Raytheon Company awarded $24.9M for Patriot missile system component repair and rebuild

Contract Overview

Contract Amount: $24,878,853 ($24.9M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2011-05-09

End Date: 2015-12-31

Contract Duration: 1,697 days

Daily Burn Rate: $14.7K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: REPAIR AND REBUILD OF PATRIOT SECONDARY ITEMS

Place of Performance

Location: ANDOVER, ESSEX County, MASSACHUSETTS, 01810

State: Massachusetts Government Spending

Plain-Language Summary

Department of Defense obligated $24.9 million to RAYTHEON COMPANY for work described as: REPAIR AND REBUILD OF PATRIOT SECONDARY ITEMS Key points: 1. Contract awarded to a single vendor suggests potential lack of competitive pricing. 2. The cost-plus-fixed-fee structure may incentivize higher costs over efficiency. 3. Long contract duration of nearly 1700 days indicates a sustained need for services. 4. The specific nature of 'secondary items' repair points to specialized technical requirements. 5. Awarded by the Department of the Army, highlighting defense sector focus. 6. The contract's value is moderate within the context of large defense procurements.

Value Assessment

Rating: fair

Benchmarking the value of this contract is challenging without specific details on the 'secondary items' repaired. However, the $24.9 million awarded over nearly five years for repair and rebuild services for a critical defense system like the Patriot missile is within a reasonable range for specialized maintenance. The cost-plus-fixed-fee (CPFF) pricing structure, while common for complex repairs where costs are uncertain, can lead to higher overall expenditures compared to fixed-price contracts if not managed closely. Without comparable contract data for similar repair services on Patriot components, a definitive value-for-money assessment is difficult.

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 vendors. This typically occurs when a specific contractor possesses unique capabilities, proprietary technology, or is the only source capable of performing the required work. The lack of competition means that the government did not benefit from a bidding process that could have driven down prices through market forces. The justification for a sole-source award would need to demonstrate why other qualified contractors could not fulfill the requirement.

Taxpayer Impact: Sole-source awards can potentially lead to higher costs for taxpayers as there is less pressure on the contractor to offer the most competitive pricing. It also limits opportunities for other businesses to compete for and win government contracts.

Public Impact

The U.S. Army benefits from the continued operational readiness of its Patriot missile defense systems. Services include the repair and rebuild of critical secondary components for the Patriot system. The geographic impact is primarily within the operational theater of the U.S. Army's air defense units. Workforce implications include specialized technical roles for repair and maintenance personnel.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing opportunities.
Cost-plus-fixed-fee structure may not incentivize cost efficiency.
Lack of transparency on specific 'secondary items' makes detailed cost analysis difficult.
Long contract duration could mask potential cost overruns if not actively managed.

Positive Signals

Ensures continued readiness of a critical national defense asset (Patriot missile system).
Award to a known entity (Raytheon) suggests a level of established capability for this specialized work.
Contract addresses a specific, likely complex, technical repair requirement.

Sector Analysis

The defense sector, particularly aerospace and defense manufacturing, relies heavily on specialized repair and sustainment services for complex weapon systems. The Patriot missile system is a key component of U.S. and allied air defense capabilities. Contracts for its maintenance and repair are crucial for ensuring operational readiness. Spending in this sub-sector often involves high technical barriers to entry and can be dominated by a few prime contractors and their specialized subcontractors. Comparable spending benchmarks would typically be found within sustainment contracts for other major defense platforms.

Small Business Impact

This contract was not set aside for small businesses, nor does it appear to have specific subcontracting requirements for small businesses indicated in the provided data. The prime contractor, Raytheon Company, is a large defense corporation. While large prime contractors often utilize small business subcontractors, the absence of explicit set-aside provisions or reporting on subcontracting goals in this data means the direct impact on the small business ecosystem is not quantifiable here. It is possible that Raytheon engaged small businesses for specific components or services, but this is not evident from the contract details.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Army's contracting and program management offices. As a sole-source award, there may be heightened scrutiny to ensure the necessity and justification for the non-competitive nature of the procurement. The cost-plus-fixed-fee structure necessitates robust financial oversight to monitor incurred costs and ensure the fixed fee remains appropriate. Inspector General (IG) jurisdiction would apply for investigations into fraud, waste, or abuse related to the contract performance and expenditures.

Related Government Programs

Patriot Missile System Sustainment
Missile Defense Agency Contracts
Department of the Army Maintenance and Repair
Aerospace and Defense Component Manufacturing
Cost-Plus-Fixed-Fee Defense Contracts

Risk Flags

Sole-source award
Cost-plus-fixed-fee contract type
Lack of detailed cost breakdown in public data

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $24.9 million to RAYTHEON COMPANY. REPAIR AND REBUILD OF PATRIOT SECONDARY ITEMS

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 $24.9 million.

What is the period of performance?

Start: 2011-05-09. End: 2015-12-31.

What specific 'secondary items' were repaired or rebuilt under this contract, and what was the rationale for their repair versus replacement?

The provided data does not specify the exact 'secondary items' covered by this contract. These likely refer to components within the broader Patriot missile system that are not the primary missile itself but are essential for its operation, such as radar components, command and control modules, or ground support equipment. The rationale for repair versus replacement would typically be based on cost-effectiveness, availability of parts, technical feasibility, and the remaining useful life of the component. Repair is often chosen when it is significantly less expensive than procuring a new component and can restore the item to full operational capability. A detailed breakdown of these items and the repair justification would be found in the contract's statement of work and associated technical documentation.

How does the $24.9 million total contract value compare to typical sustainment costs for similar complex defense systems?

Comparing the $24.9 million value requires context regarding the specific system and the scope of work. For a critical, high-technology defense system like the Patriot, which involves sophisticated radar, missile launchers, and command systems, sustainment costs over a multi-year period can be substantial. This figure represents an average of approximately $6.2 million per year over the contract's duration. While this may seem high, it is likely modest when benchmarked against the total lifecycle costs of maintaining and operating such a system, which can run into billions of dollars. Sustainment contracts for major platforms often involve significant investments in logistics, spare parts, technical support, and specialized repair services. Without specific data on comparable contracts for other air defense systems or even other aspects of the Patriot program, it's difficult to definitively label this value as high or low, but it appears to be a focused effort on specific component repairs.

What are the risks associated with a sole-source, cost-plus-fixed-fee contract for defense repair services?

Sole-source contracts eliminate competition, which can lead to higher prices for the government as the contractor faces less pressure to be cost-efficient. The government must rely on the contractor's proposed pricing and cost justifications. The Cost-Plus-Fixed-Fee (CPFF) structure, while useful for services where costs are uncertain, carries the risk that the contractor may not be strongly incentivized to control costs, as their profit (the fixed fee) is predetermined. The primary risk is that the total cost to the government could exceed what might have been achieved through a competitive, fixed-price contract. Effective oversight, detailed cost monitoring, and strong program management are crucial to mitigate these risks and ensure fair pricing and value.

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

Raytheon Company (now RTX) has a long and established history as the prime contractor and systems integrator for the Patriot missile defense system. They have been involved in the development, production, sustainment, and upgrade of the Patriot system for decades. Their track record with the Patriot program is extensive, encompassing numerous contracts for production, upgrades, training, and logistical support. Given their role as the original equipment manufacturer and primary developer, Raytheon possesses unique technical knowledge and expertise regarding the system's components, including specialized repair requirements. Their performance on past Patriot-related contracts would be a key factor in the government's decision to award this sole-source repair contract.

How has federal spending on the Patriot missile system and its sustainment evolved over time?

Federal spending on the Patriot missile system has been significant and ongoing since its initial deployment. The program has undergone numerous upgrades and modernization efforts to maintain its effectiveness against evolving threats. Spending typically includes procurement of new systems and missiles, modernization programs, research and development for future capabilities, and extensive sustainment activities, which encompass maintenance, repair, and logistical support. Historical spending patterns would show peaks during periods of major system upgrades or increased procurement, and consistent, substantial outlays for sustainment. This specific contract for repair of secondary items represents a portion of the broader sustainment spending, which is critical for ensuring the long-term operational readiness of the fielded systems.

Industry Classification

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

Product/Service Code: ELECTRICAL/ELECTRONIC EQPT COMPNTS

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: W31P4Q10R0002

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: RTX Corp (UEI: 001344142)

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: $52,194,594

Exercised Options: $24,878,853

Current Obligation: $24,878,853

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline