DoD awards Raytheon $190M for AMRAAM sustainment, a sole-source contract with potential for cost overruns

Contract Overview

Contract Amount: $189,660,499 ($189.7M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2014-06-12

End Date: 2025-06-30

Contract Duration: 4,036 days

Daily Burn Rate: $47.0K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Official Description: PRODUCTION SUPPORT AND ANNUAL SUSTAINMENT OF ADVANCED MEDIUM RANGE AIR-TO-AIR MISSILE (AMRAAM)

Place of Performance

Location: TUCSON, PIMA County, ARIZONA, 85756

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $189.7 million to RAYTHEON COMPANY for work described as: PRODUCTION SUPPORT AND ANNUAL SUSTAINMENT OF ADVANCED MEDIUM RANGE AIR-TO-AIR MISSILE (AMRAAM) Key points: 1. The contract focuses on sustainment, indicating ongoing operational needs for the AMRAAM missile. 2. Raytheon Company is the sole provider, raising concerns about competition and potential price inflation. 3. The contract type (Cost Plus Incentive Fee) introduces risk of exceeding initial cost estimates. 4. This spending falls within the Defense sector, specifically guided missile manufacturing.

Value Assessment

Rating: questionable

The Cost Plus Incentive Fee structure allows for cost overruns, especially given the lack of competition. Benchmarking is difficult without comparable contracts.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was not competed, meaning Raytheon was the only source considered. This limits price discovery and potentially leads to higher costs for taxpayers.

Taxpayer Impact: The lack of competition for essential missile sustainment may result in taxpayers paying a premium for these services.

Public Impact

Ensures continued operational readiness of a key air-to-air missile system. Supports jobs within the defense manufacturing sector. Potential for increased defense spending if costs escalate beyond initial projections.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

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

Positive Signals

Sustains critical defense capability
Supports established defense contractor

Sector Analysis

This contract is within the Defense sector, specifically for the production support and sustainment of the Advanced Medium Range Air-to-Air Missile (AMRAAM). Spending benchmarks for missile sustainment can vary widely based on system complexity and age.

Small Business Impact

This contract was awarded to Raytheon Company and does not indicate any specific provisions or set-asides for small businesses. The nature of advanced missile manufacturing often involves large prime contractors.

Oversight & Accountability

The Defense Contract Management Agency (DCMA) is responsible for oversight. The cost-plus incentive fee structure requires careful monitoring to ensure cost control and contractor performance.

Related Government Programs

Guided Missile and Space Vehicle Manufacturing
Department of Defense Contracting
Defense Contract Management Agency Programs

Risk Flags

Lack of competition
Cost-plus contract type
Potential for cost escalation
Long-term sustainment needs
Sole-source provider

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $189.7 million to RAYTHEON COMPANY. PRODUCTION SUPPORT AND ANNUAL SUSTAINMENT OF ADVANCED MEDIUM RANGE AIR-TO-AIR MISSILE (AMRAAM)

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 $189.7 million.

What is the period of performance?

Start: 2014-06-12. End: 2025-06-30.

What is the historical cost performance of AMRAAM sustainment contracts awarded to Raytheon?

Historical cost performance data for AMRAAM sustainment contracts awarded to Raytheon would be crucial for assessing value. Without this, it's difficult to determine if the current $190 million award represents a fair price or if previous contracts experienced cost overruns due to the incentive fee structure.

What are the specific risks associated with a sole-source, cost-plus incentive fee contract for missile sustainment?

The primary risks include a lack of competitive pressure driving up prices, potential for contractor inefficiencies to be absorbed into costs, and the possibility of exceeding the target cost due to the incentive fee structure. This necessitates robust government oversight to manage performance and costs effectively.

How does the sustainment of AMRAAM contribute to overall defense effectiveness and readiness?

The AMRAAM is a critical component of U.S. air superiority, enabling fighter aircraft to engage and defeat enemy aircraft at medium ranges. Ensuring its continuous production support and sustainment is vital for maintaining combat readiness and projecting air power globally.

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: COST PLUS INCENTIVE FEE (V)

Evaluated Preference: NONE

Contractor Details

Parent Company: RTX Corp

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: $189,696,929

Exercised Options: $189,696,929

Current Obligation: $189,660,499

Actual Outlays: $44,114

Subaward Activity

Number of Subawards: 233

Total Subaward Amount: $36,359,762

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline