Raytheon Company awarded over $53.9M for electronic components, a sole-source contract with a long duration

Contract Overview

Contract Amount: $53,919,291 ($53.9M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2006-08-01

End Date: 2013-06-30

Contract Duration: 2,525 days

Daily Burn Rate: $21.4K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Other

Place of Performance

Location: ANDOVER, ESSEX County, MASSACHUSETTS, 01810

State: Massachusetts Government Spending

Plain-Language Summary

Department of Defense obligated $53.9 million to RAYTHEON COMPANY for work described as: Key points: 1. Contract awarded on a cost-plus-fixed-fee basis, which can lead to higher costs if not managed carefully. 2. The contract was not competed, raising questions about potential price efficiencies and market-driven value. 3. A long performance period of 2525 days suggests a sustained need for these components. 4. The North American Industry Classification System (NAICS) code 334419 indicates a focus on 'Other Electronic Component Manufacturing'. 5. The contract's duration and sole-source nature warrant scrutiny for potential cost overruns and lack of competitive pressure. 6. Awarded to a single contractor, limiting opportunities for other suppliers and potentially impacting innovation.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to its sole-source nature and the specific nature of electronic components. Without competitive bids, it's difficult to ascertain if the pricing reflects market rates or if a better value could have been achieved through competition. The cost-plus-fixed-fee structure necessitates close oversight to ensure costs remain reasonable and that the fixed fee is appropriate for the work performed. The long duration of the contract also means that potential cost savings over time may have been forgone.

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 can provide the required goods or services, or in cases of urgent need. The lack of competition means that the government did not benefit from the price discovery and potential cost reductions that typically arise from a competitive bidding process.

Taxpayer Impact: Taxpayers may have paid a premium for these electronic components due to the absence of competitive pressure. Without multiple bids, there is less incentive for the contractor to offer the lowest possible price.

Public Impact

The Department of the Army is the primary beneficiary, receiving essential electronic components for its operations. The contract supports the manufacturing of 'Other Electronic Components', likely critical for various defense systems. The geographic impact is centered in Massachusetts, where Raytheon Company is located, potentially supporting local employment and the regional economy. Workforce implications include employment opportunities within Raytheon's manufacturing and engineering divisions.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition and may result in higher costs for taxpayers.
Cost-plus-fixed-fee contract type requires diligent oversight to manage costs effectively.
Long contract duration (2525 days) increases the risk of cost escalation over time if not managed proactively.
Lack of transparency in the procurement process due to sole-source award.

Positive Signals

Award to a large, established defense contractor (Raytheon Company) suggests a high likelihood of meeting technical requirements.
The contract addresses a specific need within the Department of Defense, indicating strategic procurement.
The fixed fee component provides some cost certainty for the government, provided the cost base is well-controlled.

Sector Analysis

The electronic components manufacturing sector is a critical part of the broader defense industrial base. Companies like Raytheon play a significant role in supplying specialized parts for advanced military systems. Spending in this sector is often characterized by long-term contracts, high research and development costs, and a limited number of qualified suppliers due to stringent technical and security requirements. Comparable spending benchmarks are difficult to establish without more specific details on the components, but defense electronics procurement often involves substantial investment.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. Furthermore, the 'ss': false flag suggests it was not a small business prime award. This means that opportunities for small businesses to directly participate as prime contractors were likely limited. Subcontracting opportunities may exist, but without specific subcontracting plans detailed in the award, their extent and impact on the small business ecosystem are unclear.

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 cost-plus-fixed-fee structure, robust oversight is crucial to monitor expenditures, ensure performance, and validate the necessity of costs incurred. Transparency is limited by the non-competitive award, but contract modifications and performance reports would be key areas for scrutiny. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Defense Electronic Systems
Military Component Procurement
Department of the Army Contracts
Raytheon Company Contracts
Cost-Plus-Fixed-Fee Contracts

Risk Flags

Sole-source award
Cost-plus-fixed-fee contract type
Long contract duration
Lack of competition

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $53.9 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 $53.9 million.

What is the period of performance?

Start: 2006-08-01. End: 2013-06-30.

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

Raytheon Company, now part of RTX, has a long history of securing sole-source contracts with the Department of Defense and other government agencies. These contracts often involve complex systems and specialized components where the company possesses unique capabilities or intellectual property. While sole-source awards can be efficient for acquiring critical technologies quickly, they also necessitate rigorous government oversight to ensure fair pricing and prevent cost overruns. Raytheon's track record typically demonstrates a capacity to deliver on technical requirements, but the financial aspects of sole-source awards are always subject to scrutiny regarding value for money compared to potential competitive scenarios. Analyzing past performance on similar contracts would involve reviewing cost performance indices, delivery schedules, and any documented disputes or overruns.

How does the $53.9 million award compare to other electronic component manufacturing contracts awarded by the Department of the Army?

Comparing this $53.9 million award requires context regarding the specific type and quantity of electronic components procured. The Department of the Army procures a vast array of electronic components, ranging from simple resistors to highly complex integrated circuits for advanced systems. A $53.9 million contract for 'Other Electronic Component Manufacturing' over a period of approximately 7 years (2006-2013) suggests a significant, long-term supply requirement. Without knowing the exact nature of the components, it's difficult to benchmark precisely. However, for specialized or high-reliability components essential for military applications, this figure could be within a typical range. Awards for commodity electronic parts would likely be much smaller, while contracts for cutting-edge, custom-designed systems could be substantially larger.

What are the primary risks associated with a sole-source, cost-plus-fixed-fee contract for electronic components?

The primary risks associated with a sole-source, cost-plus-fixed-fee (CPFF) contract for electronic components are multifaceted. Firstly, the sole-source nature eliminates competitive pressure, potentially leading to inflated prices and reduced incentive for the contractor to optimize costs. The government bears the risk of cost overruns, as the contractor is reimbursed for allowable costs plus a fixed fee. This structure can incentivize the contractor to incur more costs, as their fee is fixed regardless of the total cost. For electronic components, risks also include potential obsolescence of technology during the long contract period, supply chain disruptions, and ensuring the quality and reliability of components meet stringent military specifications. Effective risk mitigation requires robust government oversight, detailed cost analysis, and clear performance metrics.

How effective is the 'Other Electronic Component Manufacturing' category in meeting the Army's strategic needs?

The 'Other Electronic Component Manufacturing' category (NAICS 334419) is crucial for meeting the Army's strategic needs as it encompasses a wide range of components not specifically classified elsewhere. This includes specialized semiconductors, sensors, connectors, and other critical parts that form the backbone of modern military systems, from communication devices and navigation equipment to weapon platforms and intelligence, surveillance, and reconnaissance (ISR) systems. The Army relies on this sector to ensure access to cutting-edge technology and to maintain the operational readiness of its forces. The effectiveness of this category is directly tied to the ability of manufacturers to innovate, produce high-quality, reliable components, and adapt to evolving technological demands and threat landscapes. Sole-source awards within this category, while potentially raising cost concerns, may be justified if they secure access to unique or essential technologies.

What are the historical spending patterns for electronic components by the Department of the Army?

Historical spending patterns for electronic components by the Department of the Army show a consistent and significant investment, driven by the constant need to modernize and maintain its vast array of equipment. Spending in this area fluctuates based on major acquisition programs, technological advancements, and geopolitical requirements. The Army procures everything from basic electronic parts for fielded systems to highly specialized components for next-generation platforms. Over the years, there has been a trend towards increased complexity and integration, requiring more sophisticated and often custom-designed components. While specific aggregate spending figures for 'Other Electronic Component Manufacturing' are not readily available without detailed analysis of defense budgets and contract databases, it is understood to be a substantial and critical segment of the Army's overall procurement portfolio, often involving long-term contracts and significant R&D investment.

Industry Classification

NAICS: Manufacturing › Semiconductor and Other Electronic Component Manufacturing › Other Electronic Component 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: 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

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline