DoD's $12M Raytheon contract for missile support faces scrutiny over lack of competition

Contract Overview

Contract Amount: $12,075,663 ($12.1M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2024-07-29

End Date: 2026-01-31

Contract Duration: 551 days

Daily Burn Rate: $21.9K/day

Competition Type: NOT COMPETED

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: ADVANCED MEDIUM RANGE AIR TO AIR MISSILE PROGRAM SUPPORT AND SUSTAINMENT - NON-WARRANTY REPAIRS

Place of Performance

Location: TUCSON, PIMA County, ARIZONA, 85756

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $12.1 million to RAYTHEON COMPANY for work described as: ADVANCED MEDIUM RANGE AIR TO AIR MISSILE PROGRAM SUPPORT AND SUSTAINMENT - NON-WARRANTY REPAIRS Key points: 1. Contract awarded to Raytheon Company for critical missile program support. 2. Significant portion of contract value allocated to engineering services. 3. Limited competition raises concerns about potential overpricing and value for money. 4. Contract duration extends over 1.5 years, indicating ongoing need for services. 5. Geographic concentration in Arizona for contract performance. 6. Lack of small business involvement noted in contract award details.

Value Assessment

Rating: questionable

The contract's value of $12,075,663 for engineering services related to the Advanced Medium Range Air to Air Missile program is difficult to benchmark without specific performance metrics and comparable contract data. Given the sole-source nature of the award, there is an inherent risk that the pricing may not reflect competitive market rates. Further analysis would be needed to compare the per-unit cost of services or the overall value proposition against industry standards or previous contracts for similar support.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one vendor, Raytheon Company, was solicited. This approach bypasses the standard competitive bidding process, which typically involves multiple companies vying for the contract. While sole-source awards can be justified in specific circumstances, such as when a particular contractor possesses unique capabilities or proprietary knowledge essential for the service, the lack of competition here limits the government's ability to explore alternative solutions and potentially secure more favorable pricing.

Taxpayer Impact: Sole-source awards can lead to higher costs for taxpayers as the absence of competition reduces pressure on the contractor to offer the most competitive price. This can result in less efficient use of public funds compared to contracts secured through open competition.

Public Impact

The primary beneficiary is the Department of Defense, specifically the Air Force, which relies on the sustained readiness and support of the Advanced Medium Range Air to Air Missile program. Services delivered include essential engineering support and non-warranty repairs, crucial for maintaining the operational effectiveness of advanced missile systems. The contract's performance is geographically concentrated in Arizona, potentially impacting the local economy through employment and related business activities. While not explicitly detailed, such contracts often support a specialized workforce of engineers and technicians, contributing to the high-tech defense sector's employment base.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competitive bidding may lead to inflated costs for taxpayers.
Sole-source award limits opportunities for other qualified companies to compete.
Potential for vendor lock-in due to specialized nature of missile systems.
Limited transparency in pricing due to absence of market comparison.
No explicit small business participation noted, potentially excluding smaller firms.

Positive Signals

Award ensures continued support for a critical defense asset (AMRAAM).
Contract provides necessary engineering expertise for complex systems.
Long-term sustainment support is vital for national security readiness.
Raytheon is a known entity with established expertise in this domain.
Fixed-price contract type offers some cost predictability.

Sector Analysis

The defense sector, particularly aerospace and missile systems, is characterized by high barriers to entry, significant R&D investment, and long product lifecycles. Contracts for sustainment and support of advanced weapon systems are common and critical for maintaining military readiness. The market for such specialized engineering services is often dominated by a few large prime contractors like Raytheon, which possess the necessary technical expertise, security clearances, and established relationships with the Department of Defense. Spending benchmarks for similar sustainment contracts can vary widely based on the complexity of the system, the scope of services required, and the level of competition.

Small Business Impact

This contract does not appear to include any small business set-aside provisions, nor are there indications of significant subcontracting opportunities for small businesses within the provided data. The sole-source nature of the award further limits the potential for small business participation, as the primary contract is directly awarded to a large prime contractor. This could represent a missed opportunity to leverage the capabilities of the small business defense industrial base and foster innovation within that segment.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contracting and program management offices. Accountability measures are typically embedded within the contract terms, including performance standards, delivery schedules, and payment milestones. Transparency is often limited in sole-source procurements, though contract award details are generally made public. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Advanced Medium Range Air to Air Missile (AMRAAM) Program
Department of Defense Weapon System Sustainment
Aerospace Engineering Services Contracts
Defense Logistics Agency Support Contracts
Air Force Weapon System Maintenance and Repair

Risk Flags

Sole-source award lacks competitive justification.
Potential for inflated pricing due to lack of competition.
Limited transparency in cost and performance metrics.
No clear small business participation outlined.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $12.1 million to RAYTHEON COMPANY. ADVANCED MEDIUM RANGE AIR TO AIR MISSILE PROGRAM SUPPORT AND SUSTAINMENT - NON-WARRANTY REPAIRS

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 Air Force).

What is the total obligated amount?

The obligated amount is $12.1 million.

What is the period of performance?

Start: 2024-07-29. End: 2026-01-31.

What is Raytheon Company's track record with the Department of Defense for similar missile support contracts?

Raytheon Company, now part of RTX, has a long and extensive history of contracting with the Department of Defense, particularly for missile systems. They are a primary developer and manufacturer of the Advanced Medium Range Air to Air Missile (AMRAAM) itself. Their track record includes numerous contracts for the production, sustainment, upgrades, and support of various missile programs. While this extensive experience suggests a high level of capability and familiarity with DoD requirements, it also means they are often the sole or primary source for specialized support, which can contribute to sole-source award justifications. Analyzing past performance reviews, contract modifications, and any past disputes or overcharge investigations related to Raytheon's missile support services would provide a more comprehensive picture of their reliability and cost-effectiveness in similar engagements.

How does the $12M contract value compare to historical spending on AMRAAM support?

Determining precise historical spending comparisons for this specific $12.07 million contract requires access to detailed historical contract databases and program budget information. However, the Advanced Medium Range Air to Air Missile (AMRAAM) is a cornerstone air-to-air weapon system for the U.S. Air Force and Navy, with total program costs spanning billions of dollars over its lifecycle. Sustainment and support contracts, including engineering services and repairs, represent a significant portion of this lifecycle cost. Annual spending on AMRAAM sustainment can fluctuate based on operational tempo, inventory levels, and modernization efforts. A $12 million contract for engineering services and repairs over approximately 1.5 years appears to be a component of a larger, ongoing sustainment effort. Without specific data on the scope of 'non-warranty repairs' and the exact engineering tasks, a direct value-for-money comparison is challenging, but it falls within the expected range for specialized support of a major defense program.

What are the primary risks associated with a sole-source award for critical missile sustainment?

The primary risks associated with a sole-source award for critical missile sustainment, such as this contract for AMRAAM support, revolve around cost, innovation, and vendor dependency. Without competition, the government loses the leverage to negotiate the best possible price, potentially leading to higher costs for taxpayers. The lack of competitive pressure can also stifle innovation, as the incumbent contractor may have less incentive to develop more efficient or cost-effective support methods. Furthermore, relying on a single source for critical sustainment can create vendor lock-in, making it difficult and costly to switch providers in the future, even if performance or pricing becomes unsatisfactory. This dependency also poses a risk to program continuity if the sole-source provider faces financial difficulties or strategic shifts.

What does the contract's Firm Fixed Price (FFP) type imply for cost control and risk?

A Firm Fixed Price (FFP) contract type, like the one awarded to Raytheon for AMRAAM support, is generally favored by the government for its cost control predictability. Under an FFP contract, the contractor agrees to a set price for the specified work, regardless of the actual costs incurred. This shifts the primary cost risk from the government to the contractor. If Raytheon's costs exceed the agreed-upon price, their profit margin will decrease; conversely, if they manage costs effectively, their profit increases. For the government, this means the total cost of the contract is largely fixed, making budgeting more straightforward. However, the effectiveness of FFP in controlling costs heavily relies on a well-defined scope of work and accurate initial pricing, which can be challenging in sole-source situations where market benchmarks are less available.

Are there any performance metrics or Key Performance Indicators (KPIs) specified for this contract?

The provided data snippet does not explicitly detail the performance metrics or Key Performance Indicators (KPIs) for this specific contract. However, for a contract of this nature, involving engineering services and repairs for a critical defense asset like the AMRAAM, it is highly probable that such metrics are included in the full contract documentation. Typical KPIs might include response times for repair requests, turnaround times for specific repair actions, quality of repairs (e.g., defect rates), adherence to technical specifications, and delivery schedules for engineering reports or solutions. The effectiveness of the 'non-warranty repairs' and the value derived from the 'engineering services' would be assessed against these defined performance standards. The absence of this information in the summary data limits a full assessment of contractor performance risk.

What is the significance of the contract being for 'non-warranty repairs'?

The designation 'non-warranty repairs' signifies that the required repair services fall outside the scope of any manufacturer's warranty that might have been applicable to the AMRAAM systems. This implies that the systems are either out of their warranty period, or the specific type of damage or malfunction is not covered under the original warranty terms. Consequently, the cost of these repairs is borne directly by the Department of Defense. Awarding a contract for these services, especially on a sole-source basis, underscores the ongoing need for specialized maintenance and sustainment beyond standard product guarantees. It highlights the long-term operational costs associated with complex military hardware and the necessity for continuous support infrastructure.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Architectural, Engineering, and Related Services › Engineering Services

Product/Service Code: SUPPORT SVCS (PROF, ADMIN, MGMT) › PROFESSIONAL SERVICES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: RTX Corp

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: $12,075,663

Exercised Options: $12,075,663

Current Obligation: $12,075,663

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: FA867520D0020

IDV Type: IDC

Timeline