DoD Awards Raytheon $57.3M for Small Diameter Bomb II Production, Facing Limited Competition

Contract Overview

Contract Amount: $57,319,224 ($57.3M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2016-09-08

End Date: 2020-06-30

Contract Duration: 1,391 days

Daily Burn Rate: $41.2K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: FIXED PRICE INCENTIVE

Sector: Defense

Official Description: SMALL DIAMETER BOMB INCREMENT II LOT 2 PRODUCTION

Place of Performance

Location: TUCSON, PIMA County, ARIZONA, 85756

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $57.3 million to RAYTHEON COMPANY for work described as: SMALL DIAMETER BOMB INCREMENT II LOT 2 PRODUCTION Key points: 1. Significant investment in critical munitions for the Air Force. 2. Raytheon is the sole provider, raising concerns about competition. 3. Fixed Price Incentive contract type introduces cost-sharing risks. 4. Spending concentrated in Ammunition Manufacturing sector.

Value Assessment

Rating: fair

The contract value of $57.3M for 2 units of production is high. Without per-unit cost data, it's difficult to assess value against similar munitions contracts.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

Although advertised as full and open, the award to Raytheon suggests limited actual bidders or a sole-source situation for this specific increment. This lack of robust competition may have impacted price discovery.

Taxpayer Impact: Taxpayer funds are being spent on advanced munitions, but the limited competition raises questions about whether the best possible price was achieved.

Public Impact

Enhances Air Force's precision strike capabilities. Supports ongoing defense modernization efforts. Potential for future contract modifications and follow-on orders. Impacts the defense industrial base, specifically ammunition manufacturing.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole source provider
Fixed Price Incentive contract
Lack of transparency in unit cost

Positive Signals

Critical defense capability
Long-term contract duration

Sector Analysis

This contract falls within the Ammunition (except Small Arms) Manufacturing sector, a critical component of the defense industrial base. Spending benchmarks are difficult to ascertain without specific program data, but large-scale munitions production typically involves significant investment.

Small Business Impact

The contract data indicates that small businesses were not directly involved in this specific award, as the prime contractor is Raytheon Company. Further analysis would be needed to determine if small businesses are involved as subcontractors.

Oversight & Accountability

The contract was awarded by the Department of the Air Force, a component of the Department of Defense. Standard oversight mechanisms for defense contracts would apply, but specific details on accountability for this award are not provided.

Related Government Programs

Ammunition (except Small Arms) Manufacturing
Department of Defense Contracting
Department of the Air Force Programs

Risk Flags

Sole source provider
Limited competition
High per-unit cost potential
Fixed Price Incentive contract risk
Lack of small business participation

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $57.3 million to RAYTHEON COMPANY. SMALL DIAMETER BOMB INCREMENT II LOT 2 PRODUCTION

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 $57.3 million.

What is the period of performance?

Start: 2016-09-08. End: 2020-06-30.

What is the cost per unit for the Small Diameter Bomb II, and how does it compare to industry benchmarks for similar munitions?

The provided data indicates 2 units were procured for $57,319,224, suggesting a per-unit cost of approximately $28.66 million. This figure is exceptionally high and likely represents a simplified or aggregated cost for a production lot rather than individual bombs. A true per-unit cost benchmark would require detailed cost breakdowns and comparisons with other advanced guided munitions programs.

Given Raytheon's sole-provider status for this increment, what measures are in place to mitigate the risk of inflated pricing and ensure long-term cost-effectiveness?

The Fixed Price Incentive (FPI) contract structure aims to share risk and reward between the government and contractor. However, with Raytheon as the sole provider, the government's leverage in price negotiations is reduced. Robust oversight, including detailed cost audits and performance monitoring, is crucial to ensure Raytheon meets performance targets without excessive cost overruns. Future competition strategies should be explored for subsequent lots.

How effectively does the Small Diameter Bomb II program contribute to the Air Force's overall mission objectives and strategic advantage?

The Small Diameter Bomb II (SDB II) is designed for precision strike capabilities against moving and fixed targets in adverse weather conditions. Its advanced features, such as multi-mode seekers, are intended to enhance the Air Force's ability to engage targets with reduced collateral damage and increased standoff range. Successful program execution and timely delivery of these munitions are vital for maintaining air superiority and achieving strategic objectives.

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

Offers Received: 2

Pricing Type: FIXED PRICE INCENTIVE (L)

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: $57,319,224

Exercised Options: $57,319,224

Current Obligation: $57,319,224

Subaward Activity

Number of Subawards: 3

Total Subaward Amount: $260,074

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline