Raytheon Company awarded $150.5M contract for ordnance and accessories manufacturing by the Department of the Air Force

Contract Overview

Contract Amount: $150,471,846 ($150.5M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2006-04-17

End Date: 2009-09-30

Contract Duration: 1,262 days

Daily Burn Rate: $119.2K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Place of Performance

Location: TUCSON, PIMA County, ARIZONA, 85756

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $150.5 million to RAYTHEON COMPANY for work described as: Key points: 1. Contract awarded via full and open competition, suggesting a competitive bidding process. 2. The contract type is Cost Plus Fixed Fee, which can incentivize cost overruns if not closely monitored. 3. Performance period spans over 3 years, indicating a medium-term commitment. 4. The contract is for ordnance and accessories manufacturing, a critical component of defense readiness. 5. The contractor, Raytheon Company, is a major defense industry player. 6. The contract was awarded by the Department of the Air Force, a significant federal agency. 7. The contract was awarded in 2006, providing historical context for current spending.

Value Assessment

Rating: fair

This contract's value of $150.5 million over approximately three years for ordnance and accessories manufacturing appears to be within a reasonable range for a major defense contractor like Raytheon. However, without specific details on the exact goods or services procured, a precise value-for-money assessment is challenging. The Cost Plus Fixed Fee (CPFF) contract type carries inherent risks of cost escalation, which would need to be mitigated by robust oversight to ensure fair pricing.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under 'full and open competition,' indicating that all responsible sources were permitted to submit bids. This suggests a robust bidding process designed to achieve competitive pricing. The presence of two bids (no: 2) is noted, which, while indicating some competition, might be on the lower side for a contract of this magnitude, potentially limiting the full benefits of price discovery.

Taxpayer Impact: A competitive award process generally benefits taxpayers by driving down prices through market forces. However, with only two bids, the potential for achieving the lowest possible price may have been constrained compared to a scenario with more numerous and diverse bidders.

Public Impact

The primary beneficiaries are the Department of the Air Force and its operational readiness. Services delivered include the manufacturing of ordnance and accessories, crucial for military operations. The contract's geographic impact is primarily linked to the contractor's facilities in Arizona (st: AZ, sn: ARIZONA). Workforce implications include employment opportunities at Raytheon's facilities and potentially its supply chain.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost Plus Fixed Fee contract type can lead to higher costs if not managed effectively.
Limited number of bidders (2) may reduce competitive pressure on pricing.
Contract awarded in 2006, historical data may not reflect current market conditions or technological advancements.

Positive Signals

Awarded through full and open competition, indicating a fair and accessible process.
Contractor is a well-established defense manufacturer with significant experience.
Contract supports critical defense needs for the Air Force.

Sector Analysis

The defense manufacturing sector is characterized by large, established players and significant government investment. Contracts for ordnance and accessories are fundamental to military readiness. Raytheon is a prominent entity in this sector, and this contract represents a portion of the broader defense spending allocated to munitions and related equipment. Benchmarking this specific contract's value is difficult without detailed specifications, but it falls within the typical scale of major defense procurement actions.

Small Business Impact

This contract does not appear to have a small business set-aside (ss: false, sb: false). As a large prime contract awarded to Raytheon Company, there may be opportunities for small businesses to participate as subcontractors. However, the extent of small business subcontracting is not detailed in the provided data.

Oversight & Accountability

Oversight for this contract would typically be managed by the Department of the Air Force contracting and program management offices. The Cost Plus Fixed Fee structure necessitates diligent monitoring of costs and performance to ensure compliance and value. Inspector General jurisdiction would apply to investigations of fraud, waste, or abuse related to the contract.

Related Government Programs

Ordnance Manufacturing
Defense Procurement
Air Force Contracts
Cost Plus Fixed Fee Contracts
Ammunition Production

Risk Flags

Cost Plus Fixed Fee contract type carries inherent risk of cost overruns.
Limited number of bidders (2) may indicate reduced competition.
Contract awarded in 2006; market conditions and technology may have changed significantly.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $150.5 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 $150.5 million.

What is the period of performance?

Start: 2006-04-17. End: 2009-09-30.

What is Raytheon Company's track record with Cost Plus Fixed Fee (CPFF) contracts, particularly with the Department of Defense?

Raytheon Company, now part of RTX Corporation, has a long history of engaging in various contract types with the Department of Defense, including Cost Plus Fixed Fee (CPFF). CPFF contracts are common for research and development or when costs are highly uncertain. While they allow for flexibility and innovation, they also carry a higher risk of cost overruns compared to fixed-price contracts. Raytheon's extensive experience means they are accustomed to the oversight and reporting requirements associated with CPFF agreements. However, the success and value derived from such contracts heavily depend on the government's ability to effectively monitor costs, manage scope, and ensure performance targets are met. Historical performance data across Raytheon's portfolio of CPFF contracts would be needed for a comprehensive assessment of their specific track record in managing these types of agreements efficiently and cost-effectively.

How does the $150.5 million value compare to similar ordnance and accessories manufacturing contracts awarded by the Air Force around 2006?

Comparing the $150.5 million value of this Raytheon contract to similar ordnance and accessories manufacturing contracts awarded by the Air Force around 2006 requires access to historical contract databases and specific details about the scope of work. Ordnance and accessories encompass a wide range of products, from small arms ammunition to complex missile components. Without knowing the precise nature of the items procured under this contract, a direct comparison is challenging. However, $150.5 million over approximately three years (2006-2009) represents a significant but not extraordinary sum for a major defense contractor like Raytheon. Larger, more complex systems or long-term sustainment contracts would typically exceed this amount. To provide a robust benchmark, one would need to identify contracts with comparable product categories, quantities, and contract types (CPFF) awarded within the same timeframe by the Air Force or other branches of the DoD.

What are the primary risks associated with a Cost Plus Fixed Fee (CPFF) contract for ordnance manufacturing?

The primary risks associated with a Cost Plus Fixed Fee (CPFF) contract for ordnance manufacturing revolve around cost control and potential for contractor inefficiency. In a CPFF arrangement, the contractor is reimbursed for allowable costs plus a predetermined fixed fee representing profit. This structure can reduce the contractor's incentive to minimize costs, as cost savings do not directly increase their profit margin (unlike in fixed-price contracts). For ordnance manufacturing, where material costs, production complexities, and potential for design changes can be significant, there's a risk that costs could escalate beyond initial projections. The fixed fee, while intended to provide a stable profit, might become disproportionately large if the actual costs are much lower than anticipated, or conversely, the contractor might face challenges if unforeseen cost increases erode the value of the fixed fee. Effective government oversight, stringent cost accounting standards, and clear performance metrics are crucial to mitigate these risks and ensure fair value.

How has the Department of the Air Force's spending on ordnance and accessories manufacturing evolved since this contract was awarded in 2006?

The Department of the Air Force's spending on ordnance and accessories manufacturing has likely evolved significantly since this $150.5 million contract was awarded in 2006. Factors influencing this evolution include changes in geopolitical threats, advancements in military technology (e.g., precision-guided munitions, electronic warfare countermeasures), shifts in strategic priorities, and budget fluctuations. Post-2006, the US has been involved in prolonged conflicts requiring substantial munitions, potentially increasing demand. Simultaneously, there has been a growing emphasis on developing next-generation weaponry and more efficient, potentially lower-cost, manufacturing processes. Budgetary pressures, sequestration, and evolving defense strategies also play a role. Analyzing aggregate spending data for the 'Ordnance and Accessories Manufacturing' Product Service Code (PSC) or similar categories for the Air Force from 2006 to the present would reveal trends, identify periods of increased or decreased investment, and highlight shifts in the types of ordnance being procured.

What is the significance of the contract being awarded in Arizona (AZ)?

The significance of this contract being awarded to a contractor located in Arizona (AZ) relates to the geographic distribution of defense spending and its economic impact. Arizona has a notable presence in the aerospace and defense industry, hosting major facilities for companies like Raytheon (now RTX). Awarding contracts to firms with operations in specific states contributes to local economies through job creation, investment in infrastructure, and support for ancillary businesses within the supply chain. For the Department of the Air Force, the location might be influenced by factors such as existing industrial capabilities, specialized workforce availability, or strategic considerations related to production facilities. While the primary driver for contract awards is typically technical capability and price, the geographic location of the contractor can have secondary economic and strategic implications for the state and region.

Industry Classification

NAICS: Manufacturing › Other Fabricated Metal Product Manufacturing › Other Ordnance and Accessories Manufacturing

Product/Service Code: WEAPONS

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Offers Received: 2

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

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline