent Company: RTX Corp

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

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: $262,680,114

Exercised Options: $262,680,114

Current Obligation: $250,512,687

Subaward Activity

Number of Subawards: 50

Total Subaward Amount: $4,220,982,895

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline