Raytheon Company awarded $56.2M for advanced missile systems, facing limited competition

Contract Overview

Contract Amount: $56,168,163 ($56.2M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2018-03-28

End Date: 2020-08-07

Contract Duration: 863 days

Daily Burn Rate: $65.1K/day

Competition Type: NOT COMPETED

Pricing Type: FIXED PRICE INCENTIVE

Sector: Defense

Official Description: ADVANCED MEDIUM RANGE AIR TO AIR MISSILE (AMRAAM) - PS, SLPP, CLS

Place of Performance

Location: TUCSON, PIMA County, ARIZONA, 85756

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $56.2 million to RAYTHEON COMPANY for work described as: ADVANCED MEDIUM RANGE AIR TO AIR MISSILE (AMRAAM) - PS, SLPP, CLS Key points: 1. Contract awarded on a sole-source basis, raising concerns about price discovery. 2. Significant investment in advanced air-to-air missile technology. 3. Performance period spans over two years, indicating a substantial project. 4. Geographic focus on Arizona for delivery. 5. Fixed Price Incentive contract type suggests shared risk between government and contractor. 6. No small business set-aside noted, potentially limiting broader economic participation.

Value Assessment

Rating: questionable

The contract value of $56.2 million for advanced missile systems requires careful benchmarking against similar sole-source procurements. Without competitive bidding, it is difficult to definitively assess value for money. The fixed-price incentive structure aims to control costs, but the absence of competition means the government may not be achieving the lowest possible price. Further analysis of historical pricing for AMRAAM systems and comparable missile technologies would be necessary to provide a more robust value assessment.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one bidder, Raytheon Company, was considered. This approach bypasses the standard competitive bidding process, which typically involves multiple companies vying for the contract. While sole-source awards can be justified under specific circumstances (e.g., unique capabilities or urgent needs), they inherently limit price discovery and potentially lead to higher costs for the government compared to a fully competed contract. The lack of competition here means taxpayers may not benefit from the cost savings that competition usually drives.

Taxpayer Impact: The sole-source nature of this award means taxpayers may be paying a premium, as there was no opportunity for multiple companies to bid and drive down the price through competition.

Public Impact

The primary beneficiary is the Department of Defense, specifically the Air Force, in acquiring advanced missile capabilities. The contract delivers advanced medium-range air-to-air missiles (AMRAAM), crucial for air superiority. The geographic impact is centered in Arizona, where the delivery orders are fulfilled. The contract supports specialized engineering services related to missile systems.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure on pricing.
Lack of transparency in the procurement process due to limited competition.
Potential for cost overruns if not closely managed, despite FPI contract type.

Positive Signals

Award to a known contractor with established expertise in missile systems.
Fixed Price Incentive contract type aligns contractor and government interests in cost control.
Delivery order structure allows for phased execution and potential flexibility.

Sector Analysis

The defense sector, particularly the aerospace and defense sub-sector, is characterized by high R&D costs, long product development cycles, and significant government procurement. Contracts for advanced weaponry like the AMRAAM are critical for maintaining national security. The market for such specialized systems is often concentrated among a few major defense contractors due to the technical expertise and capital investment required. This contract represents a significant investment within this specialized segment of the defense industry.

Small Business Impact

The data indicates that this contract was not set aside for small businesses, nor does it appear to involve significant subcontracting opportunities for them based on the provided information. This suggests that the primary awardee, Raytheon Company, is handling the majority of the work. Consequently, the direct impact on the small business ecosystem for this specific contract is likely minimal, as the procurement did not leverage small business set-aside provisions.

Oversight & Accountability

Oversight for this contract would fall under the Department of Defense's established procurement regulations and contract management processes. The Air Force contracting office is responsible for monitoring performance, ensuring compliance with contract terms, and managing payments. Given the sole-source nature, enhanced scrutiny may be applied to ensure fair pricing and necessity. Inspector General investigations could be initiated if any irregularities or fraud are suspected.

Related Government Programs

Air-to-Air Missiles
Defense Procurement
Advanced Weapon Systems
Department of Defense Contracts
Raytheon Defense Contracts

Risk Flags

Sole Source Procurement
Lack of Competition
Potential for Price Inflation

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $56.2 million to RAYTHEON COMPANY. ADVANCED MEDIUM RANGE AIR TO AIR MISSILE (AMRAAM) - PS, SLPP, CLS

Who is the contractor on this award?

The obligated recipient is RAYTHEON COMPANY.

Which agency awarded this contract?

Awarding agency: Department of Defense (Department of the Air Force).

What is the total obligated amount?

The obligated amount is $56.2 million.

What is the period of performance?

Start: 2018-03-28. End: 2020-08-07.

What is the historical spending trend for AMRAAM systems by the Department of Defense?

Historical spending on the Advanced Medium Range Air-to-Air Missile (AMRAAM) program by the Department of Defense has been substantial over the years, reflecting its critical role in air combat capabilities. While specific year-over-year figures fluctuate based on production runs, modernization efforts, and foreign military sales, the program consistently represents a significant portion of the Air Force's and Navy's tactical missile procurement budgets. Data from sources like the Government Accountability Office (GAO) and the Department of Defense's own budget requests often detail multi-billion dollar investments across various fiscal years. These trends are influenced by geopolitical factors, the retirement of older platforms, and the introduction of new threats, necessitating continuous investment in advanced missile technology to maintain air superiority. The $56.2 million awarded in this specific instance is part of this ongoing, larger investment strategy.

How does the pricing of this sole-source contract compare to potentially competitive bids?

Direct comparison of pricing for this sole-source contract to hypothetical competitive bids is inherently challenging. Sole-source procurements, by definition, lack the price pressure that multiple competing vendors exert. While the contract uses a Fixed Price Incentive (FPI) structure, which aims to share cost risks and incentivize efficiency, the absence of competition means the government cannot be certain it secured the best possible price. Benchmarking against previous sole-source awards for similar systems or against publicly available cost estimates for comparable technologies can offer some insight, but these are often imperfect comparisons. Without a competitive process, the government relies heavily on negotiation and cost analysis, which may not yield the same cost savings as a robust bidding environment. Therefore, it is likely that a competitively procured contract could have resulted in a lower overall price for the taxpayer.

What are the key performance risks associated with the AMRAAM system and its production?

Key performance risks associated with the AMRAAM system and its production primarily revolve around technological maturity, supply chain reliability, and integration challenges. While AMRAAM is a mature and proven system, continuous upgrades and variants introduce complexities. Ensuring the consistent availability of specialized components and raw materials from the supply chain can pose a risk, especially in a globalized market susceptible to disruptions. Integration risks arise when the missile system needs to interface with evolving aircraft platforms and avionics, requiring rigorous testing and validation. Furthermore, manufacturing defects or quality control issues during production, though mitigated by contract types like FPI, remain a potential performance risk that requires diligent oversight. The sole-source nature of this award could potentially exacerbate oversight challenges if not managed proactively by the contracting agency.

What is the strategic importance of the AMRAAM system for the U.S. Air Force?

The AMRAAM system holds immense strategic importance for the U.S. Air Force, serving as a cornerstone of its air-to-air combat capability. It is designed to engage a wide range of aerial threats, including enemy aircraft and cruise missiles, at medium ranges, providing crucial standoff capability. This allows fighter jets to neutralize threats before they can pose a danger to friendly forces or assets. The AMRAAM's "fire-and-forget" capability, utilizing active radar homing, significantly enhances pilot survivability and combat effectiveness by allowing them to break away after missile launch. Maintaining a robust inventory and continuous modernization of AMRAAM ensures the Air Force retains air superiority, a fundamental prerequisite for projecting power globally and defending national interests. This contract directly supports that strategic imperative.

How has the contract type (Fixed Price Incentive) influenced the cost and performance of this delivery order?

The Fixed Price Incentive (FPI) contract type for this delivery order aims to balance cost control with performance incentives. Under an FPI contract, the final price is adjusted based on the contractor's performance relative to target cost and target profit goals. If the contractor achieves lower costs than targeted, both the government and the contractor share in the savings according to a pre-negotiated formula. Conversely, if costs exceed the target, both parties share the overrun, up to a ceiling price. This structure incentivizes the contractor (Raytheon) to manage costs efficiently and meet performance specifications. For this specific delivery order, the FPI type suggests that the government sought to achieve a specific missile capability while sharing some of the cost-risk with the contractor, encouraging them to perform effectively within defined financial parameters.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Architectural, Engineering, and Related Services › Engineering Services

Product/Service Code: SUPPORT SVCS (PROF, ADMIN, MGMT) › PROFESSIONAL SERVICES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

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: $56,168,163

Exercised Options: $56,168,163

Current Obligation: $56,168,163

Subaward Activity

Number of Subawards: 10

Total Subaward Amount: $1,781,921

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: FA867515D0062

IDV Type: IDC

Timeline