DoD awards $56M for CH-53K helicopter parts, with no competition and long-term delivery

Contract Overview

Contract Amount: $56,042,328 ($56.0M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2021-09-27

End Date: 2026-05-31

Contract Duration: 1,707 days

Daily Burn Rate: $32.8K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: CH-53K LRIP LOT 4 AND 5, OPTIONS LOTS 6-8

Place of Performance

Location: MCKINNEY, COLLIN County, TEXAS, 75071

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $56.0 million to RAYTHEON COMPANY for work described as: CH-53K LRIP LOT 4 AND 5, OPTIONS LOTS 6-8 Key points: 1. Contract awarded on a sole-source basis, limiting price competition. 2. Long performance period suggests potential for cost overruns. 3. Focus on specialized aircraft parts indicates a niche but critical defense need. 4. Fixed-price contract type shifts some risk to the contractor. 5. Delivery order structure allows for phased funding and execution. 6. Contractor is a major defense supplier, suggesting established capabilities.

Value Assessment

Rating: fair

The contract value of $56 million for CH-53K helicopter parts appears reasonable given the specialized nature of the aircraft and the long delivery period. However, without competitive bidding, it is difficult to benchmark the pricing against market alternatives. The firm fixed-price structure provides some cost certainty, but the extended duration could still lead to cost increases if not managed effectively. Further analysis of historical pricing for similar components or previous lots would be beneficial.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one vendor, Raytheon Company, was solicited. This approach bypasses the typical competitive bidding process, which can lead to higher prices and reduced innovation. The justification for a sole-source award would need to be thoroughly reviewed to understand why full and open competition was not feasible.

Taxpayer Impact: The lack of competition means taxpayers may not be receiving the best possible price for these critical helicopter parts, as there was no incentive for vendors to underbid each other.

Public Impact

The primary beneficiaries are the U.S. Marine Corps, who rely on the CH-53K King Stallion for heavy-lift helicopter operations. The contract delivers essential parts and auxiliary equipment for the CH-53K aircraft, ensuring operational readiness. The contract's geographic impact is primarily within Texas, where the contractor is located, and potentially at military bases where the aircraft are deployed. Workforce implications include continued employment for skilled manufacturing and aerospace workers at Raytheon.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price discovery and potentially increases costs for taxpayers.
Long contract duration (over 5 years) increases the risk of cost escalation and scope creep.
Lack of transparency in the sole-source justification could hide inefficiencies.
Dependence on a single supplier for critical components poses a supply chain risk.

Positive Signals

Firm fixed-price contract shifts some financial risk to the contractor.
Award to an established defense contractor like Raytheon suggests a high likelihood of meeting technical requirements.
Delivery order structure allows for phased funding and management of requirements.
Specialized nature of the parts indicates support for a critical, advanced military platform.

Sector Analysis

This contract falls within the aerospace and defense manufacturing sector, specifically focusing on aircraft parts. The CH-53K is a next-generation heavy-lift helicopter, representing a significant investment in advanced military aviation technology. Spending in this sub-sector is often characterized by high R&D costs, long production cycles, and a limited number of prime contractors due to the complexity and specialized nature of the platforms. Comparable spending benchmarks would likely involve other major defense aircraft component procurements.

Small Business Impact

This contract does not appear to include a small business set-aside. Given the sole-source nature and the specialized components for a major defense platform, it is unlikely that small businesses would be primary awardees. However, Raytheon may engage small businesses as subcontractors, but the extent of this subcontracting is not detailed in the provided data.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy's contracting and program management offices. The firm fixed-price nature provides some level of cost control. Transparency regarding the sole-source justification and performance metrics would be key areas for oversight. The Inspector General of the Department of Defense may also conduct audits or investigations into the contract's execution and pricing.

Related Government Programs

CH-53K Helicopter Program
Department of Defense Aircraft Procurement
Aerospace Component Manufacturing
Defense Logistics and Sustainment

Risk Flags

Sole-source award
Long contract duration
Lack of competitive bidding

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $56.0 million to RAYTHEON COMPANY. CH-53K LRIP LOT 4 AND 5, OPTIONS LOTS 6-8

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 Navy).

What is the total obligated amount?

The obligated amount is $56.0 million.

What is the period of performance?

Start: 2021-09-27. End: 2026-05-31.

What is the specific justification for awarding this contract on a sole-source basis to Raytheon Company?

The provided data indicates the contract was 'NOT COMPETED'. A sole-source award typically occurs when only one responsible source is available or when full and open competition is not feasible due to specific circumstances, such as urgent and compelling needs, unique capabilities, or follow-on work to a previously competed contract. For this CH-53K LRIP LOT 4 AND 5, OPTIONS LOTS 6-8 contract, the justification would likely stem from Raytheon's unique position as a supplier of specific components for this advanced helicopter program, potentially due to proprietary technology, existing integration, or the specialized manufacturing capabilities required. A detailed review of the official Justification and Approval (J&A) document would be necessary to confirm the precise reasons and assess their validity.

How does the pricing of this contract compare to previous lots or similar aircraft component contracts?

Direct comparison of pricing for this $56 million contract against previous lots or similar aircraft component contracts is challenging without access to historical pricing data and detailed cost breakdowns. The contract is a firm fixed-price delivery order, which aims to establish a ceiling cost. However, as a sole-source award, there's an inherent lack of competitive pressure that typically drives down prices. To assess value for money, one would need to analyze the unit costs of specific components within this award, compare them to any available historical data for the same or similar parts from previous lots (if available and adjusted for inflation/scope), and benchmark against industry standards for comparable complex aerospace components. The extended delivery schedule also complicates direct price comparisons over time.

What are the primary risks associated with the long performance period (2021-2026) for this contract?

The extended performance period of approximately five years for this contract presents several risks. Firstly, there is an increased likelihood of cost escalation due to inflation, material price fluctuations, and potential changes in labor costs over such a long duration, even with a firm fixed-price structure. Secondly, the risk of scope creep or requirement changes increases, which could lead to contract modifications and additional costs if not managed rigorously. Thirdly, technological obsolescence is a potential concern; while the CH-53K is a modern platform, advancements in manufacturing or materials could occur during the contract's life. Finally, the prolonged duration increases the potential for supply chain disruptions or contractor performance issues that may not become apparent until later in the contract lifecycle.

What is the significance of this contract within the broader CH-53K helicopter program's lifecycle?

This contract, covering Low Rate Initial Production (LRIP) Lots 4 and 5, along with options for subsequent lots, signifies a crucial stage in the CH-53K helicopter program's transition from development to full-rate production. LRIP is designed to establish and validate the production capability, refine manufacturing processes, and build a foundational number of aircraft and components. Awarding these lots indicates the program is progressing through its planned production ramp-up. The components procured under this contract are essential for building and sustaining the operational fleet, ensuring the Marine Corps can field the required number of these heavy-lift aircraft to meet its mission requirements.

How does the firm fixed-price (FFP) contract type mitigate or introduce risks for the government and the contractor?

The Firm Fixed-Price (FFP) contract type generally shifts the majority of the cost risk from the government to the contractor. The contractor agrees to a set price for the work, and is responsible for managing costs to ensure profitability. This provides the government with cost certainty, as the final price is known upfront, barring any contract modifications. For the contractor, the risk lies in accurately estimating all costs associated with production, including labor, materials, and overhead. If costs exceed the fixed price, the contractor absorbs the loss. Conversely, if the contractor can deliver the components more efficiently than anticipated, they retain the savings, creating an incentive for cost control. However, in sole-source situations, the FFP may be set at a higher initial price to account for the contractor's risk and lack of competition.

Industry Classification

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

Product/Service Code: COMM/DETECT/COHERENT RADIATION

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

Parent Company: RTX Corp

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

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: $58,549,078

Exercised Options: $56,042,328

Current Obligation: $56,042,328

Subaward Activity

Number of Subawards: 50

Total Subaward Amount: $6,877,091

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: N0001920G0007

IDV Type: BOA

Timeline