DoD awards $23.1M for Paveway III kits, raising questions about competition and value

Contract Overview

Contract Amount: $23,128,989 ($23.1M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2011-07-29

End Date: 2013-04-30

Contract Duration: 641 days

Daily Burn Rate: $36.1K/day

Competition Type: NOT AVAILABLE FOR COMPETITION

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: TO PROCURE PAVEWAY III KITS

Place of Performance

Location: TUCSON, PIMA County, ARIZONA, 85756

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $23.1 million to RAYTHEON COMPANY for work described as: TO PROCURE PAVEWAY III KITS Key points: 1. Contract awarded on a non-competitive basis, limiting price discovery. 2. Limited competition may lead to higher costs for taxpayers. 3. Fixed-price contract type shifts risk to the contractor. 4. Contract duration of 641 days suggests a moderate-sized project. 5. Awarded to Raytheon Company, a major defense contractor. 6. Ammunition manufacturing sector, with a specific focus on guidance kits.

Value Assessment

Rating: questionable

The contract value of $23.1 million for Paveway III kits is difficult to benchmark without more specific details on the quantity and type of kits procured. The lack of competition is a significant concern, as it prevents a direct comparison with market rates or other potential suppliers. The fixed-price nature of the contract is positive in that it caps the government's financial exposure, but the absence of competitive bidding means the government may not have secured the best possible price.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one vendor, Raytheon Company, was solicited. The justification for this approach is not provided in the data. Sole-source awards limit the government's ability to leverage competition to drive down prices and ensure the most innovative solutions are considered. This can lead to higher costs and potentially less favorable terms for the government.

Taxpayer Impact: Taxpayers may be paying a premium due to the lack of competitive bidding. Without multiple offers, there is no market pressure to ensure the price is aligned with fair market value.

Public Impact

The primary beneficiaries are the Department of the Air Force, receiving essential Paveway III kits. These kits are crucial for enhancing the precision-strike capabilities of various aircraft. The contract supports the defense industrial base, particularly in ammunition manufacturing. Work is likely to be performed in Arizona, supporting the local economy and workforce.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competitive bidding raises concerns about potential overpricing.
Sole-source award limits transparency and potential for innovation from other suppliers.
Specific details on the quantity and configuration of Paveway III kits are not provided, hindering detailed value analysis.

Positive Signals

Fixed-price contract type provides cost certainty for the government.
Award to an established contractor like Raytheon suggests a degree of reliability in delivery.
The procurement addresses a specific, likely critical, military capability.

Sector Analysis

The Paveway III kits fall within the broader defense sector, specifically the ammunition and munitions manufacturing sub-sector. This market is characterized by high barriers to entry due to specialized technology, stringent quality control, and long-standing relationships with government agencies. Major defense contractors like Raytheon dominate this space. Spending in this area is driven by military modernization efforts and operational requirements, with significant government investment annually.

Small Business Impact

There is no indication that this contract included a small business set-aside. Given the nature of advanced munitions and the sole-source award to a large prime contractor, it is unlikely that small businesses were directly involved as prime contractors. Subcontracting opportunities for small businesses may exist but are not detailed in this award data.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Defense's contracting and financial management systems. The Air Force is the awarding agency, and its Inspector General's office may conduct audits or investigations into contract performance and pricing, especially given the sole-source nature. Transparency is limited by the lack of competitive bidding documentation.

Related Government Programs

Precision-Guided Munitions
Air-to-Ground Munitions
Defense Ammunition Procurement
Air Force Munitions Contracts

Risk Flags

Sole-source award
Lack of competition
Potential for overpricing
Limited transparency

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $23.1 million to RAYTHEON COMPANY. TO PROCURE PAVEWAY III KITS

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 $23.1 million.

What is the period of performance?

Start: 2011-07-29. End: 2013-04-30.

What is the specific quantity and type of Paveway III kits being procured under this contract?

The provided data does not specify the exact quantity or the precise variant of Paveway III kits being procured. The total contract value is $23,128,989.19. Paveway III kits are typically laser-guided bomb conversion kits that transform unguided munitions into precision-guided munitions. Understanding the quantity and specific configuration (e.g., for different bomb bodies) is crucial for a detailed cost-per-unit analysis and for comparing this award against historical or similar procurements.

What was the justification for awarding this contract on a sole-source basis?

The justification for the sole-source award is not detailed in the provided data. Typically, sole-source procurements are justified under specific circumstances outlined in federal acquisition regulations, such as the existence of only one responsible source, urgent and compelling needs, or specific national security requirements that preclude competition. Without this justification, it is difficult to assess whether the lack of competition was warranted or if it represented a missed opportunity for better value.

How does the per-unit cost of these Paveway III kits compare to similar contracts or market benchmarks?

A direct per-unit cost comparison is not feasible with the current data, as the quantity of kits is unknown. Furthermore, the sole-source nature of the award prevents benchmarking against competitive bids. To perform such a comparison, one would need to know the number of kits procured and compare the resulting unit price to historical Paveway III procurements by the Air Force or other services, or to prices of similar guidance kits from other manufacturers, assuming such data were publicly available and comparable.

What is Raytheon Company's track record with Paveway III kits and similar munitions?

Raytheon Company (now RTX) has a long-standing history as a prime contractor for various munitions and guidance systems, including the Paveway family of kits. They are a major defense industrial base supplier. Their track record typically involves extensive experience in manufacturing, integration, and delivery of complex defense systems. Performance on past contracts, including delivery timeliness, quality, and adherence to budget, would be detailed in government performance records (e.g., CPARS), which are not included here but are critical for assessing contractor reliability.

What are the potential risks associated with this sole-source contract?

The primary risks associated with this sole-source contract include potential overpricing due to the lack of competition, limited access to technological advancements from other potential suppliers, and a reduced incentive for the contractor to innovate or offer significant cost savings. There's also a risk that the government's specific requirements might not be perfectly met if alternative solutions were not explored. The government relies heavily on the contractor's proposed pricing and the agency's internal cost analysis without market validation.

How does this spending fit into the broader context of Air Force munitions procurement?

This contract represents a specific investment within the Air Force's broader munitions procurement strategy, which aims to maintain and modernize its arsenal for air superiority and precision strike capabilities. Paveway III kits are a component of this strategy, enabling the use of precision-guided munitions. Annual spending on munitions can fluctuate based on operational tempo, strategic priorities, and budget allocations. This $23.1 million award is one piece of a much larger, multi-billion dollar annual defense spending pie for aviation ordnance.

Industry Classification

NAICS: Manufacturing › Other Fabricated Metal Product Manufacturing › Ammunition (except Small Arms) Manufacturing

Product/Service Code: AMMUNITION AND EXPLOSIVES

Competition & Pricing

Extent Competed: NOT AVAILABLE FOR COMPETITION

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 1151 E HERMANS RD, TUCSON, AZ, 90

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: $23,128,989

Exercised Options: $23,128,989

Current Obligation: $23,128,989

Contract Characteristics

Cost or Pricing Data: NO

Timeline