Navy awards $345M contract for CIWS production to Raytheon Company, a sole-source procurement

Contract Overview

Contract Amount: $344,863,710 ($344.9M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2019-08-16

End Date: 2024-11-28

Contract Duration: 1,931 days

Daily Burn Rate: $178.6K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: CIWS FY19/20 PRODUCTION

Place of Performance

Location: LOUISVILLE, JEFFERSON County, KENTUCKY, 40214

State: Kentucky Government Spending

Plain-Language Summary

Department of Defense obligated $344.9 million to RAYTHEON COMPANY for work described as: CIWS FY19/20 PRODUCTION Key points: 1. Contract awarded on a sole-source basis, limiting price competition. 2. The contract is for the production of Close-In Weapon Systems (CIWS). 3. Duration of the contract is over 5 years, indicating a long-term need. 4. The contract type is Firm Fixed Price, which shifts some risk to the contractor. 5. No small business set-aside was indicated for this procurement. 6. The contract is for manufacturing of search, detection, navigation, guidance, and related systems.

Value Assessment

Rating: fair

Benchmarking the value of this contract is challenging without detailed cost breakdowns or comparisons to similar sole-source procurements. The firm fixed price structure provides some cost certainty for the government, but the lack of competition inherently limits the government's ability to secure the lowest possible price. Further analysis would require understanding the specific components and labor involved in CIWS production and comparing them to industry standards or previous contract pricing for similar systems.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one bidder, Raytheon Company, was solicited. This approach is typically used when a unique capability is required, or when only one source can meet the government's needs. The lack of competition means that the government did not benefit from a competitive bidding process, which could potentially lead to higher prices than if multiple vendors had vied for the contract.

Taxpayer Impact: Taxpayers may not be receiving the best possible price due to the absence of competitive pressure. The government's negotiating position is weakened without alternative sources to compare against.

Public Impact

The U.S. Navy benefits from the continued production of critical defensive weapon systems. This contract ensures the availability of Close-In Weapon Systems for naval platforms. The contract supports manufacturing operations and potentially jobs in Kentucky, where the contractor has a presence. The services delivered are the production of advanced defense systems essential for maritime security.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing.
Long contract duration may not reflect evolving technology needs.
Lack of small business participation noted.

Positive Signals

Firm Fixed Price contract provides cost predictability.
Contract supports a critical defense system for the Navy.
Contractor is an established defense manufacturer.

Sector Analysis

The defense manufacturing sector is characterized by high barriers to entry, specialized technologies, and significant government investment. Contracts for weapon systems like CIWS are crucial for national security and represent a substantial portion of defense spending. Raytheon Company is a major player in this sector, and this contract aligns with its established capabilities in producing advanced defense hardware. Benchmarking would involve comparing the cost and performance of CIWS to other similar naval defense systems and the overall spending on weapon system procurement within the Department of Defense.

Small Business Impact

This contract does not appear to include a small business set-aside, nor is there an indication of significant subcontracting opportunities for small businesses within the provided data. As a sole-source award to a large prime contractor, the direct impact on the small business ecosystem is likely minimal unless Raytheon Company actively engages small businesses for specific components or services not detailed here. Further investigation into subcontracting plans would be necessary to fully assess the impact.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy's contracting and program management offices. The firm fixed price nature of the contract provides a degree of accountability for the contractor to deliver the specified goods within the agreed-upon price. Transparency is limited due to the sole-source nature of the award. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Naval Surface Warfare Systems
Ammunition Production Contracts
Defense Weapon System Procurement
Ship Self-Defense Systems

Risk Flags

Sole-source award may lead to higher costs.
Lack of competition limits price discovery.
Long-term contract duration requires ongoing monitoring.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $344.9 million to RAYTHEON COMPANY. CIWS FY19/20 PRODUCTION

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 Navy).

What is the total obligated amount?

The obligated amount is $344.9 million.

What is the period of performance?

Start: 2019-08-16. End: 2024-11-28.

What is the historical spending trend for CIWS production by the Department of the Navy?

Historical spending data for CIWS production by the Department of the Navy would reveal the total investment over previous fiscal years. Analyzing this trend can indicate whether spending has been consistent, increasing, or decreasing. For instance, if spending has been steadily rising, it might suggest increased demand or rising production costs. Conversely, a decline could indicate program maturity or shifts in defense priorities. Without specific historical data for this contract vehicle, it's difficult to provide precise figures, but understanding the long-term financial commitment to CIWS is crucial for assessing its strategic importance and budget impact.

How does the unit cost of this CIWS contract compare to previous awards or similar systems?

Comparing the unit cost of the Close-In Weapon System (CIWS) under this contract to previous awards or similar systems is essential for value assessment. As this is a sole-source award, direct price comparison is limited. However, if historical contract data exists for Raytheon's CIWS production, or if comparable defensive systems procured competitively by the Navy have publicly available pricing, a benchmark can be established. Factors such as inflation, technological upgrades, and changes in raw material costs can influence unit prices over time. A significant deviation from historical or comparable pricing, especially without clear justification, could indicate potential overpricing or inefficiencies.

What are the specific performance metrics and delivery schedules associated with this contract?

The specific performance metrics and delivery schedules are critical components of the contract that define the government's expectations and the contractor's obligations. While the provided data indicates a start date of August 16, 2019, and an end date of November 28, 2024, it does not detail the phased delivery of CIWS units or the quality assurance standards. Performance metrics typically include factors like system reliability, operational readiness, and adherence to technical specifications. Delivery schedules outline the quantity of units to be produced and delivered within specific timeframes. Robust oversight would involve tracking adherence to these schedules and metrics to ensure timely and effective delivery of essential defense capabilities.

What is Raytheon Company's track record with sole-source defense contracts of this magnitude?

Raytheon Company, now RTX, has a long and extensive history of securing sole-source defense contracts, particularly for advanced weapon systems. Their track record with contracts of this magnitude ($345 million) is generally characterized by significant technical expertise and established production capabilities. However, sole-source awards inherently raise questions about price justification and the absence of competitive pressure. Analyzing Raytheon's performance on similar sole-source contracts would involve reviewing on-time delivery rates, adherence to budget (where applicable, though less relevant for fixed-price), product quality, and any past issues related to cost overruns or performance deficiencies. Their position as a primary defense contractor suggests a generally reliable, albeit often expensive, supplier for critical military hardware.

What are the potential risks associated with a sole-source procurement for critical defense systems like CIWS?

The primary risk associated with a sole-source procurement for critical defense systems like CIWS is the potential for inflated costs due to the lack of competitive bidding. Without competing offers, the government has less leverage to negotiate the best possible price. Another risk is vendor lock-in, where the government becomes dependent on a single supplier, potentially limiting future options or flexibility. Furthermore, sole-source contracts can sometimes lead to complacency on the part of the contractor regarding innovation or efficiency improvements, as the competitive imperative is absent. Ensuring robust oversight, independent cost analysis, and clear performance standards becomes even more crucial in sole-source situations to mitigate these inherent risks.

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: N0002418R5406

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Rockwell Collins Australia PTY Limited

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: $394,580,628

Exercised Options: $344,863,710

Current Obligation: $344,863,710

Subaward Activity

Number of Subawards: 2677

Total Subaward Amount: $627,185,535

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline