Raytheon Company awarded $62.2M for Small Diameter Bomb Increment II, with no competition

Contract Overview

Contract Amount: $62,246,026 ($62.2M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2022-03-28

End Date: 2026-10-31

Contract Duration: 1,678 days

Daily Burn Rate: $37.1K/day

Competition Type: NOT COMPETED

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: SMALL DIAMETER BOMB INCREMENT II

Place of Performance

Location: TUCSON, PIMA County, ARIZONA, 85756

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $62.2 million to RAYTHEON COMPANY for work described as: SMALL DIAMETER BOMB INCREMENT II Key points: 1. The contract value of $62.2 million represents a significant investment in advanced munitions. 2. The sole-source nature of this award raises questions about potential price inflation and lack of market pressure. 3. The contract duration extends over four years, indicating a long-term need for these munitions. 4. The Cost Plus Fixed Fee (CPFF) contract type may incentivize cost overruns, requiring close oversight. 5. The award is managed by the Department of the Air Force, highlighting its strategic importance. 6. The manufacturing location in Arizona suggests potential regional economic impact and workforce development.

Value Assessment

Rating: questionable

Benchmarking the value for this specific contract is challenging due to its sole-source nature and specialized product. However, Cost Plus Fixed Fee contracts, while allowing for flexibility, can sometimes lead to higher overall costs compared to fixed-price contracts if not managed diligently. The lack of competition means there's no direct market comparison to assess if the pricing is optimal. Further analysis would require access to historical pricing data for similar munitions and detailed cost breakdowns.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one vendor, Raytheon Company, was solicited. This approach bypasses the competitive bidding process, which typically involves multiple companies vying for the contract. While sole-source awards can be justified for unique capabilities or urgent needs, they limit price discovery and can potentially lead to higher costs for the government.

Taxpayer Impact: The absence of competition means taxpayers may not be receiving the best possible price for these munitions. Without competing bids, there is less incentive for the contractor to offer the most cost-effective solution.

Public Impact

The primary beneficiaries are the Department of Defense and specifically the Air Force, receiving advanced munitions critical for air operations. The services delivered include the manufacturing and potential sustainment of Small Diameter Bomb Increment II munitions. The geographic impact is centered in Arizona, where the manufacturing will take place, potentially creating or sustaining jobs in the region. Workforce implications include skilled labor in advanced manufacturing and defense production within the specified geographic area.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition, potentially increasing costs for taxpayers.
Cost Plus Fixed Fee contract type can incentivize cost overruns without strict oversight.
Lack of transparency in the sole-source justification process.
Limited opportunities for other manufacturers to contribute or innovate in this specific munition.
Potential for vendor lock-in due to specialized technology.

Positive Signals

Ensures access to a critical and potentially advanced munition capability for the Air Force.
Raytheon Company is an established defense contractor with existing expertise in munitions.
The contract duration allows for stable production and planning.
Manufacturing in Arizona may support domestic industrial base and jobs.

Sector Analysis

The defense sector, particularly the munitions manufacturing sub-sector, is characterized by high technological barriers to entry and significant R&D investment. Major defense contractors like Raytheon dominate this space. Spending in this area is driven by national security requirements and the need for advanced weaponry. Comparable spending benchmarks would involve looking at other large-scale, sole-source awards for advanced munitions programs within the DoD.

Small Business Impact

This contract does not appear to include a small business set-aside. Given the sole-source nature and the specialized product, it is unlikely that subcontracting opportunities for small businesses would be mandated or actively sought unless specified by the prime contractor. The impact on the small business ecosystem is minimal in terms of direct set-aside benefits, though Raytheon may engage small businesses in its supply chain.

Oversight & Accountability

Oversight for this contract will likely be managed by the Department of the Air Force contracting and program management offices. Accountability measures would be embedded within the Cost Plus Fixed Fee structure, requiring detailed cost reporting and performance metrics. Transparency may be limited due to the sole-source nature, but contract modifications and performance reports should be accessible through federal procurement databases. Inspector General jurisdiction would apply to investigations of fraud, waste, or abuse.

Related Government Programs

Small Diameter Bomb Increment I
Joint Direct Attack Munition (JDAM)
Advanced Precision Kill Weapon System (APKWS)

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 $62.2 million to RAYTHEON COMPANY. SMALL DIAMETER BOMB INCREMENT 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 $62.2 million.

What is the period of performance?

Start: 2022-03-28. End: 2026-10-31.

What is Raytheon Company's track record with Cost Plus Fixed Fee (CPFF) contracts, particularly for munitions?

Raytheon Company, as a major defense contractor, has extensive experience with various contract types, including Cost Plus Fixed Fee (CPFF). CPFF contracts are often used when the scope of work is not fully defined or when there is significant uncertainty in the costs involved, such as in advanced development or production of complex systems like munitions. While CPFF contracts offer flexibility, they also carry a higher risk of cost overruns if not managed rigorously. Raytheon's historical performance with CPFF contracts would need to be assessed by examining past contract awards, performance reviews, and any documented instances of cost variances or disputes. The effectiveness of CPFF for this specific Small Diameter Bomb Increment II program will depend heavily on the Air Force's oversight, including detailed cost tracking, milestone reviews, and negotiation of the fixed fee.

How does the $62.2 million award compare to previous or similar sole-source awards for advanced munitions?

Direct comparison of this $62.2 million sole-source award for Small Diameter Bomb Increment II is difficult without access to proprietary pricing data and specific technical configurations of comparable munitions. Sole-source awards inherently lack the price discovery mechanism of competitive bidding. However, the value suggests a significant procurement of a specialized munition. To benchmark effectively, one would need to analyze historical sole-source awards for similar advanced air-to-ground munitions from Raytheon or other prime contractors, considering factors like quantity, technological sophistication, and contract duration. Publicly available data on contract awards often provides only the total value, making granular cost-per-unit or cost-per-capability comparisons challenging, especially for sole-source procurements.

What are the primary risk indicators associated with this sole-source, CPFF contract for munitions?

The primary risk indicators for this contract are its sole-source nature and the Cost Plus Fixed Fee (CPFF) structure. The sole-source award means there is no competitive pressure to drive down prices, potentially leading to higher costs for the government. The CPFF structure, while providing flexibility, can incentivize the contractor to incur higher costs to increase the fixed fee earned, especially if the fee is a percentage of the total costs. This necessitates robust government oversight to monitor expenditures and ensure efficiency. Other risks include potential schedule delays, technical performance issues, and the possibility of contractor over-reliance on government funding without sufficient cost-saving initiatives. The long duration also presents a risk of obsolescence or changing threat landscapes.

What is the expected program effectiveness and impact of the Small Diameter Bomb Increment II?

The Small Diameter Bomb Increment II (SDB II) is designed to provide aircrews with a highly capable, low-cost, adverse-weather, precision-guided munition. Its effectiveness is expected to stem from its multi-mode seeker (infrared, radar, laser) and network-enabled capabilities, allowing it to engage moving targets, targets behind obstacles, and targets in all weather conditions. This enhances the Air Force's ability to conduct precision strikes against a wider range of threats, including hardened or mobile targets, with reduced risk of collateral damage. The program aims to increase the lethality and flexibility of airpower, providing airmen with a critical tool for modern warfare scenarios.

How does this contract fit into the broader historical spending patterns for air-delivered munitions?

This $62.2 million award for Small Diameter Bomb Increment II fits within the broader historical spending patterns of the Department of Defense for advanced, precision-guided munitions. The DoD consistently allocates significant portions of its budget to developing and procuring sophisticated weaponry to maintain technological superiority. Spending on munitions, especially those with advanced capabilities like SDB II, reflects a strategic emphasis on precision strike, reduced collateral damage, and the ability to counter evolving threats. While specific dollar amounts fluctuate based on program maturity, production rates, and new system introductions, the trend has been towards more intelligent, networked, and multi-purpose munitions, justifying substantial investments in programs like SDB II.

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: $64,845,268

Exercised Options: $63,866,916

Current Obligation: $62,246,026

Subaward Activity

Number of Subawards: 7

Total Subaward Amount: $508,585

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