Raytheon Company awarded $88.4M for pod repair and maintenance, a sole-source contract with a 5-year duration

Contract Overview

Contract Amount: $88,357,105 ($88.4M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2018-12-01

End Date: 2023-12-31

Contract Duration: 1,856 days

Daily Burn Rate: $47.6K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIXED PRICE INCENTIVE

Sector: Defense

Official Description: HTS CLS FOLLOW ON CONTRACT 2019-2022. SUPPORTS THE REPAIR AND MAINTENANCE OF PODS.

Place of Performance

Location: TUCSON, PIMA County, ARIZONA, 85756

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $88.4 million to RAYTHEON COMPANY for work described as: HTS CLS FOLLOW ON CONTRACT 2019-2022. SUPPORTS THE REPAIR AND MAINTENANCE OF PODS. Key points: 1. Contract awarded to a single vendor, raising questions about potential price efficiencies. 2. The fixed-price incentive contract structure aims to balance cost control with performance. 3. Long-term contract duration suggests a sustained need for these specialized maintenance services. 4. The contract supports critical repair and maintenance for an unspecified 'pod' system. 5. Geographic focus on Arizona for contract performance. 6. No small business set-aside noted, potentially limiting opportunities for smaller firms.

Value Assessment

Rating: fair

The contract's value of $88.4 million over five years for repair and maintenance services requires careful benchmarking against similar specialized equipment support. Without specific details on the 'pods' being serviced, a direct comparison is difficult. However, the fixed-price incentive structure suggests an attempt to manage costs while ensuring quality. The absence of competition inherently limits the ability to assess if the pricing represents the best value achievable in a competitive market.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was not competed, indicating a sole-source award. This approach bypasses the standard competitive bidding process, which typically drives down prices and fosters innovation. The lack of competition means that the government did not explore alternative vendors or solutions, potentially leading to higher costs than might be achieved through open bidding.

Taxpayer Impact: Sole-source awards mean taxpayers may not be receiving the most cost-effective solution available, as the benefits of competitive pressure on pricing are absent.

Public Impact

The Department of Defense benefits from the continued operational readiness of its 'pod' systems. Services include repair and maintenance, ensuring the longevity and functionality of critical equipment. The contract's performance is geographically concentrated in Arizona. The contract supports specialized technical roles within the defense sector.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to inflated pricing.
Limited transparency into the justification for sole-source award.
Potential for vendor lock-in due to specialized nature of services.

Positive Signals

Long-term contract provides stability for essential maintenance services.
Fixed-price incentive contract aims to align contractor performance with cost objectives.
Contractor, Raytheon Company, is a major defense contractor with established capabilities.

Sector Analysis

The contract falls within the broader defense sector, specifically supporting the maintenance and repair of specialized electronic or precision equipment. The market for such services is often characterized by high barriers to entry due to technical expertise, security clearances, and established relationships with government agencies. Benchmarking spending in this niche requires comparing it to similar sustainment contracts for complex defense systems.

Small Business Impact

The contract data indicates that this was not a small business set-aside, nor does it appear to involve significant subcontracting opportunities for small businesses based on the information provided. This suggests that the primary awardee, Raytheon Company, will likely perform the majority of the work, potentially limiting the direct economic benefit to the small business ecosystem for this specific contract.

Oversight & Accountability

Oversight for this contract would typically fall under the purview of the Defense Contract Management Agency (DCMA), which is responsible for ensuring contractor performance and compliance. The fixed-price incentive structure includes built-in accountability for cost and performance. Transparency regarding the justification for the sole-source award and ongoing performance metrics would be key areas for public scrutiny.

Related Government Programs

Defense Logistics Agency (DLA) Maintenance, Repair, and Overhaul (MRO) Services
Air Force Sustainment Center Contracts
Naval Air Systems Command (NAVAIR) Support Contracts

Risk Flags

Sole-source award
Lack of competition
Long contract duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $88.4 million to RAYTHEON COMPANY. HTS CLS FOLLOW ON CONTRACT 2019-2022. SUPPORTS THE REPAIR AND MAINTENANCE OF PODS.

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 $88.4 million.

What is the period of performance?

Start: 2018-12-01. End: 2023-12-31.

What specific 'pods' does this contract support, and what is their operational significance to the Department of Defense?

The provided data does not specify the exact nature of the 'pods' being repaired and maintained under this contract. However, in a defense context, 'pods' can refer to a wide range of modular equipment, such as electronic warfare pods, targeting pods, reconnaissance pods, or even weapon pods. Their operational significance would depend entirely on their function. For instance, targeting pods are crucial for precision strikes, while electronic warfare pods are vital for battlefield awareness and electronic countermeasures. The lack of specificity in the contract description hinders a precise understanding of the system's importance and the impact of its maintenance.

What was the justification for awarding this contract on a sole-source basis instead of through full and open competition?

The justification for a sole-source award typically stems from specific circumstances where only one responsible source can provide the required supplies or services. Common reasons include: unique capabilities or proprietary technology held by a single contractor, urgent and compelling needs where competition is impractical, or when a follow-on contract is awarded to the original source of an item that is not yet available competitively. Without the specific justification document (e.g., a Justification and Approval - J&A), it is impossible to determine the precise rationale. However, for specialized defense equipment maintenance, it often relates to unique technical expertise, existing infrastructure, or specific system knowledge held exclusively by the incumbent contractor, Raytheon Company in this case.

How does the 'Fixed Price Incentive' (FPI) contract type aim to manage costs and ensure performance for this $88.4 million award?

A Fixed Price Incentive (FPI) contract establishes a target cost, target profit, and target price. The final price is adjusted based on the contractor's performance relative to the target cost. If the contractor's final cost is below the target cost, both the government and the contractor share in the savings (cost underrun). Conversely, if the final cost exceeds the target cost, both share in the increased cost (cost overrun), up to a ceiling price. This structure incentivizes the contractor to control costs while meeting performance specifications. For this $88.4 million contract, the FPI type suggests that Raytheon is motivated to perform the repair and maintenance efficiently to achieve a favorable final price, while the government benefits from a defined ceiling and potential cost savings if performance targets are exceeded.

What is Raytheon Company's track record with similar pod repair and maintenance contracts for the Department of Defense?

Raytheon Company, now part of RTX, has a long and extensive history as a major defense contractor, frequently involved in the development, production, and sustainment of complex defense systems. This includes a wide array of airborne systems and components that could be classified as 'pods,' such as targeting systems (e.g., Paveway, Sniper), electronic warfare systems, and reconnaissance systems. Their track record with the DoD for similar sustainment and maintenance contracts is generally robust, characterized by significant experience and established infrastructure. However, specific performance metrics, past issues, or successes related to 'pod' maintenance would require a deeper dive into contract performance databases and historical award data beyond the scope of this summary.

How does the $88.4 million spending over five years compare to historical spending on similar maintenance services within the DoD?

Comparing this $88.4 million contract to historical spending requires identifying comparable contracts based on the specific type of 'pods' and the nature of the maintenance services. Without that specificity, a direct comparison is challenging. However, the average annual value of this contract is approximately $17.7 million ($88.4M / 5 years). This figure needs to be benchmarked against the average annual cost of sustainment for similar complex defense systems or components. Given Raytheon's role as a prime contractor for advanced defense technologies, this level of spending for specialized maintenance is not unusual, but its value-for-money proposition is best assessed against contracts for analogous systems and services, considering factors like system complexity, criticality, and market availability of support.

What are the potential risks associated with a sole-source contract of this magnitude and duration?

The primary risks associated with a sole-source contract of this magnitude ($88.4 million) and duration (5 years) include: 1. **Lack of Price Competition:** The absence of competitive bidding can lead to the government paying higher prices than might be achievable in a competitive environment. 2. **Reduced Innovation:** Without the pressure of competition, the contractor may have less incentive to innovate or improve service delivery. 3. **Vendor Lock-in:** The government becomes dependent on a single provider, making it difficult and costly to switch vendors in the future, even if performance or pricing becomes unsatisfactory. 4. **Potential for Complacency:** The contractor might become complacent due to the guaranteed business, potentially impacting service quality or responsiveness. 5. **Limited Transparency:** Sole-source justifications can sometimes obscure the true reasons for not competing, raising concerns about fairness and efficiency.

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: FIXED PRICE INCENTIVE (L)

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: $88,357,105

Exercised Options: $88,357,105

Current Obligation: $88,357,105

Actual Outlays: $5,090,544

Subaward Activity

Number of Subawards: 10

Total Subaward Amount: $3,299,484

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline