DoD Awards Raytheon $2.18 Billion for AMRAAM Missiles, Undermining Competition

Contract Overview

Contract Amount: $2,177,484,016 ($2.2B)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2021-03-26

End Date: 2027-06-30

Contract Duration: 2,287 days

Daily Burn Rate: $952.1K/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 34-36

Place of Performance

Location: TUCSON, PIMA County, ARIZONA, 85756

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $2.18 billion to RAYTHEON COMPANY for work described as: ADVANCED MEDIUM RANGE AIR TO AIR MISSILE (AMRAAM) PRODUCTION LOTS 34-36 Key points: 1. Significant contract value for advanced missile systems. 2. Sole-source award to Raytheon raises concerns about price discovery. 3. Long-term contract duration (2021-2027) impacts future flexibility. 4. Missile manufacturing sector is highly specialized and consolidated.

Value Assessment

Rating: questionable

The contract value of $2.18 billion over three lots is substantial. Without competitive bidding, it's difficult to assess if this price represents fair market value compared to potential alternatives or previous production runs.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was not competed, indicating a sole-source award to Raytheon. This limits price discovery and potentially leads to higher costs for taxpayers as there is no market pressure to reduce prices.

Taxpayer Impact: The lack of competition likely results in a higher cost to taxpayers than a competed contract would yield.

Public Impact

Taxpayers may be overpaying for critical defense assets due to lack of competition. The long duration of the contract could lock the DoD into a specific technology or supplier. Dependence on a single supplier for advanced missile systems poses a strategic risk.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award
Lack of competition
Long contract duration
High contract value

Positive Signals

Procurement of critical defense assets
Long-term supply chain stability

Sector Analysis

The defense sector, particularly missile manufacturing, is characterized by high R&D costs, long development cycles, and significant consolidation. Spending benchmarks are difficult to establish due to the specialized nature of these systems.

Small Business Impact

This contract does not appear to involve small business participation, as it is a sole-source award to a large prime contractor, Raytheon. Opportunities for small businesses are likely limited to subcontracting roles.

Oversight & Accountability

The sole-source nature of this award warrants close oversight to ensure fair pricing and performance. The Department of Defense should justify the lack of competition and explore future competitive opportunities.

Related Government Programs

Guided Missile and Space Vehicle Manufacturing
Department of Defense Contracting
Department of the Air Force Programs

Risk Flags

Lack of competition
Potential for inflated pricing
Long-term supplier dependency
Limited innovation potential
Strategic supply chain risk

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $2.18 billion to RAYTHEON COMPANY. ADVANCED MEDIUM RANGE AIR TO AIR MISSILE (AMRAAM) PRODUCTION LOTS 34-36

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 $2.18 billion.

What is the period of performance?

Start: 2021-03-26. End: 2027-06-30.

What is the justification for awarding this contract on a sole-source basis, and what steps are being taken to ensure fair and reasonable pricing?

The justification for a sole-source award typically involves factors like unique capabilities, urgent need, or lack of viable alternatives. For fair pricing, the DoD relies on cost analysis, historical data, and negotiation. However, without competition, the assurance of the 'best' price is diminished, necessitating robust internal review and potentially independent cost estimates.

What are the long-term strategic risks associated with relying on a single supplier for AMRAAM production, especially given the contract's duration?

The primary strategic risk is reduced leverage in future negotiations and potential supply chain disruptions if the sole supplier faces issues. It can also stifle innovation by limiting exposure to alternative technologies or manufacturing processes. The long duration (over 6 years) exacerbates these risks by locking in the current supplier and potentially delaying the adoption of next-generation capabilities.

How does the unit cost of AMRAAM under this contract compare to previous production lots or similar missile systems, and what factors influence this cost?

Without competitive bidding, a direct comparison is challenging. Unit costs are influenced by production volume, material costs, labor, overhead, and contract type (Fixed Price Incentive). Inflation and evolving technological requirements can also drive costs up. A detailed cost breakdown and comparison with prior lots, adjusted for inflation and scope, would be needed for a proper assessment.

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: $2,177,484,016

Exercised Options: $2,177,484,016

Current Obligation: $2,177,484,016

Actual Outlays: $485,230

Subaward Activity

Number of Subawards: 2167

Total Subaward Amount: $1,652,779,389

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline