Raytheon Company awarded $42.3M contract for guided missile system improvements, with a long performance period

Contract Overview

Contract Amount: $42,290,339 ($42.3M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2015-07-02

End Date: 2024-01-30

Contract Duration: 3,134 days

Daily Burn Rate: $13.5K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Official Description: SYSTEM IMPROVEMENT PROGRAM 2- EMD

Place of Performance

Location: TUCSON, PIMA County, ARIZONA, 85756

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $42.3 million to RAYTHEON COMPANY for work described as: SYSTEM IMPROVEMENT PROGRAM 2- EMD Key points: 1. Contract value represents significant investment in defense systems. 2. Sole-source award suggests limited market alternatives or specific contractor expertise. 3. Extended performance duration indicates a long-term need for system sustainment or upgrades. 4. Cost-plus contract type may lead to cost overruns if not managed closely. 5. Geographic concentration in Arizona for contract performance. 6. Focus on guided missile and space vehicle manufacturing highlights a critical defense capability.

Value Assessment

Rating: fair

The contract value of $42.3 million for system improvements is substantial. However, without comparable contract data for similar system upgrades or specific performance metrics, a precise value-for-money assessment is challenging. The cost-plus incentive fee structure allows for shared savings but also carries inherent risks of cost escalation if not meticulously managed. Benchmarking against industry standards for missile system development and sustainment would be necessary for a more definitive evaluation.

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 could be due to proprietary technology, unique expertise, or the need for compatibility with existing systems. The lack of competition means that price discovery through market forces was not utilized, potentially leading to a higher price than if multiple bidders had participated.

Taxpayer Impact: Taxpayers may not have received the benefit of competitive pricing, as the government did not have multiple offers to choose from. This underscores the importance of robust justification for sole-source awards to ensure fair and reasonable pricing.

Public Impact

The primary beneficiaries are the Department of Defense and its operational units requiring advanced guided missile capabilities. The contract supports the sustainment and improvement of critical defense infrastructure. Geographic impact is concentrated in Arizona, where contract performance is expected. Workforce implications include specialized engineering, manufacturing, and technical support roles within Raytheon and its supply chain.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure on pricing.
Cost-plus contract type can incentivize higher spending if not tightly controlled.
Long contract duration increases exposure to potential scope creep or evolving requirements.
Lack of detailed performance metrics in the provided data makes outcome assessment difficult.

Positive Signals

Award to a major defense contractor suggests established capabilities and experience.
Focus on system improvement indicates investment in maintaining and enhancing defense readiness.
Cost-plus incentive fee structure can align contractor and government interests towards efficiency.
Long performance period ensures continuity of essential defense capabilities.

Sector Analysis

This contract falls within the Guided Missile and Space Vehicle Manufacturing sector, a critical component of the aerospace and defense industry. This sector is characterized by high R&D investment, stringent quality control, and long product lifecycles. Spending in this area is driven by national security requirements and technological advancements. Comparable spending benchmarks would typically involve other major defense contracts for similar weapon systems or upgrades, often running into tens or hundreds of millions of dollars.

Small Business Impact

The provided data indicates that small business participation was not a primary consideration for this specific award (ss: false, sb: false). As a sole-source contract awarded to a large prime contractor, there is a potential for limited subcontracting opportunities for small businesses unless explicitly mandated or pursued by the prime. The impact on the small business ecosystem is likely minimal for this particular contract, though larger defense contracts often have subcontracting plans that can benefit small businesses.

Oversight & Accountability

Oversight for this contract would typically be managed by the Defense Contract Management Agency (DCMA), which is responsible for ensuring contractor performance, quality, and compliance with contract terms. Accountability measures are embedded within the cost-plus incentive fee structure, which can reward efficiency and penalize cost overruns. Transparency is generally maintained through contract award databases, though specific performance details and cost breakdowns may be sensitive.

Related Government Programs

Guided Missile Manufacturing
Space Vehicle Manufacturing
Defense System Modernization
Aerospace and Defense Contracting
Cost Plus Contracts

Risk Flags

Sole Source Award
Cost-Plus Contract Type
Long Performance Period

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $42.3 million to RAYTHEON COMPANY. SYSTEM IMPROVEMENT PROGRAM 2- EMD

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 $42.3 million.

What is the period of performance?

Start: 2015-07-02. End: 2024-01-30.

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

Raytheon Company, now part of RTX, has a long history of securing sole-source contracts within the Department of Defense, particularly for complex defense systems like missiles and aircraft. These awards are often based on their established expertise, proprietary technologies, and existing production lines. While sole-source awards can raise concerns about competition, they are typically justified by factors such as unique capabilities, urgent national security needs, or the need for interoperability with existing platforms. Raytheon's track record in managing such contracts involves navigating complex technical requirements, stringent quality standards, and significant budget oversight. Analyzing past performance on similar sole-source awards would involve reviewing contract modifications, delivery timelines, and any reported cost variances or performance issues to gauge their reliability and efficiency in delivering specialized defense capabilities.

How does the $42.3 million contract value compare to similar guided missile system improvement programs?

The $42.3 million contract value for system improvements is within the typical range for significant upgrades to complex defense systems like guided missiles. However, direct comparisons are challenging without specific details on the scope of 'System Improvement Program 2 - EMD' (Engineering and Manufacturing Development). Similar programs can range from tens of millions for incremental upgrades to hundreds of millions or even billions for major overhauls or new system developments. Factors influencing cost include the complexity of the technology, the number of systems being upgraded, the extent of modifications (e.g., software vs. hardware), and the duration of the improvement effort. Given the extended performance period (over 8 years), this value suggests a substantial, long-term effort rather than a short-term fix, aligning with the typical lifecycle costs of advanced defense platforms.

What are the primary risks associated with a Cost Plus Incentive Fee (CPIF) contract for this type of system?

The primary risks associated with a Cost Plus Incentive Fee (CPIF) contract for guided missile system improvements revolve around cost control and performance alignment. While CPIF aims to incentivize efficiency by sharing cost savings or overruns between the contractor and the government, it still carries inherent risks. The government bears the majority of the cost risk, as the contractor is reimbursed for allowable costs. If the target cost is set too high or if unforeseen technical challenges arise, the total expenditure can exceed initial estimates. Furthermore, the incentive fee structure requires careful negotiation and monitoring to ensure the targets are challenging yet achievable, and that the incentives truly drive desired outcomes without encouraging corner-cutting on quality or safety. Effective oversight by the Defense Contract Management Agency (DCMA) is crucial to manage these risks, including rigorous auditing of costs and performance metrics.

What does the extended contract duration (3134 days) imply about the program's effectiveness and future needs?

The extended contract duration of 3134 days (approximately 8.6 years) implies that the 'SYSTEM IMPROVEMENT PROGRAM 2 - EMD' is a long-term initiative critical to the Department of Defense's operational capabilities. This duration suggests that the improvements are not minor or short-term fixes but rather substantial enhancements or sustainment efforts required over an extended period. It indicates a recognized, ongoing need for the capabilities provided by this guided missile system. Such long-term contracts often involve complex engineering, integration, testing, and potential iterative development cycles. The effectiveness of the program will be measured by its ability to deliver these improvements on schedule and within budget, ultimately enhancing the system's performance, reliability, or lifespan to meet evolving defense requirements.

How does the geographic concentration in Arizona (AZ) impact contract oversight and potential risks?

The geographic concentration of contract performance in Arizona (AZ) simplifies oversight for the contracting agency, as it allows for focused monitoring by a specific Defense Contract Management Agency (DCMA) field office. This can lead to more consistent application of contract surveillance and a better understanding of the contractor's facilities and operations. However, it also introduces a single point of failure risk; any disruptions in Arizona, such as natural disasters, labor disputes, or unforeseen local economic issues, could significantly impact program delivery. While oversight may be streamlined, the reliance on a single geographic location necessitates robust contingency planning by both the government and the contractor to mitigate potential disruptions to this critical defense capability.

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: 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: $42,407,524

Exercised Options: $42,407,524

Current Obligation: $42,290,339

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline