Raytheon Company awarded $20.1M for guided missile manufacturing, with a significant contract duration

Contract Overview

Contract Amount: $20,106,326 ($20.1M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2010-06-08

End Date: 2024-01-30

Contract Duration: 4,984 days

Daily Burn Rate: $4.0K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Official Description: INCORPORATE FPDS TRANSACTION CODE 4 FOR "EP BASIC IMPLEMENTATION"

Place of Performance

Location: TUCSON, PIMA County, ARIZONA, 85756

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $20.1 million to RAYTHEON COMPANY for work described as: INCORPORATE FPDS TRANSACTION CODE 4 FOR "EP BASIC IMPLEMENTATION" Key points: 1. The contract's long duration suggests a sustained need for these specialized manufacturing capabilities. 2. The cost-plus-incentive-fee structure aims to balance contractor performance with cost control. 3. Limited competition for specialized defense manufacturing can lead to higher prices. 4. The contract's value is substantial within the guided missile manufacturing sector. 5. Performance context is critical given the long timeline and complex nature of the product. 6. The absence of small business set-asides indicates a focus on large prime contractors.

Value Assessment

Rating: fair

Benchmarking the value of this contract is challenging without specific performance metrics and comparable contract data. The cost-plus-incentive-fee (CPIF) pricing structure, while common in complex defense procurements, can lead to cost overruns if not managed tightly. The long duration of nearly 14 years suggests a potentially high total expenditure, but the initial award amount of $20.1 million appears modest for such a lengthy period, implying significant future modifications or task orders are anticipated. Further analysis would require understanding the scope of work and the specific incentives tied to performance.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, indicating that the Department of Defense identified Raytheon Company as the only responsible source capable of fulfilling the requirement. This is often due to proprietary technology, unique capabilities, or existing system integration. The lack of competition means that price discovery through market forces was bypassed, potentially leading to less favorable pricing for the government compared to a competed scenario.

Taxpayer Impact: Sole-source awards limit opportunities for taxpayers to benefit from competitive pricing, potentially resulting in higher overall costs for defense systems.

Public Impact

The primary beneficiaries are the Department of Defense, ensuring the continued production of guided missiles. Services delivered include the manufacturing of guided missiles and related components. The geographic impact is primarily in Arizona, where the contractor is located. Workforce implications include sustained employment for specialized manufacturing roles at Raytheon.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing benefits for taxpayers.
Long contract duration increases the risk of cost escalation over time.
Cost-plus-incentive-fee contracts require robust oversight to ensure cost efficiency.

Positive Signals

Contract award ensures continued supply of critical defense assets.
Long-term contract provides stability for specialized manufacturing capabilities.
CPIF structure incentivizes contractor performance on key metrics.

Sector Analysis

This contract falls within the Guided Missile and Space Vehicle Manufacturing sector (NAICS 336414), a highly specialized segment of the aerospace and defense industry. This sector is characterized by high barriers to entry, significant R&D investment, and long production cycles. Spending in this area is driven by national security requirements and technological advancements. Comparable spending benchmarks would typically involve other major defense contractors producing similar complex weapon systems, often awarded through sole-source or limited competition due to unique technological requirements.

Small Business Impact

The contract data indicates that this award was not set aside for small businesses, nor does it appear to have specific subcontracting requirements for small businesses explicitly detailed in the provided summary. This is common for large, specialized defense manufacturing contracts where the prime contractor possesses unique capabilities. The absence of small business participation could limit opportunities for smaller firms to contribute to this specific defense program, though the prime contractor may engage small businesses indirectly through their broader supply chain.

Oversight & Accountability

Oversight for this contract would primarily fall under the Defense Contract Management Agency (DCMA), responsible for ensuring contractor performance, quality, and compliance with contract terms. The cost-plus-incentive-fee structure necessitates rigorous financial oversight to monitor costs and verify that performance incentives are met. Transparency is generally limited in sole-source defense contracts, but reporting requirements mandated by the contract and agency regulations would provide some level of accountability. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse.

Related Government Programs

Missile Defense Systems
Air-to-Air Missiles
Ground-Launched Missiles
Aerospace Manufacturing
Defense Procurement

Risk Flags

Sole-source award
Long contract duration
Cost-plus contract type

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $20.1 million to RAYTHEON COMPANY. INCORPORATE FPDS TRANSACTION CODE 4 FOR "EP BASIC IMPLEMENTATION"

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 $20.1 million.

What is the period of performance?

Start: 2010-06-08. End: 2024-01-30.

What is the historical spending pattern for Raytheon Company with the Department of Defense for guided missile manufacturing?

Analyzing historical spending patterns for Raytheon Company with the Department of Defense in guided missile manufacturing requires access to comprehensive FPDS data beyond this single contract. However, Raytheon (and its predecessor companies like Hughes Aircraft and Raytheon Missile Systems) has been a major, long-standing prime contractor for a wide array of missile systems for decades. Their spending typically involves large, multi-year contracts for research, development, production, and sustainment of various platforms, including air-to-air, air-to-ground, and strategic defense missiles. The total value of these contracts often runs into billions of dollars over the lifecycle of a program. This specific $20.1 million award, with its long duration, likely represents a specific production run or sustainment effort within a larger, ongoing program, contributing to a consistent, substantial historical spending relationship between Raytheon and the DoD in this critical defense sector.

How does the cost-plus-incentive-fee (CPIF) structure typically impact contractor behavior and final costs in defense contracts?

The Cost-Plus-Incentive-Fee (CPIF) contract structure is designed to encourage contractor efficiency and performance by sharing cost savings or overruns and linking profit to the achievement of specific performance targets. Under a CPIF, the final negotiated fee (profit) is adjusted based on whether the final cost is below or above the target cost, and whether performance objectives (e.g., delivery schedule, technical performance) are met. This incentivizes the contractor to control costs and meet or exceed performance goals to maximize their fee. However, it requires robust government oversight to establish realistic target costs and performance metrics, and to diligently monitor progress. If targets are poorly set or oversight is weak, the contractor may still achieve a high fee with suboptimal cost control, or conversely, be penalized for factors beyond their control. The sharing ratio between the government and contractor for cost variances is crucial in determining the ultimate cost outcome.

What are the primary risks associated with long-duration defense manufacturing contracts like this one?

Long-duration defense manufacturing contracts, such as this nearly 14-year award, present several primary risks. Firstly, there is the risk of cost escalation due to inflation, unforeseen technical challenges, or changes in material costs over an extended period. Secondly, technological obsolescence is a concern; the technology or requirements may evolve significantly during the contract's life, potentially rendering the product outdated or requiring costly modifications. Thirdly, contractor performance degradation over time is possible, especially if incentives are not consistently applied or if key personnel depart. Fourthly, the long duration can make it difficult to accurately forecast future needs and budgets, leading to potential funding instability. Finally, the extended period increases the likelihood of scope creep or contract modifications, which can further complicate cost and schedule management if not rigorously controlled.

Given this is a sole-source award, what mechanisms are in place to ensure fair pricing and prevent contractor overcharging?

Even in sole-source defense contracts, several mechanisms aim to ensure fair pricing and prevent overcharging. The government typically requires detailed cost proposals from the contractor, which are then scrutinized by contracting officers and cost analysts. This often involves 'should cost' or 'will cost' analyses, where the government estimates what the product or service should cost based on historical data, industry benchmarks, and independent cost research. Price negotiation is a critical phase, where the government uses this analysis to negotiate the final price with the contractor. Furthermore, contract clauses related to defective pricing can allow the government to recover overpayments if it's later found that the contractor provided inaccurate cost or pricing data during negotiations. For Cost-Plus contracts, robust oversight of incurred costs is essential, and audit rights are typically included.

What is the significance of the specific FPDS transaction code '4' mentioned for 'EP BASIC IMPLEMENTATION' in relation to this contract?

The mention of FPDS transaction code '4' for 'EP BASIC IMPLEMENTATION' suggests this contract might be related to the 'Enterprise Platform' or a similar foundational system implementation, potentially for program management, financial systems, or enterprise resource planning. In the context of a defense manufacturing contract for guided missiles, this code could indicate that the $20.1 million award is not solely for the physical production of missiles but also includes the implementation or sustainment of the underlying IT systems or processes necessary for managing the program, its logistics, or its lifecycle. Transaction code '4' often signifies contract actions that are modifications or task orders under an existing contract, or potentially a new award for a specific phase of a larger program. Understanding the 'EP BASIC IMPLEMENTATION' aspect would clarify whether this funding covers software, system integration, training, or related services supporting the missile manufacturing effort.

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 INCENTIVE FEE (V)

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: $20,443,706

Exercised Options: $20,443,706

Current Obligation: $20,106,326

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline