DoD's $45.3M PATRIOT Missile Repair Contract Awarded to Raytheon Company Under Sole Source Basis

Contract Overview

Contract Amount: $45,302,760 ($45.3M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2014-04-01

End Date: 2020-09-30

Contract Duration: 2,374 days

Daily Burn Rate: $19.1K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: PATRIOT SECONDARY REPAIR

Place of Performance

Location: ANDOVER, ESSEX County, MASSACHUSETTS, 01810

State: Massachusetts Government Spending

Plain-Language Summary

Department of Defense obligated $45.3 million to RAYTHEON COMPANY for work described as: PATRIOT SECONDARY REPAIR Key points: 1. Contract awarded on a sole-source basis, limiting price competition and potentially increasing costs. 2. Significant duration of 2374 days (over 6 years) suggests a long-term need for repair services. 3. The contract type (Cost Plus Fixed Fee) can incentivize cost overruns. 4. Lack of competition raises concerns about achieving best value for taxpayer dollars. 5. The contract falls under 'Other Electronic Component Manufacturing,' indicating a specialized technical service. 6. The award amount of over $45 million signifies a substantial investment in defense readiness.

Value Assessment

Rating: questionable

Benchmarking the value of this sole-source contract is challenging due to the absence of competitive bids. The Cost Plus Fixed Fee (CPFF) contract type, while allowing for flexibility, can lead to higher costs if not managed rigorously, as the contractor is reimbursed for allowable costs plus a fixed fee. Without comparable contracts or market data, it's difficult to definitively assess if the pricing represents fair value. The long duration and the specialized nature of the PATRIOT system repairs suggest a high degree of technical expertise required, which may justify higher costs, but the lack of competition prevents a clear value-for-money determination.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one bidder, Raytheon Company, was solicited. This approach is typically used when only one responsible source is available or when there is a compelling justification for not seeking competition. The lack of multiple bidders means there was no opportunity for price discovery through a competitive bidding process. This significantly limits the government's ability to negotiate the best possible price and terms.

Taxpayer Impact: Taxpayers may have paid a premium for these repair services due to the absence of competitive pressure. The government could not leverage multiple offers to drive down costs, potentially leading to a less efficient use of public funds.

Public Impact

The primary beneficiaries are the U.S. Army, ensuring the operational readiness of the PATRIOT missile defense system. Services delivered include the repair and maintenance of critical components for the PATRIOT system. The geographic impact is likely focused on military installations where PATRIOT batteries are deployed or maintained. Workforce implications include the need for highly skilled technicians and engineers specializing in complex electronic systems.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing and value assessment.
Cost Plus Fixed Fee contract type can incentivize higher costs.
Long contract duration (over 6 years) requires sustained oversight to manage potential cost creep.
Lack of transparency in pricing due to no competition.

Positive Signals

Ensures continued operational readiness of a critical defense asset (PATRIOT system).
Award to a known contractor (Raytheon) with presumed expertise in PATRIOT systems.
Contract addresses a specific, long-term need for specialized repair services.

Sector Analysis

The defense electronics sector is characterized by high R&D costs, long product lifecycles, and significant government procurement. Contracts for the repair and sustainment of complex weapon systems like the PATRIOT are crucial for maintaining military readiness. The market for such specialized services is often dominated by a few prime contractors who possess the proprietary knowledge and manufacturing capabilities. Comparable spending benchmarks are difficult to establish without access to specific repair cost data and competitive bids for similar systems.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. Furthermore, the prime contractor, Raytheon Company, is a large defense corporation. While large prime contractors are often required to subcontract a portion of their work to small businesses, the specific subcontracting plan for this contract is not detailed here. The absence of a set-aside suggests that opportunities for small businesses may be limited to subcontracting roles rather than direct prime contract awards for this specific requirement.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Army and the Department of Defense. Given the sole-source nature and CPFF structure, rigorous oversight of incurred costs, contractor performance, and adherence to contract terms would be essential. Transparency is limited due to the lack of competition. Inspector General jurisdiction would apply to investigations of fraud, waste, or abuse related to the contract.

Related Government Programs

PATRIOT Missile System Sustainment
Missile Defense Agency Contracts
Department of the Army Repair and Maintenance Contracts
Defense Logistics Agency (DLA) Support Contracts

Risk Flags

Sole-source award
Cost-plus contract type
Long contract duration
Lack of competitive bidding

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $45.3 million to RAYTHEON COMPANY. PATRIOT SECONDARY REPAIR

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 $45.3 million.

What is the period of performance?

Start: 2014-04-01. End: 2020-09-30.

What is Raytheon Company's track record with PATRIOT system contracts?

Raytheon Company, now part of RTX Corporation, has a long-standing and primary role as the prime contractor for the PATRIOT missile defense system. Their track record includes development, production, and sustainment of the system for both U.S. and international customers. Historically, Raytheon has been responsible for upgrades, modifications, and ongoing maintenance, making them a critical partner in ensuring the system's operational capability. While their expertise is well-established, the specific performance metrics and cost-effectiveness of past contracts, particularly sole-source ones, would require detailed review of individual contract data and performance reports.

How does the Cost Plus Fixed Fee (CPFF) contract type compare to other contract types for this type of service?

Cost Plus Fixed Fee (CPFF) contracts reimburse the contractor for allowable costs plus a predetermined fixed fee, which represents profit. This type is often used when the scope of work is not precisely defined or when there's uncertainty in the costs involved, such as complex repairs. Compared to Firm-Fixed-Price (FFP) contracts, CPFF offers less cost certainty for the government, as costs can fluctuate. However, it can be more appropriate than FFP for R&D or specialized services where cost estimation is difficult. Other types like Cost Plus Incentive Fee (CPIF) or Cost Plus Award Fee (CPAF) introduce performance incentives, which CPFF lacks, potentially leading to better cost control and value. The lack of competition here exacerbates the risks associated with CPFF.

What are the primary risks associated with a sole-source award for defense repair services?

The primary risks associated with a sole-source award for defense repair services include: 1. **Higher Costs:** Without competition, the contractor has less incentive to offer the lowest possible price, potentially leading to inflated costs for the government. 2. **Reduced Innovation:** The absence of competitive pressure can stifle innovation and efficiency improvements that might arise from multiple bidders seeking to win the contract. 3. **Lack of Transparency:** It becomes harder to benchmark pricing and assess whether the government is receiving fair value for its money. 4. **Potential for Complacency:** The incumbent contractor may become complacent, knowing they are the only option, potentially impacting service quality or responsiveness over time. 5. **Limited Source Availability:** Reliance on a single source can create vulnerabilities if that source faces production issues, financial instability, or geopolitical challenges.

What is the historical spending pattern for PATRIOT secondary repair services?

Historical spending on PATRIOT secondary repair services is substantial, reflecting the system's critical role in national defense and its deployment by numerous allies. Data from sources like USAspending.gov indicates consistent, multi-million dollar annual expenditures for the sustainment and repair of the PATRIOT system over many years. This spending is often distributed across various contracts, including those for depot-level maintenance, component repair, and upgrades, awarded primarily to Raytheon. The specific amount of $45.3 million for this particular contract (2014-2020) fits within the broader pattern of significant, ongoing investment required to maintain the operational readiness of this advanced air and missile defense system.

How does the geographic location (Massachusetts) influence contract performance or oversight?

The contract's mention of 'MASSACHUSETTS' (ST: MA) likely indicates the location of the contractor's facility performing the repair work or a significant operational base. For oversight, this means that government contracting officers and potentially quality assurance representatives may be physically located in or near Massachusetts to monitor performance, conduct inspections, and manage the contract. Proximity can facilitate communication and oversight, but it also means that any disruptions in that region (e.g., natural disasters, labor issues) could potentially impact contract performance. For the workforce, it implies job creation and economic activity within that specific geographic area related to defense contracting.

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: W31P4Q12R0121

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: $97,907,927

Exercised Options: $45,302,760

Current Obligation: $45,302,760

Subaward Activity

Number of Subawards: 48

Total Subaward Amount: $4,898,910

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline