Raytheon Company awarded $103.6M contract for missile defense systems by the Department of Defense

Contract Overview

Contract Amount: $103,612,079 ($103.6M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2017-11-01

End Date: 2022-10-31

Contract Duration: 1,825 days

Daily Burn Rate: $56.8K/day

Competition Type: NOT COMPETED

Pricing Type: COST PLUS AWARD FEE

Sector: Defense

Official Description: US SBX DEVELOPMENT IGF::OT::IGF

Place of Performance

Location: WOBURN, MIDDLESEX County, MASSACHUSETTS, 01801

State: Massachusetts Government Spending

Plain-Language Summary

Department of Defense obligated $103.6 million to RAYTHEON COMPANY for work described as: US SBX DEVELOPMENT IGF::OT::IGF Key points: 1. Contract awarded for critical missile defense systems, indicating a significant investment in national security infrastructure. 2. The contract's cost-plus-award-fee structure allows for performance-based incentives, potentially driving efficiency and effectiveness. 3. A long performance period of 1825 days suggests a sustained need for these specialized systems. 4. The absence of small business set-asides raises questions about opportunities for smaller firms in this high-value sector. 5. This award falls under the 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' NAICS code, highlighting specialized industrial capabilities. 6. The contract's value, while substantial, needs to be benchmarked against similar defense procurements to fully assess value for money.

Value Assessment

Rating: fair

Benchmarking the value of this $103.6 million contract is challenging without specific details on the deliverables and performance metrics. The cost-plus-award-fee (CPA) structure can lead to cost overruns if not managed tightly, but it also incentivizes contractor performance. Comparing this to similar missile defense system contracts would provide better insight into whether the pricing is competitive and reflects fair market value for the technology and services rendered. The base award fee structure needs careful scrutiny to ensure it aligns with achievable performance targets.

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 when there is an urgent need that precludes a competitive process. The lack of competition means that price discovery through market forces was bypassed, potentially leading to higher costs than if multiple bids had been solicited. The justification for this sole-source award would need to be thoroughly reviewed to ensure it was appropriate and in the government's best interest.

Taxpayer Impact: Taxpayers may face higher costs due to the absence of competitive bidding. Without a competitive process, there is less pressure on the contractor to offer the lowest possible price for the goods and services provided.

Public Impact

The primary beneficiaries are the Department of Defense and national security interests, receiving advanced missile defense capabilities. The contract supports the development and delivery of critical systems essential for protecting against missile threats. Geographic impact is likely national, focusing on strategic defense installations and command centers. Workforce implications include highly skilled engineers, technicians, and program managers within Raytheon Company and its potential subcontractors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive opportunities and potentially increases costs for taxpayers.
Cost-plus-award-fee contracts require robust oversight to prevent cost overruns and ensure performance targets are met.
Lack of transparency in the justification for sole-source procurement raises concerns about fairness and efficiency.
The long duration of the contract could lead to scope creep or outdated technology if not actively managed.

Positive Signals

Awarding to Raytheon Company, a known defense contractor, suggests access to established expertise and technology.
The cost-plus-award-fee structure incentivizes performance, potentially leading to higher quality and more effective systems.
The contract addresses a critical national security need, indicating a commitment to safeguarding the nation.
The long performance period suggests a stable, long-term requirement for these vital defense capabilities.

Sector Analysis

This contract falls within the defense sector, specifically focusing on advanced missile defense systems. The industry is characterized by high barriers to entry due to specialized technology, stringent security requirements, and significant R&D investment. Major defense contractors like Raytheon dominate this space. Comparable spending benchmarks would involve analyzing other large-scale missile defense procurements, which often run into hundreds of millions or billions of dollars, reflecting the complexity and strategic importance of these systems.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. This means that opportunities for small businesses to directly participate as prime contractors were likely limited. While Raytheon Company may engage small businesses as subcontractors, the absence of a direct set-aside suggests that the primary contract vehicle was not designed to foster small business prime contracting. This could limit the ecosystem of small businesses involved in developing and supplying advanced defense technologies.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contracting and program management offices. The cost-plus-award-fee structure necessitates rigorous monitoring of costs, performance, and adherence to contract terms. Accountability measures would be tied to the award fee criteria. Transparency regarding the sole-source justification and performance reviews would be key to assessing overall oversight effectiveness. Inspector General jurisdiction would apply to investigations of fraud, waste, or abuse.

Related Government Programs

Missile Defense Systems Procurement
Advanced Weapon Systems Development
Department of Defense Research and Development
National Security Technology Acquisition
Aeronautical and Nautical System Manufacturing

Risk Flags

Sole-source award may limit competition and potentially increase costs.
Cost-plus-award-fee contracts require diligent oversight to manage costs and ensure performance.
Lack of specific performance metrics in the provided data makes value assessment difficult.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $103.6 million to RAYTHEON COMPANY. US SBX DEVELOPMENT IGF::OT::IGF

Who is the contractor on this award?

The obligated recipient is RAYTHEON COMPANY.

Which agency awarded this contract?

Awarding agency: Department of Defense (Missile Defense Agency).

What is the total obligated amount?

The obligated amount is $103.6 million.

What is the period of performance?

Start: 2017-11-01. End: 2022-10-31.

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

Raytheon Company, now part of RTX, has a long and extensive history of developing and producing advanced defense systems for the U.S. Department of Defense and allied nations. They are a prime contractor for numerous missile defense programs, including the Patriot air and missile defense system, the THAAD (Terminal High Altitude Area Defense) system, and various radar and command-and-control systems. Their track record includes both successes and challenges, typical for large, complex defense programs. Past performance reviews, contract awards, and any associated disputes or investigations would provide a more granular understanding of their reliability and effectiveness in delivering on complex defense contracts. Analyzing their performance on similar cost-plus-award-fee contracts would be particularly relevant to assessing their ability to manage costs and meet performance objectives.

How does the $103.6 million award compare to historical spending on similar missile defense systems by the Department of Defense?

The $103.6 million award represents a significant investment, but its context within historical spending requires a detailed analysis of comparable contracts. The Department of Defense allocates billions of dollars annually to missile defense, encompassing research, development, procurement, and sustainment of various systems. This specific award, for 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing,' likely pertains to a specific component or upgrade within a larger missile defense architecture. To assess its relative value, one would need to compare it against the total budget allocated to missile defense over several fiscal years, identify contracts with similar scopes of work (e.g., radar systems, interceptor components, command and control software), and analyze the unit costs or total contract values of those procurements. Without such a detailed comparison, it's difficult to definitively state whether this award is high, low, or average relative to historical spending.

What are the primary risks associated with this sole-source contract, and how are they being mitigated?

The primary risks associated with this sole-source contract include potential cost overruns due to the lack of competitive pressure, reduced innovation from a single provider, and the possibility of the government paying a premium. Mitigation strategies typically involve robust government oversight, detailed performance metrics within the contract, and stringent review processes for any proposed cost increases. The cost-plus-award-fee structure itself is a mitigation tool, as it ties a portion of the contractor's profit to achieving specific performance targets. However, the effectiveness of these mitigation strategies hinges on the government's ability to actively manage the contract, conduct thorough audits, and ensure that the award fee criteria are challenging yet achievable, thereby incentivizing both cost control and high performance.

What is the expected program effectiveness or outcome of the systems being procured under this contract?

The expected program effectiveness and outcome of the systems procured under this contract are directly tied to enhancing the Department of Defense's missile defense capabilities. Given the NAICS code and the agency (Missile Defense Agency), these systems are likely intended to improve the ability to detect, track, and potentially intercept various types of ballistic and cruise missiles. The specific outcome would depend on the exact nature of the 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' components being acquired. This could range from upgrading existing radar systems for better threat identification, developing new guidance algorithms for interceptors, or enhancing the overall command and control network that integrates various defense assets. Ultimately, the goal is to bolster national security by providing a more robust and reliable defense against missile threats.

What are the implications of the 'cost plus award fee' (CPA F) contract type for government oversight and contractor performance?

The 'Cost Plus Award Fee' (CPAF) contract type has significant implications for both government oversight and contractor performance. For the government, it necessitates intensive oversight to monitor incurred costs and ensure they are reasonable and allocable. The 'award fee' component requires the government to establish clear, objective performance criteria and to conduct regular evaluations to determine the amount of award fee earned by the contractor. This evaluation process can be subjective and resource-intensive. For the contractor, CPAF provides an incentive to control costs while also striving for superior performance, as a portion of their potential profit is tied directly to meeting or exceeding defined performance metrics. This structure aims to balance the government's need for cost control with the contractor's motivation to deliver high-quality results on complex projects where precise cost and performance outcomes are difficult to define upfront.

Industry Classification

NAICS: Manufacturing › Navigational, Measuring, Electromedical, and Control Instruments Manufacturing › Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing

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

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: HQ014717R0012

Pricing Type: COST PLUS AWARD FEE (R)

Evaluated Preference: NONE

Contractor Details

Parent Company: Rockwell Collins Australia PTY Limited

Address: 225 PRESIDENTIAL WAY, WOBURN, MA, 01801

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: $105,141,145

Exercised Options: $104,710,404

Current Obligation: $103,612,079

Actual Outlays: $6,769,470

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: HQ014718D0002

IDV Type: IDC

Timeline