Raytheon Company awarded $551.6M contract for aircraft parts, highlighting sole-source procurement in defense

Contract Overview

Contract Amount: $551,635,434 ($551.6M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2003-08-27

End Date: 2010-08-31

Contract Duration: 2,561 days

Daily Burn Rate: $215.4K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Place of Performance

Location: EL SEGUNDO, LOS ANGELES County, CALIFORNIA, 90245

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $551.6 million to RAYTHEON COMPANY for work described as: Key points: 1. Contract awarded on a sole-source basis, raising questions about price discovery and potential for overpayment. 2. Long contract duration of 2561 days suggests a sustained need for these aircraft parts. 3. The contract falls under the 'Other Aircraft Parts and Auxiliary Equipment Manufacturing' NAICS code, indicating specialized production. 4. Awarded by the Department of Defense, this contract supports critical military aviation sustainment. 5. The firm fixed-price structure aims to control costs, but sole-source nature limits competitive pressure. 6. Significant contract value points to a substantial requirement for these specific components.

Value Assessment

Rating: questionable

The contract's value of over $551 million over its duration is substantial. However, without competitive bidding, it is difficult to benchmark the pricing against market rates or similar contracts. The firm fixed-price nature provides some cost certainty, but the lack of competition means taxpayers may not be receiving the best possible value. Further analysis would be needed to determine if the pricing is reasonable given the sole-source award.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning it was not competed. This typically occurs when only one responsible source can provide the required goods or services. The lack of competition limits the opportunity for price negotiation and may result in higher costs for the government compared to a fully competed contract. It also means fewer bidders were considered, reducing the pool of potential suppliers.

Taxpayer Impact: Sole-source awards mean taxpayers do not benefit from the cost savings that typically arise from competitive bidding processes. This can lead to higher overall expenditure for the government.

Public Impact

The primary beneficiaries are the U.S. military branches relying on these aircraft parts for operational readiness. Services delivered include the manufacturing and supply of specialized aircraft components. The geographic impact is primarily within California, where the contract was awarded, and potentially extends to military bases nationwide. Workforce implications include employment within Raytheon's manufacturing facilities and its supply chain.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure, potentially leading to higher costs for taxpayers.
Long contract duration could mask inefficiencies or scope creep if not closely monitored.
Lack of transparency in the sole-source justification process can obscure potential alternatives.
Reliance on a single contractor for critical parts can create supply chain vulnerabilities.

Positive Signals

Firm fixed-price contract provides cost certainty for the government.
Award to a large, established defense contractor like Raytheon suggests a high likelihood of meeting technical requirements.
The contract supports the sustainment of critical military aviation assets.

Sector Analysis

This contract falls within the aerospace and defense manufacturing sector, specifically focusing on aircraft parts. The market for specialized defense components is often characterized by high barriers to entry due to technological complexity and stringent quality requirements. Large, established prime contractors like Raytheon dominate this space. Spending benchmarks for similar aircraft parts can vary widely based on specificity, but a $551 million award over several years indicates a significant and sustained requirement.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. Furthermore, the contractor, Raytheon Company, is a large business. While large prime contractors are often required to subcontract a portion of their work to small businesses, the specific subcontracting plan for this contract is not detailed here. The absence of a direct set-aside means small businesses are less likely to be the primary awardees, though they may participate as subcontractors.

Oversight & Accountability

Oversight for this contract would typically be managed by the Defense Contract Management Agency (DCMA), which is responsible for ensuring contractors meet contractual requirements and quality standards. The firm fixed-price nature of the award provides a degree of cost accountability. Transparency regarding the sole-source justification and performance metrics would be crucial for comprehensive oversight. Inspector General involvement would be triggered by specific allegations of fraud, waste, or abuse.

Related Government Programs

Aircraft Component Manufacturing
Defense Logistics Agency Contracts
Military Aircraft Sustainment Programs
Sole-Source Defense Procurements

Risk Flags

Sole-source award lacks competitive justification.
Potential for inflated pricing due to lack of competition.
Long contract duration requires robust oversight.
Limited transparency on specific part details and justification.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $551.6 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 (Defense Contract Management Agency).

What is the total obligated amount?

The obligated amount is $551.6 million.

What is the period of performance?

Start: 2003-08-27. End: 2010-08-31.

What specific types of aircraft parts are covered under this $551.6 million contract?

The provided data indicates the NAICS code is 336413, which corresponds to 'Other Aircraft Parts and Auxiliary Equipment Manufacturing.' While the specific part numbers or categories are not detailed in the summary data, this classification suggests the contract covers a range of components beyond engines, airframes, or landing gear. These could include avionics, electrical systems, hydraulic components, structural elements, or specialized equipment necessary for the operation and maintenance of various military aircraft. The substantial value and long duration imply these are critical, potentially complex, and likely non-commercial off-the-shelf items.

Why was this contract awarded on a sole-source basis, and what was the justification?

The data explicitly states the contract type as 'NOT COMPETED' and the award method as 'SOLE SOURCE'. The specific justification for this sole-source award is not provided in the summary data. Typically, sole-source justifications are required by federal procurement regulations and must demonstrate that only one responsible source can meet the government's needs. Reasons can include unique capabilities, proprietary technology, urgent and compelling needs where competition is not feasible, or specific follow-on requirements to existing systems where only the original manufacturer can provide compatible parts. Without the official justification document, the precise rationale remains unknown.

How does the firm fixed-price (FFP) contract type mitigate risk for the government, especially in a sole-source scenario?

A Firm Fixed-Price (FFP) contract type establishes a ceiling price that the contractor must not exceed, regardless of their actual costs. This shifts the cost risk from the government to the contractor. In a sole-source scenario, where competitive pressure is absent, the FFP structure is particularly important for the government. It provides a degree of cost certainty and predictability, preventing cost overruns that could occur if the contractor's expenses increased significantly. However, it does not guarantee the 'best' price, as the initial negotiated price might be higher due to the lack of competition.

What is the historical spending pattern for this specific type of aircraft part or with this contractor by the Department of Defense?

The provided data shows a single definitive contract awarded to Raytheon Company for 'Other Aircraft Parts and Auxiliary Equipment Manufacturing' from August 2003 to August 2010, totaling $551.6 million. This represents a significant, long-term commitment. To understand historical patterns, one would need to examine broader Department of Defense (DoD) spending databases for similar NAICS codes (336413) and contracts awarded to Raytheon and other major defense contractors in the aircraft parts sector. This contract appears to be a substantial, but potentially isolated, award within this specific category for the given period.

What are the potential implications of a sole-source award of this magnitude on market competition and innovation in the long term?

A large, sole-source award like this can have mixed implications. In the short term, it ensures a critical need is met by a known entity. However, in the long term, it can stifle competition by creating a barrier to entry for other potential suppliers who might develop innovative solutions or offer more competitive pricing. If this contract represents a sustained need for a specific type of part, it might discourage other companies from investing in R&D for alternative or improved components, potentially leading to technological stagnation in that niche. It also concentrates significant revenue with one firm, potentially reducing market opportunities for others.

Industry Classification

NAICS: Manufacturing › Aerospace Product and Parts Manufacturing › Other Aircraft Parts and Auxiliary Equipment Manufacturing

Product/Service Code: RESEARCH AND DEVELOPMENT › C – National Defense R&D Services

Competition & Pricing

Extent Competed: NOT COMPETED

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Contractor Details

Address: 2000 EAST EL SEGUNDO BLVD, EL SEGUNDO, CA, 90245

Business Categories: Category Business, Not Designated a Small Business

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline