Raytheon awarded $444M for AMRAAM missile production, a sole-source contract with a long duration

Contract Overview

Contract Amount: $444,311,941 ($444.3M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2008-05-28

End Date: 2025-10-19

Contract Duration: 6,353 days

Daily Burn Rate: $69.9K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: AMRAAM LOT 22 PRODUCTION

Place of Performance

Location: TUCSON, PIMA County, ARIZONA, 85756

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $444.3 million to RAYTHEON COMPANY for work described as: AMRAAM LOT 22 PRODUCTION Key points: 1. This contract represents a significant investment in air-to-air missile capabilities. 2. The sole-source nature of this award warrants scrutiny regarding price justification. 3. A long contract duration of over 17 years suggests a stable, long-term need. 4. The firm-fixed-price structure aims to transfer risk to the contractor. 5. Focus on production indicates a mature system rather than new development. 6. The contract is managed by the Defense Contract Management Agency, ensuring oversight.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to its sole-source nature and long duration. Without competitive bids, it's difficult to ascertain if the $444 million represents a fair market price. The firm-fixed-price contract type is generally favorable for the government in managing cost certainty, but the absence of competition raises concerns about potential overpricing. Further analysis would require access to historical pricing data for similar lots and production runs.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning Raytheon was the only bidder considered. This typically occurs when a specific capability is unique to a single provider or for follow-on production where competition is not feasible or cost-effective. The lack of competition limits the government's ability to leverage market forces to drive down prices and may indicate a reliance on a single supplier for this critical defense asset.

Taxpayer Impact: Taxpayers may be paying a premium due to the absence of competitive pressure. Without competing offers, there is less assurance that the price reflects the lowest possible cost for the required missiles.

Public Impact

The primary beneficiaries are the U.S. Air Force and Navy, who will receive advanced air-to-air missiles for their fighter aircraft. This contract ensures the continued production of the Advanced Medium-Range Air-to-Air Missile (AMRAAM), a key component of air superiority. The contract's geographic impact is centered in Arizona, where Raytheon's production facilities are located, supporting local jobs. The contract supports a specialized manufacturing workforce within the guided missile and space vehicle manufacturing sector.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price negotiation and potential savings.
Long contract duration increases exposure to potential cost overruns or market shifts.
Lack of competition raises concerns about contractor's incentive to innovate or reduce costs.
Firm-fixed-price can be disadvantageous if unforeseen production issues arise that are not the contractor's fault.

Positive Signals

Firm-fixed-price contract shifts cost risk to the contractor.
Long duration provides production stability and predictability for a critical weapon system.
Production of a proven, advanced missile system ensures operational readiness.
Managed by DCMA, indicating established oversight processes.

Sector Analysis

The AMRAAM is a cornerstone of air-to-air combat capabilities for numerous allied nations, making its production a significant segment within the defense industry's missile manufacturing sector. The market for advanced air-to-air missiles is highly specialized, with a limited number of prime contractors capable of producing such systems. This contract fits within the broader category of defense procurement for guided missile manufacturing, a market characterized by high technological barriers to entry and long-term government demand.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by the 'sb' field being false. Furthermore, the 'ss' field is also false, suggesting no specific small business subcontracting goals were mandated within this award. This means that opportunities for small businesses to participate in this specific contract are likely limited to those that may be part of Raytheon's broader supply chain, rather than direct set-aside awards.

Oversight & Accountability

The contract is managed by the Defense Contract Management Agency (DCMA), which is responsible for ensuring contractor compliance with contract terms and conditions. Oversight mechanisms would include monitoring production schedules, quality control, and financial reporting. Transparency is generally maintained through contract databases, but specific details on cost breakdowns and performance metrics may be restricted. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse.

Related Government Programs

Air-to-Air Missiles
Guided Missile Manufacturing
Defense Procurement
Aviation Systems
Weapon Systems Production

Risk Flags

Sole-source award
Long contract duration
Lack of competition

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $444.3 million to RAYTHEON COMPANY. AMRAAM LOT 22 PRODUCTION

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 $444.3 million.

What is the period of performance?

Start: 2008-05-28. End: 2025-10-19.

What is Raytheon's track record with AMRAAM production contracts?

Raytheon Company (now RTX Corporation) has been the sole producer of the AMRAAM missile for decades. Their track record includes numerous production lots, upgrades, and international sales. Historically, they have demonstrated the capability to meet production demands and incorporate technological advancements into the missile system. However, like many long-term sole-source defense contracts, there have been periods of scrutiny regarding pricing and efficiency. The consistent award of subsequent lots suggests a continued reliance on their expertise and production capacity by the Department of Defense, indicating a generally successful, albeit non-competitive, performance history in delivering this critical weapon system.

How does the $444 million value compare to previous AMRAAM production lots?

Direct comparison of the $444 million value to previous AMRAAM production lots is complex without specific lot numbers and quantities. Contract values fluctuate based on the number of units procured, specific missile variants, and any incorporated upgrades or engineering changes. However, given the long duration and the nature of defense procurement, it is reasonable to expect that total contract values for AMRAAM production have historically been in the hundreds of millions of dollars per lot. The firm-fixed-price nature of this contract aims to cap costs, but the absence of competition makes it difficult to definitively state if this specific value is higher or lower than what might have been achieved through a competitive bidding process.

What are the primary risks associated with this sole-source, long-duration contract?

The primary risks associated with this sole-source, long-duration contract include potential price escalation due to lack of competition, contractor complacency, and technological obsolescence. Without competitive pressure, Raytheon may have less incentive to aggressively reduce costs or innovate. The extended period of performance (over 17 years) increases the risk that the missile's technology could become outdated before the contract concludes, or that unforeseen production challenges could arise, potentially leading to cost overruns if not managed effectively. Furthermore, a sole-source award makes the Department of Defense heavily reliant on a single supplier, creating a strategic risk if Raytheon faces production disruptions.

How effective is the firm-fixed-price contract type in managing costs for AMRAAM production?

The firm-fixed-price (FFP) contract type is generally considered effective in managing costs for production programs like the AMRAAM because it transfers the majority of the cost risk to the contractor. Raytheon is obligated to deliver the specified missiles at the agreed-upon price, regardless of their actual costs. This provides the government with cost certainty. However, the effectiveness of FFP in achieving the lowest possible price is significantly diminished in a sole-source environment. While the government knows its maximum liability, it cannot be certain that the fixed price represents the best value achievable in a competitive market. The contractor bears the risk of cost overruns, but also reaps the benefit of cost savings, which may be substantial if their internal costs are lower than anticipated.

What is the historical spending trend for AMRAAM production?

Historical spending on AMRAAM production has been substantial and consistent over many years, reflecting its critical role in U.S. air defense strategy and its widespread adoption by allied nations. The Department of Defense has awarded numerous production lots, often valued in the hundreds of millions of dollars, to Raytheon. While specific annual spending figures can vary based on procurement quantities and program priorities, the overall trend indicates a sustained, high-volume demand for this missile system. This consistent spending underscores the system's perceived effectiveness and the ongoing need for air-to-air missile capabilities, driving significant, long-term investment in its production.

Industry Classification

NAICS: Manufacturing › Aerospace Product and Parts Manufacturing › Guided Missile and Space Vehicle Manufacturing

Product/Service Code: GUIDED MISSLES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

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: $444,956,973

Exercised Options: $444,956,973

Current Obligation: $444,311,941

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline