DoD's $21.8M Raytheon contract for spares shows limited competition and potential value concerns

Contract Overview

Contract Amount: $21,825,149 ($21.8M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2019-12-01

End Date: 2025-08-11

Contract Duration: 2,080 days

Daily Burn Rate: $10.5K/day

Competition Type: NOT COMPETED

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: FY19 BASE SPARES

Place of Performance

Location: WOBURN, MIDDLESEX County, MASSACHUSETTS, 01801

State: Massachusetts Government Spending

Plain-Language Summary

Department of Defense obligated $21.8 million to RAYTHEON COMPANY for work described as: FY19 BASE SPARES Key points: 1. Contract awarded to a single source, raising questions about price competitiveness. 2. Long performance period suggests a need for ongoing support, but lacks competitive pressure. 3. The contract type (Cost Plus Fixed Fee) can incentivize cost overruns. 4. Limited transparency into the specific spares procured and their necessity. 5. Performance context is within the critical Missile Defense Agency, highlighting strategic importance. 6. Sector positioning is in defense electronics maintenance, a specialized and high-cost area.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to the lack of competitive bids and the specific nature of 'spares'. However, the Cost Plus Fixed Fee (CPFF) contract type, while common in defense, can lead to higher costs compared to fixed-price contracts if not managed rigorously. Without comparable contract data or detailed cost breakdowns, it's difficult to definitively assess if the pricing represents fair value for the taxpayer. The duration of the contract also implies a significant, ongoing need, making value assessment over its lifespan crucial.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning there was no open competition. This typically occurs when a specific contractor is the only source capable of providing the required goods or services, often due to proprietary technology or existing system integration. The lack of competition limits the government's ability to solicit and compare multiple offers, potentially leading to higher prices than if a competitive process had been employed.

Taxpayer Impact: Sole-source awards mean taxpayers may not be getting the best possible price, as the government could not leverage competition to drive down costs.

Public Impact

The primary beneficiaries are the Department of Defense, specifically the Missile Defense Agency, ensuring operational readiness of critical defense systems. Services delivered include the provision of spare parts essential for the maintenance and repair of electronic and precision equipment. Geographic impact is primarily within the operational theaters and maintenance facilities supporting the Missile Defense Agency's assets. Workforce implications are indirect, supporting the specialized technical workforce required to maintain advanced defense systems.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price discovery and potentially inflates costs.
Cost Plus Fixed Fee contract type can incentivize higher spending if not closely monitored.
Lack of transparency regarding specific spares procured makes independent value assessment difficult.
Long contract duration without competitive re-evaluation could lead to sustained above-market pricing.

Positive Signals

Awarded to Raytheon Company, a major defense contractor with established expertise in relevant systems.
Contract supports critical national security assets within the Missile Defense Agency.
The contract ensures the availability of essential spare parts, contributing to system readiness.

Sector Analysis

This contract falls within the Defense sector, specifically focusing on the maintenance and repair of electronic and precision equipment, a sub-sector often characterized by high technological complexity and specialized suppliers. The market for such specialized spares is typically dominated by original equipment manufacturers or their authorized distributors. Spending in this area is driven by the need to maintain the operational readiness of sophisticated military hardware, such as missile defense systems, where downtime can have significant strategic implications. Comparable spending benchmarks are difficult to establish without more specific details on the types of spares procured.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. Furthermore, the 'ss' (small business subcontracting) is also false. This suggests that small businesses are unlikely to be directly involved as subcontractors on this specific award, potentially limiting opportunities for them within this particular contract's scope.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contracting and financial management systems, with potential involvement from the Missile Defense Agency's program management. Inspector General jurisdiction would apply for investigations into fraud, waste, or abuse. Transparency is limited due to the sole-source nature and the specific classification of defense spares, making public oversight challenging.

Related Government Programs

Missile Defense Systems Procurement
Defense Electronics Maintenance Contracts
Cost Plus Fixed Fee Contracts
Sole Source Defense Acquisitions

Risk Flags

Sole Source Award
Cost Plus Contract Type
Lack of Competition
Potential for Overpricing

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $21.8 million to RAYTHEON COMPANY. FY19 BASE SPARES

Who is the contractor on this award?

The obligated recipient is RAYTHEON COMPANY.

Which agency awarded this contract?

Awarding agency: Department of Defense (Missile Defense Agency).

What is the total obligated amount?

The obligated amount is $21.8 million.

What is the period of performance?

Start: 2019-12-01. End: 2025-08-11.

What is Raytheon Company's track record with sole-source contracts for defense spares?

Raytheon Company, now RTX, has a long history of contracting with the U.S. Department of Defense, including numerous sole-source awards for specialized systems and components. Analyzing their broader contract portfolio reveals a pattern of securing sole-source positions due to the proprietary nature of their technologies and the critical role their systems play in national defense. While this can ensure access to essential parts, it also necessitates robust government oversight to ensure fair pricing and prevent potential cost escalations. Historical data suggests that sole-source awards to large, established contractors like Raytheon are common in complex defense programs where competition is limited by technical expertise and existing infrastructure.

How does the Cost Plus Fixed Fee (CPFF) contract type compare in value to other contract types for similar defense spares?

Cost Plus Fixed Fee (CPFF) contracts are often used when the scope of work is not precisely defined or when there is significant uncertainty in the costs involved, such as with specialized spares. In terms of value, CPFF contracts can be less advantageous for the government compared to fixed-price contracts (like Firm-Fixed-Price or FFP). With FFP, the contractor bears the risk of cost overruns, incentivizing efficiency. In a CPFF, the government pays the actual costs incurred plus a fixed fee, meaning the government absorbs cost increases, and the contractor's profit is fixed regardless of the final cost. This can lead to higher overall spending if not managed with stringent cost controls and oversight, making it potentially less cost-effective than competitive fixed-price awards.

What are the primary risks associated with sole-source procurement of defense spares?

The primary risks associated with sole-source procurement of defense spares include a lack of price competition, which can lead to inflated costs for taxpayers. Without competing bids, there is less incentive for the contractor to offer the lowest possible price. Additionally, sole-source awards can create vendor lock-in, making it difficult and expensive to switch suppliers in the future. There's also a potential risk of reduced innovation, as the contractor may face less pressure to improve products or processes. Furthermore, without a competitive process, it can be harder to verify the necessity and fair market value of the spares being procured, increasing the risk of waste or fraud if oversight is inadequate.

What is the typical performance period for similar defense spare parts contracts?

The typical performance period for defense spare parts contracts can vary significantly depending on the complexity of the equipment, the expected lifespan of the systems they support, and the nature of the spares themselves. Contracts can range from a few months for immediate needs to several years, often incorporating options for extension. A performance period of approximately 2080 days (as indicated by 'dur': 2080, likely representing days) for a contract that started in late 2019 and ends in mid-2025 is within the expected range for sustainment contracts supporting major defense systems. Longer periods are common for ensuring long-term readiness of critical assets, but they also underscore the importance of competitive re-evaluation or robust cost management over the contract's life.

How does the 'Other Electronic and Precision Equipment Repair and Maintenance' NAICS code relate to the Missile Defense Agency's needs?

The NAICS code 811219, 'Other Electronic and Precision Equipment Repair and Maintenance,' is a broad category that encompasses services for a wide array of electronic and precision equipment. For the Missile Defense Agency (MDA), this code is relevant because it covers the repair and maintenance of complex electronic systems integral to missile defense platforms. This includes components, sub-assemblies, and potentially full systems that require specialized technical expertise for upkeep and operational readiness. The 'spares' procured under this contract would likely be parts needed to perform these repair and maintenance activities, ensuring that the sophisticated radar, tracking, and interceptor systems remain functional and effective.

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: COMM/DETECT/COHERENT RADIATION

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: HQ014718R0001

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Rockwell Collins Australia PTY Limited

Address: 225 PRESIDENTIAL WAY, WOBURN, MA, 01801

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: $26,331,499

Exercised Options: $26,331,499

Current Obligation: $21,825,149

Actual Outlays: $13,504,837

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: HQ014718D0001

IDV Type: IDC

Timeline