DoD's $18M Raytheon contract for missile support lacks competition, raising value concerns

Contract Overview

Contract Amount: $18,049,247 ($18.0M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2022-09-12

End Date: 2025-03-11

Contract Duration: 911 days

Daily Burn Rate: $19.8K/day

Competition Type: NOT COMPETED

Pricing Type: FIXED PRICE INCENTIVE

Sector: Defense

Official Description: ADVANCED MEDIUM-RANGE AIR-TO-AIR MISSILE PROGRAM SUPPORT AND SUSTAINMENT NON-WARRANTY REPAIRS

Place of Performance

Location: TUCSON, PIMA County, ARIZONA, 85756

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $18.0 million to RAYTHEON COMPANY for work described as: ADVANCED MEDIUM-RANGE AIR-TO-AIR MISSILE PROGRAM SUPPORT AND SUSTAINMENT NON-WARRANTY REPAIRS Key points: 1. Contract awarded on a non-competitive basis, limiting price discovery. 2. Fixed Price Incentive contract type suggests shared risk but requires careful monitoring. 3. Long duration of over 30 months indicates a significant, ongoing need. 4. Focus on repairs and sustainment highlights the importance of readiness for critical defense assets. 5. Geographic concentration in Arizona for sustainment operations. 6. No small business set-aside, potentially limiting broader economic participation.

Value Assessment

Rating: questionable

The contract's value is difficult to benchmark due to its non-competitive nature. Without competing offers, it's challenging to ascertain if the $18 million represents a fair market price for engineering services related to missile support and sustainment. The fixed-price incentive structure aims to control costs, but the absence of competition means the government may not be achieving optimal value for money. Further analysis would require comparing the per-unit costs of specific repair actions or sustainment hours to industry averages, which are not readily available in this data.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning there was no open competition. This approach is typically used when only one vendor possesses the necessary capabilities, technology, or security clearances. The lack of competition means that the government did not benefit from a range of proposals and pricing strategies that could have driven down costs. This raises questions about whether alternative solutions or more cost-effective approaches were explored.

Taxpayer Impact: Taxpayers may be paying a premium due to the absence of competitive bidding. Without multiple offers, the government has less leverage to negotiate favorable terms and pricing, potentially leading to higher overall expenditures for this critical defense need.

Public Impact

The primary beneficiaries are the U.S. Air Force and potentially other Department of Defense branches relying on advanced medium-range air-to-air missiles. Services delivered include non-warranty repairs and sustainment support, crucial for maintaining the operational readiness of vital defense systems. The contract has a geographic impact primarily in Arizona, where sustainment operations will be conducted. Workforce implications include the potential for skilled engineering and technical jobs within Raytheon Company, particularly in Arizona.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition limits price discovery and potentially increases costs for taxpayers.
Sole-source award raises concerns about whether the government secured the best possible value.
Fixed Price Incentive contract requires careful oversight to ensure contractor performance aligns with cost objectives.
Long contract duration could lead to cost overruns if not managed effectively.
No small business participation noted, potentially missing opportunities for economic inclusion.

Positive Signals

Awarding to Raytheon Company, a known defense contractor, suggests access to specialized expertise for critical missile systems.
The Fixed Price Incentive contract type aims to incentivize cost control while ensuring performance.
Focus on sustainment and repair is essential for maintaining military readiness.
The contract duration aligns with the expected lifecycle support needs of advanced weaponry.

Sector Analysis

This contract falls within the aerospace and defense sector, specifically focusing on engineering services for advanced missile systems. The market for such specialized support is often concentrated among a few prime defense contractors due to high barriers to entry, including proprietary technology, security clearances, and extensive testing requirements. Spending on missile defense and sustainment is a significant component of the overall defense budget, reflecting the ongoing need for advanced military capabilities.

Small Business Impact

This contract does not appear to include a small business set-aside, nor is there an indication of significant subcontracting opportunities for small businesses within the provided data. The sole-source nature of the award further limits the potential for small business involvement. This suggests that the primary focus was on securing specialized services from the incumbent contractor, potentially overlooking opportunities to foster small business participation in the defense supply chain for this specific requirement.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contracting and program management offices. The fixed-price incentive structure necessitates monitoring of performance metrics and cost expenditures to ensure alignment with contract goals. Transparency may be limited due to the sole-source nature, but contract modifications, performance reports, and financial audits would serve as key accountability measures. The Inspector General's office could investigate any allegations of fraud, waste, or abuse.

Related Government Programs

Advanced Medium-Range Air-to-Air Missile (AMRAAM) Program
Air Force Weapon System Sustainment Contracts
Defense Engineering Services Contracts
Aerospace Component Repair and Overhaul

Risk Flags

Sole-source award
Lack of competition
Potential for cost overruns
Limited small business participation

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $18.0 million to RAYTHEON COMPANY. ADVANCED MEDIUM-RANGE AIR-TO-AIR MISSILE PROGRAM SUPPORT AND SUSTAINMENT NON-WARRANTY REPAIRS

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 $18.0 million.

What is the period of performance?

Start: 2022-09-12. End: 2025-03-11.

What is Raytheon Company's track record with similar Department of Defense contracts, particularly for missile sustainment?

Raytheon Company, now RTX, has a long and extensive history of supporting Department of Defense programs, including numerous contracts related to missile systems. They are a primary developer and manufacturer of various air-to-air and air-to-ground missiles, including the Advanced Medium-Range Air-to-Air Missile (AMRAAM). Their track record typically involves complex engineering, manufacturing, and sustainment services. While specific performance data for individual contracts is often sensitive, Raytheon is generally considered a key strategic partner for the DoD in missile technology. However, like any large defense contractor, they have faced scrutiny over contract costs and performance on specific programs in the past. For this particular contract, the lack of competition makes a direct comparison of Raytheon's performance against alternatives impossible without further internal DoD data.

How does the $18 million contract value compare to similar missile sustainment contracts awarded competitively?

Directly comparing the $18 million value of this sole-source contract to competitively awarded contracts for similar missile sustainment services is challenging without access to detailed, apples-to-apples comparisons of scope, duration, and specific services rendered. Sole-source awards often carry a premium due to the absence of competitive pressure. If this contract were competed, it is plausible that multiple bidders would offer a range of prices, potentially driving the final award price lower than what was negotiated here. Benchmarking would require analyzing the per-unit cost of specific repair actions, labor hours, or sustainment packages against industry standards or other DoD contracts for comparable missile systems, which are not publicly available in this dataset. The fixed-price incentive (FPI) structure suggests an attempt to manage costs, but the baseline price is set without competitive validation.

What are the primary risks associated with a sole-source award for critical defense systems like AMRAAM support?

The primary risks associated with a sole-source award for critical defense systems like AMRAAM support include potential overpayment due to lack of price competition, reduced incentive for the contractor to innovate or improve efficiency, and a potential over-reliance on a single supplier, which can create vulnerabilities in the supply chain or strategic dependencies. Without competitive pressure, the government may not achieve the best possible value for its investment. Furthermore, it can stifle innovation from other potential providers who might offer alternative or more cost-effective solutions. Ensuring robust oversight, clear performance metrics, and fair pricing mechanisms becomes even more critical in sole-source situations to mitigate these inherent risks and protect taxpayer interests.

How effective is the Fixed Price Incentive (FPI) contract type in controlling costs for long-term sustainment programs?

The Fixed Price Incentive (FPI) contract type aims to provide a middle ground between fixed-price and cost-reimbursement contracts, offering potential cost savings while ensuring performance. In 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 contractor share in the savings (upward or downward adjustment). This structure incentivizes the contractor to control costs and improve efficiency. However, for long-term sustainment programs, the effectiveness of FPI hinges on the accuracy of the initial cost targets and the government's ability to effectively monitor performance and negotiate adjustments. Poorly defined targets or inadequate oversight can still lead to cost overruns, even with the incentive structure in place. The 'incentive' aspect requires careful negotiation and monitoring to ensure it truly benefits the government.

What are the historical spending patterns for AMRAAM program support and sustainment within the Department of Defense?

Historical spending patterns for AMRAAM program support and sustainment within the Department of Defense are substantial, reflecting the system's critical role in air superiority. The AMRAAM has undergone numerous upgrades and requires continuous sustainment to maintain its operational effectiveness. DoD spending on AMRAAM encompasses research and development, procurement of new missiles, and crucially, sustainment, including repairs, upgrades, and logistics support. Over the years, total obligations for the AMRAAM program have amounted to billions of dollars. Sustainment costs are a significant portion of this, driven by the complexity of the weapon system, the need for specialized maintenance, and the large fleet size. Annual spending can fluctuate based on modernization efforts, operational tempo, and specific sustainment needs identified through readiness assessments. This $18 million contract represents a portion of that ongoing sustainment expenditure.

What are the implications of awarding this contract to Raytheon (RTX) without small business subcontracting requirements?

The absence of explicit small business subcontracting requirements in this sole-source award to Raytheon (RTX) has several implications. Firstly, it means that opportunities for small businesses to participate in the provision of engineering services or repairs related to the AMRAAM program are likely limited to whatever Raytheon voluntarily includes in its supply chain. Typically, larger sole-source contracts may not carry the same pressure or mandate for small business participation as competitively bid contracts, where such goals are often negotiated. This can result in missed opportunities for small businesses to gain experience, revenue, and build their capabilities within the defense sector. It also means the government may not be leveraging the full breadth of the industrial base, potentially missing out on innovative solutions or cost efficiencies that small businesses could offer.

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: $18,049,247

Exercised Options: $18,049,247

Current Obligation: $18,049,247

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