Raytheon Company awarded $232M for missile spares, highlighting sole-source procurement in defense logistics

Contract Overview

Contract Amount: $231,970,075 ($232.0M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2023-12-22

End Date: 2028-04-30

Contract Duration: 1,591 days

Daily Burn Rate: $145.8K/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 $232.0 million to RAYTHEON COMPANY for work described as: MISSILE SPARES PROCUREMENT Key points: 1. Significant contract value for essential missile spare parts. 2. Sole-source award indicates limited competition for specialized defense needs. 3. Long contract duration suggests sustained demand and potential for future modifications. 4. Firm Fixed Price contract type aims to control costs for the government. 5. Procurement falls under the 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' NAICS code. 6. Contract awarded by the Defense Logistics Agency, a key DOD support entity.

Value Assessment

Rating: fair

The contract value of $232 million for missile spares is substantial. Without specific benchmarks for this type of specialized equipment, a direct value-for-money assessment is challenging. However, the sole-source nature of the award raises concerns about potential overpricing compared to a competitive environment. The firm fixed-price structure is a positive indicator for cost control, but the absence of competition limits the government's ability to leverage market forces for the best possible pricing.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one bidder, Raytheon Company, was solicited. This approach is typically used when a product or service is unique, proprietary, or when only one responsible source can fulfill the requirement. The lack of competition means that the government did not benefit from multiple offers, which could have led to lower prices or improved terms through a bidding process.

Taxpayer Impact: Taxpayers may be paying a premium due to the absence of competitive bidding. The government's negotiating position is weakened when only one supplier is available, potentially leading to higher overall expenditures for these critical missile spares.

Public Impact

Ensures the operational readiness of critical missile systems for the Department of Defense. Supports the ongoing maintenance and sustainment of national defense assets. Benefits the defense industrial base by providing a large, long-term contract to a key manufacturer. Maintains the availability of specialized components essential for national security missions. Indirectly supports the workforce employed by Raytheon Company and its supply chain.

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 (over 4 years) could lead to cost overruns if not managed effectively.
Reliance on a single contractor for critical spares may pose supply chain risks.
Lack of transparency in the sole-source justification process.

Positive Signals

Firm Fixed Price contract type provides cost certainty for the government.
Award to an established defense contractor (Raytheon) suggests a track record of capability.
Defense Logistics Agency's role implies a focus on ensuring operational readiness of military assets.
Contract duration aligns with the expected lifecycle of missile systems requiring ongoing support.

Sector Analysis

The defense logistics and aerospace manufacturing sector is characterized by high barriers to entry, significant R&D investment, and a concentrated supplier base. Contracts for specialized components like missile spares are often awarded to prime contractors who possess unique manufacturing capabilities and intellectual property. The total addressable market for defense logistics and sustainment is in the billions, with significant portions dedicated to spare parts procurement to maintain fleet readiness. This contract fits within the broader ecosystem of defense sustainment, ensuring the operational availability of critical weapon systems.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. 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 specific subcontracting plan details are not provided here. The absence of a direct set-aside means that small businesses are unlikely to be the primary recipients of this specific award, though they may benefit indirectly through subcontracting opportunities.

Oversight & Accountability

Oversight for this contract will primarily be managed by the Department of Defense, specifically the Defense Logistics Agency (DLA). The DLA has established procurement and contract management processes to ensure compliance with federal regulations and contract terms. The firm fixed-price nature of the contract provides a degree of cost oversight. Transparency may be limited due to the sole-source nature, but contract awards and basic details are typically reported in federal procurement databases. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Missile Systems Sustainment
Defense Logistics Agency Procurement
Raytheon Company Contracts
Department of Defense Spare Parts
Aeronautical and Nautical System Manufacturing

Risk Flags

Sole-source award
Potential for cost overruns due to lack of competition
Long contract duration
Reliance on a single supplier for critical components

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $232.0 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 $232.0 million.

What is the period of performance?

Start: 2023-12-22. End: 2028-04-30.

What is Raytheon Company's track record with the Department of Defense for similar missile spare parts procurements?

Raytheon Company, now part of RTX, has a long and extensive history of supplying missile systems and associated spare parts to the Department of Defense. They are a prime contractor for numerous advanced missile platforms, including air-to-air, surface-to-air, and strategic missiles. Their track record typically involves complex manufacturing, integration, and sustainment services. Historical data from federal procurement databases (like FPDS or SAM.gov) would show a consistent pattern of large-value contracts for spare parts, upgrades, and maintenance across various military branches. While specific performance metrics for individual contracts are not always publicly detailed, their continued role as a major defense supplier indicates a generally accepted capability and reliability in meeting DOD requirements for critical components.

How does the $232 million contract value compare to historical spending on missile spares by the Defense Logistics Agency?

The $232 million contract value for missile spares is a significant, but not unprecedented, figure for the Defense Logistics Agency (DLA). The DLA manages a vast inventory and procurement system for the Department of Defense, including a wide array of spare parts for various weapon systems. Annual spending on spare parts across all defense agencies can run into the tens of billions of dollars. A single contract of this magnitude for a specific category like missile spares is substantial and reflects the high cost and critical nature of these components. To provide a precise comparison, one would need to analyze DLA's historical spending trends for 'missile spares' or similar classifications (e.g., by NAICS code 334511) over several fiscal years. However, it is reasonable to assume that such awards represent a notable portion of the DLA's sustainment budget for missile systems.

What are the primary risks associated with a sole-source procurement of this magnitude for critical defense components?

The primary risks associated with a sole-source procurement of this magnitude for critical defense components are multifaceted. Firstly, there is a significant risk of paying a premium price due to the lack of competition. Without competing bids, the government loses the leverage to negotiate the best possible terms and pricing. Secondly, there's a potential for reduced innovation and efficiency, as the sole contractor may face less pressure to improve processes or offer cost-saving alternatives. Thirdly, a sole-source award can create vendor lock-in, making it difficult and costly to switch suppliers in the future, even if performance issues arise or better options become available. Finally, there's an inherent supply chain risk; over-reliance on a single source for critical parts can be problematic if that supplier experiences production issues, financial instability, or geopolitical disruptions.

How effective is the Firm Fixed Price (FFP) contract type in managing costs for specialized defense equipment like missile spares?

The Firm Fixed Price (FFP) contract type is generally considered effective for managing costs in procurements where the scope of work is well-defined and the risks of cost overruns are manageable. For specialized defense equipment like missile spares, FFP provides the government with cost certainty, as the contractor assumes the majority of the risk for cost overruns. This means the price is set upfront and generally does not change unless there are significant, unforeseen circumstances or contract modifications. This structure incentivizes the contractor to control their own costs efficiently to maximize profit. However, the effectiveness of FFP can be diminished in sole-source situations, as the contractor may inflate the initial price knowing there is no competition to challenge it. Despite this, FFP remains a preferred contract type for cost control when feasible.

What are the implications of this contract's duration (nearly 4 years) on program sustainment and potential future procurements?

The contract duration of approximately 1591 days (nearly 4 years) has several implications for program sustainment and future procurements. Firstly, it ensures a stable and predictable supply of critical missile spares over an extended period, which is crucial for maintaining the operational readiness of the defense systems they support. This long-term commitment can also provide the contractor with the certainty needed to invest in production capacity or specialized tooling. Secondly, such a long duration might indicate that the specific missile systems supported by these spares are expected to remain in service for the foreseeable future. However, it also means that the government is locked into this specific supplier for the contract's term, potentially delaying the adoption of newer technologies or alternative solutions if they emerge during this period. Planning for subsequent procurements or potential technology refreshes should begin well in advance of the contract's expiration.

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: $231,970,075

Exercised Options: $231,970,075

Current Obligation: $231,970,075

Subaward Activity

Number of Subawards: 87

Total Subaward Amount: $80,672,849

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