Raytheon Company awarded $55.1M contract for electronic equipment repair, raising questions about competition and value

Contract Overview

Contract Amount: $55,100,583 ($55.1M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2011-12-01

End Date: 2014-11-30

Contract Duration: 1,095 days

Daily Burn Rate: $50.3K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: CLS FY12

Place of Performance

Location: TUCSON, PIMA County, ARIZONA, 85756

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $55.1 million to RAYTHEON COMPANY for work described as: CLS FY12 Key points: 1. Contract awarded on a firm-fixed-price basis, providing cost certainty but potentially limiting flexibility. 2. The contract was not competed, suggesting potential limitations in market exploration and price discovery. 3. A significant duration of 1095 days (3 years) indicates a long-term need for these services. 4. The award to Raytheon Company, a major defense contractor, places this within a landscape of large-scale federal procurement. 5. The specific NAICS code (811219) points to a niche service area within electronic equipment maintenance. 6. The contract's value of $55.1M warrants scrutiny regarding its alignment with market rates for similar services.

Value Assessment

Rating: questionable

Benchmarking the value of this $55.1M contract is challenging without specific details on the scope of work and the nature of the electronic equipment being repaired. However, the lack of competition suggests that taxpayers may not have benefited from the most competitive pricing. Comparing this to similar contracts for electronic equipment repair and maintenance, especially those that were competed, would be crucial to assess if the price paid represents good value for money. The firm-fixed-price structure offers predictability but could mask inefficiencies if not closely monitored.

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 security clearances, or in cases of urgent need. The absence of a competitive bidding process means that the government did not explore the full range of market capabilities or potentially lower prices that competition could have driven. This raises concerns about whether the government secured the best possible terms.

Taxpayer Impact: Sole-source awards can lead to higher costs for taxpayers as the benefits of competitive pricing are forgone. Without competition, there is less pressure on the contractor to offer the most cost-effective solution.

Public Impact

The primary beneficiaries are likely entities within the Department of the Air Force requiring specialized repair and maintenance for electronic equipment. The services delivered involve the upkeep and restoration of critical electronic systems, ensuring operational readiness. The contract is geographically tied to Arizona (AZ), indicating the primary location for service delivery or the base of operations for the contractor. This contract supports specialized technical roles within the defense sector, potentially involving skilled technicians and engineers.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to inflated prices and reduced value for taxpayer dollars.
Sole-source awards can create vendor lock-in, making it difficult to switch providers or negotiate better terms in the future.
The long contract duration without competition could mask potential performance issues or cost overruns that are not readily apparent.

Positive Signals

Firm-fixed-price contract provides cost certainty for the government, simplifying budget management.
Award to a major contractor like Raytheon suggests access to established expertise and resources for complex electronic systems.
The contract addresses a specific, ongoing need for maintenance, contributing to the operational readiness of Air Force assets.

Sector Analysis

The defense sector relies heavily on specialized maintenance and repair services for its complex electronic equipment. This contract falls under the broader category of defense logistics and support services. The market for such services is often dominated by large, established defense contractors due to the technical expertise, security clearances, and infrastructure required. Comparable spending benchmarks would involve analyzing other contracts for similar electronic repair services within the Department of Defense or other federal agencies, particularly those that have undergone competitive bidding.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb: false'. Furthermore, there is no explicit mention of subcontracting requirements for small businesses. This suggests that the primary award went to a large business, and opportunities for small businesses to participate in this specific contract may be limited unless they are direct subcontractors to Raytheon. The impact on the small business ecosystem is likely minimal for this particular award, as it bypasses the typical mechanisms designed to funnel work to smaller enterprises.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Air Force's contracting and program management offices. Accountability measures would be defined within the contract's terms and conditions, including performance standards and reporting requirements. Transparency is facilitated through contract databases like FPDS, which record award details. Inspector General jurisdiction would apply if any fraud, waste, or abuse is suspected related to the contract's execution.

Related Government Programs

Defense Logistics Agency (DLA) Maintenance, Repair, and Operations (MRO) contracts
Air Force Materiel Command (AFMC) support services
Electronic Systems Center (ESC) procurements
Department of Defense (DoD) depot maintenance contracts

Risk Flags

Sole-source award
Lack of competition
Potential for overpricing
Long contract duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $55.1 million to RAYTHEON COMPANY. CLS FY12

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 $55.1 million.

What is the period of performance?

Start: 2011-12-01. End: 2014-11-30.

What is the specific nature of the electronic equipment requiring repair under this contract, and why was it deemed a sole-source requirement?

The contract (811219) pertains to 'Other Electronic and Precision Equipment Repair and Maintenance.' Without further details, the specific equipment remains unspecified. Sole-source awards are typically justified when a unique capability, proprietary technology, or critical security requirement exists that only one contractor can meet. For this contract, the justification for sole-sourcing would likely stem from the specialized nature of the electronic systems used by the Air Force, potentially involving proprietary diagnostic tools, unique repair procedures, or specific security protocols that only Raytheon possesses or is authorized to perform. A thorough review of the Justification for Other than Full and Open Competition (JOFOC) document would provide the precise rationale.

How does the $55.1 million contract value compare to industry benchmarks for similar electronic equipment repair services, especially considering it was not competed?

Directly comparing the $55.1 million value to industry benchmarks is difficult without knowing the exact scope of work, the types of equipment, and the required service levels. However, the absence of competition is a significant factor. Competitively procured contracts typically yield lower prices due to market pressures. If similar, competed contracts for comparable services exist, their values could serve as a benchmark. Given that this was a sole-source award to Raytheon, a major defense contractor, the price might be at the higher end of the spectrum. Further analysis would require examining historical data for similar sole-source awards or comparing the contract's unit rates (if available) against market research data for electronic repair services.

What are the potential risks associated with a sole-source, firm-fixed-price contract of this duration (3 years) for electronic equipment repair?

Several risks are associated with this contract structure. Firstly, the sole-source nature means the government lacks the benefit of competitive pricing, potentially leading to overpayment. Secondly, a firm-fixed-price contract, while offering cost certainty, can incentivize the contractor to cut corners on quality or service to maximize profit if oversight is weak. The long duration (1095 days) exacerbates these risks; if the initial pricing was not thoroughly vetted or if market conditions change significantly, the government could be locked into an unfavorable agreement for an extended period. There's also a risk of vendor lock-in, making it difficult and costly to transition to a different provider if performance issues arise or better solutions become available.

What is Raytheon Company's track record with the Department of the Air Force and in providing electronic repair and maintenance services?

Raytheon Company (now RTX) is a major defense contractor with an extensive history of providing a wide array of services and products to the Department of the Air Force and other branches of the U.S. military. They are known for their expertise in areas such as radar systems, missiles, command and control systems, and various electronic warfare capabilities. Their track record typically includes large-scale, complex contracts. While specific performance metrics for this particular contract are not detailed here, Raytheon generally possesses the technical capabilities and infrastructure required for sophisticated electronic repair and maintenance. However, like any large contractor, their performance history can vary across different contracts, and a comprehensive review would involve examining past performance evaluations and any documented issues or successes.

How does this $55.1 million contract fit into the broader context of federal spending on electronic equipment repair and maintenance, particularly within the defense sector?

This $55.1 million contract represents a portion of the significant federal spending allocated to maintaining the operational readiness of military assets. The Department of Defense, including the Air Force, invests heavily in the upkeep of complex electronic systems that are critical for national security. Spending in this category often includes depot-level maintenance, component repair, and system upgrades. While $55.1 million is a substantial sum for a single contract, it is one among thousands within the DoD's overall budget for sustainment and logistics. The trend in federal spending for such services is generally driven by the modernization cycles of military platforms and the ongoing operational tempo. This contract aligns with the broader objective of ensuring that advanced electronic equipment remains functional and effective throughout its lifecycle.

Industry Classification

NAICS: Other Services (except Public Administration) › Electronic and Precision Equipment Repair and Maintenance › Other Electronic and Precision Equipment Repair and Maintenance

Product/Service Code: MAINT, REPAIR, REBUILD EQUIPMENT › MAINT, REPAIR, REBUILD OF EQUIPMENT

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

Address: 1151 E HERMANS RD, TUCSON, AZ, 90

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: $97,734,340

Exercised Options: $55,100,583

Current Obligation: $55,100,583

Contract Characteristics

Cost or Pricing Data: YES

Timeline