Raytheon Company awarded $83.1M contract for guided missile and space vehicle manufacturing, a sole-source award

Contract Overview

Contract Amount: $83,164,548 ($83.2M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2009-08-18

End Date: 2017-02-28

Contract Duration: 2,751 days

Daily Burn Rate: $30.2K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: SIP

Place of Performance

Location: TUCSON, PIMA County, ARIZONA, 85756

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $83.2 million to RAYTHEON COMPANY for work described as: SIP Key points: 1. Contract awarded on a sole-source basis, limiting price competition. 2. The contract duration of 2751 days suggests a long-term need for these services. 3. The Cost Plus Fixed Fee (CPFF) contract type can incentivize cost overruns. 4. The award was managed by the Defense Contract Management Agency. 5. The contractor, Raytheon Company, is a major defense industry player. 6. The contract falls under the Guided Missile and Space Vehicle Manufacturing sector.

Value Assessment

Rating: questionable

Benchmarking the value for this specific contract is challenging due to its sole-source nature and the specialized field of guided missile manufacturing. Without competitive bids, it's difficult to ascertain if the $83.1 million represents a fair market price. The Cost Plus Fixed Fee (CPFF) structure, while common in complex defense projects, carries inherent risks of cost escalation, potentially leading to a higher final expenditure than initially projected. Further analysis would require access to cost breakdowns and comparisons with similar sole-source awards for comparable systems.

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 approach is typically used when only one vendor possesses the necessary capabilities, technology, or security clearances. The lack of competition means that taxpayers did not benefit from the price discovery mechanisms that open competition provides, potentially leading to higher costs.

Taxpayer Impact: Sole-source awards limit the government's ability to negotiate the best possible price, as there is no competitive pressure on the contractor to offer lower terms. This can result in taxpayer funds being used less efficiently.

Public Impact

The primary beneficiaries are the Department of Defense, which receives critical missile and space vehicle components. The services delivered are essential for national defense capabilities. The contract's geographic impact is primarily in Arizona, where the contractor is located. The contract supports specialized manufacturing jobs within the defense industrial base.

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 (CPFF) contract type can incentivize higher spending if not closely monitored.
Long contract duration (2751 days) increases the risk of cost overruns and scope creep without vigilant oversight.

Positive Signals

Award to a major defense contractor (Raytheon) suggests access to established expertise and production capabilities.
Contract supports a critical defense need (guided missiles and space vehicles).
The contract is managed by the Defense Contract Management Agency, indicating established oversight processes.

Sector Analysis

The Guided Missile and Space Vehicle Manufacturing sector is a highly specialized and critical segment of the defense industrial base. Companies operating in this area require significant technological expertise, advanced manufacturing capabilities, and stringent security clearances. Spending in this sector is driven by national security requirements and geopolitical factors. Comparable spending benchmarks are difficult to establish due to the proprietary nature of many weapon systems and the unique specifications of each contract.

Small Business Impact

There is no indication that this contract included small business set-asides. As a sole-source award to a large prime contractor, it is unlikely to have direct subcontracting opportunities specifically designated for small businesses unless Raytheon voluntarily includes them in its subcontracting plan. The impact on the small business ecosystem is likely minimal for this specific award, though large prime contractors often engage small businesses for specialized components or services.

Oversight & Accountability

Oversight for this contract would typically be provided by the Defense Contract Management Agency (DCMA), which is responsible for ensuring contract compliance, monitoring performance, and verifying costs. Accountability measures are built into the CPFF contract structure, requiring the contractor to justify costs and adhere to the fixed fee. Transparency may be limited due to the classified or sensitive nature of the products being manufactured.

Related Government Programs

Missile Manufacturing
Space Vehicle Production
Defense Procurement
Advanced Weapons Systems

Risk Flags

Sole-source award limits competition.
CPFF contract type carries risk of cost overruns.
Long contract duration increases risk exposure.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $83.2 million to RAYTHEON COMPANY. SIP

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 $83.2 million.

What is the period of performance?

Start: 2009-08-18. End: 2017-02-28.

What is Raytheon Company's track record with similar sole-source defense contracts?

Raytheon Company, now part of RTX Corporation, has a long history of securing sole-source contracts for complex defense systems, including missiles and space vehicles. Their track record often involves extensive experience and proprietary technology that justifies non-competitive awards. While this can ensure access to critical capabilities, it also necessitates rigorous government oversight to ensure fair pricing and prevent cost overruns. Analyzing past performance on similar contracts would involve reviewing their delivery history, cost performance reports, and any documented issues or successes in managing large, sole-source agreements within the Department of Defense.

How does the $83.1 million value compare to similar guided missile and space vehicle manufacturing contracts?

Direct comparison of the $83.1 million award is challenging due to the specialized nature of guided missile and space vehicle manufacturing and the sole-source designation of this contract. Pricing in this sector is heavily influenced by technological complexity, research and development costs, production volume, and specific system requirements. Without access to detailed cost breakdowns or a pool of competitively bid contracts for identical or highly similar systems, it is difficult to benchmark this value definitively. However, given the scale and complexity typically associated with such defense articles, $83.1 million could represent a moderate to significant investment, underscoring the need for robust cost analysis by the contracting agency.

What are the primary risks associated with a Cost Plus Fixed Fee (CPFF) contract for this type of product?

The primary risk with a Cost Plus Fixed Fee (CPFF) contract, especially for complex products like guided missiles and space vehicles, is the potential for cost overruns. While the 'fixed fee' provides a ceiling on the contractor's profit, the 'cost plus' element means the government reimburses the contractor for all allowable costs incurred. If the contractor's costs exceed initial estimates, the total contract value increases. This structure can sometimes disincentivize cost control by the contractor, as their profit margin (the fixed fee) remains constant regardless of the actual costs incurred. Effective oversight, detailed cost tracking, and clear performance metrics are crucial to mitigate these risks.

What is the historical spending pattern for guided missile and space vehicle manufacturing by the Department of Defense?

Historical spending by the Department of Defense (DoD) on guided missile and space vehicle manufacturing has consistently been substantial, reflecting the critical role these systems play in national security. Annual expenditures can fluctuate based on geopolitical events, modernization programs, and specific threat assessments. The DoD often relies on a few key prime contractors, such as Raytheon, Lockheed Martin, and Northrop Grumman, for these advanced capabilities. Spending trends typically show a long-term commitment to research, development, and procurement of evolving missile technologies and space-based assets. Detailed historical data would reveal significant investments in areas like strategic defense, tactical missiles, and satellite technology.

What oversight mechanisms are typically in place for sole-source defense contracts of this magnitude?

Sole-source defense contracts of this magnitude are subject to stringent oversight mechanisms. The Defense Contract Management Agency (DCMA) typically plays a central role, monitoring contractor performance, verifying costs, ensuring compliance with contract terms, and assessing quality control. Contract officers and program managers within the procuring agency (in this case, likely the Army, Navy, or Air Force, managed via DoD) are also responsible for oversight. Key oversight activities include regular progress reviews, audits of contractor financial records, inspections of manufactured goods, and adherence to security protocols. The Federal Acquisition Regulation (FAR) provides the framework for these oversight activities, emphasizing transparency and accountability.

Industry Classification

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

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

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

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: $86,173,151

Exercised Options: $86,173,151

Current Obligation: $83,164,548

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline