Raytheon Company awarded $35M contract for missile parts, raising questions about competition and value

Contract Overview

Contract Amount: $35,098,010 ($35.1M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2010-09-10

End Date: 2014-01-31

Contract Duration: 1,239 days

Daily Burn Rate: $28.3K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: UCA

Place of Performance

Location: ANDOVER, ESSEX County, MASSACHUSETTS, 01810

State: Massachusetts Government Spending

Plain-Language Summary

Department of Defense obligated $35.1 million to RAYTHEON COMPANY for work described as: UCA Key points: 1. Contract awarded on a sole-source basis, limiting price discovery and potentially increasing costs. 2. The contract duration of over 3 years suggests a need for sustained supply of these parts. 3. The fixed-price nature of the contract shifts some risk to the contractor. 4. The specific parts manufactured fall under a niche category, potentially explaining limited competition. 5. Spending on this contract represents a small fraction of the overall defense budget. 6. The contractor, Raytheon Company, is a major defense contractor with a significant track record.

Value Assessment

Rating: fair

Benchmarking the value of this contract is challenging due to the lack of competitive bids. The firm fixed-price structure provides some cost certainty, but without comparison to other offers, it's difficult to assess if the $35 million represents optimal value for the specified missile parts. The award amount is substantial, and further analysis would be needed to determine if the unit costs align with industry standards for similar components.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded using a sole-source justification, meaning it was not openly competed. This approach is typically used when only one responsible source can provide the required goods or services. The lack of competition means that taxpayers did not benefit from the price reductions that can arise from a competitive bidding process.

Taxpayer Impact: Sole-source awards can lead to higher prices for taxpayers as there is no market pressure to drive down costs. This limits the government's ability to secure the best possible price for these essential missile parts.

Public Impact

The primary beneficiaries are the Department of Defense, ensuring the availability of critical missile components. The services delivered include the manufacturing and supply of specialized parts for guided missiles. The geographic impact is primarily within the United States, where Raytheon operates its manufacturing facilities. Workforce implications include employment opportunities within Raytheon's manufacturing and engineering divisions.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competitive bidding may have resulted in a higher price than a competed contract.
Sole-source awards can reduce transparency and accountability in government spending.
Reliance on a single supplier can create supply chain vulnerabilities.
The specific nature of the parts may limit the pool of qualified manufacturers, necessitating sole-source awards.

Positive Signals

The firm fixed-price contract shifts cost overrun risk to the contractor.
Raytheon is an established defense contractor with a proven ability to deliver complex systems.
The contract ensures the continued supply of essential components for defense readiness.
The duration of the contract provides stability for both the government and the contractor.

Sector Analysis

The contract falls within the 'Other Guided Missile and Space Vehicle Parts and Auxiliary Equipment Manufacturing' sector, a specialized segment of the broader aerospace and defense industry. This industry is characterized by high technological barriers to entry, significant R&D investment, and long product development cycles. Spending in this sector is heavily influenced by national security priorities and defense budgets. Comparable spending benchmarks are difficult to establish without more specific details on the parts themselves, but the overall defense procurement budget runs into hundreds of billions of dollars annually.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. Furthermore, there is no explicit mention of subcontracting requirements for small businesses. This suggests that the primary contractor, Raytheon, will likely fulfill the contract requirements directly or through its own supply chain, potentially limiting opportunities for small businesses to participate in this specific procurement.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Defense's contracting and procurement regulations. Accountability measures are inherent in the firm fixed-price contract type, which obligates the contractor to deliver specified goods at an agreed-upon price. Transparency is limited due to the sole-source nature of the award. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse related to the contract.

Related Government Programs

Guided Missile Production
Defense Procurement
Aerospace Manufacturing
Supply Chain Management (Defense)
Raytheon Company Contracts

Risk Flags

Sole-source award lacks competition
Potential for inflated pricing due to lack of competition
Limited transparency in procurement process
Dependency on a single supplier

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $35.1 million to RAYTHEON COMPANY. UCA

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 $35.1 million.

What is the period of performance?

Start: 2010-09-10. End: 2014-01-31.

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 prime contractor on numerous major defense programs, including various missile systems like the Patriot and Tomahawk. Their track record generally indicates a capacity to deliver complex defense hardware and services. However, like any large defense contractor, they have also faced scrutiny over contract costs, performance, and specific program challenges. For this particular contract, the sole-source nature means that direct comparisons to other Raytheon bids for similar parts are not publicly available, but their overall experience suggests they are a capable supplier for these types of specialized components.

How does the $35 million contract value compare to other procurements for missile parts?

Directly comparing the $35 million contract value for 'Other Guided Missile and Space Vehicle Parts and Auxiliary Equipment Manufacturing' to other procurements is challenging without knowing the exact nature and quantity of the parts. Missile components can range from relatively simple fasteners to highly complex guidance system sub-assemblies, each with vastly different cost structures. Given that this was a sole-source award over a period of approximately 3.5 years (1239 days), the annual value is roughly $10 million. This figure needs to be contextualized against the specific technological requirements, production volumes, and the specialized nature of the components. Without access to detailed specifications or competitive bidding data, it's difficult to definitively state whether this represents a high or low value compared to market rates for similar, albeit unspecified, parts.

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

The primary risks associated with this sole-source contract stem directly from the lack of competition. Firstly, there is a significant risk of paying a premium price, as the government did not benefit from competitive bidding that could have driven down costs. Secondly, there's a potential for reduced innovation and efficiency, as the contractor faces less pressure to optimize processes or offer cost-saving alternatives. Thirdly, a sole-source award can create a dependency on a single supplier, potentially leading to supply chain vulnerabilities if the contractor experiences production issues or faces financial difficulties. Finally, the lack of transparency inherent in sole-source procurements can make it harder to identify and mitigate risks related to performance or quality.

How effective is the firm fixed-price contract type in managing costs for this type of procurement?

The firm fixed-price (FFP) contract type is generally considered effective in managing costs for procurements where the scope of work is well-defined and the risks are understood. In this case, for manufacturing specific missile parts, an FFP contract shifts the primary cost risk to the contractor, Raytheon. This means that Raytheon is obligated to deliver the specified parts at the agreed-upon price, regardless of their actual costs incurred. This structure incentivizes the contractor to control their own costs and improve efficiency to maximize profit. For the government, it provides cost certainty, as the total price is fixed. However, the effectiveness of FFP in this sole-source context is diminished because the 'fixed price' was not determined through competitive negotiation, potentially leading to a higher baseline price than might have been achieved otherwise.

What is the historical spending pattern for 'Other Guided Missile and Space Vehicle Parts and Auxiliary Equipment Manufacturing' by the Department of Defense?

Historical spending patterns for the 'Other Guided Missile and Space Vehicle Parts and Auxiliary Equipment Manufacturing' category by the Department of Defense are part of the broader, multi-billion dollar annual defense procurement budget. This specific sub-category represents a niche within the larger defense industrial base. While precise historical figures for this exact PSC code (336419) are not readily available without specialized database access, it's understood that spending in this area fluctuates based on the development, production, and sustainment needs of various missile programs. The Department of Defense consistently invests significant resources in missile technology and associated components to maintain strategic advantage and readiness. Trends would likely show increased spending during periods of new missile development or heightened geopolitical tensions, and potentially stable or reduced spending during sustainment phases or budget austerity.

Industry Classification

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

Product/Service Code: ELECTRICAL/ELECTRONIC EQPT COMPNTS

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

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: $41,375,440

Exercised Options: $41,375,440

Current Obligation: $35,098,010

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline