Raytheon Company awarded $152.8M for sustainment services, a sole-source contract for navigation and guidance systems

Contract Overview

Contract Amount: $152,872,403 ($152.9M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2013-01-01

End Date: 2017-08-31

Contract Duration: 1,703 days

Daily Burn Rate: $89.8K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: SUSTAINMENT RAYTHEON CLS

Place of Performance

Location: MCKINNEY, COLLIN County, TEXAS, 75071

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $152.9 million to RAYTHEON COMPANY for work described as: SUSTAINMENT RAYTHEON CLS Key points: 1. Contract awarded on a sole-source basis, limiting competitive price discovery. 2. The contract value represents a significant investment in sustainment for critical defense systems. 3. Performance period spans over 4 years, indicating a long-term need for these services. 4. The firm-fixed-price structure aims to control costs for the government. 5. The absence of small business set-asides suggests a focus on large prime contractors. 6. This contract falls under the manufacturing of navigation, guidance, and control instruments.

Value Assessment

Rating: fair

Benchmarking the value of this sole-source contract is challenging due to the lack of competitive bids. The total award of over $152 million for sustainment services over approximately four years suggests a substantial commitment. Without comparable contracts or market data, it's difficult to definitively assess if the pricing represents excellent value for money. However, the firm-fixed-price nature of the contract provides some cost certainty for the Department of Defense.

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 vendor possesses the necessary capabilities, technology, or proprietary knowledge to fulfill the requirement. The lack of competition means that the government did not benefit from the price reductions and innovation that can arise from a competitive bidding process.

Taxpayer Impact: Taxpayers may have paid a premium due to the absence of competition, as the government could not leverage multiple offers to secure the best possible price.

Public Impact

The primary beneficiaries are the Department of Defense units relying on the sustained operational readiness of navigation and guidance systems. Services delivered include maintenance, repair, and logistical support for critical defense equipment. The geographic impact is likely concentrated where these defense systems are deployed, potentially globally. Workforce implications include the employment of skilled technicians and engineers by Raytheon Company to perform sustainment activities.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure on pricing.
Lack of transparency in the justification for sole-source award.
Potential for cost overruns if not closely managed due to lack of competition.

Positive Signals

Firm-fixed-price contract provides cost certainty.
Long-term sustainment contract ensures operational readiness.
Award to an established contractor with relevant expertise.

Sector Analysis

This contract falls within the aerospace and defense sector, specifically focusing on the manufacturing and sustainment of navigation, detection, and guidance systems. The market for such specialized components is often dominated by a few large, established players due to high barriers to entry, including significant R&D investment and stringent quality requirements. Comparable spending in this sub-sector often involves substantial long-term support contracts to ensure the reliability of complex military hardware.

Small Business Impact

This contract does not appear to have included small business set-asides. The nature of the specialized sustainment services likely requires capabilities typically found in larger, prime contracting organizations. There is no explicit indication of subcontracting plans for small businesses within the provided data, suggesting that the primary focus is on the prime contractor's direct capabilities.

Oversight & Accountability

Oversight for this contract would typically be managed by the Defense Contract Management Agency (DCMA), which is responsible for ensuring contractor compliance with contract terms and conditions. Accountability measures are inherent in the firm-fixed-price structure, which incentivizes the contractor to manage costs effectively. Transparency regarding the sole-source justification and performance metrics would be crucial for assessing accountability.

Related Government Programs

Defense Logistics Agency (DLA) Sustainment Programs
Air Force Materiel Command (AFMC) Sustainment
Navy Fleet Readiness Centers
Army Aviation and Missile Command (AMCOM) Sustainment

Risk Flags

Sole-source award
Lack of competition
Potential for cost overruns
Long-term commitment

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $152.9 million to RAYTHEON COMPANY. SUSTAINMENT RAYTHEON CLS

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 $152.9 million.

What is the period of performance?

Start: 2013-01-01. End: 2017-08-31.

What is Raytheon Company's track record with similar sustainment contracts for defense navigation and guidance systems?

Raytheon Company, now part of RTX Corporation, has a long and extensive history of providing complex systems and sustainment services to the Department of Defense and allied nations. They are a major prime contractor for numerous platforms, including aircraft, missiles, and radar systems, many of which incorporate sophisticated navigation and guidance components. Their track record typically involves managing large, multi-year contracts for the maintenance, repair, overhaul, and logistical support of these critical systems. While specific performance metrics for this particular $152.8 million contract are not detailed here, Raytheon's general experience suggests a capacity to handle the technical and logistical demands of such sustainment efforts. However, past performance on other contracts, including any past issues or successes, would require a deeper dive into contract performance reports and historical data.

How does the $152.8 million award compare to typical sustainment contract values in the defense navigation and guidance sector?

The $152.8 million award for sustainment services over approximately four years falls within a common range for major defense sustainment contracts, particularly for complex systems like navigation and guidance. The annual value of roughly $38.2 million is substantial but not extraordinary given the critical nature and technological sophistication of these components. Larger, more comprehensive sustainment programs for entire weapon systems can easily reach billions of dollars. However, when compared to sustainment for less complex equipment or for shorter durations, this contract represents a significant investment. Benchmarking requires careful consideration of the specific systems being supported, the scope of services (e.g., depot-level maintenance vs. field support), and the operational tempo of the supported platforms.

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

The primary risk associated with this sole-source contract is the potential for inflated costs due to the lack of competitive bidding. Without competing offers, there is less pressure on the contractor (Raytheon) to offer the lowest possible price, and the government may not achieve the best value. Another risk is vendor lock-in, where the government becomes heavily reliant on a single provider, potentially limiting future flexibility or negotiation leverage. Performance risk also exists; while Raytheon is an experienced contractor, any issues in delivering timely and effective sustainment services could impact the operational readiness of critical defense assets. Finally, there's a risk of scope creep or cost overruns if the contract terms are not tightly managed and monitored, especially given the absence of competitive oversight.

How effective is a firm-fixed-price contract in managing costs for long-term sustainment services like this?

A firm-fixed-price (FFP) contract is generally considered an effective tool for managing costs, especially for well-defined requirements like sustainment services, as it shifts most of the cost risk to the contractor. Under an FFP agreement, the contractor is obligated to perform the work for a set price, regardless of their actual costs. This incentivizes the contractor to be efficient and control their expenses. For long-term sustainment, an FFP contract provides budget certainty for the government. However, the effectiveness can be diminished if the initial price is not accurately estimated or if unforeseen technical challenges arise that were not adequately accounted for during the sole-source negotiation. Robust government oversight is still necessary to ensure the contractor is meeting performance standards within the agreed-upon price.

What are the historical spending patterns for sustainment of navigation and guidance systems within the Department of Defense?

Historical spending patterns for sustainment of navigation and guidance systems within the Department of Defense (DoD) show a consistent and significant allocation of resources. These systems are critical for virtually all military platforms, from aircraft and ships to ground vehicles and missiles. Consequently, their upkeep represents a substantial portion of the defense budget. Spending typically increases as platforms age and require more intensive maintenance, or when new technologies are introduced that require specialized support. The DoD often enters into long-term sustainment contracts, sometimes sole-source due to proprietary technology or unique contractor capabilities, to ensure the continuous operational readiness of these vital systems. Overall, sustainment spending in this category is characterized by long-term commitments and substantial, often multi-year, contract awards.

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: ARCHITECT/ENGINEER SERVICES › ARCH-ENG SVCS - GENERAL

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: RTX Corp (UEI: 001344142)

Address: 2501 W UNIVERSITY DR, MCKINNEY, TX, 75071

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $259,589,242

Exercised Options: $155,937,692

Current Obligation: $152,872,403

Actual Outlays: $-196,837

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline