Raytheon Company awarded $900.5M contract for guided missile and space vehicle parts, raising questions about competition

Contract Overview

Contract Amount: $900,509,700 ($900.5M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2006-09-11

End Date: 2012-10-31

Contract Duration: 2,242 days

Daily Burn Rate: $401.7K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Place of Performance

Location: MCKINNEY, COLLIN County, TEXAS, 75071, UNITED STATES OF AMERICA

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $900.5 million to RAYTHEON COMPANY for work described as: Key points: 1. The contract's value of over $900 million represents a significant investment in defense manufacturing. 2. Awarded as 'NOT COMPETED,' this contract signals a lack of competitive bidding, potentially impacting price. 3. The duration of 2242 days (over 6 years) suggests a long-term need for these specialized parts. 4. The contract's focus on 'Other Guided Missile and Space Vehicle Parts' places it within a critical defense sector. 5. The fixed-price nature of the contract aims to control costs for the government. 6. The award to Raytheon Company, a major defense contractor, is consistent with industry practices for complex systems.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging without specific details on the parts procured and their market rates. However, the substantial dollar amount warrants scrutiny, especially given the lack of competition. The firm fixed-price structure is a positive indicator for cost control, but the absence of competitive bids means there's no direct market validation of the pricing. Without comparative data on similar sole-source procurements or detailed cost breakdowns, it's difficult to definitively assess value for money.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded under a sole-source justification, meaning it was not openly competed. This typically occurs when only one responsible source is available or when a compelling reason exists to bypass full and open competition. The lack of multiple bidders means the government did not benefit from the price discovery and innovation that typically arises from a competitive bidding process.

Taxpayer Impact: Taxpayers may have paid a premium due to the absence of competitive pressure. The government's ability to negotiate the best possible price is diminished in a sole-source scenario.

Public Impact

The primary beneficiaries are the Department of Defense and its operational readiness, ensuring the availability of critical missile and space vehicle components. The contract supports the manufacturing and supply chain for advanced defense systems, contributing to national security. The geographic impact is primarily centered around Raytheon's facilities in Texas, potentially supporting local employment and economic activity. This contract sustains specialized manufacturing capabilities within the defense industrial base.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition raises concerns about potential overpricing and reduced value for taxpayer dollars.
Sole-source awards can limit opportunities for other capable manufacturers to enter the market or compete for defense contracts.
The long contract duration could lead to complacency or reduced urgency in cost management if not rigorously overseen.

Positive Signals

The firm fixed-price contract type provides cost certainty for the government.
Awarding to a known, established contractor like Raytheon suggests a focus on reliability and proven performance for critical defense components.
The contract supports essential defense capabilities, contributing to national security objectives.

Sector Analysis

This contract falls within the Guided Missile and Space Vehicle Manufacturing sector, a highly specialized and critical segment of the aerospace and defense industry. This sector is characterized by high barriers to entry, significant R&D investment, and stringent quality control requirements. Spending in this area is driven by national security priorities and technological advancements. Comparable spending benchmarks are difficult to establish due to the proprietary nature of many defense systems, but large-scale awards to prime contractors are common for complex weapon systems and their components.

Small Business Impact

The data indicates this contract was not set aside for small businesses (ss: false) and does not explicitly mention subcontracting goals for small businesses. As a sole-source award to a large prime contractor, there is a potential risk that subcontracting opportunities for small businesses may be limited or not fully realized. Further investigation into Raytheon's subcontracting plan would be necessary to assess the actual impact on the small business ecosystem.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Defense's contracting and program management offices. Given the sole-source nature, oversight would focus on ensuring performance against contract requirements, adherence to the fixed-price terms, and managing any contract modifications. Transparency might be limited due to the classified or sensitive nature of the components. Inspector General jurisdiction would apply to investigations of fraud, waste, or abuse.

Related Government Programs

Guided Missile Manufacturing
Space Vehicle Manufacturing
Defense Procurement
Aerospace Parts Manufacturing
Raytheon Company Contracts
Department of the Army Procurement

Risk Flags

Sole-source award
Lack of competition
High contract value
Long contract duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $900.5 million to RAYTHEON COMPANY. See the official description on USAspending.

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 $900.5 million.

What is the period of performance?

Start: 2006-09-11. End: 2012-10-31.

What specific types of guided missile and space vehicle parts are being procured under this contract?

The contract identifies the North American Industry Classification System (NAICS) code 336419, which covers 'Other Guided Missile and Space Vehicle Parts and Auxiliary Equipment Manufacturing.' This broad classification suggests the contract could encompass a wide range of components, including but not limited to, structural elements, propulsion system parts, guidance and control system components, electronic subsystems, or auxiliary equipment necessary for the operation and maintenance of guided missiles and space vehicles. Without further details or contract line item numbers (CLINs), the precise nature of the parts remains unspecified. This lack of specificity is common for high-level contract awards but makes detailed value analysis challenging.

What was the justification for awarding this contract on a sole-source basis?

The contract was awarded as 'NOT COMPETED,' indicating a sole-source justification. Common reasons for sole-source awards in defense contracting include: unique capabilities possessed by only one contractor, urgent and compelling needs where competition is not feasible, or when the government has previously invested significantly in a specific system and requires follow-on support from the original manufacturer. For a contract of this magnitude and duration, the justification likely relates to specialized technology, proprietary designs, or the need for seamless integration with existing platforms where only Raytheon could provide the required parts. A formal Justification for Other Than Full and Open Competition (JOFOC) would typically be documented internally by the agency.

How does the $900.5 million contract value compare to historical spending on similar parts or by the same agency?

Comparing the $900.5 million contract value requires context regarding the specific parts and the typical spending patterns of the Department of the Army for guided missile and space vehicle components. While this is a substantial sum, it may be in line with the procurement of complex, high-technology components for major defense systems over a multi-year period. Historical spending data for NAICS code 336419 or specific weapon systems procured by the Army would be needed for a direct comparison. Given the sole-source nature, it's harder to benchmark against competitive awards. However, the sheer scale suggests these are critical, potentially high-cost items integral to significant defense programs.

What are the potential risks associated with a sole-source contract of this size and duration?

The primary risks associated with a sole-source contract of this magnitude ($900.5M) and duration (2242 days) include: 1) Potential for inflated pricing due to the lack of competitive pressure, leading to reduced value for taxpayer money. 2) Reduced incentive for the contractor to innovate or improve efficiency beyond contractually mandated levels. 3) Limited opportunities for other capable small and large businesses to participate in this segment of the defense supply chain. 4) Risk of vendor lock-in, making it difficult or costly to switch suppliers in the future. 5) Potential for cost overruns if the fixed-price contract does not adequately account for unforeseen complexities or material cost increases, although the fixed-price nature does shift some risk to the contractor.

What is Raytheon Company's track record with the Department of Defense, particularly in this product category?

Raytheon Company (now RTX) is a major, well-established defense contractor with a long history of supplying complex systems and components to the Department of Defense. They are known for their expertise in areas such as missiles, radar, and aerospace technologies. Their track record with the DoD is extensive, involving numerous large-scale contracts across various branches. For guided missile and space vehicle parts (NAICS 336419), Raytheon is a significant player, often involved in the development and production of critical subsystems and components for advanced platforms. Their experience suggests a high level of technical capability and familiarity with DoD requirements, which likely contributed to their selection for this sole-source award.

Industry Classification

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

Product/Service Code: GUIDED MISSLES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: W31P4Q05R0328

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 2501 W UNIVERSITY DR, MCKINNEY, TX, 75071

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

Contract Characteristics

Cost or Pricing Data: YES

Timeline