Raytheon Company awarded $19.4M for Small Diameter Bomb II System Improvement Program, a sole-source contract

Contract Overview

Contract Amount: $19,399,708 ($19.4M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2020-03-19

End Date: 2022-12-31

Contract Duration: 1,017 days

Daily Burn Rate: $19.1K/day

Competition Type: NOT COMPETED

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: SMALL DIAMETER BOMB II SYSTEM IMPROVEMENT PROGRAM (SIP) 2020

Place of Performance

Location: TUCSON, PIMA County, ARIZONA, 85756

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $19.4 million to RAYTHEON COMPANY for work described as: SMALL DIAMETER BOMB II SYSTEM IMPROVEMENT PROGRAM (SIP) 2020 Key points: 1. Contract awarded on a sole-source basis, limiting price competition. 2. The contract type is Cost Plus Fixed Fee, which can lead to cost overruns. 3. Performance period spans over two years, indicating a medium-term project. 4. The contract is for ammunition manufacturing, a critical defense sector. 5. The contract is managed by the Defense Contract Management Agency. 6. The system improvement program suggests ongoing development and upgrades to existing capabilities.

Value Assessment

Rating: questionable

Benchmarking the value for this specific contract is challenging due to its sole-source nature and the specialized defense product. The Cost Plus Fixed Fee (CPFF) contract type, while allowing for flexibility in development, carries inherent risks of cost escalation compared to fixed-price contracts. Without competitive bids or detailed cost breakdowns, it's difficult to definitively assess if the $19.4 million represents optimal value for the system improvements. Further analysis would require comparing the scope of improvements to similar R&D efforts in the defense sector.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning it was not competed among multiple vendors. This typically occurs when a specific contractor possesses unique capabilities, intellectual property, or is the sole provider of a critical component or service. The lack of competition means that price discovery through market forces was not utilized, potentially leading to higher costs for the government.

Taxpayer Impact: Taxpayers may face higher costs due to the absence of competitive bidding. Without multiple offers, the government cannot leverage market dynamics to secure the most cost-effective solution.

Public Impact

The primary beneficiaries are the U.S. Department of Defense, specifically units requiring advanced munitions. The services delivered include improvements and sustainment for the Small Diameter Bomb II System. The geographic impact is primarily within the defense supply chain and operational theaters where the system is deployed. Workforce implications include specialized engineering, manufacturing, and program management roles within Raytheon Company.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure on pricing.
Cost Plus Fixed Fee contract type can incentivize cost growth.
Lack of publicly available performance metrics makes value assessment difficult.

Positive Signals

Contract supports critical defense system improvement, enhancing national security.
Raytheon is an established defense contractor with relevant expertise.
The contract addresses specific system upgrades, indicating a focused objective.

Sector Analysis

The defense industry is characterized by long-term relationships, high R&D investment, and significant government procurement. Contracts for advanced munitions like the Small Diameter Bomb II are crucial for maintaining technological superiority. Spending in this sub-sector is driven by evolving threat landscapes and the need for precision-guided munitions. Comparable spending benchmarks are difficult to ascertain publicly due to the classified nature of some defense programs, but investments in missile and bomb systems represent a significant portion of the defense budget.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. Furthermore, the 'ss' (small business subcontracting) is also false. This suggests that small businesses are unlikely to be directly involved as prime contractors or through mandatory subcontracting opportunities on this specific award. The focus is on a large, established defense contractor, Raytheon.

Oversight & Accountability

Oversight for this contract would typically fall under the purview of the Department of Defense's contract management and acquisition oversight bodies, potentially including the Defense Contract Management Agency (DCMA) which is listed as the 'sa'. Accountability measures are embedded within the CPFF contract structure, requiring justification for costs incurred. Transparency is limited due to the sole-source nature and the defense sector, with specific performance metrics and cost details often not publicly disclosed.

Related Government Programs

Small Diameter Bomb (SDB) Program
Precision Guided Munitions
Air-to-Ground Munitions
Defense Acquisition Programs
Ammunition Manufacturing Contracts

Risk Flags

Sole-source award
Cost Plus Fixed Fee contract type
Lack of competitive bidding

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $19.4 million to RAYTHEON COMPANY. SMALL DIAMETER BOMB II SYSTEM IMPROVEMENT PROGRAM (SIP) 2020

Who is the contractor on this award?

The obligated recipient is RAYTHEON COMPANY.

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Contract Management Agency).

What is the total obligated amount?

The obligated amount is $19.4 million.

What is the period of performance?

Start: 2020-03-19. End: 2022-12-31.

What is the track record of Raytheon Company in delivering similar defense system improvements?

Raytheon Company, now part of RTX Corporation, has a long and extensive track record in developing and producing advanced defense systems, including munitions. They are a primary contractor for numerous U.S. military programs, encompassing missiles, bombs, and other ordnance. Their experience with the Small Diameter Bomb program specifically, and similar precision-guided munitions, suggests a high level of technical expertise and program execution capability. However, like many large defense contractors, they have faced scrutiny over cost, schedule, and performance on various programs throughout their history. A detailed review of their performance on comparable sole-source, CPFF contracts would be necessary for a comprehensive assessment.

How does the Cost Plus Fixed Fee (CPFF) contract type compare to other contract types in terms of value for money in defense procurement?

Cost Plus Fixed Fee (CPFF) contracts are often used for research and development or when the scope of work is not well-defined, offering flexibility. The government agrees to pay the contractor's actual costs plus a fixed fee representing profit. While this allows for innovation and adaptation, it carries a higher risk of cost overruns for the government compared to fixed-price contracts (like FFP - Firm-Fixed-Price). In a CPFF structure, the contractor has less incentive to control costs beyond what is necessary to complete the work and earn their fee. For value for money, fixed-price contracts are generally preferred when requirements are stable and well-understood, as they place cost risk on the contractor and incentivize efficiency. CPFF can be justified for complex, uncertain R&D, but requires robust oversight to manage costs effectively.

What are the primary risks associated with sole-source defense contracts like this one?

The primary risks associated with sole-source defense contracts are related to cost and competition. Without competitive bidding, the government loses the opportunity to leverage market forces to drive down prices. This can lead to paying a premium for goods or services. There's also a reduced incentive for the sole-source provider to innovate or become more efficient, as they face no direct competitive threat. Furthermore, sole-source awards can create vendor lock-in, making it difficult and costly to switch providers in the future. Dependence on a single supplier can also pose supply chain risks, especially if that supplier faces production issues or financial instability.

What is the typical lifecycle and upgrade path for advanced munitions systems like the Small Diameter Bomb II?

Advanced munitions systems like the Small Diameter Bomb II (SDB II) typically have a long lifecycle, involving initial development, production, fielding, sustainment, and periodic upgrades. The SDB II, designed for precision strike against moving targets, requires continuous improvement to maintain its effectiveness against evolving threats and to incorporate new technologies. System Improvement Programs (SIPs) are common and focus on enhancing capabilities such as range, accuracy, target discrimination, seeker technology, or integration with new platforms. These upgrades are crucial for ensuring the system remains relevant and cost-effective over its operational life, which can span decades, justifying ongoing investment through contracts like this one.

How does the stated contract value of approximately $19.4 million compare to overall spending on the SDB program?

The stated contract value of approximately $19.4 million for the Small Diameter Bomb II System Improvement Program (SIP) 2020 represents a specific investment within the broader SDB program. The total lifecycle cost of major defense programs like the SDB II can run into billions of dollars, encompassing research, development, testing, procurement of thousands of units, and sustainment over many years. This $19.4 million award is likely for a particular phase or set of improvements within a larger, ongoing effort. Without access to the full program budget and historical spending data, it's difficult to place this specific award in context, but it appears to be a component of a much larger, sustained investment in this capability.

Industry Classification

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

Product/Service Code: RESEARCH AND DEVELOPMENT › C – National Defense R&D Services

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Pricing Type: COST PLUS FIXED FEE (U)

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: $28,709,898

Exercised Options: $28,709,898

Current Obligation: $19,399,708

Actual Outlays: $1,646,311

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