DoD awards Raytheon $172M for Guided Missile Manufacturing, raising concerns about competition and value

Contract Overview

Contract Amount: $172,164,682 ($172.2M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2012-08-31

End Date: 2015-11-30

Contract Duration: 1,186 days

Daily Burn Rate: $145.2K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: MALD-J LOT 5 AND OPTION LOT 6

Place of Performance

Location: TUCSON, PIMA County, ARIZONA, 85756

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $172.2 million to RAYTHEON COMPANY for work described as: MALD-J LOT 5 AND OPTION LOT 6 Key points: 1. Significant contract value of $172M awarded to a single large business. 2. Lack of competition raises questions about price discovery and potential overspending. 3. Contract type (Cost Plus Fixed Fee) can incentivize cost overruns. 4. Focus on guided missile manufacturing places this in a critical defense sector.

Value Assessment

Rating: questionable

The Cost Plus Fixed Fee contract type, while common for complex R&D, can lead to higher costs compared to fixed-price contracts. Without competitive benchmarking, assessing the true value for money is difficult.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was not competed, indicating a sole-source award. This limits price discovery and potentially leads to higher costs for taxpayers as there is no market pressure to offer the best price.

Taxpayer Impact: The lack of competition for a $172M contract suggests taxpayers may be paying a premium for goods and services that could potentially be acquired at a lower cost through a competitive bidding process.

Public Impact

Taxpayers may be overpaying due to the absence of competitive bidding. Potential for cost overruns inherent in Cost Plus Fixed Fee contracts. National security implications if the high cost impacts the quantity or quality of essential defense equipment.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award
Cost Plus Fixed Fee contract type
Lack of transparency in pricing
No small business participation noted

Positive Signals

Award to a major defense contractor
Supports critical defense manufacturing capabilities

Sector Analysis

This contract falls within the Guided Missile and Space Vehicle Manufacturing sector, a critical component of national defense. Spending in this area is often characterized by high R&D costs and specialized production, but competitive practices are still crucial for fiscal responsibility.

Small Business Impact

The contract was not awarded to small businesses, and there is no indication of subcontracting opportunities for them. This represents a missed opportunity to support small business growth within the defense industrial base.

Oversight & Accountability

The award was managed by the Defense Contract Management Agency, responsible for overseeing contract performance. However, the lack of competition limits the agency's ability to ensure the best possible price for the government.

Related Government Programs

Guided Missile and Space Vehicle Manufacturing
Department of Defense Contracting
Defense Contract Management Agency Programs

Risk Flags

Sole-source award limits price competition.
Cost Plus Fixed Fee contract may incentivize higher costs.
Lack of transparency regarding cost justification.
No small business participation identified.
Potential for taxpayer overpayment due to non-competitive nature.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $172.2 million to RAYTHEON COMPANY. MALD-J LOT 5 AND OPTION LOT 6

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 $172.2 million.

What is the period of performance?

Start: 2012-08-31. End: 2015-11-30.

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 is critical for understanding why competition was bypassed. Typically, this involves unique capabilities, urgent needs, or lack of available sources. Without this information, it's difficult to assess if the government received fair value or if alternative procurement strategies could have yielded better pricing and broader industry participation.

How does the final cost compare to industry benchmarks for similar guided missile systems, given the Cost Plus Fixed Fee structure?

Assessing the final cost against industry benchmarks is challenging without detailed cost breakdowns and comparable contract data. The Cost Plus Fixed Fee structure inherently allows for costs to fluctuate, making direct comparisons difficult. A thorough audit and benchmarking analysis would be needed to determine if the contractor's costs were reasonable and if the fixed fee adequately compensated for the work performed relative to market rates.

What measures are in place to ensure the effectiveness and quality of the guided missiles produced under this contract, despite the lack of competitive pressure on price?

Effectiveness and quality are typically ensured through stringent contract specifications, performance metrics, and rigorous testing and acceptance protocols managed by the contracting agency. Despite the absence of competitive price pressure, the Defense Contract Management Agency's oversight, quality assurance surveillance plans, and acceptance criteria are designed to ensure the end product meets all required performance and reliability standards.

Industry Classification

NAICS: Manufacturing › Aerospace Product and Parts Manufacturing › Guided Missile and Space Vehicle Manufacturing

Product/Service Code: GUIDED MISSLES

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

Parent Company: RTX Corp

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: $173,124,032

Exercised Options: $172,289,143

Current Obligation: $172,164,682

Subaward Activity

Number of Subawards: 337

Total Subaward Amount: $422,017,889

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline