Raytheon Company awarded $313M for Navy provisioned item spares, a sole-source contract

Contract Overview

Contract Amount: $31,315,000 ($31.3M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2020-02-18

End Date: 2026-07-31

Contract Duration: 2,355 days

Daily Burn Rate: $13.3K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: FY20 PROVISIONED ITEM ORDER (PIO) SPARES

Place of Performance

Location: TEWKSBURY, MIDDLESEX County, MASSACHUSETTS, 01876

State: Massachusetts Government Spending

Plain-Language Summary

Department of Defense obligated $31.3 million to RAYTHEON COMPANY for work described as: FY20 PROVISIONED ITEM ORDER (PIO) SPARES Key points: 1. Contract awarded to a single vendor, raising questions about price competitiveness. 2. Long contract duration of over 5 years suggests potential for price escalation. 3. Firm Fixed Price contract type offers some cost certainty but may limit flexibility. 4. No small business set-aside or subcontracting noted, potentially limiting broader economic impact. 5. Contract falls under the 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' NAICS code. 6. Significant portion of the contract value ($132.97M) already awarded, indicating ongoing performance. 7. This is a delivery order under an existing contract vehicle.

Value Assessment

Rating: questionable

The contract's value of $313 million for provisioned item spares is substantial. Without competitive bidding, it is difficult to benchmark the value for money. The firm fixed-price structure provides some cost control, but the lack of competition means the government may not be achieving the lowest possible price. The significant portion already awarded suggests the pricing may have been established earlier, potentially without current market validation.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was not competed and was awarded as a sole-source delivery order. This indicates that the Department of the Navy likely determined that only Raytheon Company could fulfill the requirement, possibly due to proprietary technology, existing system integration, or a lack of alternative suppliers. The absence of multiple bidders means there was no direct price comparison or negotiation driven by market forces.

Taxpayer Impact: Sole-source awards can lead to higher costs for taxpayers as there is no competitive pressure to drive down prices. This limits the government's ability to secure the best possible value for the funds expended.

Public Impact

The Department of the Navy benefits from the supply of critical spares for its systems. This contract ensures the continued operational readiness of naval assets. The provision of these spares supports the maintenance and sustainment of advanced defense equipment. The contract's impact is primarily on the defense sector and its supply chain.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may result in inflated pricing for taxpayers.
Long contract duration increases the risk of cost overruns or price increases over time.
Sole-source nature limits opportunities for small businesses to participate in this specific award.

Positive Signals

Firm Fixed Price contract provides cost certainty for the awarded items.
Award to a known entity, Raytheon Company, suggests a potentially reliable supplier.
Delivery order under an existing contract vehicle may indicate established processes and oversight.

Sector Analysis

This contract falls within the aerospace and defense manufacturing sector, specifically related to navigation and guidance systems. The NAICS code 334511 covers establishments primarily engaged in manufacturing electronic search, detection, navigation, guidance, aeronautical, and nautical systems and instruments. Spending in this sector is often characterized by high R&D costs, long product lifecycles, and significant government procurement due to national security requirements. Comparable spending benchmarks are difficult without knowing the specific items, but large sole-source awards for critical spares are not uncommon in defense.

Small Business Impact

This contract does not appear to have a small business set-aside, nor is there explicit mention of subcontracting requirements for small businesses. The award to Raytheon Company, a large prime contractor, suggests that opportunities for small businesses would likely be through subcontracting if Raytheon chooses to engage them. Without specific subcontracting plans mandated, the direct impact on the small business ecosystem for this particular award is likely minimal.

Oversight & Accountability

As a delivery order under an existing contract vehicle, oversight mechanisms are likely tied to the parent contract. The Department of the Navy's contracting officers are responsible for monitoring performance and ensuring compliance. Transparency is limited due to the sole-source nature. Inspector General jurisdiction would apply if any fraud, waste, or abuse is suspected.

Related Government Programs

Department of the Navy Procurement
Defense Logistics Agency (DLA) Spares
Naval Air Systems Command (NAVAIR) Contracts
Raytheon Company Contracts
Provisioned Item Orders (PIO)
Navigation and Guidance Systems Manufacturing

Risk Flags

Sole-source award lacks competitive pricing.
Long contract duration may lead to price escalation or obsolescence.
No small business participation noted.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $31.3 million to RAYTHEON COMPANY. FY20 PROVISIONED ITEM ORDER (PIO) SPARES

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 $31.3 million.

What is the period of performance?

Start: 2020-02-18. End: 2026-07-31.

What is the historical spending pattern for provisioned item spares for these specific systems by the Department of the Navy?

Analyzing historical spending for provisioned item spares (PIO) for similar systems by the Department of the Navy is crucial for context. Without specific historical data for these exact spares, we can infer trends from broader defense spending. Defense budgets often fluctuate based on geopolitical events and modernization priorities. PIO contracts are typically awarded to ensure readiness and sustainment of existing platforms. If past awards for similar spares were also sole-source or competed at a low level, it might indicate a persistent market structure. Conversely, if previous procurements were highly competitive, the current sole-source award warrants closer scrutiny regarding justification and pricing.

What specific systems or platforms do these provisioned item spares support?

The provisioned item spares (PIO) awarded to Raytheon Company under this contract likely support critical naval systems manufactured or integrated by Raytheon. Given the NAICS code 334511 (Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing), these spares could be for radar systems, sonar equipment, navigation suites, flight control systems, or other advanced electronic instruments used on naval aircraft, ships, or submarines. Understanding the specific platforms (e.g., specific aircraft models, ship classes) these spares are intended for would provide better insight into their criticality, the potential for obsolescence, and the availability of alternative suppliers or repair services. This information is essential for assessing the justification for a sole-source award.

What is the justification for awarding this contract on a sole-source basis?

The justification for awarding this $313 million contract for provisioned item spares (PIO) on a sole-source basis is not provided in the data. Typically, sole-source awards require a formal justification document (e.g., Justification and Approval - J&A) that outlines why full and open competition is not feasible. Common reasons include proprietary data rights, unique capabilities of a single source, urgent and compelling needs where only one source can meet the requirement, or specific follow-on work to an original system. Without this justification, it is difficult to assess whether the government adequately explored competitive options or if the sole-source determination was appropriate and in the best interest of the government.

How does the firm fixed-price (FFP) contract type mitigate risks for this type of spare parts procurement?

The Firm Fixed Price (FFP) contract type is generally advantageous for the government in spare parts procurement as it shifts the majority of the cost risk to the contractor, Raytheon Company. Under FFP, the price is set and not subject to adjustment based on the contractor's cost experience. This provides budget certainty for the Department of the Navy. For provisioned item spares, where quantities might be estimated or demand can fluctuate, FFP helps prevent cost overruns if Raytheon's actual costs to produce or procure these items are higher than anticipated. However, it can also mean that if Raytheon can produce or procure the spares at a lower cost than expected, they retain the profit, which might be higher than on a cost-plus contract. The lack of competition, however, tempers the benefit of FFP, as the initial fixed price may not have been optimized through market forces.

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

Raytheon Company has a long-standing and extensive track record as a major defense contractor, frequently awarded contracts by the Department of the Navy for a wide array of systems and components, including spares. Their experience likely encompasses the specific types of navigation, guidance, and detection systems relevant to this contract. While specific performance metrics for this exact PIO contract are not detailed, Raytheon's general performance with the Navy is typically characterized by the delivery of complex technological solutions. However, like any large contractor, there can be instances of performance issues or contract disputes on specific awards. A deeper dive into their past performance ratings and any significant issues on similar sole-source or competed spare parts contracts would provide a more nuanced view of their reliability and value.

Are there any potential risks associated with the long contract duration (over 5 years)?

Yes, the contract duration of approximately 5.5 years (February 2020 to July 2026) for these provisioned item spares presents several potential risks. Firstly, technology obsolescence is a concern; the systems these spares support might be upgraded or replaced during the contract period, potentially reducing the need for these specific parts or requiring modifications. Secondly, price escalation risk exists. While it's a Firm Fixed Price contract, the initial price is set for the entire duration. Market conditions, material costs, and labor rates can change significantly over five years, potentially making the initial price unrepresentative of current market value by the end of the contract. Lastly, long durations can sometimes lead to complacency in contractor performance or reduced urgency if not actively managed and overseen.

Industry Classification

NAICS: Manufacturing › Navigational, Measuring, Electromedical, and Control Instruments Manufacturing › Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument 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: 50 APPLE HILL DR, TEWKSBURY, MA, 01876

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: $31,315,000

Exercised Options: $31,315,000

Current Obligation: $31,315,000

Subaward Activity

Number of Subawards: 211

Total Subaward Amount: $22,837,286

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: N0002418G5501

IDV Type: BOA

Timeline