Raytheon Company awarded $101.6M for Small Diameter Bomb II, with contract ending December 2029

Contract Overview

Contract Amount: $101,630,557 ($101.6M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2019-09-30

End Date: 2029-12-31

Contract Duration: 3,745 days

Daily Burn Rate: $27.1K/day

Competition Type: NOT COMPETED

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: SMALL DIAMETER BOMB II

Place of Performance

Location: TUCSON, PIMA County, ARIZONA, 85756

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $101.6 million to RAYTHEON COMPANY for work described as: SMALL DIAMETER BOMB II Key points: 1. Contract awarded to a single source, raising questions about price discovery and potential for cost overruns. 2. The contract type, Cost Plus Fixed Fee, can incentivize contractors to increase costs to maximize profit. 3. Long contract duration of nearly 11 years suggests a sustained need for these munitions. 4. The specific Product Service Code (PSC) is missing, hindering detailed analysis of the services procured. 5. The contract is not a small business set-aside, indicating large prime contractor involvement. 6. Geographic location of the contractor's facility in Arizona may have implications for regional economic impact.

Value Assessment

Rating: questionable

The contract value of $101.6 million for Small Diameter Bomb II (SDB II) requires further benchmarking against similar munitions contracts. The Cost Plus Fixed Fee (CPFF) contract type, while common for R&D or uncertain scope, can lead to higher costs compared to fixed-price contracts if not managed rigorously. Without detailed cost breakdowns or comparisons to industry benchmarks for similar advanced munitions, it is difficult to definitively assess value for money. The extended period of performance also necessitates careful monitoring of cost growth over time.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning there was no open competition. This typically occurs when a specific contractor possesses unique capabilities or intellectual property essential for the requirement. However, the lack of competition limits the government's ability to solicit the best possible pricing and terms from multiple vendors, potentially leading to higher costs than if a competitive process had been employed.

Taxpayer Impact: Sole-source awards mean taxpayers may not benefit from competitive pricing pressures, potentially resulting in a higher overall expenditure for these munitions.

Public Impact

The primary beneficiaries are the U.S. Air Force, receiving advanced munitions capabilities. The contract supports the production and sustainment of the Small Diameter Bomb II (SDB II) system. The geographic impact is primarily associated with Raytheon's facility in Arizona, potentially creating or sustaining jobs in that region. Workforce implications include skilled labor in aerospace manufacturing, engineering, and defense logistics.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing, potentially increasing costs for taxpayers.
Cost Plus Fixed Fee contract type can incentivize cost increases if not closely managed.
Long contract duration increases exposure to potential cost overruns and scope creep.
Lack of detailed Product Service Code (PSC) hinders specific service analysis.
Absence of small business participation noted, suggesting limited opportunities for smaller firms in this specific award.

Positive Signals

Award supports a critical defense capability (SDB II), enhancing air power.
Contract provides long-term sustainment, ensuring availability of munitions.
Raytheon is an established defense contractor with significant experience in munitions.
Contract completion date extends to late 2029, indicating a strategic, long-term procurement.

Sector Analysis

The defense sector, particularly munitions manufacturing, is characterized by high R&D costs, stringent quality requirements, and long procurement cycles. The Small Diameter Bomb II (SDB II) represents a significant technological advancement in precision-guided munitions, designed for high-speed aircraft and complex engagement scenarios. Spending in this area is driven by evolving geopolitical threats and the need for advanced standoff capabilities. Comparable spending benchmarks would involve other major precision-guided munition programs, often valued in the hundreds of millions or billions of dollars over their lifecycle.

Small Business Impact

This contract was not awarded as a small business set-aside, and the data does not indicate any specific subcontracting requirements for small businesses. This suggests that the prime contractor, Raytheon Company, will likely perform the majority of the work. While large prime contractors often engage small businesses as subcontractors, the absence of a set-aside or explicit subcontracting goals in the provided data means opportunities for small businesses may be limited or not formally tracked within this specific award. This could impact the broader small business defense industrial base.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Air Force's contracting and program management offices. Given the sole-source nature and CPFF structure, rigorous oversight of cost, schedule, and performance is crucial. The Department of Defense's Inspector General (IG) may conduct audits or investigations into contract execution, particularly concerning cost reasonableness and compliance. Transparency is enhanced through contract databases like FPDS, though detailed cost breakdowns are often proprietary.

Related Government Programs

Precision-Guided Munitions
Air-to-Ground Munitions
Advanced Weapons Systems
Department of Defense Ammunition Procurement
Air Force Munitions Contracts

Risk Flags

Sole-source award
Cost Plus Fixed Fee contract type
Long contract duration
Lack of specific PSC
No small business set-aside indicated

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $101.6 million to RAYTHEON COMPANY. SMALL DIAMETER BOMB II

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 $101.6 million.

What is the period of performance?

Start: 2019-09-30. End: 2029-12-31.

What is the specific justification for the sole-source award of the Small Diameter Bomb II (SDB II) contract to Raytheon Company?

Sole-source awards are typically justified when a specific contractor possesses unique capabilities, proprietary technology, or is the sole producer of a critical component or system. For the SDB II, Raytheon is the original developer and manufacturer. The justification likely centers on the unique design, performance characteristics, and established production infrastructure for this advanced munition, making it impractical or excessively costly to transition to another supplier. The government would have conducted a Justification and Approval (J&A) process to document this rationale, often citing factors like industrial base considerations, urgent need, or lack of viable alternatives.

How does the Cost Plus Fixed Fee (CPFF) contract type compare to other contract types in terms of cost efficiency for munitions procurement?

Cost Plus Fixed Fee (CPFF) contracts reimburse the contractor for allowable costs plus a fixed fee representing profit. This structure is often used when the scope of work is not well-defined or involves significant research and development. Compared to Fixed-Price contracts, CPFF generally offers less incentive for the contractor to control costs, as the government bears the risk of cost overruns. While it provides flexibility, it can lead to higher final prices if not managed with stringent oversight. For mature, well-defined requirements like mass production of munitions, Fixed-Price Incentive Fee (FPIF) or Firm-Fixed-Price (FFP) contracts are often preferred for better cost control and value for taxpayers.

What are the potential risks associated with the long contract duration (ending December 2029) for the SDB II program?

A contract duration extending nearly 11 years presents several risks. Firstly, it increases the potential for cost growth due to inflation, changes in material costs, and unforeseen technical challenges over time. Secondly, the extended period may lead to 'scope creep,' where additional requirements are added without adequate adjustments to cost or schedule. Thirdly, maintaining the relevance and technological edge of the SDB II system over such a long period requires continuous investment and adaptation, which might not be fully captured in the initial contract. Finally, long-term sole-source contracts can reduce flexibility to adopt newer, potentially superior technologies that emerge during the contract's life.

What is the significance of the 'Ammunition (except Small Arms) Manufacturing' Product Service Code (PSC) for this contract?

The PSC 'Ammunition (except Small Arms) Manufacturing' (ND) indicates that the contract is for the production or manufacturing services related to ammunition, excluding small arms ammunition. This is a broad category that encompasses various types of munitions, including guided missiles, bombs, rockets, and artillery shells. For the SDB II, this PSC is appropriate as it falls under the category of advanced aerial munitions. However, the absence of a more specific PSC or a detailed description of the services within the contract data limits granular analysis of the exact nature of the work being performed, such as research, development, testing, or full-rate production.

How does the lack of small business participation (sb: false) impact the overall defense industrial base and taxpayer value?

When a significant contract like this does not include specific small business set-asides or explicit subcontracting goals, it can limit opportunities for smaller, innovative firms to participate in major defense programs. This can hinder the growth and development of the broader defense industrial base, which often relies on the agility and specialized capabilities of small businesses. From a taxpayer perspective, while large contractors may achieve economies of scale, the exclusion of small businesses might mean missing out on potentially more cost-effective solutions or innovative approaches that smaller companies could offer. It also concentrates prime contract dollars within fewer, larger entities.

Industry Classification

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

Product/Service Code: AMMUNITION AND EXPLOSIVES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: FA867219R1101

Pricing Type: COST PLUS FIXED FEE (U)

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: $101,630,557

Exercised Options: $101,630,557

Current Obligation: $101,630,557

Actual Outlays: $4,159,270

Subaward Activity

Number of Subawards: 14

Total Subaward Amount: $7,189,295

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: FA867219D0001

IDV Type: IDC

Timeline