Raytheon Company awarded $73.1M contract for guided missile and space vehicle manufacturing, a sole-source procurement

Contract Overview

Contract Amount: $73,172,620 ($73.2M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2008-04-30

End Date: 2009-12-31

Contract Duration: 610 days

Daily Burn Rate: $120.0K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: RAID BETSS-C 107 FOOT TOWER SYSTEMS

Place of Performance

Location: ANDOVER, ESSEX County, MASSACHUSETTS, 01810

State: Massachusetts Government Spending

Plain-Language Summary

Department of Defense obligated $73.2 million to RAYTHEON COMPANY for work described as: RAID BETSS-C 107 FOOT TOWER SYSTEMS Key points: 1. Contract awarded on a sole-source basis, raising questions about price discovery and potential for overpayment. 2. The contract type is Cost Plus Fixed Fee (CPFF), which can incentivize cost overruns. 3. Performance period spans 610 days, indicating a medium-term project. 4. The contractor, Raytheon Company, is a major defense industry player. 5. The North American Industry Classification System (NAICS) code 336414 points to specialized manufacturing capabilities. 6. No small business set-aside was indicated, suggesting a focus on large prime contractors.

Value Assessment

Rating: questionable

The contract's value of $73.1 million for guided missile and space vehicle manufacturing is significant. However, without a competitive bidding process, it is difficult to benchmark the value for money. The Cost Plus Fixed Fee (CPFF) contract type, while common in complex defense procurements, carries inherent risks of cost escalation. A comparison to similar sole-source procurements for comparable systems would be necessary to assess if the pricing is reasonable. The lack of competition limits the ability to determine if taxpayers received the best possible price.

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. This typically occurs when only one responsible source can provide the required goods or services. The absence of multiple bidders means there was no direct price competition, which can lead to higher costs for the government compared to a fully competed contract. The justification for a sole-source award would need to be thoroughly reviewed to ensure it was indeed necessary.

Taxpayer Impact: Sole-source awards mean taxpayers do not benefit from the cost savings typically achieved through competitive bidding. This can result in a higher overall expenditure for the government.

Public Impact

The primary beneficiaries are likely the Department of Defense, receiving advanced missile and space vehicle systems. The contract supports the manufacturing of critical defense components, enhancing national security capabilities. The geographic impact is primarily centered around the contractor's facilities, likely in Massachusetts given the 'ST' code. The contract supports specialized manufacturing jobs within the defense industrial base.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition, potentially leading to higher costs.
Cost Plus Fixed Fee contract type can incentivize cost overruns.
Lack of transparency in the justification for sole-source award.
Potential for contractor to leverage market dominance due to lack of competition.

Positive Signals

Contract awarded to a reputable and experienced defense contractor (Raytheon Company).
The contract addresses a specific need within the defense sector for guided missile and space vehicles.
The fixed fee component of the CPFF contract provides some level of cost predictability for the contractor's profit.

Sector Analysis

The defense manufacturing sector, particularly guided missile and space vehicle production, is characterized by high barriers to entry, significant R&D investment, and long production cycles. Raytheon Company is a major player in this specialized market. Spending in this area is driven by national security requirements and technological advancements. Comparable spending benchmarks would typically involve analyzing other sole-source or competitively awarded contracts for similar complex defense systems, considering factors like system complexity, quantity, and technological maturity.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. This suggests that the primary contractor, Raytheon Company, is expected to fulfill the contract requirements directly or through its own large-scale supply chain. There may be subcontracting opportunities for small businesses within Raytheon's network, but this contract does not explicitly mandate or prioritize small business participation. The impact on the small business ecosystem is therefore indirect.

Oversight & Accountability

Oversight for this contract would typically fall under the purview of the Department of Defense's contract management agencies, such as the Defense Contract Management Agency (DCMA). Accountability measures would be defined within the contract terms, including performance standards and payment schedules. Transparency is often limited in sole-source defense procurements, with justifications for the award being the primary source of public information. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Guided Missile Manufacturing
Space Vehicle Manufacturing
Defense Procurement
Cost Plus Fixed Fee Contracts
Sole Source Contracts

Risk Flags

Sole-source award
Cost Plus Fixed Fee contract type
Lack of competition

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $73.2 million to RAYTHEON COMPANY. RAID BETSS-C 107 FOOT TOWER SYSTEMS

Who is the contractor on this award?

The obligated recipient is RAYTHEON COMPANY.

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Contract Management Agency).

What is the total obligated amount?

The obligated amount is $73.2 million.

What is the period of performance?

Start: 2008-04-30. End: 2009-12-31.

What is Raytheon Company's track record with similar sole-source defense contracts?

Raytheon Company, now part of RTX Corporation, has a long history of securing sole-source contracts within the Department of Defense for complex defense systems, including missiles and space vehicles. These awards are often justified by the company's unique technological capabilities, existing infrastructure, and established production lines for specific platforms. While such contracts are essential for maintaining national security and leveraging specialized expertise, they also necessitate robust government oversight to ensure fair pricing and prevent potential cost overruns. Analyzing past performance on similar sole-source awards can provide insights into Raytheon's ability to deliver on time and within budget, as well as the government's effectiveness in managing these high-value, non-competitive procurements. Historical data often shows a pattern of significant contract values and long-term relationships in these specialized defense manufacturing areas.

How does the Cost Plus Fixed Fee (CPFF) contract type compare to other contract types in terms of value for money in defense manufacturing?

The Cost Plus Fixed Fee (CPFF) contract type is often used for research and development or complex manufacturing where the scope of work is not precisely defined at the outset, or where innovation is a key component. In such cases, it allows the contractor to cover incurred costs while earning a predetermined profit (the fixed fee). Compared to fixed-price contracts, CPFF offers less cost certainty for the government, as the final price is not capped. However, it can be advantageous when risks are high and innovation is paramount, potentially leading to better technological outcomes. For value for money, fixed-price incentive contracts or even firm-fixed-price contracts (if scope is well-defined) generally offer better cost control. The effectiveness of CPFF hinges on stringent government oversight to manage costs and ensure the contractor remains incentivized to control expenditures, making 'value for money' highly dependent on the execution of the contract.

What are the primary risks associated with sole-source procurements in the defense sector?

Sole-source procurements in the defense sector carry several significant risks. The most prominent is the lack of price competition, which can lead to inflated prices and reduced value for taxpayer money. Without competing bids, the government has less leverage to negotiate favorable terms. Another risk is the potential for contractor complacency or reduced efficiency, as there is no competitive pressure to innovate or optimize processes. Furthermore, sole-source awards can create dependency on a single supplier, which can be problematic if that supplier faces financial difficulties, production issues, or if geopolitical circumstances change. Ensuring the justification for a sole-source award is robust and that adequate oversight is in place are critical mitigation strategies to address these inherent risks.

How does the $73.1 million contract value compare to historical spending on guided missile and space vehicle manufacturing?

The $73.1 million contract value for guided missile and space vehicle manufacturing represents a substantial investment. To contextualize this, one would need to examine historical spending data for similar systems or components within the Department of Defense. For instance, if this contract is for a specific missile program or a batch of space vehicle components, comparing its value to previous awards for the same or comparable items over time is crucial. Trends in defense spending, inflation rates, and technological advancements all influence contract values. A $73 million award could be considered moderate to large depending on the specific nature of the systems being produced. If this is a sole-source award for a critical but niche capability, the value might be justified. However, if similar systems have been procured competitively at lower price points, it raises concerns about the efficiency of this particular award.

What are the implications of the 'MA' state code (Massachusetts) for this contract?

The 'MA' state code indicates that the contract is associated with Massachusetts. This likely means that the contractor, Raytheon Company, has significant operations or facilities in Massachusetts where the work will be performed or managed. Massachusetts has a strong presence in the aerospace and defense industry, with numerous companies involved in advanced manufacturing, R&D, and technology. For this specific contract, the 'MA' designation suggests that a portion of the $73.1 million will be spent within the state, potentially supporting local jobs and the regional economy. It also implies that oversight and management might involve regional defense contract administration offices located in or responsible for that area.

Industry Classification

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

Product/Service Code: FIRE CONTROL EQPT.

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: $76,446,111

Exercised Options: $76,446,111

Current Obligation: $73,172,620

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline