Raytheon Company awarded $27.4M for PAVEWAY II production, with 2 bidders indicating moderate competition

Contract Overview

Contract Amount: $27,445,831 ($27.4M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2016-07-11

End Date: 2018-07-10

Contract Duration: 729 days

Daily Burn Rate: $37.6K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: PAVEWAY II PRODUCTION UNITS

Place of Performance

Location: TUCSON, PIMA County, ARIZONA, 85756

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $27.4 million to RAYTHEON COMPANY for work described as: PAVEWAY II PRODUCTION UNITS Key points: 1. Contract awarded to Raytheon Company for PAVEWAY II production units. 2. The contract was competed under full and open competition. 3. Two bids were received, suggesting a moderate level of competition. 4. The contract type is Firm Fixed Price, which shifts risk to the contractor. 5. Delivery orders were issued over a 729-day period. 6. The contract is associated with Ammunition (except Small Arms) Manufacturing. 7. The contract was awarded by the Department of the Air Force.

Value Assessment

Rating: fair

The total award amount is $27.4 million. Benchmarking this specific contract for PAVEWAY II production units is challenging without detailed cost breakdowns or comparisons to similar ammunition manufacturing contracts. The firm fixed-price nature suggests that the government has locked in a price, but the value for money depends heavily on the negotiated price relative to market rates and the contractor's actual costs. Further analysis would require understanding the unit costs and comparing them to historical data or other solicitations for similar munitions.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, meaning all responsible sources were permitted to submit bids. Two bids were received, indicating a moderate level of competition for this specific requirement. While more than one bidder is present, a higher number of bidders typically leads to more robust price discovery and potentially lower prices for the government.

Taxpayer Impact: The presence of two bidders suggests that taxpayers likely received a reasonably competitive price, but there may be an opportunity for even greater savings if more firms were able to participate or were incentivized to bid.

Public Impact

The Department of the Air Force benefits from the production of PAVEWAY II units, crucial for its munitions inventory. This contract supports the manufacturing of specific types of ammunition. The contract's performance is geographically linked to Arizona, where the contractor is located. The contract supports jobs within the defense manufacturing sector, specifically in ammunition production.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Limited competition (2 bidders) may not have driven the lowest possible price.
Lack of detailed cost data makes independent value assessment difficult.
Firm Fixed Price contracts can lead to higher contractor profit margins if costs are lower than anticipated.

Positive Signals

Full and open competition was utilized, allowing for broad market participation.
Firm Fixed Price contract structure transfers cost overrun risk to the contractor.
Contract awarded to a known defense contractor (Raytheon Company) with established production capabilities.

Sector Analysis

The defense sector, particularly ammunition manufacturing, is a significant area of federal spending. Contracts like this are essential for maintaining military readiness and supplying armed forces with necessary ordnance. The market for such specialized munitions can be concentrated among a few key defense contractors, influencing competition dynamics. Benchmarking requires comparing this award to other contracts for similar munitions, considering factors like quantity, specifications, and production timelines.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb: false'. There is no explicit information provided regarding subcontracting plans for small businesses. Therefore, the direct impact on the small business ecosystem from this specific award is likely minimal, unless the prime contractor voluntarily engages small businesses in their supply chain.

Oversight & Accountability

The contract is subject to standard federal procurement oversight. As a delivery order under a larger contract vehicle, oversight would focus on adherence to the terms and conditions of the base contract and the specific delivery order. Transparency is generally maintained through contract award databases like FPDS. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse.

Related Government Programs

PAVEWAY II Munitions
Air Force Ammunition Procurement
Defense Ammunition Manufacturing Contracts
Raytheon Company Defense Contracts

Risk Flags

Moderate competition level (2 bidders) may not have secured the best price.
Lack of detailed cost transparency hinders full value-for-money assessment.
Potential for concentrated market in specialized munitions manufacturing.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $27.4 million to RAYTHEON COMPANY. PAVEWAY II PRODUCTION UNITS

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 $27.4 million.

What is the period of performance?

Start: 2016-07-11. End: 2018-07-10.

What is the historical spending trend for PAVEWAY II production units by the Department of Defense?

Analyzing historical spending on PAVEWAY II production units requires accessing comprehensive contract databases over multiple fiscal years. While this specific award is for $27.4 million, understanding the broader trend involves identifying all prior and subsequent contracts for the same or similar munitions. Factors such as changes in military requirements, technological advancements, and shifts in defense budgets can influence spending patterns. Without access to a complete historical dataset for PAVEWAY II, it's difficult to ascertain if this $27.4 million award represents an increase, decrease, or stable level of investment compared to previous periods. Further investigation into contract award histories for the specific National Stock Number (NSN) or product description would be necessary to establish a trend.

How does the number of bidders (2) compare to typical competition levels for similar ammunition manufacturing contracts?

The receipt of two bids for this PAVEWAY II production contract suggests a moderate level of competition. For many standard or widely produced defense items, competition can often involve more bidders, especially if the requirement is large or if multiple manufacturers possess the necessary capabilities. However, for specialized munitions like PAVEWAY II, the market might be more consolidated, with fewer potential suppliers. A typical range for competitive solicitations can vary widely, but often sees anywhere from 3 to 10 or more bids for less specialized items. Receiving only two bids could indicate barriers to entry, such as high technical requirements, specialized manufacturing processes, or a limited number of qualified sources. This level of competition might not fully leverage market forces to achieve the lowest possible price for taxpayers.

What are the potential risks associated with a Firm Fixed Price (FFP) contract for ammunition production?

A Firm Fixed Price (FFP) contract, like the one awarded for PAVEWAY II production, shifts the majority of cost risk to the contractor. The primary risk for the government is that the contractor may have underestimated costs, leading to potential quality compromises to maintain profitability, or conversely, if the contractor significantly overestimated costs, the government may have paid a premium. For the contractor, the risk lies in unforeseen increases in material, labor, or production costs that could erode profit margins or lead to losses. In the context of ammunition production, risks could include supply chain disruptions for raw materials, unexpected manufacturing challenges, or changes in regulatory requirements affecting production. However, FFP contracts are generally favored for their price predictability for the government.

What is Raytheon Company's track record with similar defense manufacturing contracts?

Raytheon Company, now part of RTX, has an extensive and long-standing track record in defense manufacturing, including the production of various munitions and weapon systems. They are a major prime contractor for the U.S. Department of Defense and allied nations. Their experience encompasses a wide range of ordnance, from guided missiles to bombs and related components. Historical data indicates Raytheon has frequently been awarded contracts for large-scale production runs, often competing successfully against other major defense firms. While specific performance metrics for every contract are not publicly detailed, their continued role as a primary supplier suggests a generally reliable performance history. However, like any large contractor, they may have faced scrutiny or performance issues on specific programs over their history, necessitating review of individual contract performance data where available.

How does the $27.4 million award compare to the overall defense spending on ammunition?

The $27.4 million awarded for PAVEWAY II production units represents a relatively small fraction of the Department of Defense's overall annual budget for ammunition. The DoD procures billions of dollars worth of munitions annually, encompassing a vast array of small arms, artillery, air-to-ground munitions, and specialized ordnance. This specific contract focuses on a particular type of munition, PAVEWAY II, which is likely a component or a specific variant of a larger weapon system. Therefore, while significant for the contractor and the specific program, its scale is modest when viewed against the totality of defense ammunition spending. To provide a precise comparison, one would need to aggregate total DoD ammunition spending for the relevant fiscal year and compare this award as a percentage.

Industry Classification

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

Product/Service Code: AMMUNITION AND EXPLOSIVES

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: SUBJECT TO MULTIPLE AWARD FAIR OPPORTUNITY

Offers Received: 2

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

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: $27,445,831

Exercised Options: $27,445,831

Current Obligation: $27,445,831

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: FA821311D0008

IDV Type: IDC

Timeline