Raytheon Company awarded $22.3M for missile parts, a sole-source contract with a long duration

Contract Overview

Contract Amount: $22,274,873 ($22.3M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2010-12-21

End Date: 2018-12-20

Contract Duration: 2,921 days

Daily Burn Rate: $7.6K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: MLE AND ODC

Place of Performance

Location: ANDOVER, ESSEX County, MASSACHUSETTS, 01810

State: Massachusetts Government Spending

Plain-Language Summary

Department of Defense obligated $22.3 million to RAYTHEON COMPANY for work described as: MLE AND ODC Key points: 1. Contract awarded to a single, large defense contractor, limiting competitive pricing opportunities. 2. The contract's extended duration suggests a long-term need for these specific parts. 3. Fixed-price contract type may offer cost certainty but could limit savings if costs decrease. 4. The award falls under the 'Other Guided Missile and Space Vehicle Parts' manufacturing NAICS code. 5. This contract represents a portion of broader Department of Defense spending on missile systems.

Value Assessment

Rating: fair

Benchmarking the value of this specific contract is challenging due to its sole-source nature and the specialized parts involved. Without competitive bids, it's difficult to definitively assess if the $22.3 million represents optimal value for money. The firm fixed-price structure provides cost predictability for the government, but the absence of competition means there's less pressure on the contractor to offer the lowest possible price. Further analysis would require comparing the unit costs of these parts to similar components or historical pricing if available.

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 suppliers. This approach is typically used when only one contractor possesses the necessary capabilities, technology, or proprietary knowledge to fulfill the requirement. The lack of competition means that the government did not benefit from the price discovery mechanisms that typically occur in a competitive bidding process, potentially leading to higher costs than might be achieved through open competition.

Taxpayer Impact: Taxpayers may have paid a premium for this contract due to the absence of competitive pressure. The government did not have the opportunity to solicit and evaluate multiple offers, which could have driven down the price.

Public Impact

The primary beneficiaries are the Department of Defense, ensuring the supply of critical missile components. Services delivered include the manufacturing and supply of 'Other Guided Missile and Space Vehicle Parts and Auxiliary Equipment'. The geographic impact is primarily within Massachusetts, where Raytheon Company is headquartered. Workforce implications include continued employment for skilled manufacturing and engineering personnel at Raytheon.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition, potentially increasing costs for taxpayers.
Long contract duration (nearly 8 years) means significant taxpayer funds are committed without ongoing competitive review.
Lack of transparency in pricing due to sole-source nature makes value assessment difficult.

Positive Signals

Firm fixed-price contract provides budget certainty for the government.
Award to a known, large defense contractor suggests established capability and reliability for critical components.
Contract supports the defense industrial base and associated skilled jobs.

Sector Analysis

The aerospace and defense sector is characterized by high barriers to entry, complex supply chains, and significant government procurement. This contract falls within the specialized manufacturing segment for missile components. The market for such specialized parts is often dominated by a few large, established contractors like Raytheon due to the advanced technology and stringent quality requirements. Comparable spending benchmarks are difficult to establish without more specific part details, but overall defense spending on missile systems runs into billions annually.

Small Business Impact

This contract was awarded directly to Raytheon Company and does not appear to include specific small business set-aside provisions. Given the sole-source nature and the specialized manufacturing involved, it is unlikely that significant subcontracting opportunities for small businesses were mandated within this specific award. The impact on the small business ecosystem is therefore minimal for this particular contract, though Raytheon's broader supply chain may engage small businesses for less specialized components.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contracting and program management offices. As a definitive contract, it is subject to standard procurement regulations and oversight. Transparency is limited due to the sole-source award, but contract performance and payment would be monitored. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse.

Related Government Programs

Guided Missile and Space Vehicle Manufacturing
Defense Procurement
Department of the Army Contracts
Raytheon Company Contracts

Risk Flags

Sole-source award
Long contract duration
Lack of competition

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $22.3 million to RAYTHEON COMPANY. MLE AND ODC

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 $22.3 million.

What is the period of performance?

Start: 2010-12-21. End: 2018-12-20.

What is Raytheon Company's track record with the Department of Defense for similar contracts?

Raytheon Company, now part of RTX, has a long and extensive history of contracting with the Department of Defense, particularly for missile systems and related components. They are a prime contractor on numerous major defense programs. Analyzing their broader contract portfolio reveals a pattern of large, complex awards, often involving sole-source or limited competition due to the specialized nature of their products. While specific performance metrics for individual contracts are often not publicly detailed, their continued role as a major defense supplier suggests a generally accepted level of performance and capability in meeting DoD requirements. However, like any large contractor, they have faced scrutiny over pricing and program execution on various projects throughout their history.

How does the $22.3 million value compare to other contracts for missile parts?

Directly comparing the $22.3 million value of this specific contract to others for 'Other Guided Missile and Space Vehicle Parts and Auxiliary Equipment' is challenging without knowing the exact nature and quantity of the parts procured. Missile components can range from relatively simple fasteners to highly complex guidance system sub-assemblies, each with vastly different cost profiles. Given this contract's sole-source nature and its nearly 8-year duration, the total value is substantial. However, without competitive benchmarks or detailed specifications of the parts, it's difficult to definitively state if this represents a high or low cost relative to the market. Broader defense spending on missile programs often runs into billions, placing this contract within a significant but not exceptionally large segment of that spending.

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

The primary risk associated with this sole-source contract is the potential for inflated pricing due to the lack of competitive pressure. Without competing bids, the government has less leverage to negotiate the best possible price. Another risk is contractor performance; while Raytheon is a large, established company, any sole-source award carries a risk that the contractor may not perform optimally if they perceive less oversight or competitive threat. Furthermore, the long duration of the contract (nearly 8 years) increases the risk of cost overruns if market prices for raw materials or labor increase significantly, and the fixed-price nature might not fully insulate the government from such escalations depending on contract clauses.

How effective is a firm fixed-price contract for specialized defense components?

A firm fixed-price (FFP) contract is generally considered effective for specialized defense components when the scope of work and specifications are well-defined and stable. It offers the government the most cost certainty, as the contractor assumes the risk of cost overruns. For Raytheon, producing missile parts likely involves established manufacturing processes, making FFP suitable. However, the effectiveness can be diminished in sole-source situations, as the contractor may build contingency into the price to cover risks they would otherwise mitigate through efficiency. If unforeseen technical challenges arise or material costs fluctuate unexpectedly, the FFP structure could lead to the contractor realizing higher-than-expected profits or, in extreme cases, seeking contract modifications.

What are the historical spending patterns for 'Other Guided Missile and Space Vehicle Parts' by the Department of Defense?

Historical spending patterns for 'Other Guided Missile and Space Vehicle Parts and Auxiliary Equipment Manufacturing' by the Department of Defense are substantial, reflecting the ongoing need for modernization and maintenance of missile arsenals. While specific figures for this NAICS code fluctuate annually based on program needs and budget allocations, the overall defense budget consistently allocates billions towards missile systems, including procurement, research, development, and sustainment. Contracts in this category are often awarded to large, specialized defense contractors. Spending tends to be concentrated within major defense agencies like the Army, Navy, and Air Force. Trends may show increased spending during periods of heightened geopolitical tension or specific program ramp-ups.

Industry Classification

NAICS: Manufacturing › Aerospace Product and Parts Manufacturing › Other Guided Missile and Space Vehicle 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: 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: $62,674,115

Exercised Options: $44,495,291

Current Obligation: $22,274,873

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline