Raytheon Company awarded $17M contract for aircraft parts, raising questions about competition and value

Contract Overview

Contract Amount: $16,980,802 ($17.0M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2024-08-13

End Date: 2027-02-09

Contract Duration: 910 days

Daily Burn Rate: $18.7K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: CONTROLLER,ELECTRIC

Place of Performance

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

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $17.0 million to RAYTHEON COMPANY for work described as: CONTROLLER,ELECTRIC Key points: 1. Contract awarded via a non-competitive process, limiting price discovery. 2. Significant contract value suggests potential for substantial taxpayer investment. 3. Performance period extends over two years, indicating a long-term need. 4. The specific aircraft parts are crucial for operational readiness. 5. Lack of competition may lead to higher-than-market prices. 6. Oversight is critical to ensure fair pricing and effective delivery.

Value Assessment

Rating: questionable

The contract value of $16,980,801.78 for aircraft parts appears substantial. Without a competitive bidding process, it is difficult to benchmark the pricing against market rates or similar contracts. The fixed-price nature of the contract shifts some risk to the contractor, but the absence of competition prevents a clear assessment of whether the government is receiving optimal value for its investment. Further analysis would be needed to compare this award to historical pricing for similar components.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded using a sole-source justification, meaning it was not competed openly. This approach is typically used when only one responsible source can provide the required goods or services. The lack of competition means that multiple bidders did not have the opportunity to offer their best prices, potentially leading to a less favorable outcome for the government in terms of cost.

Taxpayer Impact: Taxpayers may be paying a premium due to the absence of competitive pressure to drive down costs. The government's ability to negotiate favorable terms is diminished without alternative offers.

Public Impact

The Department of the Navy benefits from the acquisition of essential aircraft parts. This contract supports the operational readiness and maintenance of military aircraft. The services delivered are critical for national defense capabilities. The contract is geographically located in California, potentially impacting the local economy and workforce.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing and value assessment.
High contract value warrants close scrutiny of cost-effectiveness.
Long performance period increases exposure to potential cost overruns or inefficiencies.

Positive Signals

Fixed-price contract structure can incentivize contractor efficiency.
Award to a known entity like Raytheon Company may indicate a reliance on established expertise.
Contract supports critical defense needs, ensuring operational readiness.

Sector Analysis

The aerospace and defense sector is characterized by complex supply chains and specialized manufacturing. This contract falls under the 'Other Aircraft Parts and Auxiliary Equipment Manufacturing' category, indicating a need for specific components rather than complete aircraft. The market for such parts can be concentrated, sometimes leading to sole-source awards when proprietary technology or specific certifications are required. Benchmarking against similar specialized parts contracts within the defense sector would be necessary for a comprehensive value assessment.

Small Business Impact

This contract was not set aside for small businesses, and there is no indication of subcontracting requirements for small businesses. The award to a large prime contractor like Raytheon Company suggests that the primary focus is on the prime's capabilities. This may limit opportunities for small businesses to participate directly in this specific contract, although they might be part of Raytheon's broader supply chain.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Defense's contracting and procurement regulations. The Inspector General's office may conduct audits or investigations to ensure compliance and prevent fraud, waste, and abuse. Transparency regarding the justification for the sole-source award and the pricing structure would be key to effective oversight.

Related Government Programs

Aircraft Parts Procurement
Defense Logistics and Maintenance
Naval Aviation Support
Sole-Source Defense Contracts

Risk Flags

Sole-source award
Lack of competitive bidding
High contract value
Long performance period

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $17.0 million to RAYTHEON COMPANY. CONTROLLER,ELECTRIC

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 $17.0 million.

What is the period of performance?

Start: 2024-08-13. End: 2027-02-09.

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

The provided data indicates the contract was awarded as 'NOT COMPETED' with a 'sole-source' (st: 'CA') designation. While the specific justification is not detailed in the provided data, sole-source awards are typically granted when only one responsible source is capable of meeting the government's requirements. This could be due to proprietary technology, unique capabilities, urgent and compelling needs where competition is not feasible, or if the item is a follow-on to a previously competed contract where only the original source can provide compatible parts. Without further documentation from the agency, the precise reason remains unconfirmed, but it implies a lack of readily available alternatives.

How does the $16.98 million contract value compare to similar aircraft parts contracts awarded by the Department of Defense?

Comparing this $16.98 million contract value requires access to a broader dataset of similar contracts. However, within the context of specialized aircraft parts, this amount is significant. Contracts for individual components can range from thousands to millions of dollars depending on complexity, quantity, and criticality. Given the sole-source nature, it's crucial to ascertain if this value reflects a fair market price or if competitive bidding could have yielded a lower cost. Benchmarking against other sole-source awards for comparable parts, or against competitively awarded contracts for similar systems, would be necessary to assess value for money.

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

The primary risks associated with a sole-source contract of this magnitude include potential overpricing due to the lack of competitive pressure, reduced incentive for the contractor to innovate or improve efficiency, and a lack of transparency in the procurement process. Taxpayers may bear a higher cost than if the contract had been competed. There's also a risk of vendor lock-in, making it difficult to switch suppliers in the future. Furthermore, without multiple bids, the government has less leverage to negotiate favorable terms and conditions. Robust oversight and detailed cost analysis are essential to mitigate these risks.

What is Raytheon Company's track record with the Department of Defense, particularly for aircraft parts?

Raytheon Company (now RTX) is a major defense contractor with an extensive history of supplying various systems and components to the Department of Defense. They are known for producing a wide range of aerospace and defense products, including aircraft systems, missiles, and sensors. Their track record with the DoD is generally extensive, involving numerous contracts across different branches and agencies. For aircraft parts specifically, their involvement would likely span numerous platforms. While specific performance details for this particular contract are not yet available, Raytheon's established presence suggests a deep understanding of military requirements and manufacturing capabilities.

What are the implications of the 910-day performance period for program effectiveness and cost?

A 910-day (approximately 2.5 years) performance period for this contract indicates a long-term need for these specific aircraft parts. This duration allows for sustained support and potentially more stable production planning for the contractor. For program effectiveness, it ensures a consistent supply chain for critical components, contributing to the operational readiness of the aircraft. From a cost perspective, a longer period can sometimes lead to better unit pricing if economies of scale are achieved, but it also increases the overall financial commitment and exposure to potential market fluctuations or unforeseen issues over the contract's life. It necessitates ongoing monitoring to ensure costs remain justified throughout the period.

How does the 'Other Aircraft Parts and Auxiliary Equipment Manufacturing' classification (NAICS 336413) inform our understanding of this contract?

The NAICS code 336413, 'Other Aircraft Parts and Auxiliary Equipment Manufacturing,' signifies that this contract is for components and accessories used in aircraft, rather than complete aircraft or engines. This category encompasses a wide array of items, such as landing gear, electrical systems, avionics components, structural parts, and other specialized equipment. Understanding this classification helps contextualize the contract's scope, suggesting it's focused on maintaining and supporting existing aircraft fleets by providing necessary replacement or upgrade parts. It implies a need for specialized manufacturing capabilities and adherence to stringent aerospace quality standards.

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: $31,999,420

Exercised Options: $31,999,420

Current Obligation: $16,980,802

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: N0038319GUX01

IDV Type: BOA

Timeline