DoD's $25.1M sole-source contract for missile parts awarded to Raytheon Company, raising value-for-money questions

Contract Overview

Contract Amount: $25,146,007 ($25.1M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2018-08-24

End Date: 2021-06-30

Contract Duration: 1,041 days

Daily Burn Rate: $24.2K/day

Competition Type: NOT AVAILABLE FOR COMPETITION

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: UNITED STATES SOLE SPARES

Place of Performance

Location: TUCSON, PIMA County, ARIZONA, 85756

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $25.1 million to RAYTHEON COMPANY for work described as: UNITED STATES SOLE SPARES Key points: 1. The contract's sole-source nature limits price competition, potentially increasing costs for taxpayers. 2. Raytheon's established role in defense manufacturing suggests a strong incumbent advantage. 3. The contract duration of over 1000 days warrants scrutiny for potential cost overruns or scope creep. 4. Fixed-price contract type offers some cost certainty but relies heavily on initial pricing accuracy. 5. Lack of small business participation noted, with no indication of set-aside or subcontracting. 6. Geographic concentration in Arizona for this critical defense supply chain component.

Value Assessment

Rating: questionable

Benchmarking the value of this sole-source contract is challenging due to the lack of competitive bids. The $25.1 million awarded to Raytheon for specialized missile parts suggests a significant investment. Without comparable contracts or market data, it's difficult to definitively assess if the pricing reflects fair market value. The fixed-price nature provides some cost control, but the absence of competition means taxpayers are reliant on Raytheon's pricing integrity.

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 supplies or services. The lack of competition means there were no other bidders to drive down prices through a bidding process. This approach can be justified for unique or proprietary items but often leads to higher costs compared to competitive procurements.

Taxpayer Impact: Sole-source awards limit the government's ability to leverage market competition to secure the best possible prices, potentially resulting in higher expenditures for taxpayers.

Public Impact

The primary beneficiaries are the Department of Defense and its missile defense programs, ensuring operational readiness. Services delivered include the provision of specialized parts essential for guided missile and space vehicle operations. The geographic impact is concentrated in Arizona, where Raytheon's facility is located, supporting local operations. Workforce implications include the employment of skilled labor within Raytheon's manufacturing facilities.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price discovery and potentially inflates costs.
Long contract duration increases risk of cost escalation and schedule delays.
Lack of transparency regarding the justification for sole-source award.
No indication of small business participation or subcontracting opportunities.

Positive Signals

Raytheon is a well-established defense contractor with a proven track record.
Fixed-price contract type offers some cost predictability.
Contract supports critical national defense capabilities.

Sector Analysis

This contract falls within the 'Other Guided Missile and Space Vehicle Parts and Auxiliary Equipment Manufacturing' sector, a specialized niche within the broader aerospace and defense industry. This sector is characterized by high barriers to entry, significant R&D investment, and strong reliance on established prime contractors like Raytheon. Spending in this area is driven by national security requirements and technological advancements in defense systems. Comparable spending benchmarks are difficult to ascertain due to the proprietary nature of many components and the limited number of qualified suppliers.

Small Business Impact

There is no indication that this contract included a small business set-aside. Furthermore, the contract details do not suggest any subcontracting requirements aimed at engaging small businesses. This suggests that the primary contractor, Raytheon, is expected to fulfill the contract requirements directly, potentially limiting opportunities for the small business ecosystem within this specific procurement.

Oversight & Accountability

Oversight for this contract would typically fall under the purview of the Defense Contract Management Agency (DCMA), which is responsible for ensuring contractor performance and compliance. Accountability measures are inherent in the firm-fixed-price contract type, which places the cost risk on the contractor. Transparency regarding the justification for the sole-source award and the specific parts procured would be key areas for assessment.

Related Government Programs

Missile Defense Systems
Guided Missile Manufacturing
Space Vehicle Components
Defense Logistics and Sustainment

Risk Flags

Sole Source Award
Lack of Competition
Long Contract Duration
No Small Business Participation Indicated

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $25.1 million to RAYTHEON COMPANY. UNITED STATES SOLE SPARES

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 $25.1 million.

What is the period of performance?

Start: 2018-08-24. End: 2021-06-30.

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

Raytheon Company, now part of RTX, has a long history of securing sole-source contracts within the Department of Defense, particularly for advanced missile systems and components. Their extensive experience and established position as a prime contractor often lead to sole-source awards when specific technological expertise or proprietary systems are involved. While this provides continuity and leverages existing capabilities, it also necessitates rigorous oversight to ensure fair pricing and value. Historical data from agencies like the Government Accountability Office (GAO) often reviews sole-source awards to major defense contractors, highlighting instances where competition was limited but justified by unique requirements or national security imperatives. Analyzing past performance on similar contracts can provide insights into Raytheon's pricing strategies and delivery reliability under such arrangements.

How does the $25.1 million value compare to similar contracts for missile parts?

Directly comparing the $25.1 million value of this sole-source contract for 'Other Guided Missile and Space Vehicle Parts and Auxiliary Equipment' to similar contracts is challenging due to the proprietary nature of defense components and the limited number of qualified suppliers. Sole-source awards inherently lack a competitive benchmark. However, general industry data suggests that specialized aerospace and defense components can command high prices due to complex manufacturing processes, stringent quality control, and advanced materials. Without access to specific part numbers, quantities, and detailed specifications, a precise value-for-money assessment against market rates is not feasible. The absence of competition means the government relies on Raytheon's cost proposals and the oversight of the Defense Contract Management Agency (DCMA) to ensure reasonable pricing.

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

The primary risks associated with this sole-source contract stem from the lack of competition. This can lead to inflated pricing, as there is no market pressure to offer the lowest possible cost. Additionally, sole-source awards can reduce the incentive for the contractor to innovate or improve efficiency if they are guaranteed the business regardless of performance. The long duration of the contract (over 1000 days) also introduces risks related to potential cost overruns, schedule delays, and changes in technology or requirements that may not be adequately addressed in the initial fixed-price agreement. Ensuring robust oversight and clear performance metrics is crucial to mitigate these risks.

How effective is the firm-fixed-price contract type in managing costs for this specific procurement?

The firm-fixed-price (FFP) contract type is generally considered effective in managing costs because it places the primary cost risk on the contractor. Raytheon is obligated to complete the work for the agreed-upon price, regardless of their actual costs. This incentivizes the contractor to control expenses and perform efficiently. However, the effectiveness of FFP in a sole-source context is contingent on the accuracy of the initial price negotiation and the contractor's ability to accurately estimate costs for specialized, potentially unique, missile parts. If the initial estimate was flawed or if unforeseen technical challenges arise, the contractor might absorb losses, or conversely, if the price was set too high, the government may overpay. Robust negotiation and oversight are still critical.

What are the historical spending patterns for 'Other Guided Missile and Space Vehicle Parts' 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 are substantial, reflecting the continuous need for modernization and sustainment of missile systems. This category often represents a significant portion of the defense budget allocated to aerospace and defense procurement. Spending tends to be concentrated among a few large, established defense contractors due to the specialized nature of the products and high barriers to entry. Trends may show increases during periods of heightened geopolitical tension or when new missile defense programs are initiated. Analyzing historical data reveals a consistent demand for these components, often procured through a mix of competitive and sole-source contracts, with sole-source awards being more common for highly specialized or proprietary items.

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 AVAILABLE FOR COMPETITION

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0002418R5421

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: RTX Corp (UEI: 001344142)

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: $25,146,007

Exercised Options: $25,146,007

Current Obligation: $25,146,007

Subaward Activity

Number of Subawards: 91

Total Subaward Amount: $24,522,318

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: N0002418G5421

IDV Type: BOA

Timeline