Raytheon Company awarded $57.5M contract for navigation system instruments, with limited competition

Contract Overview

Contract Amount: $57,528,801 ($57.5M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2006-06-26

End Date: 2012-10-31

Contract Duration: 2,319 days

Daily Burn Rate: $24.8K/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 $57.5 million to RAYTHEON COMPANY for work described as: Key points: 1. Contract awarded to a single vendor, raising questions about price discovery and potential for overpayment. 2. Long contract duration of 2319 days suggests a need for robust performance monitoring. 3. The use of a Cost Plus Fixed Fee (CPFF) contract type can incentivize cost overruns. 4. Awarded by the Department of the Army, indicating a focus on defense-related navigation technology. 5. The North American Industry Classification System (NAICS) code 334511 points to a specialized manufacturing sector.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to the lack of competitive bids and the specific nature of the navigation system instruments. The CPFF contract type, while offering flexibility, can lead to higher costs compared to fixed-price contracts if not managed closely. Without comparable contract data or detailed cost breakdowns, it's difficult to definitively assess if the $57.5 million represents a fair price for the services and goods delivered over its extended duration.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded using a sole-source justification, meaning Raytheon Company was the only vendor considered. This significantly limits the opportunity for price competition and may result in a higher overall cost to the government. The absence of multiple bidders prevents the government from leveraging market forces to secure the most favorable pricing and terms.

Taxpayer Impact: Sole-source awards mean taxpayers do not benefit from competitive pricing, potentially leading to higher expenditures for essential defense equipment.

Public Impact

The Department of Defense, specifically the Department of the Army, is the primary beneficiary, receiving critical navigation system instruments. This contract supports the operational readiness and technological advancement of military aviation and naval assets. The contract's impact is primarily within the defense sector, ensuring the availability of specialized equipment for military operations. Workforce implications may include specialized manufacturing and engineering roles within Raytheon Company and its supply chain.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition.
Cost Plus Fixed Fee contract type can lead to cost overruns.
Long contract duration requires sustained oversight.
Lack of transparency in pricing due to limited competition.

Positive Signals

Award to a known defense contractor (Raytheon Company) suggests potential for reliable delivery.
Contract addresses a specific need for navigation system instruments, crucial for military operations.

Sector Analysis

The contract falls within the 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' sector, a specialized area within the broader aerospace and defense industry. This sector is characterized by high technological barriers to entry and significant government procurement. Comparable spending in this niche often involves complex, custom-engineered solutions where sole-sourcing can sometimes be justified due to unique capabilities, though it necessitates rigorous oversight.

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. The focus on a large, sole-source award to Raytheon Company suggests limited direct opportunities for small businesses within this specific contract, though they may be involved in Raytheon's broader supply chain.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Army's contracting and program management offices. Given the sole-source nature and CPFF structure, continuous monitoring of costs, performance, and adherence to contract terms would be crucial. Transparency is limited due to the lack of competitive bidding, and specific Inspector General (IG) involvement would depend on identified risks or performance issues.

Related Government Programs

Defense Logistics Agency (DLA) procurement
Naval Air Systems Command (NAVAIR) contracts
Air Force Materiel Command (AFMC) procurements
Department of Defense research and development funding

Risk Flags

Sole-source award
Cost Plus Fixed Fee contract type
Lack of competitive bidding
Potential for cost overruns
Extended contract duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $57.5 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 $57.5 million.

What is the period of performance?

Start: 2006-06-26. End: 2012-10-31.

What is Raytheon Company's track record with similar navigation system contracts awarded by the Department of Defense?

Raytheon Company, now part of RTX Corporation, has a long and extensive history of supplying advanced defense systems, including navigation, guidance, and control technologies, to the U.S. military. They are a prime contractor on numerous programs across all branches of service. While specific data on past navigation system contracts of this exact scope and value awarded solely to Raytheon is not detailed here, their overall performance in delivering complex electronic systems for defense applications is generally considered robust. However, like any large defense contractor, they have experienced contract modifications, cost adjustments, and performance reviews on various programs over the years. A deeper dive would require examining specific contract histories for similar product lines and agencies.

How does the $57.5 million award compare to market rates for similar navigation system instruments?

Directly comparing the $57.5 million award to market rates for similar navigation system instruments is difficult without detailed specifications and quantities. This contract is sole-sourced and uses a Cost Plus Fixed Fee (CPFF) structure, which inherently obscures direct price comparisons. Market rates are typically established through competitive bidding processes. Given the specialized nature of military-grade navigation systems and the lack of competition, it's plausible that the price may be higher than what could be achieved in a fully competitive environment. Benchmarking would require access to cost data or similar sole-source awards for comparable systems, which is not publicly available.

What are the primary risks associated with a sole-source, CPFF contract for navigation system instruments?

The primary risks associated with this sole-source, Cost Plus Fixed Fee (CPFF) contract are twofold. Firstly, the sole-source nature eliminates competitive pressure, potentially leading to inflated costs as the government lacks alternative pricing options. Taxpayers may end up paying more than necessary. Secondly, the CPFF structure shifts much of the cost risk to the government. While the contractor receives a fixed fee, their costs are reimbursed, which can reduce the incentive for the contractor to control expenses rigorously. This necessitates strong government oversight to ensure costs remain reasonable and that the contractor exercises due diligence in managing expenditures throughout the contract's lifecycle.

How effective is the Department of the Army in overseeing long-duration, sole-source contracts like this one?

The effectiveness of the Department of the Army in overseeing long-duration, sole-source contracts varies significantly depending on the specific program, the contracting team's expertise, and the resources allocated for oversight. For sole-source contracts, particularly those with CPFF structures, robust oversight is critical. This includes detailed cost analysis, performance monitoring, regular audits, and proactive risk management. The Army has established procedures and dedicated personnel for contract oversight, including Defense Contract Management Agency (DCMA) support. However, the sheer volume of contracts and the complexity of some systems can strain oversight capabilities. Success hinges on diligent application of these oversight mechanisms and strong communication channels with the contractor.

What is the historical spending trend for navigation system instruments by the Department of the Army?

Historical spending trends for navigation system instruments by the Department of the Army are part of a broader category of defense electronics and avionics procurement. While specific figures for 'navigation system instruments' alone are not readily available without detailed analysis of procurement databases, the Army consistently invests billions annually in aviation, ground vehicle, and soldier systems that rely heavily on advanced navigation and guidance technologies. Spending in this area is driven by modernization efforts, operational tempo, and the need to maintain technological superiority. Trends likely show a gradual increase in complexity and cost per unit due to technological advancements, with significant fluctuations based on specific program starts, completions, and overall defense budgets.

What are the implications of the 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' NAICS code for this contract?

The NAICS code 334511, 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing,' signifies that this contract is for the production of highly specialized equipment. Companies operating under this code typically possess advanced engineering capabilities, sophisticated manufacturing processes, and often hold security clearances due to the sensitive nature of the products. This specialization means there are fewer potential suppliers, which can contribute to limited competition and higher unit costs. It also indicates that the government is procuring critical components essential for the operation of complex military platforms, requiring stringent quality control and performance standards.

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: MAINT, REPAIR, REBUILD EQUIPMENT › MAINT, REPAIR, REBUILD OF EQUIPMENT

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: W31P4Q06R0128

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

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: $66,570,563

Exercised Options: $66,570,563

Current Obligation: $57,528,801

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline