Raytheon Company awarded $1.06B sole-source contract for defense systems, spanning over 7 years

Contract Overview

Contract Amount: $1,061,028,427 ($1.1B)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2007-07-25

End Date: 2015-04-30

Contract Duration: 2,836 days

Daily Burn Rate: $374.1K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: AWARD SOLE SOURCE LRAS3 MULTI-YEAR CONTRACT

Place of Performance

Location: MCKINNEY, COLLIN County, TEXAS, 75071

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $1.06 billion to RAYTHEON COMPANY for work described as: AWARD SOLE SOURCE LRAS3 MULTI-YEAR CONTRACT Key points: 1. Contract awarded as sole-source, limiting competitive price discovery. 2. Long contract duration of 2836 days suggests a stable, long-term need. 3. Firm Fixed Price contract type shifts cost risk to the contractor. 4. Awarded by the Department of Defense, indicating a strategic national security focus. 5. Contractor is Raytheon Company, a major defense industry player. 6. No small business set-aside, potentially limiting opportunities for smaller firms.

Value Assessment

Rating: fair

Benchmarking the value of this $1.06 billion contract is challenging without specific performance metrics or comparable sole-source awards. The firm fixed-price structure is generally favorable for the government in managing cost overruns. However, the absence of competition inherently removes a key mechanism for ensuring the best possible price. The long duration suggests a need for sustained support, but the overall value-for-money proposition is difficult to assess without more granular data on the services or systems procured.

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 approach is typically used when only one vendor possesses the necessary capabilities, technology, or security clearances, or in cases of urgent need. The lack of competition means that the government did not benefit from the price reductions and innovation that can arise from a competitive bidding process. The government likely negotiated terms directly with Raytheon Company.

Taxpayer Impact: Sole-source awards mean taxpayers may not be getting the most competitive pricing available, as the usual market forces of competition are absent.

Public Impact

The primary beneficiaries are the Department of Defense and its operational units requiring the specific defense systems provided. Services delivered likely include the manufacturing, integration, and sustainment of advanced search, detection, and navigation systems. Geographic impact is national, supporting defense readiness across various military branches and potentially global operations. Workforce implications include employment at Raytheon Company facilities and its supply chain, particularly in Texas where the contractor is located.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure on pricing.
Long contract duration may obscure potential inefficiencies over time.
Lack of small business set-aside could limit broader economic participation.

Positive Signals

Firm Fixed Price contract shifts cost risk to the contractor.
Award to a major, established defense contractor suggests reliability.
Long-term contract indicates a critical and sustained need for the systems.

Sector Analysis

This contract falls within the 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' sector, a critical component of the defense industry. This industry is characterized by high R&D investment, stringent quality requirements, and significant government procurement. The market size is substantial, driven by national security needs. Comparable spending benchmarks would involve other large-scale defense system procurements, often involving sole-source or limited competition due to specialized technology.

Small Business Impact

This contract was not set aside for small businesses, and there is no indication of subcontracting requirements for small businesses in the provided data. This means that opportunities for small businesses to participate in this significant $1.06 billion award are likely limited, unless they are direct suppliers to Raytheon Company. The absence of a small business focus in this large contract could represent a missed opportunity to foster growth and innovation within the small business defense ecosystem.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Defense's contracting and program management offices, with potential involvement from the Defense Contract Management Agency (DCMA) for contract administration. Inspector General (IG) audits could be initiated to review performance, cost, and compliance. Transparency is often limited for sole-source defense contracts, but reporting requirements would be stipulated within the contract terms.

Related Government Programs

Defense Procurement
Navigation Systems
Search and Detection Equipment
Aeronautical Systems
Nautical Systems
Raytheon Company Contracts

Risk Flags

Sole-source award
Lack of competition
Long contract duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $1.06 billion to RAYTHEON COMPANY. AWARD SOLE SOURCE LRAS3 MULTI-YEAR CONTRACT

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 $1.06 billion.

What is the period of performance?

Start: 2007-07-25. End: 2015-04-30.

What specific defense systems or components are covered under this $1.06 billion contract?

The provided data indicates the contract falls under the North American Industry Classification System (NAICS) code 334511, which covers 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing.' While the specific systems are not detailed, this suggests the contract likely involves the production, integration, or sustainment of advanced radar, sonar, guidance systems, or related instrumentation crucial for military operations. These could range from components for aircraft and ships to standalone surveillance or targeting equipment. The sole-source nature implies these systems are highly specialized or proprietary to Raytheon Company.

How does the $1.06 billion award compare to Raytheon's typical contract values in this sector?

Without access to Raytheon's complete contract portfolio and historical spending data, a direct comparison is difficult. However, $1.06 billion is a substantial sum, indicative of a major program or a significant long-term supply agreement. Raytheon is a prime contractor in the defense industry, frequently awarded large-value contracts for complex systems. This award represents a significant portion of their business within the specified NAICS code over its duration. Further analysis would require benchmarking against other large sole-source or competed contracts for similar defense systems awarded to Raytheon or its competitors.

What are the primary risks associated with a sole-source award of this magnitude and duration?

The primary risk with a sole-source award of this magnitude is the lack of competitive pressure, which can lead to suboptimal pricing for the government and taxpayers. Without competing bids, there's less incentive for the contractor to minimize costs or maximize efficiency. The long duration (over 7 years) exacerbates this risk, as inefficiencies or price increases could compound over time. Additionally, sole-source awards can create vendor lock-in, making it difficult and costly to switch providers in the future. There's also a risk that the government's needs might evolve, and the sole-source solution may become less optimal without the flexibility offered by a competitive market.

What does the 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' sector entail in terms of government spending?

This sector is a critical and substantial part of government, particularly defense, spending. It encompasses the development and procurement of technologies essential for military operations, including radar systems for surveillance and targeting, sonar for underwater detection, navigation systems for aircraft and vessels, and guidance systems for munitions and platforms. Spending in this area is often characterized by long development cycles, high research and development costs, and a need for highly specialized, often classified, technologies. Consequently, contracts within this sector frequently involve large sums and can be awarded on a sole-source or limited-competition basis due to the proprietary nature of the technology or the specialized expertise required.

How does the Firm Fixed Price (FFP) contract type mitigate risk for the government in this sole-source scenario?

The Firm Fixed Price (FFP) contract type is advantageous for the government, especially in a sole-source context, as it shifts the majority of the cost risk to the contractor, Raytheon Company. Under an FFP agreement, the price is set and not subject to adjustment based on the contractor's actual costs. This means that if Raytheon's costs increase during performance, their profit margin will decrease, but the government's payment obligation remains fixed. This provides budget certainty for the Department of Defense. However, it's crucial that the initial price negotiated is fair and reasonable, as the absence of competition means the government relies heavily on its negotiation skills and market intelligence to set an appropriate baseline price.

What is the significance of the contract being awarded in Texas (ST: TX)?

The indication that the contractor's facility or operations related to this contract are in Texas (ST: TX) signifies a geographic concentration of economic activity and employment related to this federal spending. Texas has a significant defense industry presence, and this contract would contribute to jobs, supply chain activity, and technological development within the state. For taxpayers nationwide, the location itself doesn't directly impact cost-effectiveness, but it highlights the distribution of federal contract dollars and their impact on regional economies. It may also suggest specific state-level incentives or infrastructure supporting defense manufacturing.

Industry Classification

NAICS: Manufacturing › Navigational, Measuring, Electromedical, and Control Instruments Manufacturing › Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing

Product/Service Code: COMM/DETECT/COHERENT RADIATION

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: 2501 W UNIVERSITY DR, MC KINNEY, TX, 75071

Business Categories: Category Business, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $1,061,621,277

Exercised Options: $1,061,621,277

Current Obligation: $1,061,028,427

Contract Characteristics

Consolidated Contract: Yes

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline