DoD Awards Raytheon $2.15 Billion for SM-3 Block IB Missile Production

Contract Overview

Contract Amount: $2,146,629,345 ($2.1B)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2020-03-27

End Date: 2027-03-26

Contract Duration: 2,555 days

Daily Burn Rate: $840.2K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIXED PRICE INCENTIVE

Sector: Defense

Official Description: SM-3 BLK IB ALL UP ROUNDS

Place of Performance

Location: TUCSON, PIMA County, ARIZONA, 85756

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $2.15 billion to RAYTHEON COMPANY for work described as: SM-3 BLK IB ALL UP ROUNDS Key points: 1. Significant investment in advanced missile defense capabilities. 2. Sole-source award to Raytheon raises questions about price discovery. 3. Long-term contract (7 years) with potential for cost overruns. 4. Focus on strategic defense sector, impacting national security.

Value Assessment

Rating: questionable

The contract value is substantial, but without competition, it's difficult to assess if the pricing is optimal. The fixed-price incentive structure aims to control costs, but the baseline is high.

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 compared to a competitive process.

Taxpayer Impact: The lack of competition for this large contract may result in taxpayers paying a premium for these advanced missile systems.

Public Impact

Enhances U.S. and allied missile defense capabilities against ballistic missile threats. Supports advanced technological development in the defense sector. Contributes to geopolitical stability through deterrence. Potential for job creation within Raytheon and its supply chain.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition
High contract value
Long contract duration
Fixed-price incentive risk

Positive Signals

Critical defense capability
Advanced technology development
Potential for innovation

Sector Analysis

This contract falls within the defense sector, specifically guided missile and space vehicle manufacturing. Spending in this area is driven by national security needs and technological advancements, with significant government investment.

Small Business Impact

The contract is awarded to a large prime contractor, Raytheon Company. There is no explicit information provided regarding subcontracting opportunities for small businesses within this award.

Oversight & Accountability

The Department of Defense, through the Defense Contract Management Agency, is responsible for overseeing this contract. The fixed-price incentive structure implies performance monitoring to manage costs and delivery.

Related Government Programs

Guided Missile and Space Vehicle Manufacturing
Department of Defense Contracting
Defense Contract Management Agency Programs

Risk Flags

Sole-source award limits price competition.
High contract value increases financial exposure.
Long contract duration (7 years) poses long-term risk.
Fixed-price incentive may not guarantee cost savings without competitive baseline.
Potential for scope creep or unaddressed technical challenges over contract life.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $2.15 billion to RAYTHEON COMPANY. SM-3 BLK IB ALL UP ROUNDS

Who is the contractor on this award?

The obligated recipient is RAYTHEON COMPANY.

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Contract Management Agency).

What is the total obligated amount?

The obligated amount is $2.15 billion.

What is the period of performance?

Start: 2020-03-27. End: 2027-03-26.

What is the historical cost performance of similar SM-3 missile contracts awarded competitively?

Without a competitive benchmark, assessing the value of this sole-source award is challenging. Historical data on competitively procured missile systems, while not directly comparable, could offer insights into potential cost savings achievable through open bidding. Further analysis would require access to classified cost data or comparative studies of similar defense procurements.

What are the specific risks associated with the fixed-price incentive (FPI) structure in this sole-source context?

The FPI structure aims to incentivize cost control by sharing savings or overruns between the government and contractor. However, in a sole-source award, the government lacks a competitive baseline to set realistic target costs. This increases the risk that the contractor may not be sufficiently motivated to minimize costs, potentially leading to higher-than-necessary expenditures for the taxpayer.

How does the lack of competition impact the long-term effectiveness and innovation of the SM-3 missile program?

A sole-source award can stifle innovation by reducing the pressure on the incumbent contractor to improve designs or reduce costs. Without competitive alternatives, the government may be locked into a specific technology path. This could limit the adoption of potentially superior solutions from other manufacturers and slow down the overall advancement of missile defense capabilities.

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

Solicitation ID: HQ027618R0002

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: $2,156,008,910

Exercised Options: $2,156,008,910

Current Obligation: $2,146,629,345

Actual Outlays: $755,122,289

Subaward Activity

Number of Subawards: 686

Total Subaward Amount: $3,392,165,664

Contract Characteristics

Multi-Year Contract: Yes

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline