DoD awards Raytheon $277.8M for CIWS production, a sole-source contract spanning over 4 years

Contract Overview

Contract Amount: $277,752,471 ($277.8M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2013-09-10

End Date: 2018-03-31

Contract Duration: 1,663 days

Daily Burn Rate: $167.0K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: FY13/14 CIWS PRODUCTION- FMS

Place of Performance

Location: LOUISVILLE, JEFFERSON County, KENTUCKY, 40214

State: Kentucky Government Spending

Plain-Language Summary

Department of Defense obligated $277.8 million to RAYTHEON COMPANY for work described as: FY13/14 CIWS PRODUCTION- FMS Key points: 1. Contract awarded to Raytheon Company for Close-In Weapon System (CIWS) production. 2. Significant award value of $277.8 million over a 1663-day period. 3. Contract type is Firm Fixed Price, indicating price certainty for the government. 4. Sole-source award raises questions about potential lack of competition and price discovery. 5. The contract falls under the Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing sector.

Value Assessment

Rating: questionable

The contract value of $277.8 million for CIWS production over nearly 5 years is substantial. Without comparable sole-source contracts or detailed cost breakdowns, assessing its value against industry benchmarks is difficult. The lack of competition inherently limits the government's ability to secure the best possible price.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was not competed, indicating a sole-source award to Raytheon Company. This approach bypasses the competitive bidding process, potentially leading to higher costs for taxpayers and limiting opportunities for other qualified manufacturers to offer their solutions.

Taxpayer Impact: The sole-source nature of this award means taxpayers may not be receiving the most cost-effective solution available, as competition is a key driver for price reduction.

Public Impact

Ensures continued production of critical Close-In Weapon Systems for naval defense. Potential for higher costs due to the absence of competitive bidding. Limited transparency on how the final price was determined without competition. Impacts the defense industrial base by consolidating production with a single provider.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award
Lack of competition
Potential for inflated pricing
Limited taxpayer value

Positive Signals

Firm Fixed Price contract type
Long-term production commitment
Ensures supply of critical defense system

Sector Analysis

This contract falls within the Defense sector, specifically related to the manufacturing of navigation and guidance systems. The $277.8 million award is significant for this sub-sector, especially given its sole-source nature. Benchmarks for similar sole-source defense system production contracts are often difficult to ascertain due to proprietary information and unique system requirements.

Small Business Impact

The data indicates this contract was not awarded to small businesses (sb: false). The prime contractor, Raytheon Company, is a large defense manufacturer. There is no information provided on subcontracting opportunities for small businesses within this award.

Oversight & Accountability

The Department of Defense, through the Defense Contract Management Agency, is responsible for overseeing this contract. The sole-source nature necessitates robust oversight to ensure fair pricing and contract compliance, though the lack of competition inherently reduces the leverage for price negotiation.

Related Government Programs

Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing
Department of Defense Contracting
Defense Contract Management Agency Programs

Risk Flags

Sole-source award limits price competition.
Potential for cost overruns without competitive pressure.
Lack of transparency in price determination.
Risk of vendor lock-in.
Limited opportunities for alternative solutions.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $277.8 million to RAYTHEON COMPANY. FY13/14 CIWS PRODUCTION- FMS

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 $277.8 million.

What is the period of performance?

Start: 2013-09-10. End: 2018-03-31.

What is the justification for awarding this CIWS production contract as sole-source to Raytheon Company?

The justification for a sole-source award typically stems from unique capabilities, proprietary technology, or the need for compatibility with existing systems that only one contractor can provide. Without specific documentation, it's presumed that Raytheon possesses the exclusive rights or necessary expertise for this particular CIWS production, thereby precluding competitive bidding.

How can the government ensure fair pricing on this sole-source contract without competitive pressure?

The government can employ several strategies to ensure fair pricing, including conducting thorough cost realism analyses, benchmarking against similar sole-source contracts (if available), negotiating profit margins, and utilizing independent cost estimates. Robust auditing and negotiation by contracting officers are crucial to mitigate the risks associated with the absence of competition.

What is the long-term strategic value of this sole-source CIWS production contract for the Department of Defense?

The long-term strategic value lies in ensuring a consistent and reliable supply of a critical defense asset. By maintaining a relationship with a single, established producer, the DoD can guarantee the availability of CIWS, potentially simplifying logistics, training, and maintenance. However, this must be balanced against the risk of technological stagnation and higher long-term costs compared to a competitive environment.

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: WEAPONS

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0002412R5406

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: RTX Corp

Address: 1151 E HERMANS RD, TUCSON, AZ, 85756

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: $277,752,471

Exercised Options: $277,752,471

Current Obligation: $277,752,471

Subaward Activity

Number of Subawards: 840

Total Subaward Amount: $544,684,038

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline