DoD's $90.9M missile software contract awarded to Raytheon Company raises value and competition concerns

Contract Overview

Contract Amount: $90,904,575 ($90.9M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2021-10-07

End Date: 2026-11-30

Contract Duration: 1,880 days

Daily Burn Rate: $48.4K/day

Competition Type: NOT COMPETED

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: ADVANCED MEDIUM RANGE AIR TO AIR MISSILE SYSTEM- SYSTEM IMPROVEMENT PROGRAM (SIP)- SOFTWARE DEVELOPMENT

Place of Performance

Location: TUCSON, PIMA County, ARIZONA, 85756

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $90.9 million to RAYTHEON COMPANY for work described as: ADVANCED MEDIUM RANGE AIR TO AIR MISSILE SYSTEM- SYSTEM IMPROVEMENT PROGRAM (SIP)- SOFTWARE DEVELOPMENT Key points: 1. Contract awarded on a sole-source basis, limiting price discovery and potentially increasing costs. 2. Significant investment in software development for a critical defense system. 3. Long performance period suggests ongoing need and potential for future modifications. 4. Lack of competition is a key risk indicator for value for money. 5. Performance context is within advanced missile system improvement, a high-stakes sector. 6. Sector positioning is within defense R&D, a critical area for national security.

Value Assessment

Rating: questionable

The contract's value of $90.9 million for software development is substantial. Without competitive bidding, it is difficult to benchmark the pricing against market rates or similar contracts. The cost-plus-fixed-fee (CPFF) contract type, while common for R&D, can lead to cost overruns if not managed tightly. The lack of transparency in pricing due to sole-source award makes a definitive value assessment challenging.

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 procurement process, which typically involves soliciting bids from multiple qualified vendors. While sole-source awards can be justified in specific circumstances (e.g., unique capabilities, national security urgency), they inherently limit price negotiation and may not result in the best possible value for the government.

Taxpayer Impact: The absence of competition means taxpayers may be paying a premium for this software development. Without competing offers, there is less pressure on the contractor to offer the most cost-effective solution, potentially leading to higher overall expenditure.

Public Impact

The primary beneficiaries are the Department of Defense and the U.S. Air Force, ensuring the continued development and improvement of critical air-to-air missile systems. Services delivered include essential software development and system improvements for the Advanced Medium Range Air to Air Missile (AMRAAM) system. Geographic impact is primarily within the defense industrial base, with potential implications for national security operations. Workforce implications include specialized software engineering and defense contracting jobs, likely concentrated around Raytheon's facilities.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure, potentially inflating costs.
CPFF contract type can incentivize cost increases if not rigorously overseen.
Lack of public data on performance metrics makes independent assessment difficult.
Long contract duration increases the risk of scope creep and cost overruns.
Dependence on a single contractor for critical system software.

Positive Signals

Award to an established defense contractor with a track record in missile systems.
Focus on improving a key strategic asset (AMRAAM) enhances national security capabilities.
Software development is crucial for maintaining technological superiority in defense.
Clear end date provides a defined period for development and improvement.

Sector Analysis

The defense sector, particularly R&D for advanced weapon systems, represents a significant portion of federal spending. This contract falls under the 'Research and Development in the Physical, Engineering, and Life Sciences' category. The market for advanced missile technology is highly specialized, with a limited number of prime contractors capable of undertaking such complex development efforts. Spending in this area is driven by the need for technological superiority and maintaining a strategic advantage.

Small Business Impact

This contract was not set aside for small businesses, nor does it appear to have specific subcontracting requirements for small businesses explicitly detailed in the provided data. As a sole-source award to a large prime contractor, the direct impact on the small business ecosystem is likely minimal unless Raytheon Company actively engages small businesses as subcontractors for specific components or services not covered by this software development effort.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contracting and program management offices. The specific oversight mechanisms for a sole-source, CPFF contract would involve rigorous review of incurred costs, progress reports, and adherence to the fixed fee. Transparency is limited due to the non-competitive nature, but contract performance would be monitored by the Air Force. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Advanced Medium Range Air to Air Missile (AMRAAM) Program
Department of Defense Research and Development Spending
Air Force Weapon System Modernization
Defense Software Development Contracts

Risk Flags

Sole-source award
Cost-plus-fixed-fee contract type
Lack of competitive bidding
Potential for cost overruns
Limited transparency in pricing

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $90.9 million to RAYTHEON COMPANY. ADVANCED MEDIUM RANGE AIR TO AIR MISSILE SYSTEM- SYSTEM IMPROVEMENT PROGRAM (SIP)- SOFTWARE DEVELOPMENT

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 $90.9 million.

What is the period of performance?

Start: 2021-10-07. End: 2026-11-30.

What is Raytheon Company's track record with similar sole-source defense contracts, particularly for missile system software development?

Raytheon Company, now part of RTX, has a long history of sole-source and competitive contracts with the Department of Defense, particularly in missile systems. They are the prime contractor for the AMRAAM program. While specific details on past sole-source software development contracts are often proprietary, their extensive experience suggests a deep understanding of the technology. However, sole-source awards, by definition, mean there's no direct comparison of pricing or performance against competing firms for that specific award, making it difficult to assess value independently. Historical data would need to be analyzed for patterns of cost overruns or performance issues on similar contract types.

How does the $90.9 million contract value compare to historical spending on AMRAAM software improvements?

Without access to historical spending data specifically for AMRAAM software improvements, a direct comparison is challenging. However, $90.9 million represents a significant investment. The duration of the contract (October 2021 to November 2026, approximately 5 years) suggests a substantial, ongoing effort. If previous software improvement phases were significantly less expensive, this could indicate increased complexity, inflation, or a less cost-effective procurement strategy. Conversely, if previous phases were similarly funded, it might reflect consistent investment in maintaining and upgrading a critical defense asset. A detailed analysis would require historical contract awards for AMRAAM software modifications.

What are the primary risks associated with a sole-source, Cost Plus Fixed Fee (CPFF) contract for critical defense software?

The primary risks with a sole-source CPFF contract are twofold. First, the sole-source nature eliminates competitive pressure, potentially leading to higher prices than could be achieved through bidding. The government lacks the benefit of comparing multiple proposals. Second, the CPFF structure, while providing flexibility for R&D, can incentivize the contractor to incur more costs, as their fee is a fixed percentage of those costs. This necessitates robust government oversight to ensure costs are reasonable and necessary. Without strong oversight, there's a risk of cost overruns and reduced value for taxpayer money. The lack of competition exacerbates these risks.

What specific improvements are expected from this software development effort for the AMRAAM system?

The provided data indicates the contract is for 'ADVANCED MEDIUM RANGE AIR TO AIR MISSILE SYSTEM- SYSTEM IMPROVEMENT PROGRAM (SIP)- SOFTWARE DEVELOPMENT.' While specific technical details of the software improvements are not publicly disclosed, such efforts typically aim to enhance the missile's capabilities. This could include improved targeting algorithms, enhanced electronic counter-countermeasures (ECCM) to defeat enemy jamming, updated guidance software for better accuracy, integration with new platforms or sensors, or improved data links for networked warfare. The goal is generally to maintain the AMRAAM's effectiveness against evolving threats.

How does the $90.9M contract fit within the broader R&D spending for the Department of Defense, specifically for missile technology?

The Department of Defense's R&D budget is substantial, often in the tens of billions of dollars annually. A $90.9 million contract for software development on a key missile system represents a focused investment within this larger portfolio. It is not an exceptionally large sum in the context of overall DoD R&D but is significant for a specific system improvement program. This contract signifies the ongoing commitment to modernizing and enhancing air-to-air combat capabilities, reflecting a strategic priority to maintain technological superiority in a critical domain. Comparable spending would exist for other major weapon system upgrades across different branches.

What are the potential implications of relying solely on Raytheon for critical AMRAAM software updates?

Relying solely on Raytheon for critical AMRAAM software updates creates a dependency that carries inherent risks. While Raytheon possesses the institutional knowledge and technical expertise, this sole-source arrangement limits the government's options if performance issues arise or if alternative solutions could be more cost-effective. It also means that the government's leverage in negotiations is reduced. Furthermore, it could stifle innovation from other potential vendors who might offer novel approaches to software development or system improvement. Long-term, this dependency requires diligent contract management and performance monitoring to ensure continued value and capability.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Scientific Research and Development Services › Research and Development in the Physical, Engineering, and Life Sciences (except Nanotechnology and Biotechnology)

Product/Service Code: RESEARCH AND DEVELOPMENT › C – National Defense R&D Services

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Pricing Type: COST PLUS FIXED FEE (U)

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: $94,041,238

Exercised Options: $94,041,238

Current Obligation: $90,904,575

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: FA867520D0002

IDV Type: IDC

Timeline