Raytheon Company awarded over $584M for guided missile and space vehicle parts, a sole-source contract

Contract Overview

Contract Amount: $583,965,182 ($584.0M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2003-12-18

End Date: 2012-12-31

Contract Duration: 3,301 days

Daily Burn Rate: $176.9K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Place of Performance

Location: TUCSON, PIMA County, ARIZONA, 85756

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $584.0 million to RAYTHEON COMPANY for work described as: Key points: 1. Contract awarded for essential defense components, indicating a critical need for specialized parts. 2. Sole-source award suggests limited market availability or unique contractor capabilities. 3. Long contract duration of 3301 days points to sustained demand and program stability. 4. Firm Fixed Price contract type aims to control costs and provide budget certainty. 5. Contract awarded to a major defense contractor, Raytheon Company, known for its extensive experience in this sector. 6. Geographic location of contract performance in Arizona may indicate specialized manufacturing facilities.

Value Assessment

Rating: fair

Benchmarking the value of this contract is challenging due to its sole-source nature and the specific, specialized nature of guided missile and space vehicle parts. Without competitive bids, it's difficult to ascertain if the price reflects optimal market value. However, the firm fixed-price structure provides some cost control. The total award amount of over $584 million over a nearly 9-year period suggests significant investment in critical defense capabilities. Further analysis would require detailed cost breakdowns and comparisons to similar, albeit rare, sole-source procurements for highly specialized defense components.

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 among multiple vendors. This typically occurs when only one vendor possesses the necessary technical capabilities, intellectual property, or security clearances required for the specific goods or services. While this ensures the use of a qualified provider, it limits the potential for price competition and may result in higher costs for the government compared to a fully competed contract. The lack of competition means the government did not benefit from a bidding process to drive down prices.

Taxpayer Impact: Taxpayers may face higher costs due to the absence of competitive bidding. The government's negotiating position is weakened, potentially leading to less favorable pricing than could be achieved in a competitive environment.

Public Impact

The primary beneficiaries are the U.S. Department of Defense, ensuring the availability of critical components for national security. Services delivered include the manufacturing and supply of specialized parts for guided missiles and space vehicles. Geographic impact is concentrated in Arizona, where the contract is performed, potentially supporting local jobs and the regional economy. Workforce implications include employment opportunities for skilled labor in advanced manufacturing and aerospace within Arizona.

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 could lead to cost overruns if not managed effectively.
Lack of competition may reduce incentives for innovation and efficiency from the contractor.
Specialized nature of parts means limited alternative suppliers, increasing reliance on Raytheon.

Positive Signals

Award to a reputable contractor (Raytheon) with a proven track record in defense.
Firm Fixed Price contract type provides cost certainty for the government.
Contract supports critical defense capabilities, ensuring national security readiness.
Long duration suggests a stable, ongoing need for these essential components.

Sector Analysis

The contract falls within the 'Other Guided Missile and Space Vehicle Parts and Auxiliary Equipment Manufacturing' sector, a highly specialized niche within the broader aerospace and defense industry. This sector is characterized by high barriers to entry, significant R&D investment, and stringent quality control requirements. The market is dominated by a few large, established defense contractors like Raytheon. Spending in this area is directly tied to defense budgets and strategic priorities, often involving complex, high-value procurements for advanced military systems. Comparable spending benchmarks are difficult to establish due to the unique nature of the products.

Small Business Impact

This contract does not appear to involve small business set-asides, as indicated by 'sb: false'. Given the specialized nature of guided missile and space vehicle parts, it is likely that the prime contractor, Raytheon, possesses the unique capabilities required. There is no explicit information on subcontracting plans for small businesses within the provided data. However, large defense contracts often have subcontracting goals, and it's possible that Raytheon engages small businesses for specific components or services, though this is not detailed here. The absence of set-asides means direct opportunities for small businesses to compete for the prime contract are unlikely.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense and its contracting agencies, such as the Defense Contract Management Agency (DCMA). As a definitive contract, it is subject to standard government oversight procedures, including performance monitoring, quality assurance, and financial audits. The firm fixed-price nature of the contract helps in financial oversight by setting a ceiling on costs. Transparency is generally maintained through contract databases, although specific details of sole-source justifications and pricing negotiations may be less public. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Guided Missile Manufacturing
Space Vehicle Manufacturing
Defense Procurement
Aerospace Parts Manufacturing
National Defense Spending

Risk Flags

Sole-source award
Lack of competition
Potential for cost overruns
Limited transparency in pricing

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $584.0 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 $584.0 million.

What is the period of performance?

Start: 2003-12-18. End: 2012-12-31.

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

Raytheon Company has a long and extensive history of contracting with the Department of Defense, particularly in the areas of missile systems, aerospace, and defense electronics. They are a major defense contractor known for producing a wide range of advanced weaponry and related components. Their track record includes numerous large-scale, complex contracts, often involving sole-source awards due to the specialized nature of their products and proprietary technologies. While specific performance metrics for every contract are not publicly detailed, Raytheon is generally considered a reliable supplier for critical defense needs. However, like any large contractor, they have faced scrutiny over pricing and contract performance on occasion, necessitating robust government oversight.

How does the value of this contract compare to other sole-source procurements for specialized defense components?

Comparing the value of this $584 million contract to other sole-source procurements for specialized defense components is challenging due to the unique nature of such acquisitions. Sole-source contracts are inherently less transparent regarding pricing benchmarks than competitive ones. However, given the scale and duration (over 9 years), this award appears substantial, reflecting the high cost of developing and manufacturing advanced missile and space vehicle parts. Large defense programs often involve multi-billion dollar investments over many years. This contract's value is likely in line with significant, specialized sole-source awards within the defense sector where only a few companies possess the requisite technology and manufacturing capabilities. Detailed cost analysis would be needed to assess if the price is reasonable relative to the specific components and services provided.

What are the primary risks associated with a sole-source award of this magnitude?

The primary risks associated with a sole-source award of this magnitude include potential cost overruns due to a lack of competitive pressure, reduced incentive for the contractor to innovate or improve efficiency, and a lack of transparency in pricing. The government's negotiating power is diminished, potentially leading to less favorable terms. There's also a risk of vendor lock-in, where the government becomes heavily reliant on a single supplier, making future transitions difficult or costly. Furthermore, without competition, it's harder to independently verify the necessity and cost-effectiveness of the procured items. Robust contract management, detailed cost analysis, and strong oversight are crucial to mitigate these risks.

How effective is the firm fixed-price contract type in managing costs for specialized defense parts?

The firm fixed-price (FFP) contract type is generally considered effective in managing costs for specialized defense parts, especially when the scope of work is well-defined and risks are understood. FFP places the primary cost risk on the contractor, incentivizing them to control expenses and deliver within the agreed-upon price. This provides budget certainty for the government. However, for highly complex or developmental items where costs are less predictable, FFP can sometimes lead contractors to inflate their initial bids to cover potential unforeseen expenses, or it might discourage them from undertaking costly but necessary modifications. In this case, for 'parts,' FFP is likely a suitable choice, assuming the parts themselves are standardized or their production costs are well-understood by Raytheon.

What are the historical spending patterns for 'Other Guided Missile and Space Vehicle Parts and Auxiliary Equipment Manufacturing' by the Department of Defense?

Historical spending patterns for 'Other Guided Missile and Space Vehicle Parts and Auxiliary Equipment Manufacturing' by the Department of Defense typically show significant and relatively stable investment, driven by ongoing modernization efforts and national security requirements. This sub-sector often represents a substantial portion of the overall aerospace and defense budget. Spending can fluctuate based on geopolitical events, new program starts, and the lifecycle of major weapon systems. Large, multi-year contracts, often sole-sourced due to technological specialization, are common. While specific annual figures vary, the DoD consistently allocates billions of dollars to this category to ensure the readiness and advancement of its missile and space-based defense capabilities. This particular contract, awarded in 2003 and ending in 2012, reflects a period of sustained investment in these critical components.

Industry Classification

NAICS: Manufacturing › Aerospace Product and Parts Manufacturing › Other Guided Missile and Space Vehicle Parts and Auxiliary Equipment 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 EAST HERMANS ROAD, TUCSON, AZ, 85706

Business Categories: Category Business, Not Designated a Small Business

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline