DoD awards Raytheon $59M for AMRAAM missile program support, a sole-source contract

Contract Overview

Contract Amount: $59,035,623 ($59.0M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2022-08-01

End Date: 2024-09-30

Contract Duration: 791 days

Daily Burn Rate: $74.6K/day

Competition Type: NOT COMPETED

Pricing Type: FIXED PRICE INCENTIVE

Sector: Defense

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

Place of Performance

Location: TUCSON, PIMA County, ARIZONA, 85756

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $59.0 million to RAYTHEON COMPANY for work described as: ADVANCED MEDIUM RANGE AIR TO AIR MISSILE PROGRAM SUPPORT AND ANNUAL SUSTAINMENT Key points: 1. Contract awarded to a single vendor, raising questions about competitive pricing. 2. Focus on sustainment and support suggests a long-term need for the AMRAAM system. 3. Fixed Price Incentive contract type aims to balance cost control with performance. 4. The contract duration extends over a year, indicating ongoing program requirements. 5. Awarded to Raytheon, a major defense contractor with extensive experience in missile systems. 6. Potential for cost overruns exists given the incentive-based pricing structure.

Value Assessment

Rating: fair

Benchmarking the value for this specific contract is challenging due to its sole-source nature and specialized technical requirements. The Fixed Price Incentive (FPI) contract type suggests an attempt to manage costs by incentivizing the contractor to stay within target price ranges, but it also carries inherent risks of cost escalation if targets are not met. Without comparable sole-source contracts for similar missile sustainment services, a definitive value-for-money assessment is difficult. However, the significant dollar amount warrants close monitoring of performance and cost trends.

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 a specific contractor possesses unique capabilities, proprietary technology, or is the sole provider of a required service or product. While it ensures access to specialized expertise, it limits the potential for price competition, which could lead to higher costs for the government compared to a fully competed procurement.

Taxpayer Impact: Sole-source awards reduce opportunities for taxpayer savings that arise from competitive bidding. The government may pay a premium for specialized services when competition is absent.

Public Impact

The primary beneficiaries are the U.S. Air Force, ensuring the operational readiness of the Advanced Medium-Range Air-to-Air Missile (AMRAAM) system. Services delivered include program support and annual sustainment, crucial for maintaining the effectiveness of air defense capabilities. The geographic impact is primarily within the United States, with potential implications for Air Force bases and operations nationwide. Workforce implications may include the continued employment of specialized engineers and technicians at Raytheon facilities.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition, potentially increasing costs for taxpayers.
Fixed Price Incentive contract type can lead to cost overruns if targets are missed.
Lack of competition makes it harder to benchmark pricing against market alternatives.
Dependence on a single contractor for critical missile sustainment poses a long-term risk.

Positive Signals

Award to an experienced contractor (Raytheon) with a proven track record in missile systems.
Contract structure includes incentives to manage performance and cost.
Ensures continued support for a critical national defense asset (AMRAAM).

Sector Analysis

The defense sector, particularly within aerospace and missile systems, is characterized by high R&D costs, long product lifecycles, and significant government investment. Contracts for sustainment and support are crucial for maintaining the readiness of complex weapon systems. Spending in this area often involves specialized engineering services and proprietary technologies, leading to a market dominated by a few large, established defense contractors like Raytheon. Comparable spending benchmarks are difficult to establish due to the unique nature of each missile system and its support requirements.

Small Business Impact

This contract does not appear to involve a small business set-aside. As a sole-source award to a large prime contractor, the potential for small business subcontracting opportunities would depend on Raytheon's internal subcontracting plans and the availability of small businesses capable of providing specialized support services for the AMRAAM program. Further analysis of Raytheon's subcontracting goals would be necessary to assess the impact on the small business ecosystem.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contracting and program management offices. Accountability measures are embedded within the Fixed Price Incentive contract structure, which links contractor profit to performance against cost targets. Transparency may be limited due to the sole-source nature of the award. The Inspector General's office within the Department of Defense would have jurisdiction to investigate any potential fraud, waste, or abuse related to this contract.

Related Government Programs

Air-to-Air Missile Programs
Missile Defense Systems
Aerospace Engineering Services
Defense Logistics and Sustainment

Risk Flags

Sole-source award
Potential for cost overruns (FPI contract)
Limited competition

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $59.0 million to RAYTHEON COMPANY. ADVANCED MEDIUM RANGE AIR TO AIR MISSILE PROGRAM SUPPORT AND 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 $59.0 million.

What is the period of performance?

Start: 2022-08-01. End: 2024-09-30.

What is Raytheon's track record with the AMRAAM program and similar missile sustainment contracts?

Raytheon Company has a long-standing history as the prime contractor for the Advanced Medium-Range Air-to-Air Missile (AMRAAM) program, including its development, production, and sustainment. Their extensive experience with this specific weapon system suggests a deep understanding of its technical requirements and operational needs. The company has consistently been awarded follow-on contracts for sustainment and upgrades, indicating a strong performance record and a trusted relationship with the Department of Defense. Benchmarking their performance on this contract against other similar sole-source sustainment contracts for complex missile systems would require access to proprietary cost and performance data, which is not publicly available. However, their continued role as the incumbent provider suggests a level of satisfaction with their capabilities and service delivery.

How does the Fixed Price Incentive (FPI) contract structure aim to control costs for this sole-source award?

The Fixed Price Incentive (FPI) contract structure is designed to provide a middle ground between fixed-price and cost-reimbursement contracts, particularly for sole-source procurements where cost targets can be established. In an FPI contract, the government and contractor agree on a target cost, a target profit, and a price ceiling. If the final cost is below the target cost, both parties share in the savings according to a predetermined formula. Conversely, if the final cost exceeds the target cost but remains below the ceiling, the contractor's profit is reduced, and the government pays a portion of the overrun. If the cost exceeds the ceiling, the contractor is responsible for the excess. This structure incentivizes the contractor to control costs while providing the government with some protection against unlimited cost escalation, though the price ceiling can still be substantial.

What are the primary risks associated with a sole-source award for critical defense sustainment services?

The primary risks associated with a sole-source award for critical defense sustainment services include a lack of competitive pressure, which can lead to inflated pricing and reduced innovation. Without competing bids, the government has less leverage to negotiate favorable terms and may end up paying more than necessary. There's also a risk of vendor lock-in, where the government becomes overly dependent on a single supplier, making it difficult and costly to switch providers even if performance declines or better alternatives emerge. Furthermore, a sole-source provider may have less incentive to invest in efficiency improvements or advanced technologies if they are guaranteed the business. This dependence can also create vulnerabilities in the supply chain and national security if the sole provider faces financial difficulties or operational disruptions.

What is the historical spending pattern for AMRAAM program support and sustainment by the Department of Defense?

Historical spending data for the AMRAAM program support and sustainment by the Department of Defense indicates a consistent and significant investment over many years. While specific annual figures fluctuate based on program requirements, upgrades, and sustainment needs, the overall trend shows a substantial and ongoing commitment to maintaining the operational readiness of this critical air-to-air missile system. The total contract value of approximately $59 million awarded in this instance represents a portion of the broader, multi-year investment in the AMRAAM lifecycle. Analyzing past contract awards for AMRAAM sustainment reveals a pattern of sole-source or limited-competition awards to Raytheon, reflecting the specialized nature of the work and the contractor's incumbent status. This consistent spending underscores the strategic importance of the AMRAAM to air superiority.

How does the $59 million award compare to the overall lifecycle cost or annual sustainment budget for the AMRAAM program?

The $59 million award for AMRAAM program support and annual sustainment represents a specific funding allocation for a defined period (August 2022 to September 2024). To contextualize this amount, it's essential to consider the broader lifecycle costs and annual sustainment budgets associated with the AMRAAM program. The AMRAAM is a complex, high-value weapon system with a long operational life, meaning its total lifecycle cost, encompassing research, development, procurement, sustainment, and eventual retirement, runs into billions of dollars. Annual sustainment budgets for such systems can also be substantial, often in the hundreds of millions of dollars, covering maintenance, upgrades, spare parts, and technical support. Therefore, this $59 million award, while significant, is likely a component of a larger, ongoing sustainment effort rather than the entirety of the program's annual or lifecycle expenditure.

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: 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: $59,035,623

Exercised Options: $59,035,623

Current Obligation: $59,035,623

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