Raytheon Company awarded $35.6M for defense systems, with limited competition and a 3170-day duration

Contract Overview

Contract Amount: $35,589,809 ($35.6M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2011-01-14

End Date: 2019-09-19

Contract Duration: 3,170 days

Daily Burn Rate: $11.2K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: INCORPORATE FPDS TRANSACTION CODE 4.

Place of Performance

Location: TUCSON, PIMA County, ARIZONA, 85756

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $35.6 million to RAYTHEON COMPANY for work described as: INCORPORATE FPDS TRANSACTION CODE 4. Key points: 1. Contract awarded to a single, established defense contractor, indicating potential for limited price negotiation. 2. Long contract duration suggests a sustained need for the specified defense systems. 3. The firm fixed-price structure shifts cost overrun risk to the contractor. 4. Awarded by the Department of the Air Force, aligning with national defense priorities. 5. The specific product code points to specialized manufacturing within the defense sector. 6. The contract's value, while substantial, needs to be benchmarked against similar defense procurements.

Value Assessment

Rating: fair

The contract value of $35.6 million over approximately 8.7 years represents a significant investment. Without specific per-unit cost data or comparable contract benchmarks for these specialized defense systems, a precise value-for-money assessment is challenging. However, the long duration and sole-source nature may indicate a premium paid for specialized capabilities or a lack of competitive pressure. Further analysis would require benchmarking against similar systems procured by other defense agencies or through more competitive processes.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded using a sole-source procurement method, meaning only one vendor, Raytheon Company, was solicited. This approach is typically used when a unique capability is required, or when only one source can fulfill the requirement. The lack of competition means that the government did not benefit from a bidding process that could have driven down prices through market forces. This raises questions about whether the best possible price was achieved.

Taxpayer Impact: Sole-source awards can potentially lead to higher costs for taxpayers as competitive pressures are absent, potentially limiting price discovery and negotiation leverage.

Public Impact

The primary beneficiaries are the Department of the Air Force and potentially other branches of the U.S. military requiring advanced defense systems. The contract delivers specialized search, detection, navigation, guidance, and related systems and instruments. The contract is associated with Arizona (AZ), indicating potential workforce and economic impact in that state. The manufacturing of these complex systems likely supports a skilled technical workforce within Raytheon and its supply chain.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing and potentially increases cost to taxpayers.
Long contract duration (3170 days) may indicate a lack of readily available alternatives or a sustained, potentially inflexible, requirement.
Lack of transparency on specific performance metrics makes it difficult to assess effectiveness beyond delivery.
Absence of small business participation noted, potentially missing opportunities for economic inclusion.

Positive Signals

Award to a major defense contractor like Raytheon suggests access to advanced, proven technology.
Firm fixed-price contract shifts cost overrun risk to the contractor, providing budget certainty.
Long-term contract indicates a stable, ongoing need for critical defense capabilities.
Specific product code (334511) suggests a focus on specialized, high-value defense instrumentation.

Sector Analysis

The contract falls within the 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' sector, a critical component of the aerospace and defense industry. This industry is characterized by high R&D investment, stringent quality requirements, and significant government procurement. The market size is substantial, driven by national security needs. Comparable spending benchmarks would involve analyzing other procurements for similar advanced sensor and navigation systems within the Department of Defense and allied nations.

Small Business Impact

This contract does not appear to have a small business set-aside (ss: false, sb: false). The award to Raytheon Company, a large prime contractor, suggests that small businesses are unlikely to be direct recipients of this prime contract. However, Raytheon may engage small businesses as subcontractors, though this is not explicitly detailed in the provided data. The absence of a set-aside means opportunities for direct contracting with small businesses were not prioritized for this specific procurement.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Air Force's contracting and program management offices. Raytheon, as a major defense contractor, is subject to various federal regulations and oversight mechanisms, including potential audits and reviews by the Defense Contract Audit Agency (DCAA) and the Government Accountability Office (GAO). Transparency is generally maintained through contract awards databases like FPDS, but detailed performance and cost breakdowns may be less accessible due to national security considerations.

Related Government Programs

Defense Advanced Research Projects Agency (DARPA) programs
Tactical Air Command (TAC) procurements
Naval Air Systems Command (NAVAIR) contracts
Intelligence, Surveillance, and Reconnaissance (ISR) systems

Risk Flags

Sole-source award raises concerns about price competitiveness.
Long contract duration may indicate inflexibility or potential for obsolescence.
Lack of small business participation noted.
Specific system details are not publicly available, limiting performance assessment.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $35.6 million to RAYTHEON COMPANY. INCORPORATE FPDS TRANSACTION CODE 4.

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 $35.6 million.

What is the period of performance?

Start: 2011-01-14. End: 2019-09-19.

What is Raytheon Company's track record with the Department of Defense for similar defense systems?

Raytheon Company has a long and extensive history of contracting with the Department of Defense, particularly for advanced defense systems, including radar, sensors, and navigation equipment. They are a major defense prime contractor known for producing complex technological solutions. Analyzing their past performance on similar contracts would involve reviewing award histories, past performance evaluations, and any documented issues or successes. Given their scale and specialization, it's probable they have fulfilled numerous similar requirements, though the specific nature of this contract's systems requires detailed examination of their portfolio and past FPDS data.

How does the $35.6 million value compare to similar defense system procurements?

Benchmarking the $35.6 million award requires comparing it against procurements for comparable search, detection, navigation, and guidance systems. Factors such as system complexity, technological sophistication, quantity, and contract duration significantly influence price. Without specific details on the systems procured under this contract and their direct counterparts, a precise comparison is difficult. However, for specialized, long-duration defense systems, this value could be within a typical range, especially if procured sole-source. A comprehensive analysis would involve querying FPDS for similar systems awarded over comparable periods to identify price per unit or total contract value ranges.

What are the primary risks associated with this sole-source, long-duration contract?

The primary risks associated with this sole-source, long-duration contract include potential cost overruns if the firm fixed-price structure is insufficient to cover unforeseen expenses (though this risk is primarily on the contractor), and the risk of paying a premium due to the lack of competition. The long duration (3170 days) also introduces risks related to technological obsolescence, changing military requirements, and contractor performance degradation over time. Furthermore, sole-source awards can lead to a lack of innovation spurred by competitive pressures and may limit the government's flexibility to adapt to new technologies or threats.

How effective are firm fixed-price contracts in ensuring program effectiveness for complex defense systems?

Firm fixed-price (FFP) contracts are generally preferred when the scope of work is well-defined and risks can be reasonably estimated, aiming to provide cost certainty for the government. For complex defense systems, FFP contracts shift significant cost overrun risk to the contractor. This can incentivize efficiency and cost control by the contractor. However, if the initial cost estimates are inaccurate or unforeseen technical challenges arise, the contractor may face financial distress, potentially impacting program delivery or quality. Effectiveness also hinges on robust government oversight to ensure the contractor meets performance and quality standards despite the fixed price.

What are the historical spending patterns for the 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' sector by the Department of the Air Force?

Historical spending patterns for this sector by the Department of the Air Force typically show significant and consistent investment, reflecting the critical role of advanced systems in air operations. Spending is often driven by modernization programs, upgrades to existing platforms, and the development of new capabilities to maintain air superiority and support various mission requirements. The Air Force frequently procures sophisticated radar, electronic warfare systems, communication equipment, and navigation aids. Spending levels can fluctuate based on strategic priorities, budget allocations, and the lifecycle of major defense programs, but this sector generally represents a substantial portion of the Air Force's procurement budget.

What is the significance of the FPDS transaction code 4 for this contract?

FPDS transaction code '4' typically signifies a 'Purchase Order' or a 'Delivery Order' against a previously awarded contract or basic ordering agreement. In the context of this award, it indicates that this $35.6 million action is likely a specific order placed under a broader, potentially indefinite-delivery/indefinite-quantity (IDIQ) contract or a similar framework agreement. This implies that the foundational contract, including its terms, conditions, and competition (or lack thereof), was established separately. The code '4' itself doesn't denote the competition level of the underlying award but rather the nature of this specific financial transaction.

Industry Classification

NAICS: Manufacturing › Navigational, Measuring, Electromedical, and Control Instruments Manufacturing › Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing

Product/Service Code: GUIDED MISSLES

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, 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: $35,591,098

Exercised Options: $35,591,098

Current Obligation: $35,589,809

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NOT OBTAINED - WAIVED

Timeline