Raytheon Company awarded $16.6M contract for aircraft parts, with limited competition and a cost-plus-fixed-fee structure

Contract Overview

Contract Amount: $16,610,625 ($16.6M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2005-03-30

End Date: 2008-03-31

Contract Duration: 1,097 days

Daily Burn Rate: $15.1K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Place of Performance

Location: ANDOVER, ESSEX County, MASSACHUSETTS, 01810

State: Massachusetts Government Spending

Plain-Language Summary

Department of Defense obligated $16.6 million to RAYTHEON COMPANY for work described as: Key points: 1. Contract awarded to a single, established defense contractor, indicating potential for limited price negotiation. 2. The cost-plus-fixed-fee structure may incentivize cost overruns, requiring robust oversight. 3. A duration of nearly three years suggests a significant, ongoing need for these aircraft parts. 4. The contract falls under the 'Other Aircraft Parts and Auxiliary Equipment Manufacturing' NAICS code. 5. Awarded by the Department of Defense, highlighting its role in national security procurement. 6. The contract was not competed, raising questions about potential cost savings through broader solicitation.

Value Assessment

Rating: fair

The contract's value of $16.6 million over approximately three years for aircraft parts requires careful benchmarking. Without specific details on the parts or quantities, a direct comparison is difficult. However, the cost-plus-fixed-fee (CPFF) pricing structure, while common in complex defense procurements, can lead to higher overall costs if not managed effectively. The lack of competition further limits the ability to assess if the pricing represents a fair market value compared to what might be achieved through a competitive bidding process.

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 potential vendors. This approach is typically used when only one vendor possesses the necessary capabilities, technology, or when urgency dictates a rapid award. The absence of competition means that the government did not benefit from the price discovery mechanisms inherent in a bidding process, potentially leading to a higher price than if multiple offers had been considered.

Taxpayer Impact: The lack of competition means taxpayers may have paid a premium for these aircraft parts, as there was no market pressure to drive down costs through bidding.

Public Impact

The Department of Defense is the primary beneficiary, receiving essential aircraft parts for its operations. This contract supports the maintenance and operational readiness of military aircraft. The geographic impact is primarily within the United States, where Raytheon Company operates and where the parts will likely be utilized. It sustains jobs within the aerospace manufacturing sector, particularly at Raytheon and its subcontractors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost-plus-fixed-fee structure may lead to cost overruns without strict oversight.
Sole-source award limits price competition and potentially increases costs for taxpayers.
Lack of transparency in the sole-source justification could mask inefficiencies.
Long contract duration requires continuous monitoring of performance and costs.

Positive Signals

Award to an established contractor like Raytheon suggests a high likelihood of meeting technical requirements.
The contract addresses a specific need for aircraft parts, indicating a clear requirement.
The fixed fee component provides some cost certainty compared to other cost-reimbursement types.

Sector Analysis

The aerospace and defense sector is characterized by high technological complexity, significant R&D investment, and long product lifecycles. Contracts for aircraft parts are crucial for maintaining fleet readiness and operational capabilities. Spending in this area is substantial, driven by government defense budgets. Benchmarking requires comparing unit costs and overall contract values against similar parts or systems procured by the DoD or other defense agencies, considering factors like quantity, specifications, and contractor overhead.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. Furthermore, the 'ss' flag is also false, suggesting no specific small business subcontracting goals were mandated within this award. This means that opportunities for small businesses to participate in fulfilling this contract may be limited, and their inclusion would depend on Raytheon's internal subcontracting decisions rather than a direct contractual requirement.

Oversight & Accountability

Oversight for this contract would typically fall under the Defense Contract Management Agency (DCMA), as indicated by 'sa'. They are responsible for ensuring contractor performance, compliance with contract terms, and proper cost accounting. The CPFF structure necessitates rigorous financial oversight to scrutinize costs and prevent unnecessary expenditures. Transparency is generally maintained through contract reporting mechanisms, though the sole-source nature might limit public visibility into the negotiation process.

Related Government Programs

Aircraft Maintenance and Repair
Defense Procurement
Aerospace Manufacturing
Supply Chain Management (Defense)

Risk Flags

Sole-source award limits competition.
Cost-plus-fixed-fee structure may incentivize higher costs.
Lack of specific performance data requires trust in contractor's general reputation.
Potential for supply chain dependency due to single-source nature.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $16.6 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 $16.6 million.

What is the period of performance?

Start: 2005-03-30. End: 2008-03-31.

What specific aircraft components are being procured under this contract, and what is their criticality to military operations?

The provided data indicates the contract falls under NAICS code 336413, 'Other Aircraft Parts and Auxiliary Equipment Manufacturing.' This suggests the procurement is for a range of components beyond engines or airframes, potentially including avionics, structural elements, or specialized systems. The criticality to military operations is presumed high given the Department of Defense as the awarding agency and the sole-source nature, implying a specific, potentially unique, requirement. Without more granular data on the contract line items, the exact components and their specific operational impact remain unspecified, but they are essential enough to warrant a direct award to Raytheon.

How does the cost-plus-fixed-fee (CPFF) structure compare to other contract types for similar aircraft parts procurements, and what are the associated risks?

The CPFF structure is common for complex defense procurements where the scope of work may evolve or is not fully defined at the outset. It involves the contractor being reimbursed for allowable costs plus a predetermined fixed fee representing profit. Compared to fixed-price contracts, CPFF offers less cost certainty for the government but allows for greater flexibility. The primary risk is that the contractor has less incentive to control costs, as their profit is fixed regardless of the final cost. This necessitates robust government oversight to scrutinize costs and ensure efficiency. Other contract types like Firm-Fixed-Price (FFP) offer greater cost certainty but are less suitable for uncertain R&D or complex manufacturing.

What is Raytheon Company's performance history with the Department of Defense for similar aircraft parts contracts?

Raytheon Company is a major defense contractor with a long history of supplying various systems and components to the Department of Defense. While specific performance metrics for this particular $16.6 million contract are not detailed in the provided data, Raytheon generally has a substantial portfolio of contracts across different defense platforms. Their track record typically involves complex manufacturing and integration. Performance on past contracts would be assessed through government performance evaluations (e.g., CPARS - Contractor Performance Assessment Reporting System), which are not included here but would be crucial for a comprehensive risk assessment. Given their size and experience, they are generally expected to meet technical requirements, but cost control and schedule adherence can vary.

What is the historical spending trend for 'Other Aircraft Parts and Auxiliary Equipment Manufacturing' by the Department of Defense, and how does this contract fit?

The Department of Defense consistently spends billions of dollars annually on aircraft parts and related manufacturing, driven by the need to maintain a large and technologically advanced air fleet. Spending within the NAICS code 336413, 'Other Aircraft Parts and Auxiliary Equipment Manufacturing,' represents a significant portion of this overall expenditure. This $16.6 million contract, while substantial for a single award, is likely a small component within the broader DoD budget for aviation sustainment and modernization. Historical trends would show consistent demand for such parts, often awarded through a mix of competitive and sole-source contracts, depending on the specificity and availability of the required components.

What are the potential risks associated with a sole-source award for critical aircraft components, particularly regarding long-term supply chain stability?

A sole-source award for critical aircraft components carries several risks. Firstly, it eliminates the competitive pressure that typically drives down prices, potentially leading to higher costs for the government. Secondly, it creates a dependency on a single supplier, which can be problematic for long-term supply chain stability. If the sole-source provider faces production issues, financial difficulties, or decides to discontinue the product line, the government may struggle to find alternative sources quickly, potentially impacting aircraft readiness. This risk is amplified if the components are highly specialized or require unique manufacturing processes that only the incumbent contractor possesses.

Industry Classification

NAICS: Manufacturing › Aerospace Product and Parts Manufacturing › Other Aircraft Parts and Auxiliary Equipment Manufacturing

Product/Service Code: GUIDED MISSLES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Address: 180 HARTWELL RD, BEDFORD, MA, 06

Business Categories: Category Business, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Contract Characteristics

Cost or Pricing Data: YES

Timeline