Raytheon Company awarded $120.9M contract for optical instruments, with no competition

Contract Overview

Contract Amount: $12,092,838 ($12.1M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2005-08-30

End Date: 2008-06-30

Contract Duration: 1,035 days

Daily Burn Rate: $11.7K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Place of Performance

Location: EL SEGUNDO, LOS ANGELES County, CALIFORNIA, 90245

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $12.1 million to RAYTHEON COMPANY for work described as: Key points: 1. Contract awarded on a cost-plus-fixed-fee basis, indicating potential for cost overruns. 2. The lack of competition raises concerns about price discovery and potential overpayment. 3. The contract duration of 1035 days suggests a significant, long-term need. 4. The specific North American Industry Classification System (NAICS) code 333314 points to manufacturing of optical instruments. 5. Awarded by the Department of the Army, indicating a defense-related procurement. 6. The contract was awarded in California, a state with a significant defense industrial base.

Value Assessment

Rating: questionable

Given the 'NOT COMPETED' status and cost-plus-fixed-fee structure, a thorough value assessment is challenging without further data. Benchmarking against similar sole-source procurements for optical instruments would be necessary to determine if the $120.9 million price is reasonable. The fixed-fee component provides some cost control, but the 'cost plus' element leaves room for variability. Without competitive bids, it's difficult to ascertain if taxpayers received the best possible value.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning there was no open competition. This typically occurs when a specific capability or technology is only available from a single source, or in cases of urgent need. The absence of multiple bidders means that price discovery through market forces was not utilized, potentially leading to a higher price than if competition had been present.

Taxpayer Impact: Sole-source awards can result in higher costs for taxpayers as the government lacks the leverage that competition provides to negotiate lower prices.

Public Impact

The primary beneficiaries are likely the Department of Defense (specifically the Army) and its operational units requiring advanced optical instruments. The contract delivers essential optical instruments, crucial for surveillance, targeting, or other military applications. The geographic impact is centered in California, where the contractor is located and likely where the work is performed. Workforce implications include employment for engineers, technicians, and manufacturing personnel at Raytheon Company.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to inflated pricing.
Cost-plus-fixed-fee contracts can incentivize higher spending.
Sole-source awards limit transparency and accountability.
Performance risks are heightened without market validation of capabilities.
Contract duration may mask inefficiencies if not closely monitored.

Positive Signals

Award to a known defense contractor (Raytheon) suggests established capabilities.
Fixed fee component provides some cost predictability.
Specific NAICS code indicates a focused procurement area.
Contract award date suggests a need that has been addressed.

Sector Analysis

The optical instrument and lens manufacturing sector (NAICS 333314) is critical for defense, scientific research, and commercial applications. This contract falls within the broader defense industrial base, where specialized manufacturing capabilities are essential. Spending in this sector can vary significantly based on technological advancements and defense priorities. Comparable spending benchmarks would typically be found within defense procurement data for similar specialized equipment.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. There is no explicit information regarding subcontracting plans for small businesses. Without specific set-aside goals or subcontracting requirements, the direct impact on the small business ecosystem for this particular award is likely minimal, though Raytheon may engage small businesses as part of its supply chain.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Army's contracting and program management offices. Accountability measures would be tied to the terms of the cost-plus-fixed-fee agreement, requiring the contractor to justify costs and deliver specified performance. Transparency is limited due to the sole-source nature of the award. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Department of Defense Procurement
Army Weapon Systems
Optical and Electro-Optical Systems
Defense Manufacturing

Risk Flags

Sole-source award
Cost-plus contract type
Lack of competition
Potential for cost overruns
Limited transparency

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $12.1 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 (Department of the Army).

What is the total obligated amount?

The obligated amount is $12.1 million.

What is the period of performance?

Start: 2005-08-30. End: 2008-06-30.

What is Raytheon Company's track record with sole-source defense contracts?

Raytheon Company, now part of RTX, has a long history of securing defense contracts, including sole-source awards, due to its specialized capabilities in areas like aerospace and defense systems. Analyzing their past sole-source awards would reveal patterns in pricing, performance, and potential cost overruns. Historically, large defense contractors often receive sole-source awards for highly specialized or proprietary technologies where competition is genuinely limited. However, a review of specific contract vehicles and their outcomes, including any audits or investigations by oversight bodies, is crucial to assess Raytheon's performance and adherence to contractual obligations in such scenarios. Without access to detailed historical performance data for this specific contract or similar sole-source awards, a definitive assessment remains challenging.

How does the 'cost plus fixed fee' contract type typically compare in value to fixed-price contracts for similar goods?

Cost-plus-fixed-fee (CPFF) contracts generally offer less value certainty for the government compared to fixed-price contracts. In a CPFF arrangement, the contractor is reimbursed for allowable costs plus a predetermined fixed fee representing profit. This structure is often used when the scope of work is not well-defined or involves significant uncertainty, such as research and development. While the fixed fee provides some predictability on profit, the total cost to the government can fluctuate based on actual costs incurred. Fixed-price contracts, conversely, establish a ceiling price upfront, shifting more risk to the contractor and incentivizing cost efficiency. For standardized or well-understood procurements, fixed-price contracts typically yield better value for the government by promoting competition and cost control. CPFF contracts are inherently riskier from a cost perspective, potentially leading to higher overall expenditures if not rigorously managed.

What are the primary risks associated with a 'NOT COMPETED' contract award of this magnitude?

The primary risks associated with a 'NOT COMPETED' contract award of $120.9 million are significant. Firstly, the lack of competition means the government likely paid a higher price than it would have in a competitive bidding process, representing a potential loss of taxpayer value. Secondly, without competitive pressure, there is reduced incentive for the contractor to innovate or optimize performance and cost-efficiency. Thirdly, sole-source awards can create a perception of favoritism or a lack of transparency, potentially undermining public trust. Fourthly, the government may be locked into a relationship with a single provider, limiting future flexibility and potentially hindering the adoption of newer, more cost-effective technologies. Finally, the absence of multiple bidders makes it harder to independently verify the contractor's capabilities and the necessity of the procured item or service.

What does the duration of 1035 days imply about the nature of the optical instruments being procured?

A contract duration of 1035 days (approximately 2.8 years) for optical instruments suggests a procurement involving complex manufacturing, integration, or a sustained need for these items. This timeframe is longer than typical for off-the-shelf components, implying that the instruments are likely specialized, custom-built, or require significant development, testing, and delivery phases. Such durations are common for systems that are part of larger defense platforms or programs requiring long-term support and upgrades. It could also indicate a phased delivery schedule or a requirement for ongoing maintenance and support integrated into the contract. The extended period necessitates robust program management and oversight to ensure timely delivery and adherence to specifications throughout the contract lifecycle.

How does the specific NAICS code 333314 inform our understanding of the contract's purpose?

The North American Industry Classification System (NAICS) code 333314, 'Optical Instrument and Lens Manufacturing,' precisely defines the industry sector for this contract. This code indicates that the procurement is for the manufacturing of devices that use optical principles, such as lenses, prisms, mirrors, and related components, to sense, measure, view, or transmit light. This includes a wide range of products, from scientific and medical instruments to photographic equipment and, critically for this context, military optical systems like targeting pods, periscopes, and advanced sighting devices. Understanding this NAICS code confirms the contract's focus on tangible manufactured goods within a specialized technological domain, essential for various applications, particularly within the defense sector as indicated by the awarding agency.

Industry Classification

NAICS: Manufacturing › Commercial and Service Industry Machinery Manufacturing › Optical Instrument and Lens Manufacturing

Product/Service Code: FIRE CONTROL EQPT.

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: 2000 EAST EL SEGUNDO BLVD, EL SEGUNDO, CA, 36

Business Categories: Category Business, Not Designated a Small Business

Contract Characteristics

Cost or Pricing Data: NO

Timeline