Raytheon awarded $653M for V-22 Osprey product support, a sole-source contract with significant duration

Contract Overview

Contract Amount: $65,323,269 ($65.3M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2009-01-02

End Date: 2010-12-31

Contract Duration: 728 days

Daily Burn Rate: $89.7K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: V-22 PRODUCTS SUPPORT (USN)

Place of Performance

Location: INDIANAPOLIS, MARION County, INDIANA, 46219

State: Indiana Government Spending

Plain-Language Summary

Department of Defense obligated $65.3 million to RAYTHEON COMPANY for work described as: V-22 PRODUCTS SUPPORT (USN) Key points: 1. Contract awarded on a cost-plus-fixed-fee basis, indicating potential for cost overruns. 2. Sole-source award limits price competition and may not reflect best value. 3. Long contract duration of 728 days suggests a need for sustained support. 4. The contract falls under 'Other Aircraft Parts and Auxiliary Equipment Manufacturing,' a specialized sector. 5. Awarded by the Department of the Navy, highlighting its importance for naval aviation readiness.

Value Assessment

Rating: questionable

The contract's total value of $653 million for a two-year period is substantial. Without comparable sole-source contracts for V-22 product support, it is difficult to benchmark the value for money. The cost-plus-fixed-fee structure inherently carries a risk of cost escalation, as the contractor is reimbursed for allowable costs plus a fixed fee. This structure is often used when precise cost estimation is challenging, but it requires robust oversight to ensure costs remain reasonable.

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 justified when only one vendor possesses the necessary capabilities, proprietary technology, or when urgent needs preclude a competitive process. The lack of competition means that taxpayers did not benefit from potential price reductions that could arise from a bidding process.

Taxpayer Impact: Sole-source awards limit the government's ability to negotiate the lowest possible price, potentially leading to higher costs for taxpayers compared to a competitively awarded contract.

Public Impact

The primary beneficiaries are the U.S. Navy and Marine Corps, who rely on the V-22 Osprey for critical missions. Services delivered include product support, ensuring the operational readiness and maintenance of the V-22 aircraft fleet. The geographic impact is likely concentrated around naval aviation bases and operational theaters where the V-22 is deployed. Workforce implications include the need for specialized technical personnel to support the V-22 program, both within the contractor's organization and potentially at Navy facilities.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award raises concerns about potential lack of competitive pricing and value for money.
Cost-plus-fixed-fee contract type can incentivize higher spending if not closely monitored.
Long contract duration without clear performance metrics could lead to complacency or inefficiency.

Positive Signals

Awarding to Raytheon, a major defense contractor, suggests access to specialized expertise for V-22 support.
Ensuring product support for a critical platform like the V-22 is vital for national security readiness.
The contract aims to maintain the operational availability of a unique and complex aircraft.

Sector Analysis

The aerospace and defense sector is characterized by high barriers to entry, complex supply chains, and significant government investment. Contracts for specialized aircraft support, like that for the V-22 Osprey, are often awarded to original equipment manufacturers or prime contractors due to proprietary knowledge and specialized tooling. The market for such support is typically limited, with a few large, established players dominating. Benchmarking spending in this niche requires comparing it to other sustainment contracts for similar complex military aircraft.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. Furthermore, the prime contractor, Raytheon Company, is a large defense corporation. While large prime contractors are often required to subcontract a portion of their work to small businesses, the specific subcontracting plan for this contract is not detailed here. The absence of a direct small business set-aside means that opportunities for small businesses to directly compete for this prime contract were limited.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy's contracting and program management offices. Given the sole-source nature and cost-plus-fixed-fee structure, rigorous oversight of incurred costs, contractor performance, and adherence to contract terms would be crucial. The Inspector General of the Department of Defense may also conduct audits or investigations into the contract's execution to ensure accountability and prevent fraud, waste, and abuse.

Related Government Programs

V-22 Osprey Aircraft Procurement
Aviation Maintenance Services
Defense Logistics Support
Aerospace Component Manufacturing

Risk Flags

Sole-source award
Cost-plus-fixed-fee contract type
Long contract duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $65.3 million to RAYTHEON COMPANY. V-22 PRODUCTS SUPPORT (USN)

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 $65.3 million.

What is the period of performance?

Start: 2009-01-02. End: 2010-12-31.

What is the historical spending trend for V-22 Osprey product support by the Department of the Navy?

Analyzing historical spending for V-22 product support requires access to detailed contract databases beyond the provided data. However, given the V-22's operational history and its role as a critical asset for both the Navy and Marine Corps, it is reasonable to infer that sustainment and product support have been ongoing requirements since its introduction. Spending would likely fluctuate based on fleet size, operational tempo, and modernization efforts. A trend analysis would typically involve examining contract awards over several fiscal years to identify patterns in spending levels, contract types, and key contractors involved in providing support services for the V-22 program.

How does the cost-plus-fixed-fee (CPFF) structure compare to other contract types for similar defense sustainment contracts?

The Cost-Plus-Fixed-Fee (CPFF) contract type is common in defense sustainment when the scope of work or costs are difficult to define precisely upfront, such as in long-term support or research and development. In CPFF, the contractor is reimbursed for all allowable costs incurred, plus a predetermined fixed fee representing profit. This contrasts with Fixed-Price contracts, where the price is set regardless of actual costs, offering more cost certainty to the government but shifting risk to the contractor. Incentive contracts, like Cost Plus Incentive Fee (CPIF), aim to balance cost control and performance by adjusting the fee based on achieving specific targets. For sustainment, CPFF can be advantageous for ensuring continuous support but requires stringent oversight to manage costs effectively, whereas fixed-price contracts might offer better value if the scope is well-defined.

What are the key performance indicators (KPIs) typically used to evaluate the success of V-22 product support contracts?

Key Performance Indicators (KPIs) for V-22 product support contracts are designed to measure the effectiveness and efficiency of the services provided, ensuring the operational readiness of the aircraft. Common KPIs include aircraft availability rates (percentage of time aircraft are mission-capable), mean time between failures (MTBF) for critical components, mean time to repair (MTTR), on-time delivery of spare parts, and adherence to maintenance schedules. Additionally, metrics related to cost performance, such as variance from budget and cost efficiency, are monitored. Contractor responsiveness to urgent requirements and the quality of technical support provided are also crucial qualitative aspects often assessed through performance reviews and user feedback.

What is Raytheon Company's track record in providing product support for complex military aircraft like the V-22?

Raytheon Company, now part of RTX, has a significant track record in the defense sector, providing a wide range of products and services, including sustainment and support for complex military platforms. While the V-22 Osprey is primarily manufactured by Bell Textron (a subsidiary of Textron), Raytheon plays a crucial role in its mission systems and components. Therefore, their involvement in product support is likely focused on specific systems or integrated support solutions. Their experience with other advanced aircraft programs and complex weapon systems suggests a capability to manage large-scale sustainment contracts, though specific performance details for V-22 product support would require deeper contract-level analysis.

What are the potential risks associated with a sole-source award for critical defense equipment sustainment?

Sole-source awards for critical defense equipment sustainment carry several potential risks. Foremost is the lack of price competition, which can lead to higher costs for the government and taxpayers, as the contractor faces less pressure to offer competitive pricing. There's also a risk of complacency, where the incumbent contractor may have less incentive to innovate or improve efficiency if they are assured of continued business without competition. Furthermore, reliance on a single source can create vulnerabilities in the supply chain; if the sole provider experiences production issues, financial instability, or goes out of business, it could severely impact the availability and readiness of the critical equipment. This necessitates robust government oversight and contingency planning.

Industry Classification

NAICS: Manufacturing › Aerospace Product and Parts Manufacturing › Other Aircraft Parts and Auxiliary Equipment Manufacturing

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 FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Address: 6125 E 21ST ST, INDIANAPOLIS, IN, 07

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $65,489,351

Exercised Options: $65,489,351

Current Obligation: $65,323,269

Contract Characteristics

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: N0001905G0008

IDV Type: IDC

Timeline