Raytheon awarded $51.4M for Maverick missile guidance sections, a sole-source definitive contract

Contract Overview

Contract Amount: $51,397,686 ($51.4M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2017-10-31

End Date: 2020-04-09

Contract Duration: 891 days

Daily Burn Rate: $57.7K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: THIS CONTRACT IS FOR THE PRODUCTION OF LASER GUIDANCE CONTROL SECTIONS FOR THE MAVERICK AIR TO GROUND MISSILE.

Place of Performance

Location: TUCSON, PIMA County, ARIZONA, 85756

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $51.4 million to RAYTHEON COMPANY for work described as: THIS CONTRACT IS FOR THE PRODUCTION OF LASER GUIDANCE CONTROL SECTIONS FOR THE MAVERICK AIR TO GROUND MISSILE. Key points: 1. Contract awarded to Raytheon Company for critical missile components. 2. High value contract for specialized defense manufacturing. 3. Sole-source award indicates limited market alternatives or specific contractor capability. 4. Firm Fixed Price contract type shifts cost risk to the contractor. 5. Contract duration of 891 days suggests a substantial production run. 6. Geographic location of performance in Arizona. 7. North American Industry Classification System (NAICS) code 336414 points to guided missile manufacturing.

Value Assessment

Rating: fair

Benchmarking the value for this specific contract is challenging due to its sole-source nature and specialized product. The $51.4 million award over approximately 2.5 years for laser guidance control sections suggests a significant investment in defense capabilities. Without comparable sole-source awards or open market data for these specific components, a precise value-for-money assessment is difficult. However, the firm fixed-price structure aims to control costs, and the contract's duration implies a sustained need for these parts.

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 potential suppliers. This typically occurs when a specific contractor possesses unique capabilities, proprietary technology, or is the only source capable of meeting the government's requirements. The lack of competition means the government did not benefit from price discovery through a bidding process, potentially leading to higher costs than if multiple firms had competed.

Taxpayer Impact: Taxpayers may face higher costs due to the absence of competitive bidding. The government relies on negotiation and oversight to ensure a fair price in sole-source situations.

Public Impact

The primary beneficiaries are the U.S. Department of Defense, specifically units utilizing the Maverick air-to-ground missile system. The contract delivers essential components for the production and sustainment of advanced missile technology. Geographic impact is concentrated in Arizona, where Raytheon Company will perform the work. Workforce implications include skilled manufacturing jobs in the guided missile and space vehicle sector.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure on pricing.
Lack of transparency in sole-source negotiations can obscure true market value.
Dependence on a single supplier for critical defense components poses a supply chain risk.

Positive Signals

Firm Fixed Price contract type provides cost certainty for the government.
Award to an established defense contractor like Raytheon suggests a high likelihood of technical capability and delivery.
Production of critical missile components supports national defense objectives.

Sector Analysis

This contract falls within the Guided Missile and Space Vehicle Manufacturing sector (NAICS 336414), a highly specialized 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 needs and technological advancements in defense systems. Comparable spending benchmarks are difficult to establish due to the proprietary nature of many defense components and the limited number of qualified manufacturers.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. Furthermore, the 'ss' (small business) flag is also false. This suggests that the primary award was made directly to Raytheon Company, a large defense contractor. There is no explicit information provided regarding subcontracting plans to small businesses, which is a common requirement in larger defense contracts. The impact on the small business ecosystem is likely indirect, potentially through Raytheon's own supply chain, but not through direct set-aside opportunities on this specific award.

Oversight & Accountability

Oversight for this contract would typically be managed by the Defense Contract Management Agency (DCMA), as indicated by the 'sa' field. DCMA is responsible for ensuring contractors meet contractual requirements, including quality, delivery schedules, and cost controls. The firm fixed-price nature of the contract shifts some cost oversight responsibility to ensuring the contractor meets the agreed-upon price. Transparency is generally limited for sole-source defense contracts, but contract awards and basic details are publicly available through federal procurement databases. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Maverick Missile Program
Air-to-Ground Munitions
Defense Procurement
Missile Manufacturing
Guidance Systems

Risk Flags

Sole-source award
Potential for higher costs due to lack of competition
Supply chain dependency on a single contractor

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $51.4 million to RAYTHEON COMPANY. THIS CONTRACT IS FOR THE PRODUCTION OF LASER GUIDANCE CONTROL SECTIONS FOR THE MAVERICK AIR TO GROUND MISSILE.

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 $51.4 million.

What is the period of performance?

Start: 2017-10-31. End: 2020-04-09.

What is the historical spending pattern for Raytheon Company with the Department of Defense for similar missile components?

Analyzing historical spending for Raytheon Company with the Department of Defense for similar missile components requires access to extensive federal procurement databases. However, Raytheon is a major defense contractor with a long history of supplying various missile systems and components. Their portfolio includes a wide range of products, from tactical missiles like the Stinger and Javelin to larger systems. Spending on specific components like guidance control sections for the Maverick missile would fluctuate based on production cycles, modernization efforts, and operational tempo. Without specific historical data for this exact component or product line, it's difficult to provide precise figures. However, it is reasonable to assume Raytheon has received substantial funding over the years for missile-related production, reflecting its significant role in the defense industrial base. The $51.4 million for this contract represents a portion of that ongoing relationship.

How does the firm fixed-price (FFP) contract type impact risk and potential cost savings for the government in this scenario?

The Firm Fixed Price (FFP) contract type places the majority of the cost risk on the contractor, Raytheon Company, in this case. This means that Raytheon is obligated to complete the work for the agreed-upon price, regardless of their actual costs. If their costs exceed the contract price, they absorb the loss. Conversely, if their costs are lower than anticipated, they realize a higher profit margin. For the government, this structure provides significant cost certainty, as the total price is fixed. This helps in budget planning and avoids the risk of cost overruns that can occur with other contract types like Cost-Plus contracts. In a sole-source situation, the FFP structure is particularly important for the government to lock in a price and incentivize the contractor to manage their costs efficiently, although the absence of competition means the initial price negotiation is critical.

What are the potential risks associated with a sole-source award for critical defense components like missile guidance sections?

Sole-source awards for critical defense components present several potential risks. Firstly, the lack of competition can lead to higher prices than might be achieved in a competitive bidding process, as the government does not benefit from market forces driving down costs. Secondly, it can foster complacency in the contractor, potentially reducing incentives for innovation or efficiency improvements, as there is no direct competitor to outperform. Thirdly, it creates a dependency on a single supplier, making the supply chain vulnerable. If the sole-source contractor experiences production issues, financial instability, or decides to exit the market, the government could face significant disruptions in acquiring essential components. This dependency also limits the government's flexibility in adapting to new technologies or alternative solutions.

What is the significance of the NAICS code 336414 (Guided Missile and Space Vehicle Manufacturing) in understanding this contract?

The North American Industry Classification System (NAICS) code 336414, 'Guided Missile and Space Vehicle Manufacturing,' is highly significant as it precisely categorizes the industry and nature of the goods being procured. This code indicates that the contract is for the production of highly specialized, technologically advanced components for guided missiles. Companies operating under this NAICS code typically possess advanced manufacturing capabilities, rigorous quality control systems, and often hold specific security clearances due to the sensitive nature of their products. Understanding this code helps contextualize the contract's value, the complexity of the work, the specialized workforce required, and the limited number of potential manufacturers capable of fulfilling such requirements. It underscores the defense-centric nature of the procurement and the high technical standards involved.

How does the contract duration (891 days) relate to the production needs for Maverick missile guidance sections?

A contract duration of 891 days, approximately 2.5 years, for the production of laser guidance control sections for the Maverick missile suggests a substantial and sustained need for these components. This duration indicates that the contract is likely intended to cover a significant production run, potentially to replenish existing inventories, support new missile production lines, or fulfill ongoing operational requirements. Short durations might imply rapid prototyping or small-batch orders, while longer durations typically signify larger-scale manufacturing efforts. The extended period also allows the contractor, Raytheon, to plan production schedules, manage supply chains, and potentially achieve economies of scale, which could contribute to cost efficiency over the contract's life, assuming effective management.

Industry Classification

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

Product/Service Code: GUIDED MISSLES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: FA821317R3030

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: RTX Corp (UEI: 001344142)

Address: 1151 E HERMANS RD, TUCSON, AZ, 85756

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: $51,397,686

Exercised Options: $51,397,686

Current Obligation: $51,397,686

Subaward Activity

Number of Subawards: 24

Total Subaward Amount: $44,594,413

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline