Raytheon Company awarded $54M contract for missile parts, raising questions about competition and value

Contract Overview

Contract Amount: $53,997,978 ($54.0M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2004-05-25

End Date: 2012-11-30

Contract Duration: 3,111 days

Daily Burn Rate: $17.4K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Place of Performance

Location: ANDOVER, ESSEX County, MASSACHUSETTS, 01810

State: Massachusetts Government Spending

Plain-Language Summary

Department of Defense obligated $54.0 million to RAYTHEON COMPANY for work described as: Key points: 1. Contract awarded on a sole-source basis, limiting price discovery and potentially increasing costs. 2. Long contract duration of 3111 days suggests a sustained need for these parts. 3. The firm-fixed-price structure aims to control costs, but the lack of competition is a concern. 4. This contract falls under the 'Other Guided Missile and Space Vehicle Parts' manufacturing sector. 5. The award to a single large contractor may limit opportunities for small businesses in the supply chain.

Value Assessment

Rating: questionable

The contract's value of $54 million over its extended period is difficult to benchmark due to the sole-source nature of the award. Without competitive bids, it's challenging to ascertain if this represents a fair market price. The firm-fixed-price (FFP) type suggests an attempt to cap costs, but the absence of competition means there's no direct comparison to similar contracts or market rates for these specific missile parts. Further analysis would require access to cost breakdowns or historical pricing data for similar sole-source procurements.

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 among multiple vendors. The Department of Defense likely justified this approach due to specific requirements, proprietary technology, or the lack of alternative suppliers. The absence of competition means there were no other bidders, which can lead to less favorable pricing and reduced innovation compared to a fully competed contract. This approach bypasses the standard process of soliciting bids and evaluating multiple proposals.

Taxpayer Impact: For taxpayers, a sole-source award means there is a higher risk of paying a premium for goods or services, as the government does not benefit from the downward pressure that competition typically creates on prices.

Public Impact

The primary beneficiaries are the Department of Defense, ensuring a supply of critical missile components. The contract supports the manufacturing and supply of 'Other Guided Missile and Space Vehicle Parts'. The geographic impact is primarily centered around the contractor's facilities in Massachusetts. This contract likely sustains jobs within Raytheon Company and its direct supply chain.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing and potential cost savings for the government.
Long contract duration may indicate a lack of readily available alternatives or evolving requirements.
Lack of transparency in pricing due to no competitive bidding process.
Potential for contractor lock-in given the specialized nature of missile parts.

Positive Signals

Firm-fixed-price contract structure provides cost certainty for the government.
Award to a large, established defense contractor like Raytheon suggests reliability and experience.
Contract ensures continued availability of essential components for defense systems.

Sector Analysis

This contract falls within the aerospace and defense manufacturing sector, specifically focusing on parts for guided missiles and space vehicles. This is a highly specialized area often dominated by a few large prime contractors due to the complexity, security requirements, and significant R&D investment involved. The market size for such components is substantial, driven by global defense spending. Comparable spending benchmarks are difficult to establish without knowing the exact nature of the parts, but large-scale missile system procurement represents billions in annual federal outlays.

Small Business Impact

As this contract was awarded on a sole-source basis to Raytheon Company, a large prime contractor, there is no explicit small business set-aside. The implications for small businesses are indirect; they may serve as subcontractors to Raytheon, but this is not guaranteed. The lack of a competitive bid process means opportunities for small businesses to directly compete for this specific contract are non-existent. The overall impact on the small business ecosystem depends on Raytheon's subcontracting strategy, which is not detailed in the award information.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense and the Defense Contract Management Agency (DCMA). As a definitive contract, it is subject to standard government oversight mechanisms, including contract administration and performance monitoring. The firm-fixed-price nature simplifies some aspects of financial oversight, focusing on delivery and quality. Transparency is limited due to the sole-source award, but contract modifications and performance reports would be subject to internal DoD review and potentially Inspector General audits if specific concerns arise.

Related Government Programs

Guided Missile and Space Vehicle Manufacturing
Defense Procurement
Aerospace Parts Manufacturing
Department of Defense Contracts
Sole-Source Procurements

Risk Flags

Sole-source award
Lack of competition
Potential for inflated pricing
Long contract duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $54.0 million to RAYTHEON COMPANY. See the official description on USAspending.

Who is the contractor on this award?

The obligated recipient is RAYTHEON COMPANY.

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Contract Management Agency).

What is the total obligated amount?

The obligated amount is $54.0 million.

What is the period of performance?

Start: 2004-05-25. End: 2012-11-30.

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

Raytheon Company, now part of RTX Corporation, has a long and extensive history of contracting with the Department of Defense, particularly in areas related to missiles, defense systems, and aerospace components. They are a major defense contractor known for producing a wide range of products, including advanced missile systems like the Patriot and Tomahawk. Their track record includes numerous large-scale, complex contracts, often awarded through competitive processes but also through sole-source arrangements when deemed necessary. While generally considered a reliable supplier, like any large defense contractor, they have faced scrutiny over contract costs, performance, and delivery timelines on various programs. Specific performance metrics for this particular contract (336419) are not publicly detailed, but their overall engagement with the DoD is substantial and multifaceted.

How does the $54 million value compare to other sole-source awards for similar missile parts?

Directly comparing the $54 million value of this sole-source contract to other similar awards is challenging without more specific details about the 'Other Guided Missile and Space Vehicle Parts' being procured. Sole-source contracts inherently lack a competitive benchmark, making value assessment difficult. However, $54 million is a significant sum, indicating a substantial quantity or high-value components. For context, major missile system development and production contracts can run into billions of dollars. The value of this contract suggests it pertains to critical, potentially specialized components rather than mass-produced, low-cost items. Without knowing the specific part numbers, quantities, and the justification for the sole-source award, it's hard to definitively say if $54 million is high or low relative to market alternatives, but it warrants scrutiny due to the lack of competition.

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

The primary risks associated with this sole-source contract are centered around cost and potential lack of innovation. Without competition, the government lacks leverage to negotiate the best possible price, potentially leading to cost overruns or paying a premium for the parts. There's also a risk of complacency from the contractor, as there's no immediate threat of losing future business to competitors for this specific requirement. Furthermore, the lack of competitive pressure might stifle innovation in manufacturing processes or component design. Dependence on a single supplier can also create supply chain vulnerabilities if Raytheon faces production issues or financial instability. Finally, the long duration increases the risk of scope creep or unforeseen cost increases over time, even under a fixed-price contract, if not managed diligently.

How effective is the firm-fixed-price (FFP) contract type in managing costs for this specific procurement?

The firm-fixed-price (FFP) contract type is generally considered effective in managing costs because it shifts the risk of cost overruns to the contractor. Raytheon Company is obligated to deliver the specified missile parts for the agreed-upon price, regardless of their actual costs. This incentivizes the contractor to control expenses and improve efficiency. However, the effectiveness of FFP in this sole-source scenario is somewhat diminished. While the government has price certainty, the initial price negotiation is critical and lacks the downward pressure that competition provides. If the initial price was set too high due to the lack of bids, the FFP structure locks in that potentially inflated cost. Therefore, while FFP provides budget predictability, the overall value-for-money is heavily dependent on the initial negotiation and the contractor's ability to manage costs within that fixed price.

What are the historical spending patterns for 'Other Guided Missile and Space Vehicle Parts' by the Department of Defense?

Historical spending patterns for 'Other Guided Missile and Space Vehicle Parts' by the Department of Defense are substantial and reflect the ongoing investment in national defense capabilities. This category encompasses a wide array of components, from intricate electronics and guidance systems to structural elements and propulsion parts, essential for maintaining and modernizing missile arsenals and space-based defense assets. Annual spending in this broad category can fluctuate based on geopolitical factors, new program starts, and sustainment requirements for existing platforms. While specific figures for 'Other Guided Missile and Space Vehicle Parts' are not readily available without detailed category breakdowns, the overall defense budget allocates tens of billions of dollars annually towards missile systems and related technologies. Contracts in this domain are often long-term, high-value, and frequently involve sole-source or limited competition due to the specialized nature of the technology and the limited number of qualified manufacturers.

Industry Classification

NAICS: Manufacturing › Aerospace Product and Parts Manufacturing › Other Guided Missile and Space Vehicle Parts and Auxiliary Equipment Manufacturing

Product/Service Code: WEAPONS

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: 350 LOWELL ST, ANDOVER, MA, 01810

Business Categories: Category Business, Not Designated a Small Business

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline