Raytheon Company awarded $48.2M for Maverick program spares, a sole-source procurement

Contract Overview

Contract Amount: $48,170,390 ($48.2M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2019-12-19

End Date: 2025-06-18

Contract Duration: 2,008 days

Daily Burn Rate: $24.0K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: PROCURE 95 EACH REPLENISMENT SPARES IN SUPPORT OF THE FMS MAVERICK PROGRAM

Place of Performance

Location: TUCSON, PIMA County, ARIZONA, 85756

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $48.2 million to RAYTHEON COMPANY for work described as: PROCURE 95 EACH REPLENISMENT SPARES IN SUPPORT OF THE FMS MAVERICK PROGRAM Key points: 1. This contract represents a significant investment in maintaining critical defense capabilities. 2. The sole-source nature of this award warrants scrutiny regarding potential price inflation. 3. Long-term sustainment contracts can indicate a mature and essential program. 4. The duration of the contract suggests a need for ongoing support for the Maverick program. 5. The absence of competition raises questions about cost-effectiveness and value for money. 6. The procurement of replenishment spares highlights the operational tempo and needs of the program.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to its sole-source nature and the specific nature of replenishment spares for a guided missile system. Without competitive bids, it's difficult to ascertain if the $48.2 million price reflects fair market value. The firm-fixed-price contract type offers some cost certainty, but the lack of competition means the government cannot leverage market forces to drive down costs. Further analysis would require access to historical pricing data for similar spares and an understanding of the cost drivers for these specialized components.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning Raytheon Company was the only vendor considered. This typically occurs when a specific item or service is only available from a single source, often due to proprietary technology, unique expertise, or the need for compatibility with existing systems. The lack of competition means the government did not explore alternative suppliers or negotiate prices against multiple offers, potentially leading to higher costs than if the contract had been competed.

Taxpayer Impact: Taxpayers may be paying a premium for these spares due to the absence of competitive bidding. Without alternative quotes, it is harder to ensure the most cost-effective solution was secured.

Public Impact

The primary beneficiaries are the U.S. military units operating the Maverick missile system, ensuring operational readiness. The contract delivers essential replenishment spares, crucial for maintaining the functionality and availability of guided missile systems. The geographic impact is primarily within Arizona (ST: AZ), where the contractor is located, and wherever the Maverick program is deployed globally. The contract supports specialized manufacturing jobs within the defense industrial base, specifically in propulsion unit and parts manufacturing.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source procurement limits price discovery and potentially increases costs for taxpayers.
Lack of competition may reduce incentives for the contractor to innovate or improve efficiency.
Dependence on a single supplier for critical spares can create supply chain vulnerabilities.
The long contract duration could lock the government into potentially suboptimal pricing over time.

Positive Signals

Firm-fixed-price contract type provides cost certainty for the government.
Procurement of replenishment spares indicates a commitment to sustaining critical defense assets.
The contractor, Raytheon Company, is a well-established defense manufacturer with relevant expertise.

Sector Analysis

This contract falls within the Defense sector, specifically supporting the manufacturing of propulsion unit parts for guided missiles. The market for such specialized defense components is often characterized by limited suppliers and long-standing relationships with government agencies. Spending in this area is driven by national security requirements and the need to maintain the readiness of advanced weapon systems. Comparable spending benchmarks would typically involve other sustainment contracts for similar missile systems, often awarded through sole-source or limited competition due to technical requirements.

Small Business Impact

The data indicates that this contract was not set aside for small businesses (SB: false) and the contractor is not a small business (SS: false). Therefore, there are no direct subcontracting implications for small businesses arising from a small business set-aside. However, Raytheon Company, as a large defense contractor, may engage small businesses as subcontractors for various components or services, but this is not mandated by the contract terms provided.

Oversight & Accountability

Oversight for this contract is likely managed by the Defense Contract Management Agency (DCMA), which is responsible for ensuring contractor performance and compliance. The firm-fixed-price nature of the contract provides a degree of cost control. Transparency regarding the specific details of the sole-source justification and pricing breakdown would be crucial for a comprehensive assessment of accountability. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse.

Related Government Programs

Guided Missile and Space Vehicle Propulsion Unit and Propulsion Unit Parts Manufacturing
Defense Logistics Agency (DLA) Spare Parts Procurement
Tactical Missile Sustainment Programs
Raytheon Company Defense Contracts
Maverick Missile System Support

Risk Flags

Sole-source procurement
Lack of competition
Potential for cost overruns
Supply chain dependency

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $48.2 million to RAYTHEON COMPANY. PROCURE 95 EACH REPLENISMENT SPARES IN SUPPORT OF THE FMS MAVERICK PROGRAM

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 $48.2 million.

What is the period of performance?

Start: 2019-12-19. End: 2025-06-18.

What is Raytheon Company's track record with the Department of Defense for similar sole-source contracts?

Raytheon Company, now part of RTX, has a long and extensive history of contracting with the Department of Defense across numerous programs. Analyzing their track record for similar sole-source procurements of specialized components, particularly for missile systems, would involve reviewing past contract awards, performance reviews, and any documented instances of cost overruns or disputes. Generally, large defense contractors like Raytheon are experienced in navigating sole-source justifications, often citing proprietary technology or unique manufacturing capabilities. A detailed review would look for patterns in pricing, delivery performance, and adherence to contract terms across their portfolio of sole-source awards to assess consistency and potential risks.

How does the per-unit cost of these spares compare to industry benchmarks or historical data for the Maverick program?

Determining the per-unit cost benchmark for these specific replenishment spares is challenging without access to detailed pricing breakdowns and historical data. As a sole-source procurement, direct comparison to market rates is difficult. However, an analysis could involve comparing the unit cost of these spares to similar components within other missile systems, adjusting for complexity and technological differences. Additionally, examining the historical cost trends for spares under previous contracts for the Maverick program, if available, could reveal significant price escalations. The absence of competition inherently limits the ability to establish a definitive 'fair market value' per unit without further internal government cost analysis or access to Raytheon's cost structure.

What are the primary risks associated with a sole-source procurement for critical defense spares?

The primary risks associated with a sole-source procurement for critical defense spares include a lack of price competition, which can lead to inflated costs for the government and taxpayers. There's also a reduced incentive for the contractor to achieve efficiencies or innovate, as they face no direct market pressure from competitors. Furthermore, sole-source awards can create a dependency on a single supplier, potentially leading to supply chain vulnerabilities if that supplier experiences production issues, financial instability, or decides to discontinue the product line. This dependence can also limit the government's flexibility in seeking alternative solutions or negotiating more favorable terms in the future.

How effective is the firm-fixed-price contract type in managing costs for specialized defense components like these?

The firm-fixed-price (FFP) contract type is generally effective in managing costs for specialized defense components because it shifts the risk of cost overruns from the government to the contractor. The contractor agrees to a set price, and any costs incurred above that price are absorbed by them. This provides cost certainty for the government. However, for sole-source procurements, the initial fixed price might be set at a higher level to account for the lack of competition and the contractor's assumption of risk. While FFP provides budget predictability, its effectiveness in ensuring the 'best value' is diminished without competitive pressure to establish a fair baseline price.

What are the historical spending patterns for the Maverick program's sustainment and spare parts?

Analyzing historical spending patterns for the Maverick program's sustainment and spare parts would require access to historical contract data beyond the current award. This would involve examining previous contracts awarded for the Maverick system, including sustainment, upgrades, and spare parts procurements, over its lifecycle. Key metrics to review would include the total amount spent annually, the number and type of contracts awarded (competitive vs. sole-source), and trends in the cost of specific components or services. Understanding these patterns can reveal whether spending has been consistent, increasing, or decreasing, and whether the program has historically relied on competitive or sole-source acquisitions for its support.

What is the potential impact of this contract on the overall defense budget and resource allocation?

This $48.2 million contract for Maverick program spares represents a specific allocation within the broader Department of Defense budget. While significant in its own right, its impact on the overall defense budget is relatively modest when considered against the total annual defense spending, which runs into hundreds of billions of dollars. However, the nature of the procurement (sole-source) raises questions about efficient resource allocation. If similar sole-source awards are prevalent across various programs, they could collectively contribute to higher overall defense expenditures than might be achieved through greater competition. This contract's funding is likely drawn from the procurement or sustainment accounts designated for tactical missile systems.

Industry Classification

NAICS: Manufacturing › Aerospace Product and Parts Manufacturing › Guided Missile and Space Vehicle Propulsion Unit and Propulsion Unit Parts Manufacturing

Product/Service Code: GUIDED MISSLES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: FA821319RFMSB

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: $48,170,390

Exercised Options: $48,170,390

Current Obligation: $48,170,390

Subaward Activity

Number of Subawards: 46

Total Subaward Amount: $42,578,319

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline