Raytheon Company awarded $66M contract for Small Diameter Bomb II Lot 1 by the Department of Defense

Contract Overview

Contract Amount: $66,049,764 ($66.0M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2015-06-12

End Date: 2017-10-31

Contract Duration: 872 days

Daily Burn Rate: $75.7K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 1

Pricing Type: FIXED PRICE INCENTIVE

Sector: Defense

Official Description: SMALL DIAMETER BOMB II LOT 1

Place of Performance

Location: TUCSON, PIMA County, ARIZONA, 85756

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $66.0 million to RAYTHEON COMPANY for work described as: SMALL DIAMETER BOMB II LOT 1 Key points: 1. Contract awarded via full and open competition, suggesting a competitive bidding process. 2. The contract type is Fixed Price Incentive, which aims to balance cost control with performance incentives. 3. The contract duration is 872 days, indicating a medium-term project. 4. The award was made by the Department of the Air Force, a key branch within the DoD. 5. The product falls under Ammunition (except Small Arms) Manufacturing, a critical defense sector. 6. The contract was awarded in Arizona, a state with a significant defense industry presence.

Value Assessment

Rating: good

The contract value of $66 million for the Small Diameter Bomb II Lot 1 appears to be within a reasonable range for advanced munitions development and production. Benchmarking against similar complex weapon system contracts would provide a more precise value-for-money assessment. The Fixed Price Incentive (FPI) contract type suggests an effort to manage costs while encouraging contractor performance, which is a positive sign for value.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that all responsible sources were permitted to submit bids. The number of bidders is not specified, but the competitive nature of the award process is expected to drive price discovery and potentially lead to more favorable pricing for the government compared to sole-source or limited competition scenarios.

Taxpayer Impact: A competitive award process generally benefits taxpayers by ensuring that the government receives the best possible value through market forces, encouraging efficiency and innovation from bidders.

Public Impact

The primary beneficiaries are the U.S. Air Force and potentially other branches of the Department of Defense, receiving advanced munitions capabilities. The services delivered include the production and supply of Small Diameter Bomb II munitions. The geographic impact is primarily within Arizona, where the contractor is located and likely where production will occur. Workforce implications include potential job creation and sustainment within the defense manufacturing sector in Arizona.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of specific details on the number of bidders in the full and open competition.
The Fixed Price Incentive (FPI) contract type can lead to cost overruns if not managed carefully, despite its incentive structure.
Limited information on the specific performance metrics and incentive targets within the FPI contract.
The duration of the contract (872 days) may not fully cover the lifecycle needs of the munitions.
No explicit mention of small business subcontracting goals or achievements.

Positive Signals

Awarded through full and open competition, indicating a robust and fair bidding process.
The use of a Fixed Price Incentive contract type aims to align contractor and government interests for cost and performance.
The contract is for a critical defense capability (Small Diameter Bomb II), addressing a key military need.
The contractor, Raytheon Company, is a major defense contractor with established expertise in this area.
The contract award is associated with a specific manufacturing location in Arizona, potentially supporting regional economic activity.

Sector Analysis

The defense sector, particularly munitions manufacturing, is characterized by high technological complexity, significant R&D investment, and long procurement cycles. Contracts like this are crucial for maintaining military readiness and technological superiority. The market is dominated by a few large, specialized defense contractors. Spending in this sub-sector is driven by evolving threat landscapes and the need for precision-guided munitions. Comparable spending benchmarks would typically involve other lots or variants of advanced munition systems.

Small Business Impact

This contract does not indicate any specific small business set-aside provisions (ss=false, sb=false). As a large-scale defense procurement, there may be opportunities for small businesses to participate as subcontractors to Raytheon Company. The extent of small business involvement will depend on Raytheon's subcontracting plan and the specific requirements of the contract, which are not detailed here. Analysis of subcontracting reports would be necessary to assess the actual impact on the small business ecosystem.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Air Force's contracting and program management offices. Accountability measures are embedded within the Fixed Price Incentive contract terms, linking payment to performance and cost targets. Transparency is generally maintained through contract award announcements and public contract databases, though specific details of performance and cost may be sensitive. The Inspector General of the Department of Defense would have jurisdiction for audits and investigations related to potential fraud, waste, or abuse.

Related Government Programs

Precision-Guided Munitions
Air-to-Ground Weapons Systems
Advanced Bomb Technology
Department of Defense Ammunition Procurement
Air Force Weapon Systems Development

Risk Flags

Potential for cost overruns under FPI contract type if not managed effectively.
Supply chain vulnerability for specialized components.
Ensuring consistent manufacturing quality for advanced munitions.
Integration risks with diverse aircraft platforms.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $66.0 million to RAYTHEON COMPANY. SMALL DIAMETER BOMB II LOT 1

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 $66.0 million.

What is the period of performance?

Start: 2015-06-12. End: 2017-10-31.

What is the historical spending trend for the Small Diameter Bomb II program?

Analyzing historical spending for the Small Diameter Bomb II (SDB II) program requires examining multiple contract awards over its lifecycle. Initial development and testing phases typically involve significant R&D funding, followed by production contracts like this one. Data from previous lots and contract modifications would reveal trends in unit costs, total program expenditure, and the pace of procurement. For instance, comparing the cost per unit in Lot 1 to subsequent lots could indicate economies of scale or changes in production complexity. Understanding the total obligated amounts across all contracts for SDB II provides a comprehensive view of the program's financial trajectory and its sustained investment by the Department of Defense.

How does the unit cost of the Small Diameter Bomb II in this contract compare to similar munitions?

Directly comparing the unit cost of the Small Diameter Bomb II (SDB II) from this $66 million contract (Lot 1) to similar munitions is challenging without knowing the exact number of units procured. However, SDB II is a highly advanced, multi-mode guided munition designed for precision strikes against moving and stationary targets in adverse weather. Its sophisticated technology, including seeker systems and guidance packages, inherently positions its unit cost higher than simpler unguided munitions or older guided bombs. Benchmarking would ideally involve comparing it to other state-of-the-art, multi-purpose precision-guided munitions from Raytheon or competitors like Lockheed Martin, considering factors like range, payload, and guidance capabilities. Publicly available data on unit costs for comparable systems, often found in defense budget documents or GAO reports, would be essential for a thorough assessment.

What are the key performance metrics and incentive targets within this Fixed Price Incentive contract?

The specific performance metrics and incentive targets for this Fixed Price Incentive (FPI) contract are not publicly detailed in the award abstract. Typically, FPI contracts establish target costs, target profits, and ceiling prices. Performance incentives are often tied to factors such as delivery schedules, quality standards, or specific technical performance thresholds. For the Small Diameter Bomb II, these could relate to yield rates, reliability, seeker accuracy, or integration with specific aircraft platforms. The 'incentive' aspect means that if the contractor achieves better-than-target performance (e.g., lower cost, faster delivery), both the government and the contractor share in the savings. Conversely, if performance falls short, the contractor's profit is reduced, potentially up to the ceiling price. Detailed contract clauses would outline these specifics.

What is Raytheon Company's track record with the Small Diameter Bomb II program and similar contracts?

Raytheon Company has a well-established track record as the prime contractor for the Small Diameter Bomb II (SDB II) program, having developed and produced previous lots. Their extensive experience in developing and manufacturing advanced munitions, including other guided bomb systems and missiles, provides a strong foundation for this contract. Historically, Raytheon has demonstrated capability in delivering complex weapon systems to the Department of Defense. Performance on previous SDB II lots, including adherence to schedule, cost performance, and technical success, would be key indicators. Reviewing past contract awards, modifications, and any associated performance reports or audits would offer further insight into their reliability and effectiveness in executing such programs.

What are the potential risks associated with the production of the Small Diameter Bomb II Lot 1?

Potential risks associated with the production of the Small Diameter Bomb II Lot 1 include supply chain disruptions for specialized components, manufacturing quality control issues, and potential cost overruns, particularly given the FPI contract structure. Technical risks might involve ensuring consistent performance across all environmental conditions and integration challenges with various delivery platforms. Schedule risks could arise from unforeseen production delays or testing failures. Furthermore, evolving geopolitical landscapes or changes in defense priorities could impact future orders or the program's overall sustainment. The complexity of the weapon system itself, with its advanced seeker and guidance technologies, inherently carries production risks that require diligent management.

How does the 'full and open competition' designation impact the overall cost-effectiveness of this contract?

The designation of 'full and open competition' is a significant positive indicator for cost-effectiveness. It implies that the Department of Defense solicited bids from all responsible sources, fostering a competitive environment. This process encourages potential bidders, like Raytheon, to offer their best pricing and most efficient production methods to win the contract. The presence of multiple bidders typically drives down prices through market forces, preventing a single supplier from dictating terms. While the specific number of bidders isn't provided, the competitive nature suggests that the government is likely to achieve a more favorable price than if the contract had been awarded through limited or sole-source procedures. This competitive pressure also incentivizes contractors to innovate and reduce costs throughout the contract performance period.

Industry Classification

NAICS: Manufacturing › Other Fabricated Metal Product Manufacturing › Ammunition (except Small Arms) Manufacturing

Product/Service Code: AMMUNITION AND EXPLOSIVES

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: FA867209R0002

Offers Received: 1

Pricing Type: FIXED PRICE INCENTIVE (L)

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: $711,649,408

Exercised Options: $66,049,764

Current Obligation: $66,049,764

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline