Raytheon Company awarded $115M for navigation and guidance systems, with contract duration exceeding 13 years

Contract Overview

Contract Amount: $115,276,400 ($115.3M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2006-07-21

End Date: 2019-11-25

Contract Duration: 4,875 days

Daily Burn Rate: $23.6K/day

Competition Type: NOT AVAILABLE FOR COMPETITION

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Place of Performance

Location: GOLETA, SANTA BARBARA County, CALIFORNIA, 93117

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $115.3 million to RAYTHEON COMPANY for work described as: Key points: 1. The contract's extended duration suggests a long-term need for these critical systems. 2. Fixed-price terms offer cost certainty for the government, shifting risk to the contractor. 3. The sole-source nature raises questions about potential price overruns and lack of competitive pressure. 4. Performance spans over a decade, indicating a stable but potentially evolving technological requirement. 5. This spending falls within the broader defense sector's investment in advanced navigation technology.

Value Assessment

Rating: fair

Benchmarking the value of this definitive contract is challenging due to the lack of publicly available comparable contract data for specific navigation and guidance systems. The firm fixed-price structure provides cost predictability, but without competitive bidding, it's difficult to ascertain if the pricing reflects optimal market value. The extended performance period, however, might indicate a stable, albeit potentially higher, cost for ensuring continuous availability of these specialized systems.

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 used when only one source can provide the required goods or services, often due to proprietary technology, unique capabilities, or urgent needs. The lack of competition limits the government's ability to leverage market forces to drive down prices and ensure the best possible value.

Taxpayer Impact: Taxpayers may have paid a premium due to the absence of competitive bidding. Without competing offers, there is less assurance that the price reflects the lowest reasonable cost for these navigation and guidance systems.

Public Impact

The primary beneficiaries are the Department of Defense and its operational units relying on advanced navigation and guidance systems. The contract delivers essential components and services for maintaining and potentially upgrading critical military aircraft and systems. Geographic impact is likely global, supporting military operations worldwide. Workforce implications include specialized engineering, manufacturing, and technical support roles within Raytheon and its supply chain.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition and potential taxpayer savings.
Extended contract duration (over 13 years) may not reflect current market efficiencies.
Lack of transparency in the sole-source justification could obscure potential alternatives.
Potential for cost creep if not rigorously managed, despite fixed-price terms.

Positive Signals

Firm fixed-price contract provides cost certainty for the government.
Long-term award indicates a stable and reliable source for critical defense systems.
Contractor (Raytheon) is a well-established defense manufacturer with relevant expertise.

Sector Analysis

This contract falls within the Defense Industrial Base sector, specifically focusing on the manufacturing of navigation, guidance, and control systems. This sub-sector is characterized by high technological complexity, significant R&D investment, and long product lifecycles. Spending in this area is crucial for maintaining military readiness and technological superiority. Comparable spending benchmarks are difficult to establish due to the specialized nature of the systems, but overall defense spending on avionics and related systems runs into billions annually.

Small Business Impact

There is no indication that this contract included a small business set-aside. Given the specialized nature of navigation and guidance systems and the sole-source award to a large prime contractor, the direct impact on small businesses through set-asides is likely minimal. However, Raytheon may engage small businesses as subcontractors, contributing indirectly to the small business ecosystem within the defense supply chain.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Defense's contracting and program management offices. Accountability measures are inherent in the contract terms, particularly the firm fixed-price structure. Transparency is limited due to the sole-source nature, but contract modifications and performance reports would be subject to internal review. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Defense Advanced GPS Receivers
Aircraft Navigation Systems
Missile Guidance Systems
Avionics Manufacturing
Military Radar Systems

Risk Flags

Sole-source award
Long contract duration
Lack of public performance data

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $115.3 million to RAYTHEON COMPANY. See the official description on USAspending.

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 $115.3 million.

What is the period of performance?

Start: 2006-07-21. End: 2019-11-25.

What is Raytheon Company's track record with the Department of Defense for similar navigation and guidance systems?

Raytheon Company, now part of RTX Corporation, has a long and extensive history of providing advanced defense systems, including navigation, guidance, and control technologies, to the Department of Defense. They are a major prime contractor involved in numerous programs across various military branches. Their track record includes the development and production of complex systems such as radar, missile guidance, and electronic warfare capabilities. While specific performance metrics for individual contracts are often not public, Raytheon is generally recognized as a key player in the defense industrial base, with significant experience in delivering sophisticated technological solutions under demanding requirements. Their involvement in this specific contract suggests a recognized capability to meet the DoD's needs for these specialized systems.

How does the $115 million award compare to typical spending on navigation and guidance systems by the Air Force?

The $115 million award represents a significant but not extraordinary investment for specialized navigation and guidance systems within the Department of the Air Force. Annual spending on avionics, navigation, and guidance systems across the entire Department of Defense can range from several billion to tens of billions of dollars, depending on modernization programs and operational tempo. This specific contract, awarded over a period of more than 13 years (4875 days), averages approximately $23,646 per day or roughly $8.6 million per year. While substantial, this figure is consistent with the procurement of complex, high-technology components that require extensive research, development, testing, and manufacturing. Without knowing the exact nature and quantity of the systems procured, a direct comparison to 'typical' spending is difficult, but it falls within the expected range for such critical defense procurements.

What are the primary risks associated with a sole-source award for these types of systems?

The primary risks associated with a sole-source award for navigation and guidance systems include potential overpricing due to the lack of competitive pressure, reduced incentive for the contractor to innovate or improve efficiency, and a lack of transparency in the procurement process. Taxpayers may bear a higher cost than if the contract had been competed. Furthermore, reliance on a single source can create vulnerabilities if the contractor faces production issues, financial instability, or strategic shifts. The government also loses the opportunity to explore alternative solutions or technologies that might be offered by other capable vendors. Rigorous oversight and negotiation are crucial to mitigate these risks.

How effective are firm fixed-price contracts in managing costs for long-duration defense procurements like this one?

Firm fixed-price (FFP) contracts are generally considered effective in managing costs for long-duration defense procurements by shifting cost-risk to the contractor. Under an FFP agreement, the contractor is obligated to complete the work for a predetermined price, regardless of their actual costs. This incentivizes the contractor to control expenses and improve efficiency to maximize profit. For the government, it provides cost certainty, making budgeting more predictable. However, for highly complex or technologically uncertain projects, an FFP contract can sometimes lead to contractors bidding very high prices to cover potential risks, or conversely, cutting corners on quality if not adequately monitored. In this case, with a duration exceeding 13 years, effective oversight remains critical to ensure both cost control and quality.

What is the historical spending trend for navigation, detection, and guidance system manufacturing (NAICS 334511) by the Department of Defense?

Historical spending by the Department of Defense (DoD) on navigation, detection, and guidance system manufacturing, categorized under NAICS code 334511, has been substantial and generally follows trends in defense modernization and operational needs. While specific annual figures for the DoD alone are not readily available through standard public databases, the broader federal government's spending in this sector fluctuates based on major defense programs, technological advancements, and geopolitical factors. The sector is critical for military readiness, encompassing everything from aircraft navigation systems to missile guidance and surveillance equipment. Spending typically increases during periods of heightened global tension or when new generations of military platforms are being developed and fielded. The sustained nature of this contract suggests a consistent, long-term demand for such systems within the DoD.

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: COMM/DETECT/COHERENT RADIATION

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: 6380 HOLLISTER AVE, GOLETA, CA, 93117

Business Categories: Category Business, Not Designated a Small Business

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline