DoD's $53.6M missile program support contract awarded to Raytheon Company, with no competition

Contract Overview

Contract Amount: $53,631,811 ($53.6M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2020-08-01

End Date: 2023-02-28

Contract Duration: 941 days

Daily Burn Rate: $57.0K/day

Competition Type: NOT COMPETED

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: ADVANCED MEDIUM RANGE AIR TO AIR MISSILE PROGRAM SUPPORT&ANNUAL SUSTAINMENT

Place of Performance

Location: TUCSON, PIMA County, ARIZONA, 85756

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $53.6 million to RAYTHEON COMPANY for work described as: ADVANCED MEDIUM RANGE AIR TO AIR MISSILE PROGRAM SUPPORT&ANNUAL SUSTAINMENT Key points: 1. Contract awarded on a sole-source basis, raising questions about price discovery and potential overpayment. 2. Significant duration of 941 days suggests a long-term need for sustained missile program support. 3. Engineering services are critical for maintaining the readiness and effectiveness of advanced air-to-air missiles. 4. The contract's value, while substantial, needs benchmarking against similar sustainment contracts for value assessment. 5. Lack of competition may limit opportunities for innovative solutions or cost-saving measures from other vendors. 6. Performance context is crucial to understand if the contractor is meeting technical and delivery expectations. 7. Sector positioning highlights the importance of this contract within the broader defense aerospace industry.

Value Assessment

Rating: questionable

The contract's value of $53.6 million for engineering services and annual sustainment of the Advanced Medium Range Air to Air Missile program requires careful scrutiny due to the lack of competitive bidding. Without comparison to other potential providers or similar contracts, it is difficult to ascertain if this represents a fair market price. The firm fixed-price nature of the award suggests cost certainty for the government, but the absence of competition means there was no market pressure to drive down costs. Benchmarking against industry standards for missile sustainment and engineering support would be necessary to provide a more definitive value assessment.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning it was not competed among multiple vendors. This approach is typically used when only one vendor possesses the necessary capabilities, proprietary knowledge, or when urgency dictates a direct award. The lack of competition means that the government did not benefit from the price discovery mechanisms inherent in a competitive bidding process, potentially leading to higher costs than if multiple firms had vied for the contract. The absence of bidders also limits the government's ability to explore alternative technical solutions or service providers.

Taxpayer Impact: Taxpayers may be paying a premium for this contract due to the absence of competitive pressure. Without multiple bids, there is less assurance that the government secured the best possible price for these critical engineering and sustainment services.

Public Impact

The primary beneficiaries are the U.S. Air Force, ensuring the operational readiness of its advanced air-to-air missile systems. Services delivered include engineering support and annual sustainment, crucial for maintaining the technological edge of the missile program. The geographic impact is primarily within Arizona, where Raytheon Company's operations are located, contributing to the local economy. Workforce implications include the employment of specialized engineers and technicians required for advanced aerospace and defense programs.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing and potential cost savings for taxpayers.
Lack of transparency in the procurement process due to no-bid award.
Potential for cost overruns if not closely monitored, despite firm fixed-price structure.
Dependence on a single contractor for critical missile sustainment could pose supply chain risks.

Positive Signals

Award to a known contractor (Raytheon) with established expertise in missile systems.
Firm fixed-price contract provides cost certainty for the government.
Contract duration indicates a sustained commitment to missile program readiness.
Engineering services are vital for maintaining advanced technological capabilities.

Sector Analysis

The defense aerospace sector is characterized by high technological complexity, significant R&D investment, and long product lifecycles. Contracts for missile system support and sustainment are critical components of this industry, ensuring the operational readiness of national defense assets. Raytheon Company is a major player in this sector, with extensive experience in developing and supporting advanced weapon systems. Spending benchmarks for similar sustainment contracts can vary widely based on the specific weapon system, its technological maturity, and the scope of services required. This contract falls within the realm of specialized engineering and logistics support for advanced munitions.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'ss': false and 'sb': false. The award to a large prime contractor like Raytheon Company suggests that subcontracting opportunities may exist for small businesses within their supply chain. However, the extent of these opportunities is not detailed in the provided data. The absence of a direct set-aside means that small businesses did not have a primary opportunity to bid on the prime contract itself, relying instead on potential downstream work.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Defense's contracting and program management structures. Specific oversight mechanisms would include contract performance reviews, financial audits, and potentially Inspector General investigations if any irregularities are suspected. Transparency is enhanced through contract databases like FPDS, but the sole-source nature limits public insight into the negotiation and justification process. Accountability rests with the contracting officers and program managers responsible for ensuring Raytheon meets its contractual obligations.

Related Government Programs

Air-to-Air Missile Programs
Defense Engineering Services
Aerospace Sustainment Contracts
Raytheon Company Defense Contracts
Department of the Air Force Procurement

Risk Flags

Sole-source award
Lack of competition
Potential for cost overruns
Limited transparency

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $53.6 million to RAYTHEON COMPANY. ADVANCED MEDIUM RANGE AIR TO AIR MISSILE PROGRAM SUPPORT&ANNUAL SUSTAINMENT

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 $53.6 million.

What is the period of performance?

Start: 2020-08-01. End: 2023-02-28.

What is Raytheon Company's track record with the Department of Defense, particularly on missile system contracts?

Raytheon Company, now part of RTX, has a long and extensive history of contracting with the Department of Defense, particularly in the realm of missile systems. They are a primary developer and manufacturer of numerous advanced weapon systems, including various air-to-air and air-to-ground missiles. Their track record includes significant programs such as the AIM-120 AMRAAM (Advanced Medium Range Air-to-Air Missile), the Patriot missile defense system, and the Tomahawk cruise missile. While generally considered a reliable and capable defense contractor, like any large entity, they have faced scrutiny over contract performance, cost overruns, and technical challenges on specific programs throughout their history. However, their continued success in securing major defense contracts indicates a generally positive and established relationship with the DoD, built on decades of delivering complex defense technologies and services.

How does the $53.6 million contract value compare to similar missile sustainment contracts awarded by the DoD?

Benchmarking the $53.6 million contract value for the Advanced Medium Range Air to Air Missile (AMRAAM) program support and annual sustainment against similar DoD contracts is challenging without more specific comparative data. Missile sustainment contracts can vary significantly in scope, duration, and the specific services included (e.g., depot-level maintenance, component repair, software updates, engineering support). However, given that AMRAAM is a frontline, widely deployed missile system, annual sustainment costs in the tens of millions of dollars are not uncommon, especially when encompassing engineering services. Contracts for major weapon system sustainment can range from tens to hundreds of millions of dollars annually, depending on the system's complexity and operational tempo. The 'firm fixed price' nature suggests a defined scope, but the sole-source award prevents a direct cost comparison against competitive bids for similar services.

What are the primary risks associated with awarding a sole-source contract for critical missile program support?

The primary risks associated with awarding a sole-source contract for critical missile program support are multifaceted. Firstly, there is a significant risk of 'cost creep' or paying a premium, as the absence of competition removes the downward price pressure that multiple bidders would typically exert. This can lead to less favorable pricing for the government. Secondly, there's a risk of reduced innovation; without competitive pressure, the sole-source provider may have less incentive to invest in process improvements or develop more cost-effective solutions. Thirdly, there's a potential for complacency or reduced performance urgency from the contractor, as they are guaranteed the work without needing to outperform rivals. Finally, sole-source awards can raise concerns about transparency and fairness in the procurement process, potentially leading to public or congressional scrutiny if not adequately justified.

How effective is the firm fixed-price (FFP) contract type in managing costs for long-term sustainment programs like this?

The Firm Fixed-Price (FFP) contract type is generally considered effective in managing costs for long-term sustainment programs, especially when the scope of work is well-defined and risks are understood. Under an FFP agreement, the contractor assumes most of the financial risk, agreeing to a set price regardless of their actual costs. This provides the government with cost certainty, making budgeting more predictable. For sustainment programs, where the need for services is ongoing, FFP can incentivize the contractor to control their own costs efficiently to maximize profit. However, the effectiveness of FFP is highly dependent on the accuracy of the initial cost estimates and the clarity of the contract's requirements. If the scope is poorly defined or unforeseen technical issues arise, the contractor might seek change orders, potentially increasing the overall cost, or face financial hardship if they cannot manage their expenses within the fixed price.

What are the historical spending patterns for the Advanced Medium Range Air to Air Missile (AMRAAM) program support and sustainment?

Historical spending patterns for the Advanced Medium Range Air to Air Missile (AMRAAM) program support and sustainment are not directly available from the provided data snippet, which only details a single delivery order from August 2020 to February 2023 valued at approximately $53.6 million. However, AMRAAM is a cornerstone air-to-air missile for the U.S. Air Force and Navy, as well as allied nations, implying consistent and substantial annual funding requirements for sustainment, upgrades, and related engineering services over many years. Historically, major defense programs like AMRAAM often see multi-year sustainment contracts awarded to prime contractors like Raytheon. Annual spending can fluctuate based on operational tempo, modernization efforts, inventory levels, and specific sustainment needs. Without access to broader contract databases or program budget documents, precise historical figures are speculative, but it's reasonable to assume cumulative spending in the hundreds of millions, if not billions, over the program's lifecycle.

What is the significance of the 'Engineering Services' (NAICS 541330) classification for this contract?

The classification of 'Engineering Services' (NAICS code 541330) for this contract signifies that the core of the work being procured involves the application of engineering principles and knowledge to support the Advanced Medium Range Air to Air Missile (AMRAAM) program. This typically includes activities such as design, development, testing, analysis, and technical consultation related to the missile system. For a sustainment contract, these engineering services are crucial for troubleshooting issues that arise during operation, implementing necessary upgrades or modifications, ensuring compliance with evolving technical standards, and providing technical expertise to the end-users (the Air Force). It indicates a focus on the intellectual and technical aspects of maintaining and improving the missile system's performance and reliability, rather than purely logistical or maintenance tasks.

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: FIRM FIXED PRICE (J)

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: $53,631,811

Exercised Options: $53,631,811

Current Obligation: $53,631,811

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: FA867520D0020

IDV Type: IDC

Timeline