Raytheon Company awarded $56M for PATRIOT missile support, a sole-source definitive contract

Contract Overview

Contract Amount: $55,990,635 ($56.0M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2011-02-04

End Date: 2019-07-31

Contract Duration: 3,099 days

Daily Burn Rate: $18.1K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: PATRIOT MISSILE SUPPORT CENTER (PMSC)

Place of Performance

Location: ANDOVER, ESSEX County, MASSACHUSETTS, 01810

State: Massachusetts Government Spending

Plain-Language Summary

Department of Defense obligated $56.0 million to RAYTHEON COMPANY for work described as: PATRIOT MISSILE SUPPORT CENTER (PMSC) Key points: 1. Contract awarded to a single vendor suggests limited market exploration. 2. Long contract duration (over 8 years) may indicate specialized or ongoing support needs. 3. Cost-plus-fixed-fee structure can incentivize cost increases if not closely monitored. 4. The contract's value is substantial, requiring robust oversight to ensure efficiency. 5. Focus on missile support highlights critical defense capabilities. 6. Lack of competition raises questions about potential overpayment or suboptimal service. 7. The definitive contract type implies a specific, defined scope of work. 8. No small business set-aside indicates a focus on large prime contractors.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging without comparable sole-source agreements for PATRIOT missile support. The cost-plus-fixed-fee (CPFF) pricing structure, while common for complex defense systems, carries inherent risks of cost overruns if not meticulously managed. The total award of approximately $56 million over an eight-year period suggests a significant investment. Without competitive bids, it's difficult to ascertain if this represents a fair market price or if taxpayers are bearing a premium due to the lack of competition. Further analysis would require access to detailed cost breakdowns and historical pricing for similar support services.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning the Department of the Army did not solicit bids from multiple vendors. This approach is typically justified when only one vendor possesses the necessary capabilities, technology, or proprietary knowledge to fulfill the requirement. The lack of competition means that price discovery through market forces was absent, potentially leading to less favorable pricing for the government compared to a competed contract. The justification for sole-source procurement would need to be thoroughly documented to ensure it was appropriate.

Taxpayer Impact: Sole-source awards limit the government's ability to leverage competition to drive down costs, potentially resulting in higher expenditures for taxpayers. It also reduces the incentive for other companies to develop competing capabilities.

Public Impact

The primary beneficiaries are the U.S. Army's PATRIOT missile defense systems, ensuring their operational readiness. Services delivered likely include maintenance, repair, logistics, and technical support for the PATRIOT system. Geographic impact is national, supporting Army units equipped with PATRIOT missiles across various installations. Workforce implications include specialized technical roles for Raytheon employees supporting the contract.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure on pricing.
Cost-plus-fixed-fee structure requires diligent oversight to control costs.
Long contract duration may obscure potential inefficiencies over time.
Lack of transparency in sole-source justification can mask non-competitive practices.
Potential for vendor lock-in due to specialized nature of missile support.

Positive Signals

Award to Raytheon, a known defense contractor, suggests access to established expertise.
Definitive contract implies a clear scope, potentially reducing ambiguity.
Focus on critical defense asset (PATRIOT missile) indicates strategic importance.
Long duration may provide stability for essential support services.

Sector Analysis

This contract falls within the Defense Industrial Base sector, specifically focusing on aerospace and defense manufacturing and support services. The market for advanced missile defense systems like PATRIOT is highly specialized, dominated by a few major defense contractors. Spending in this area is driven by national security priorities and geopolitical factors. Comparable spending benchmarks would involve analyzing other large, long-term support contracts for complex weapon systems within the Department of Defense, often involving sole-source or limited competition due to unique technical requirements.

Small Business Impact

The absence of small business set-aside flags (ss: false, sb: false) indicates that this contract was not specifically targeted for small businesses. As a sole-source award to a large prime contractor, Raytheon Company, the primary impact on small businesses would be through potential subcontracting opportunities. However, without specific subcontracting plans or goals detailed in the award, it's unclear how much of the $56 million would flow down to the small business ecosystem. Large defense contracts can sometimes create opportunities for specialized small businesses, but this is not guaranteed without explicit provisions.

Oversight & Accountability

Oversight for this contract would primarily reside with the Department of the Army contracting and program management offices. Given the sole-source nature and CPFF structure, rigorous oversight is crucial to monitor costs, performance, and adherence to the contract's scope. Transparency is limited due to the non-competitive award. Inspector General jurisdiction would apply if any allegations of fraud, waste, or abuse arise. The contract's long duration necessitates continuous performance reviews and potential modifications to ensure continued value and alignment with evolving defense needs.

Related Government Programs

PATRIOT Missile System Acquisition
Missile Defense Agency Programs
Department of the Army Logistics Support Contracts
Raytheon Defense Contracts
Cost-Plus-Fixed-Fee Defense Contracts

Risk Flags

Sole Source Justification
Cost-Plus-Fixed-Fee Risk
Long-Term Contract Oversight
Lack of Competition Impact on Price
Potential for Vendor Lock-in

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $56.0 million to RAYTHEON COMPANY. PATRIOT MISSILE SUPPORT CENTER (PMSC)

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 $56.0 million.

What is the period of performance?

Start: 2011-02-04. End: 2019-07-31.

What is Raytheon Company's track record with the PATRIOT missile system and similar defense contracts?

Raytheon Company is a primary contractor for the PATRIOT missile defense system, involved in its development, production, and sustainment for decades. Their track record with PATRIOT is extensive, encompassing numerous contracts for upgrades, spare parts, training, and logistical support. Historically, Raytheon has been a major player in the defense sector, securing significant contracts across various platforms. While their experience is deep, the nature of sole-source awards, like this one, means that performance and cost-effectiveness are often evaluated internally by the procuring agency rather than through direct market comparison. Audits and performance reviews by the Department of Defense would provide the most relevant insights into their specific performance on this contract, focusing on delivery timelines, quality of service, and cost control within the CPFF framework.

How does the $56 million award compare to historical spending on PATRIOT missile support?

Comparing this $56 million award to historical spending on PATRIOT missile support requires a detailed analysis of past contracts awarded by the Department of the Army and other relevant agencies. Given the contract's duration of approximately 8 years (3099 days), the annual average value is roughly $7 million. This figure needs to be contextualized against the overall lifecycle costs of the PATRIOT system, which includes procurement, sustainment, upgrades, and operational expenses. Historical data would reveal trends in spending, identify periods of increased investment (e.g., during heightened geopolitical tensions), and show how pricing has evolved. Without access to a comprehensive database of all past PATRIOT support contracts, a precise comparison is difficult, but this award represents a significant, ongoing investment in maintaining a critical defense capability.

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

The primary risks associated with this contract structure are twofold. Firstly, the sole-source nature eliminates competitive pressure, potentially leading to inflated prices and reduced incentive for the contractor to innovate or optimize costs. The government relies heavily on the contractor's integrity and the agency's oversight capabilities to ensure fair value. Secondly, the Cost-Plus-Fixed-Fee (CPFF) structure, while providing flexibility for evolving requirements, can incentivize the contractor to incur higher costs, as the fee is fixed regardless of the actual costs incurred (within allowable limits). This necessitates robust government oversight to scrutinize costs, prevent unnecessary expenditures, and ensure the 'fixed fee' remains appropriate relative to the effort. Risks also include potential vendor lock-in and a lack of transparency in cost justification.

How effective is the PATRIOT missile system, and does this contract contribute to its overall program effectiveness?

The PATRIOT missile system is widely regarded as a highly effective, state-of-the-art, surface-to-air missile system designed to counter tactical ballistic missiles, cruise missiles, and advanced aircraft. Its effectiveness is crucial for defending against a wide range of aerial threats. This contract, providing essential support services like maintenance, repair, and logistics, directly contributes to the overall effectiveness and readiness of the PATRIOT system. By ensuring the system's components are functional and operational, the contract enables the U.S. Army to maintain its air and missile defense capabilities. The long-term nature of the award suggests a commitment to sustained operational readiness, which is vital for national security.

What are the implications of the contract's duration (over 8 years) on cost and performance?

A contract duration exceeding eight years (3099 days) for specialized support services like PATRIOT missile maintenance has several implications. On the positive side, it can provide stability and predictability for both the government and the contractor, allowing for long-term planning, workforce development, and investment in necessary infrastructure and expertise. This can lead to improved efficiency and potentially lower overall costs through economies of scale and reduced transition expenses. However, a long duration also increases the risk of cost escalation due to inflation, unforeseen technological changes, or shifts in program requirements that may not be adequately captured in the initial pricing. It also extends the period during which the government is exposed to the risks inherent in a sole-source, CPFF arrangement, making diligent oversight even more critical throughout the contract's life.

Industry Classification

NAICS: Information › Newspaper, Periodical, Book, and Directory Publishers › All Other Publishers

Product/Service Code: SUPPORT SVCS (PROF, ADMIN, MGMT) › PROFESSIONAL SERVICES

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

Parent Company: Rockwell Collins Australia PTY Limited

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: $70,127,953

Exercised Options: $56,034,061

Current Obligation: $55,990,635

Subaward Activity

Number of Subawards: 87

Total Subaward Amount: $7,286,874

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline