Raytheon Company awarded $36.4M for missile spares, a sole-source contract with a 4-year duration

Contract Overview

Contract Amount: $36,429,036 ($36.4M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2020-05-05

End Date: 2024-03-31

Contract Duration: 1,426 days

Daily Burn Rate: $25.5K/day

Competition Type: NOT COMPETED

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: MISSILE SPARES PROCUREMENT

Place of Performance

Location: ANDOVER, ESSEX County, MASSACHUSETTS, 01810

State: Massachusetts Government Spending

Plain-Language Summary

Department of Defense obligated $36.4 million to RAYTHEON COMPANY for work described as: MISSILE SPARES PROCUREMENT Key points: 1. Contract awarded to a single vendor, raising questions about competitive pricing. 2. The contract duration of 1426 days suggests a long-term need for these spares. 3. Missile spares procurement falls under critical defense logistics, requiring robust oversight. 4. The firm-fixed-price structure aims to control costs, but price validation is key. 5. Performance context is limited without specific delivery metrics or quality data. 6. Sector positioning is within defense manufacturing, a high-value, specialized industry.

Value Assessment

Rating: fair

Benchmarking the value of this $36.4 million contract for missile spares is challenging without detailed cost breakdowns or comparisons to similar sole-source procurements. The firm-fixed-price (FFP) contract type is generally favorable for cost control, but the absence of competition means the government relies heavily on Raytheon's pricing proposals. Without a competitive bidding process, it's difficult to ascertain if the price reflects the best value achievable in the market. Further analysis would require access to historical pricing data for similar spares and an understanding of the specific technical requirements driving the cost.

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 is typically used when a specific product or service is available only from a single source, or in cases of urgent and compelling need. The lack of competition means that price discovery through market forces was bypassed, potentially leading to higher costs for the government compared to a fully competed contract. The justification for sole-source procurement would need to be robust to ensure taxpayer funds are used efficiently.

Taxpayer Impact: Sole-source awards limit the government's ability to leverage competition to secure lower prices, potentially increasing the financial burden on taxpayers for essential defense supplies.

Public Impact

The primary beneficiaries are the U.S. military branches relying on these missile spares for operational readiness. Services delivered include the provision of critical components for missile systems, ensuring their functionality. Geographic impact is national, supporting defense operations across various theaters. Workforce implications are primarily within Raytheon's manufacturing and supply chain operations, supporting skilled labor in the defense industry.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to inflated prices.
Sole-source awards require strong justification to ensure fair pricing.
Long contract duration could mask inefficiencies if not actively managed.
Dependence on a single supplier can create supply chain risks.

Positive Signals

Firm-fixed-price contract type helps manage cost certainty.
Award to a known, established defense contractor like Raytheon suggests a degree of reliability.
Procurement of critical spares ensures readiness of essential defense assets.

Sector Analysis

This contract falls within the aerospace and defense manufacturing sector, specifically focusing on missile systems and their components. The North American Industry Classification System (NAICS) code 334511, 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing,' encompasses companies involved in producing complex defense electronics and systems. The market for such specialized components is often dominated by a few large, established prime contractors due to high barriers to entry, including intellectual property, specialized manufacturing capabilities, and long-standing relationships with government agencies. Comparable spending benchmarks are difficult to establish without more specific details on the missile systems involved and the exact nature of the spares.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. Furthermore, the prime contractor, Raytheon Company, is a large defense corporation. While large prime contractors are often required to subcontract a portion of their work to small businesses, the absence of a specific set-aside for this particular procurement means that opportunities for small businesses are not guaranteed and would depend on Raytheon's internal subcontracting plans. This could limit direct opportunities for small businesses to compete for this specific contract, though they may still benefit indirectly through Raytheon's supply chain.

Oversight & Accountability

Oversight for this contract would primarily fall under the Defense Logistics Agency (DLA) and the Department of Defense (DoD). As a sole-source award, there is an increased emphasis on the contracting officer's responsibility to ensure fair and reasonable pricing through negotiation and cost analysis. Transparency is facilitated through contract databases like FPDS, but detailed cost breakdowns are typically not publicly available. Inspector General (IG) jurisdiction would apply if any fraud, waste, or abuse is suspected related to the contract's execution or award.

Related Government Programs

Missile Systems Procurement
Defense Logistics Agency Contracts
Raytheon Company Contracts
Sole Source Defense Procurements
Weapon System Sustainment

Risk Flags

Sole-source award lacks competitive pricing validation.
Potential for cost overruns without competitive pressure.
Dependence on a single supplier for critical components.
Need for robust oversight to ensure fair and reasonable pricing.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $36.4 million to RAYTHEON COMPANY. MISSILE SPARES PROCUREMENT

Who is the contractor on this award?

The obligated recipient is RAYTHEON COMPANY.

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Logistics Agency).

What is the total obligated amount?

The obligated amount is $36.4 million.

What is the period of performance?

Start: 2020-05-05. End: 2024-03-31.

What is Raytheon Company's track record with the Department of Defense, particularly in missile spares procurement?

Raytheon Company, now part of RTX, has a long and extensive history as a prime contractor for the U.S. Department of Defense, particularly in areas of missile systems, defense electronics, and aerospace. They are a major supplier of various missile platforms and associated components. Their track record with the DoD is generally characterized by large-scale, complex contracts. For missile spares procurement specifically, Raytheon has consistently been a key supplier, often awarded sole-source or limited-competition contracts due to the proprietary nature of their systems and the need for specialized expertise. While this indicates a strong capability and established relationship, it also underscores the importance of rigorous oversight to ensure fair pricing and value, especially in sole-source situations where competition is absent.

How does the $36.4 million value of this contract compare to similar missile spares procurements, especially sole-source awards?

The $36.4 million value for missile spares is a significant but not extraordinary amount within the context of large defense procurements. Comparing it directly to similar sole-source awards is challenging without knowing the specific missile systems and the quantity/type of spares. However, sole-source contracts for specialized components can often be more expensive than competitively bid ones because the government lacks the leverage of multiple bidders driving down prices. The firm-fixed-price (FFP) nature of this contract suggests an attempt to cap costs, but the baseline price is determined through negotiation rather than market competition. To assess value, one would ideally compare the unit costs of these spares against historical data for the same or comparable parts, or against prices from other potential, albeit uncontracted, suppliers if such information were available.

What are the primary risks associated with a sole-source award for critical missile spares?

The primary risks associated with a sole-source award for critical missile spares include potential overpricing due to the lack of competitive pressure, reduced incentive for the contractor to innovate or improve efficiency, and increased vulnerability to supply chain disruptions if the sole supplier faces issues. Without competition, the government has less leverage to negotiate favorable terms or pricing. There's also a risk that the contractor may prioritize other, more competitive contracts if resources become constrained. Furthermore, sole-source awards can sometimes indicate a lack of market research or an over-reliance on a single vendor, which can stifle broader industry development and create long-term dependencies. Robust contract management and oversight are crucial to mitigate these risks.

What is the expected program effectiveness or outcome of procuring these missile spares?

The expected program effectiveness of procuring these missile spares is to ensure the operational readiness and sustainment of critical U.S. missile systems. By acquiring necessary components, the Department of Defense can maintain, repair, and deploy these weapons systems as needed, contributing directly to national security objectives. Effective procurement means that the spares are delivered on time, meet quality specifications, and are available when required for maintenance or deployment. The ultimate outcome is enhanced military capability and deterrence. The success of this specific contract hinges on the reliability of the spares provided by Raytheon and their integration into the missile systems, ensuring they function as intended without failure.

How does this contract fit into the broader historical spending patterns for missile spares procurement by the Department of Defense?

This $36.4 million contract for missile spares fits within a consistent and substantial historical spending pattern by the Department of Defense on weapon system sustainment and component procurement. The DoD consistently allocates significant portions of its budget to maintaining the readiness of its vast arsenal, which includes a wide array of missile systems. Spending on spares is a critical, ongoing requirement, often characterized by a mix of competitive and sole-source awards, depending on the specificity and availability of parts. Contracts like this, even when sole-source, represent a necessary investment to ensure the longevity and operational capability of high-value defense assets. Over time, the total expenditure on missile spares can run into billions of dollars annually across all branches of the military.

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

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: RTX Corp

Address: 350 LOWELL ST, ANDOVER, MA, 01810

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: $36,429,036

Exercised Options: $36,429,036

Current Obligation: $36,429,036

Contract Characteristics

Consolidated Contract: Yes

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: SPRBL115D0017

IDV Type: IDC

Timeline