Raytheon Company awarded $10.2M contract for aircraft parts, a sole-source procurement by the Department of Defense

Contract Overview

Contract Amount: $10,248,829 ($10.2M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2005-01-14

End Date: 2010-08-08

Contract Duration: 2,032 days

Daily Burn Rate: $5.0K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Place of Performance

Location: TUCSON, PIMA County, ARIZONA, 85756, UNITED STATES OF AMERICA

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $10.2 million to RAYTHEON COMPANY for work described as: Key points: 1. Contract awarded on a cost-plus-fixed-fee basis, indicating potential for cost overruns. 2. Sole-source procurement limits competitive pressure, potentially leading to higher prices. 3. Long contract duration of 2032 days suggests a sustained need for these aircraft parts. 4. The contract falls under 'Other Aircraft Parts and Auxiliary Equipment Manufacturing,' a specialized sector. 5. Awarded by the Department of Defense, highlighting its role in national security and defense readiness. 6. The contract was managed by the Defense Contract Management Agency, responsible for oversight.

Value Assessment

Rating: fair

Assessing the value for money on this sole-source contract is challenging without competitive benchmarks. The cost-plus-fixed-fee structure means the government pays the actual costs plus a negotiated fee, which can sometimes lead to higher overall costs if not managed tightly. Compared to similar sole-source procurements for specialized aircraft parts, the pricing structure is not unusual, but the lack of competition inherently limits the government's ability to secure the lowest possible price. Further analysis would require access to detailed cost breakdowns and historical pricing for similar components.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one bidder, Raytheon Company, was considered. This typically occurs when a specific capability or product is only available from a single source, or in cases of urgent need where competition is not feasible. The lack of competition means there was no price discovery through a bidding process, and the government relied on negotiation to establish the contract terms. This approach can be efficient for specialized needs but carries a risk of less favorable pricing.

Taxpayer Impact: For taxpayers, a sole-source award means there is a reduced likelihood of benefiting from competitive pricing that could drive down costs. The government must rely on robust negotiation and oversight to ensure a fair price.

Public Impact

The primary beneficiaries are the Department of Defense and its aviation units, ensuring the availability of critical aircraft parts. Services delivered include the manufacturing and supply of specialized aircraft parts, essential for maintaining operational readiness. The geographic impact is primarily within Arizona, where the contractor is located, potentially supporting local jobs and the regional economy. Workforce implications include employment opportunities for skilled labor in the aerospace manufacturing sector within Arizona.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source procurement limits competitive pricing, potentially increasing costs for taxpayers.
Cost-plus-fixed-fee contract type can incentivize higher spending if not closely monitored.
Long contract duration may obscure potential for more cost-effective solutions over time.
Lack of transparency in sole-source negotiations can make value assessment difficult.

Positive Signals

Ensures a critical supply chain for defense aviation, supporting national security objectives.
Award to an established contractor like Raytheon suggests a level of trust in their capability and reliability.
The contract supports specialized manufacturing within the US, contributing to the domestic defense industrial base.

Sector Analysis

The 'Other Aircraft Parts and Auxiliary Equipment Manufacturing' sector is a critical component of the broader aerospace and defense industry. This sector is characterized by high technological requirements, stringent quality control, and often long product lifecycles. Spending in this area is heavily influenced by defense budgets and the operational needs of military aviation. Comparable spending benchmarks are difficult to establish precisely due to the specialized nature of parts, but overall defense procurement for aircraft components represents billions of dollars annually.

Small Business Impact

This contract does not appear to involve a small business set-aside, as the awardee is Raytheon Company, a large defense contractor. There is no explicit information regarding subcontracting plans for small businesses within this data. The focus on a large prime contractor suggests that the primary economic impact will be on larger industrial capabilities rather than the small business ecosystem, unless Raytheon actively engages small businesses for subcontracting opportunities.

Oversight & Accountability

Oversight for this contract would typically fall under the purview of the Defense Contract Management Agency (DCMA), which is responsible for ensuring contract compliance, quality, and timely delivery. Accountability measures are embedded in the contract terms, including performance standards and payment schedules tied to milestones. Transparency is limited due to the sole-source nature and the proprietary information often associated with defense manufacturing. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse.

Related Government Programs

Department of Defense Aircraft Procurement
Aerospace Manufacturing Contracts
Defense Supply Chain Management
Sole-Source Defense Contracts

Risk Flags

Sole-source award
Cost-plus contract type
Lack of competitive bidding
Long contract duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $10.2 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 (Defense Contract Management Agency).

What is the total obligated amount?

The obligated amount is $10.2 million.

What is the period of performance?

Start: 2005-01-14. End: 2010-08-08.

What is Raytheon Company's track record with sole-source defense contracts?

Raytheon Company, now part of RTX, has a long history of engaging in sole-source contracts with the Department of Defense and other government agencies. These contracts are often awarded for specialized systems, upgrades, or sustainment services where unique capabilities or existing platforms necessitate a single provider. While sole-source awards can streamline procurement for critical needs, they also raise questions about price competitiveness and the potential for cost escalation. Raytheon's extensive experience means they are adept at navigating these contract types, but robust government oversight is crucial to ensure fair pricing and value. Analyzing past sole-source awards to Raytheon, particularly for similar aircraft components, could provide insights into their pricing strategies and the government's negotiation effectiveness.

How does the cost-plus-fixed-fee structure typically impact contract costs compared to fixed-price contracts?

The Cost-Plus-Fixed-Fee (CPFF) contract structure shifts a significant portion of the financial risk to the government. Under CPFF, the contractor is reimbursed for all allowable costs incurred, plus a predetermined fixed fee representing their profit. This contrasts with fixed-price contracts, where the contractor agrees to a set price regardless of actual costs, bearing most of the risk. While CPFF can be beneficial for complex projects where costs are difficult to estimate upfront, it can incentivize contractors to incur higher costs, as their fee remains constant. This necessitates stringent government oversight to monitor expenditures and ensure costs are reasonable and allocable to the contract. Without effective oversight, CPFF contracts can lead to cost overruns and a less favorable value proposition for the government compared to well-defined fixed-price agreements.

What are the primary risks associated with sole-source procurements in the defense sector?

Sole-source procurements in the defense sector carry several inherent risks. The most significant is the lack of price competition, which can lead to inflated prices and reduced value for taxpayer money. Without competing bids, there is less incentive for the contractor to offer the most cost-effective solution. Another risk is potential vendor lock-in, where the government becomes dependent on a single supplier, limiting future flexibility and negotiation leverage. Furthermore, sole-source awards can sometimes be perceived as less transparent, potentially leading to public scrutiny or accusations of favoritism if not properly justified and managed. Ensuring robust justification for the sole-source nature and rigorous negotiation of terms are critical to mitigating these risks.

What is the typical duration for contracts in the 'Other Aircraft Parts and Auxiliary Equipment Manufacturing' sector?

Contracts within the 'Other Aircraft Parts and Auxiliary Equipment Manufacturing' sector can vary significantly in duration, influenced by factors such as the complexity of the parts, the expected lifespan of the aircraft they support, and the nature of the procurement (e.g., initial production vs. long-term sustainment). Contracts for new development or initial production runs might be shorter, while those for sustainment, upgrades, or long-term supply agreements can span several years, often aligning with the operational life of the aircraft fleet. A duration of 2032 days (approximately 5.5 years) for a parts supply contract, as seen here, is not uncommon for ensuring continuous availability and managing the supply chain for critical components over a substantial period. This duration suggests a focus on sustained operational support rather than a one-time acquisition.

How does the geographic location of the contractor (Arizona) potentially impact this contract?

The geographic location of the contractor, Arizona, can have several implications for this Department of Defense contract. Firstly, it influences the domestic industrial base, supporting jobs and economic activity within the state. For the government, proximity can sometimes facilitate oversight and communication, although with modern technology, this is less critical than it once was. However, it also means that potential disruptions within that specific region, such as natural disasters or labor issues, could impact the supply chain. Furthermore, state-specific regulations, tax structures, and workforce availability in Arizona will play a role in the contractor's operational costs and capabilities, which are indirectly factored into the contract pricing.

Industry Classification

NAICS: Manufacturing › Aerospace Product and Parts Manufacturing › Other Aircraft Parts and Auxiliary Equipment Manufacturing

Product/Service Code: RESEARCH AND DEVELOPMENT › DEFENSE (OTHER) R&D

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Address: 1151 E HERMANS RD, TUCSON, AZ, 85706

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

Financial Breakdown

Contract Ceiling: $10,338,419

Exercised Options: $10,338,419

Current Obligation: $10,248,829

Contract Characteristics

Cost or Pricing Data: YES

Timeline