Raytheon Company awarded $17.6M for missile spares, raising questions about competition and value

Contract Overview

Contract Amount: $17,657,700 ($17.7M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2025-02-28

End Date: 2029-01-31

Contract Duration: 1,433 days

Daily Burn Rate: $12.3K/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 $17.7 million to RAYTHEON COMPANY for work described as: MISSILE SPARES PROCUREMENT Key points: 1. Contract awarded on a non-competitive basis, limiting price discovery. 2. Long performance period of nearly four years may indicate potential for cost overruns. 3. FIRM FIXED PRICE contract type offers some cost certainty. 4. Missile spares procurement falls under critical defense logistics. 5. No small business set-aside noted, potentially excluding smaller players. 6. High value suggests significant operational reliance on these spares.

Value Assessment

Rating: questionable

The contract value of $17.6 million for missile spares is substantial. Without competitive bidding, it is difficult to benchmark the pricing against market rates or similar contracts. The firm-fixed-price structure provides some cost control, but the lack of competition means taxpayers may not be receiving the best possible value. Further analysis would be needed to compare unit costs for specific spares against historical data or industry benchmarks.

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 approach is typically used when only one source can fulfill the requirement, often due to proprietary technology or unique capabilities. The lack of competition means there were no other bidders to drive down prices through a bidding process, potentially leading to higher costs for the government.

Taxpayer Impact: Sole-source awards mean taxpayers do not benefit from the cost savings typically achieved through competitive bidding processes, potentially resulting in a less efficient use of public funds.

Public Impact

The primary beneficiaries are the Department of Defense and its operational units relying on missile systems. Services delivered include the procurement of essential spare parts for missile systems. Geographic impact is national, supporting defense readiness across various theaters. Workforce implications include supporting manufacturing and logistics jobs within the defense industrial base.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to inflated prices.
Long contract duration increases risk of cost escalation.
Sole-source award limits transparency in pricing.

Positive Signals

Firm-fixed-price contract type offers some cost predictability.
Procurement of critical spares ensures operational readiness.
Award to an established contractor like Raytheon may indicate reliability.

Sector Analysis

This contract falls within the Defense Logistics and Aerospace Manufacturing sector. The market for specialized missile components is often concentrated among a few key defense contractors due to high barriers to entry, including technological expertise and security clearances. Spending in this area is critical for national security and is subject to significant government oversight. Comparable spending benchmarks would typically involve analyzing historical procurement data for similar missile systems and their associated spare parts.

Small Business Impact

The contract data indicates that small business participation was not a primary consideration, as it was not competed and there is no indication of a small business set-aside. This means that opportunities for small businesses to supply these critical missile spares were likely limited. Subcontracting opportunities for small businesses may exist but are not explicitly detailed in this award notice. The impact on the small business ecosystem is minimal for this specific award, as it bypassed competitive avenues where small businesses might have participated.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contracting and financial management regulations. Accountability measures are inherent in the firm-fixed-price structure, which caps the contractor's profit potential. Transparency is limited due to the sole-source nature of the award. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse.

Related Government Programs

Missile Systems Procurement
Defense Logistics Agency Contracts
Raytheon Defense Contracts
Aerospace and Defense Manufacturing
Sole-Source Defense Awards

Risk Flags

Sole-source award
Lack of competition
Potential for price inflation
Long contract duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $17.7 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 $17.7 million.

What is the period of performance?

Start: 2025-02-28. End: 2029-01-31.

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 defense systems and components to the Department of Defense, including missile systems and their associated spare parts. They are a prime contractor for numerous critical defense programs. Historical data would likely show a pattern of significant contract awards for a wide range of products. Analyzing past performance, including on-time delivery, quality, and adherence to budget for similar sole-source or competed contracts, would provide a clearer picture of their reliability and cost-effectiveness in this specific domain. However, without access to detailed historical performance metrics for this exact category of spares, a definitive assessment remains challenging.

How does the $17.6 million contract value compare to other missile spare parts procurements by the DoD?

The $17.6 million value for missile spares is a significant but not extraordinary amount within the context of large-scale defense procurement. The Department of Defense routinely awards contracts in the millions and billions for weapon systems and their sustainment. To provide a precise comparison, one would need to analyze the specific type of missile system these spares are for, as complexity and quantity heavily influence cost. However, generally speaking, this value is consistent with the procurement of specialized components for established defense platforms. The key concern here is not the absolute dollar amount, but the lack of competition, which prevents a direct value-for-money comparison against potential alternative suppliers or pricing structures.

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 price inflation due to the absence of competitive pressure, reduced incentive for the contractor to innovate or improve efficiency, and a lack of transparency in cost justification. Taxpayers may end up paying more than necessary. Furthermore, reliance on a single supplier can create supply chain vulnerabilities if that supplier faces production issues, financial instability, or geopolitical challenges. This can lead to delays in critical spare parts delivery, impacting military readiness. The government also loses the opportunity to discover potentially more cost-effective solutions from other vendors.

How effective is the firm-fixed-price contract type in mitigating cost risks for this missile spares procurement?

The firm-fixed-price (FFP) contract type is generally effective in mitigating cost risks for the government, as it shifts the majority of the cost risk to the contractor. Under an FFP agreement, the contractor is obligated to complete the work for a predetermined price, regardless of their actual costs. This provides a high degree of cost certainty for the buyer. However, the effectiveness of FFP in this sole-source scenario is somewhat diminished. While the government knows the total price, the absence of competition means that the 'firm' price itself might be higher than it would be in a competitive environment. The contractor has less incentive to reduce costs beyond what is necessary to meet the contract specifications, as their profit is capped at the agreed-upon price.

What are the historical spending patterns for missile spare parts procurement by the Defense Logistics Agency?

Historical spending patterns for missile spare parts procurement by the Defense Logistics Agency (DLA) typically show consistent and substantial investment, reflecting the ongoing need to maintain and operate complex weapon systems. The DLA manages a vast inventory and procures a wide array of parts across different platforms. Spending fluctuates based on modernization programs, operational tempo, and the lifecycle of specific missile systems. While specific figures for 'missile spares' as a distinct category can vary, overall DLA spending on aviation and missile components is in the billions annually. Analyzing past DLA solicitations and awards for similar items would reveal trends in contract types, competition levels, and average award values, highlighting whether sole-source awards are common or exceptions for such critical items.

What is the significance of the North American Industry Classification System (NAICS) code 334511 for this contract?

The North American Industry Classification System (NAICS) code 334511, 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing,' is highly relevant to this contract. It signifies that the procured missile spares fall under the manufacturing of complex systems and instruments used for guidance, navigation, and detection. This classification indicates a specialized manufacturing sector that requires advanced technology, skilled labor, and often involves significant research and development. Companies operating under this NAICS code are typically involved in high-value, technologically sophisticated production, aligning with the nature of defense contracting for critical components like missile spares.

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: GUIDED MISSLES

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: $17,657,700

Exercised Options: $17,657,700

Current Obligation: $17,657,700

Subaward Activity

Number of Subawards: 1

Total Subaward Amount: $2,721,085

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