Raytheon awarded $1.77B for AMRAAM missile production over FY14-16, with a 4.7-year duration

Contract Overview

Contract Amount: $1,769,825,201 ($1.8B)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2014-12-22

End Date: 2027-12-30

Contract Duration: 4,756 days

Daily Burn Rate: $372.1K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIXED PRICE INCENTIVE

Sector: Defense

Official Description: ADVANCED MEDIUM RANGE AIR TO AIR MISSILE (AMRAAM) PRODUCTION LOTS 28-30 FY14-16

Place of Performance

Location: TUCSON, PIMA County, ARIZONA, 85756

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $1.77 billion to RAYTHEON COMPANY for work described as: ADVANCED MEDIUM RANGE AIR TO AIR MISSILE (AMRAAM) PRODUCTION LOTS 28-30 FY14-16 Key points: 1. Contract awarded to a single supplier, raising questions about price competitiveness. 2. Long-term contract structure may offer stability but could limit flexibility. 3. Fixed Price Incentive contract type aims to balance cost control with performance. 4. Production spans multiple fiscal years, indicating sustained demand for the missile. 5. Geographic concentration in Arizona for manufacturing. 6. Missile manufacturing falls under a specific North American Industry Classification System code.

Value Assessment

Rating: fair

The total award of over $1.7 billion for AMRAAM production across three fiscal years (FY14-16) represents a significant investment. Benchmarking this specific contract's value-for-money is challenging without detailed cost breakdowns and comparisons to similar, recently awarded missile production contracts. The fixed-price incentive structure suggests an attempt to manage costs while encouraging performance, but the lack of competition inherently limits the government's ability to secure the lowest possible price.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was not competed, indicating a sole-source award. This approach is often used when a specific contractor possesses unique capabilities or intellectual property essential for the product. However, the absence of a competitive bidding process means that the government did not explore alternative suppliers or negotiate prices against a market of potential providers, which can lead to higher costs.

Taxpayer Impact: The lack of competition means taxpayers may not be benefiting from the most cost-effective pricing that could have been achieved through a bidding process. This could result in a higher overall expenditure for the AMRAAM missile program.

Public Impact

The U.S. Department of Defense is the primary beneficiary, receiving advanced air-to-air missiles. The contract ensures the continued production of a critical component for air superiority. Manufacturing is concentrated in Arizona, potentially supporting local jobs and the regional economy. The duration of the contract suggests a long-term need for this defense capability.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price discovery and potential cost savings for taxpayers.
Long contract duration without clear performance incentives could lead to complacency.
Reliance on a single supplier creates a strategic risk if production is disrupted.

Positive Signals

Fixed Price Incentive contract type encourages contractor to meet cost and performance targets.
Sustained production indicates a validated and necessary defense capability.
Long-term award provides stability for the contractor and ensures supply continuity.

Sector Analysis

The Advanced Medium Range Air-to-Air Missile (AMRAAM) is a key component in modern air combat capabilities. Its production falls under the Guided Missile and Space Vehicle Manufacturing sector, a highly specialized and technologically advanced industry. This contract represents a significant portion of spending within this niche, reflecting the high cost and complexity associated with developing and manufacturing such sophisticated weaponry. Comparable spending benchmarks would typically involve other major defense procurement programs for advanced munitions.

Small Business Impact

This contract does not appear to have specific small business set-aside provisions mentioned. Given the specialized nature of advanced missile production, it is likely that the prime contractor, Raytheon, would be responsible for managing any subcontracting opportunities. The extent to which small businesses are involved would depend on Raytheon's subcontracting plan and the availability of qualified small businesses within the supply chain for specialized components and services.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contract management agencies, such as the Defense Contract Management Agency (DCMA). The fixed-price incentive structure includes performance metrics that would be monitored. Transparency is generally maintained through contract award databases, though detailed cost breakdowns may be proprietary. Inspector General offices within the DoD would have jurisdiction to investigate any allegations of fraud, waste, or abuse.

Related Government Programs

Air-to-Air Missiles
Defense Procurement
Ammunition Production
Guided Missile Manufacturing
Department of Defense Contracts

Risk Flags

Sole-source award
Long-term contract duration
Critical defense system production

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $1.77 billion to RAYTHEON COMPANY. ADVANCED MEDIUM RANGE AIR TO AIR MISSILE (AMRAAM) PRODUCTION LOTS 28-30 FY14-16

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 $1.77 billion.

What is the period of performance?

Start: 2014-12-22. End: 2027-12-30.

What is the historical spending trend for AMRAAM production prior to this award?

Historical spending data for AMRAAM production prior to FY14-16 (Lots 28-30) would reveal the program's lifecycle cost trajectory. Analyzing previous contract awards, including their values, durations, and competition levels, would provide context for the $1.77 billion awarded for Lots 28-30. For instance, understanding if previous lots were also sole-sourced or if there were fluctuations in unit costs could indicate whether this award represents a continuation of established pricing or a deviation. Without specific prior award data, it's difficult to assess if this represents an increase or decrease in per-unit cost or overall program expenditure relative to historical trends.

How does the unit cost of AMRAAM missiles under this contract compare to similar air-to-air missiles?

Directly comparing the unit cost of AMRAAM missiles under this $1.77 billion contract to similar air-to-air missiles is complex without knowing the exact number of units procured and the specific cost-per-unit breakdown within the Fixed Price Incentive (FPI) contract. The total award covers production lots over several fiscal years (FY14-16), and the FPI structure means the final price can vary based on performance and cost targets. However, AMRAAM is generally considered a high-end, technologically advanced missile. Its unit cost is expected to be significantly higher than less sophisticated missiles. Benchmarking against other advanced, medium-range, radar-guided missiles from different manufacturers or for different platforms would be necessary for a meaningful comparison, taking into account technological capabilities, range, and guidance systems.

What are the specific performance metrics and incentives tied to the Fixed Price Incentive (FPI) structure in this contract?

The Fixed Price Incentive (FPI) contract structure implies that the final price is not fixed but can vary within a defined range based on the contractor's performance against specific targets. For this AMRAAM production contract, key performance metrics likely include production rate, quality control (defect rates), on-time delivery, and potentially adherence to specific technical specifications. The 'incentive' aspect means that if Raytheon meets or exceeds certain targets (e.g., delivering missiles under a target cost or ahead of schedule), they may receive a higher profit margin. Conversely, if they fail to meet targets, their profit could be reduced, or the government might benefit from a lower price, depending on the specific FPI clause negotiated. Detailed specifics of these metrics and incentive curves are typically found in the contract's Statement of Work and special provisions.

What is Raytheon's track record with AMRAAM production and other similar defense contracts?

Raytheon Company has a long-standing and extensive track record as the prime contractor for the Advanced Medium Range Air-to-Air Missile (AMRAAM) program, having produced numerous lots of this weapon system for the U.S. military and international partners. Their experience spans decades, indicating a deep understanding of the missile's design, manufacturing processes, and supply chain. Beyond AMRAAM, Raytheon is a major defense contractor involved in a wide array of aerospace and defense systems, including other missile systems, radar, electronic warfare, and aircraft components. This broad experience suggests a high level of technical capability and program management expertise, which is crucial for complex, high-value defense production contracts like this one.

What are the potential risks associated with a sole-source award for a critical defense system like AMRAAM?

A sole-source award for a critical defense system like the AMRAAM presents several potential risks. Firstly, the lack of competition can lead to higher prices for taxpayers, as the government does not benefit from the cost-saving pressures inherent in a competitive bidding process. Secondly, it can reduce the incentive for the sole contractor to innovate or improve efficiency beyond what is contractually required, potentially leading to stagnation in technology or cost-effectiveness over time. Thirdly, it creates a dependency on a single supplier, making the supply chain vulnerable to disruptions caused by the contractor's financial instability, production issues, geopolitical events affecting the contractor, or labor disputes. This dependency can have significant national security implications if the system is critical for military operations.

How does the duration of this contract (ending 2027) align with the expected service life or modernization plans for AMRAAM?

The contract's end date of December 30, 2027, covers production lots for FY14-16, indicating a manufacturing period extending well beyond the award date. This duration suggests a sustained need for newly produced AMRAAM missiles to replenish inventories and equip new platforms. The expected service life of an AMRAAM missile is typically measured in years or decades, depending on storage conditions and upgrades. This contract's timeline likely aligns with the DoD's long-term procurement strategy and potentially anticipates future upgrades or variants of the AMRAAM. However, it does not necessarily reflect the missile's ultimate retirement date, which would be influenced by the development and fielding of next-generation air-to-air missile systems.

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: FIXED PRICE INCENTIVE (L)

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: $2,589,863,728

Exercised Options: $1,773,501,528

Current Obligation: $1,769,825,201

Actual Outlays: $3,607,840

Subaward Activity

Number of Subawards: 2238

Total Subaward Amount: $2,671,912,313

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline