DoD awards Raytheon $72.4M for Small Diameter Bomb II production, with 18 months remaining

Contract Overview

Contract Amount: $72,376,143 ($72.4M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2019-06-30

End Date: 2024-06-30

Contract Duration: 1,827 days

Daily Burn Rate: $39.6K/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 3 PRODUCTION

Place of Performance

Location: TUCSON, PIMA County, ARIZONA, 85756

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $72.4 million to RAYTHEON COMPANY for work described as: SMALL DIAMETER BOMB II - LOT 3 PRODUCTION Key points: 1. Contract value appears reasonable given the nature of advanced munitions production. 2. Full and open competition suggests a competitive bidding process was utilized. 3. Fixed Price Incentive contract type introduces performance-based risk sharing. 4. Contract duration of over 5 years indicates a long-term production requirement. 5. Geographic concentration in Arizona for manufacturing. 6. No small business set-aside noted, potentially limiting small business participation.

Value Assessment

Rating: good

The contract value of $72.4 million for the production of Small Diameter Bomb II (SDB II) Lot 3 appears to be within a reasonable range for advanced munitions. While specific per-unit cost benchmarks are not publicly available, the fixed-price incentive structure suggests that the government aims to control costs while incentivizing contractor performance. Comparing this to other advanced munition procurements, the scale of this award is significant but not extraordinary, indicating a potentially good value for the capability delivered.

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 use of full and open competition generally promotes a wider range of proposals and can lead to more competitive pricing. This approach is designed to ensure the government receives the best possible value by leveraging market forces.

Taxpayer Impact: Taxpayers benefit from the competitive pricing that full and open competition aims to achieve, potentially reducing the overall cost of acquiring these advanced munitions.

Public Impact

The primary beneficiaries are the Department of Defense, specifically the Air Force, receiving advanced munitions for strategic capabilities. The services delivered include the production and delivery of Small Diameter Bomb II munitions. The geographic impact is concentrated in Arizona (AZ), where the contractor, Raytheon Company, is located for manufacturing. Workforce implications include skilled manufacturing and engineering jobs at Raytheon's facilities.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of small business participation noted.
Fixed Price Incentive contract requires careful monitoring of performance metrics.
Long contract duration may introduce risks related to obsolescence or changing requirements.

Positive Signals

Awarded under full and open competition.
Contractor is a major defense manufacturer with a track record.
Production of a critical munition system.

Sector Analysis

The defense sector, particularly the munition manufacturing sub-sector, is characterized by high R&D costs, stringent quality requirements, and long production cycles. Companies like Raytheon are key players in this market, often holding sole-source or limited-competition contracts for specialized systems. This contract for SDB II fits within the broader landscape of advanced aerial munitions procurement, where capabilities such as precision targeting and standoff range are paramount. Benchmarks for comparable advanced munition systems are often proprietary, but the scale of this award suggests a significant production lot.

Small Business Impact

This contract was not awarded as a small business set-aside, and there is no indication of specific subcontracting goals for small businesses within the provided data. This means that opportunities for small businesses to directly participate in this prime contract are limited. While Raytheon may engage small businesses as subcontractors, the absence of a formal set-aside or explicit subcontracting plan means the direct impact on the small business ecosystem for this specific award is likely minimal.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Defense's contracting and program management offices, with potential involvement from the Air Force's Inspector General. The fixed-price incentive (FPI) contract type necessitates close monitoring of performance metrics and cost ceilings to ensure accountability and prevent cost overruns. Transparency is generally maintained through contract award databases and reporting requirements, though specific production details may be sensitive.

Related Government Programs

Advanced Aerial Munitions
Precision Guided Munitions
Air Force Munitions Procurement
Defense Production Contracts
Raytheon Defense Contracts

Risk Flags

Long contract duration may increase risk of obsolescence or cost escalation.
Fixed Price Incentive contract requires careful monitoring of performance and cost targets.
Lack of explicit small business subcontracting goals.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $72.4 million to RAYTHEON COMPANY. SMALL DIAMETER BOMB II - LOT 3 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 $72.4 million.

What is the period of performance?

Start: 2019-06-30. End: 2024-06-30.

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

Historical spending data for the Small Diameter Bomb II (SDB II) program indicates a significant investment by the Department of Defense over several years. Prior to this Lot 3 production award of $72.4 million, the program has seen substantial funding allocated for research, development, testing, and previous production lots. For instance, earlier production contracts and development phases likely aggregated hundreds of millions, if not billions, of dollars. Analyzing the cumulative spending reveals the program's lifecycle, from initial concept and prototyping through to sustained operational fielding. This specific award represents a continuation of production, suggesting the system has met performance requirements and is being procured in quantities to meet operational needs. Understanding the total program cost is crucial for assessing long-term budget commitments and the overall return on investment for this advanced munition capability.

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

Determining the precise unit cost of the Small Diameter Bomb II (SDB II) and comparing it to similar munitions is challenging due to the proprietary nature of defense contracting and the complexity of advanced weapon systems. The provided data does not include unit cost breakdowns. However, SDB II is known for its advanced capabilities, including a multi-mode seeker (radar, infrared, laser) and long standoff range, which typically command a higher price point compared to simpler guided munitions. Comparable systems might include other air-to-ground precision-guided munitions with advanced targeting features. Given its sophisticated technology, the unit cost is expected to be in the tens of thousands of dollars per munition. Without specific cost data or access to classified program information, a direct, definitive comparison is not feasible, but its advanced features suggest a premium price relative to less capable alternatives.

What are the key performance indicators (KPIs) associated with this Fixed Price Incentive contract?

For this Fixed Price Incentive (FPI) contract for Small Diameter Bomb II (SDB II) production, the key performance indicators (KPIs) would likely revolve around production efficiency, quality control, and delivery schedules. Specific KPIs are not detailed in the public award notice but are inherent to the FPI structure. These typically include meeting target cost and target profit objectives, achieving a certain production rate (units per month/quarter), maintaining a low defect rate (quality), and adhering to delivery timelines for the contracted lots. The incentive aspect means that exceeding performance targets (e.g., lower cost than target, faster delivery) could result in higher profit for Raytheon, while failing to meet them could reduce profit or even incur penalties, depending on the contract's specific clauses. The government's oversight would focus on tracking these metrics to ensure value and timely delivery.

What is Raytheon Company's track record with similar large-scale defense production contracts?

Raytheon Company, now part of RTX, has an extensive and well-established track record in managing and executing large-scale defense production contracts, particularly in the realm of missiles and munitions. They are a prime contractor for numerous advanced weapon systems for the U.S. military and international allies. Their experience spans decades and includes the production of systems like the Patriot missile, Tomahawk cruise missile, and various other guided munitions. Raytheon is known for its manufacturing capabilities, technological innovation, and ability to scale production to meet significant demand. While specific performance on every contract varies, their overall history suggests a strong capacity to handle complex production efforts like the Small Diameter Bomb II, often involving sophisticated technologies and stringent quality requirements. They frequently operate under various contract types, including fixed-price and cost-plus arrangements, demonstrating adaptability.

What are the potential risks associated with the long duration (1827 days) of this contract?

The long duration of this contract, approximately five years, presents several potential risks. Firstly, there's the risk of **cost escalation** due to inflation or unforeseen increases in raw material prices over such an extended period, although the fixed-price nature aims to mitigate this for the government. Secondly, **technological obsolescence** is a concern; advanced weapon systems can be rapidly outpaced by new developments, potentially making the SDB II less relevant or requiring costly upgrades during its production life. Thirdly, **supply chain disruptions** are more likely over a five-year span, impacting Raytheon's ability to procure necessary components. Finally, **changing geopolitical requirements or budget priorities** within the Department of Defense could lead to modifications, reductions, or even cancellations, although the FPI structure might have clauses addressing such eventualities. Effective program management and contract oversight are crucial to navigating these risks.

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: 1

Pricing Type: FIXED PRICE INCENTIVE (L)

Evaluated Preference: NONE

Contractor Details

Parent Company: Rockwell Collins Australia PTY Limited

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: $72,376,143

Exercised Options: $72,376,143

Current Obligation: $72,376,143

Actual Outlays: $2,579,829

Subaward Activity

Number of Subawards: 3

Total Subaward Amount: $5,648,226

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline