Raytheon Company awarded $22.6M for SM-3 Block IIA Obsolescence Mitigation by the Missile Defense Agency

Contract Overview

Contract Amount: $22,566,138 ($22.6M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2022-03-11

End Date: 2026-09-29

Contract Duration: 1,663 days

Daily Burn Rate: $13.6K/day

Competition Type: NOT COMPETED

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Official Description: SM-3 BLOCK IIA OBSOLESCENCE MITIGATION

Place of Performance

Location: TUCSON, PIMA County, ARIZONA, 85756

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $22.6 million to RAYTHEON COMPANY for work described as: SM-3 BLOCK IIA OBSOLESCENCE MITIGATION Key points: 1. Contract awarded to Raytheon Company for critical missile defense system component. 2. Focus on mitigating obsolescence ensures continued operational readiness of the SM-3 Block IIA. 3. The contract type, Cost Plus Incentive Fee (CPIF), incentivizes cost control and performance. 4. This award represents a significant investment in maintaining advanced missile defense capabilities. 5. The duration of the contract extends through September 2026, indicating a long-term need. 6. Geographic location of performance in Arizona may indicate specialized manufacturing or testing facilities.

Value Assessment

Rating: good

The contract value of $22.6 million for obsolescence mitigation appears reasonable given the complexity of advanced missile defense systems. Benchmarking against similar sustainment contracts for high-tech defense platforms is challenging without more specific data on the scope of work. However, the CPIF contract type suggests an effort to manage costs effectively by aligning contractor incentives with government objectives. The specific nature of obsolescence mitigation often involves significant research and development, making direct cost comparisons difficult.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, indicating that only one responsible source was determined to be capable of fulfilling the requirement. This is common for highly specialized defense systems where a single contractor possesses unique knowledge, technology, or manufacturing capabilities. The lack of competition means that price discovery through market forces was not utilized, potentially leading to higher costs than if multiple bids were solicited.

Taxpayer Impact: Taxpayers may bear a higher cost due to the absence of competitive bidding. However, the necessity of maintaining a critical defense system may outweigh the potential cost savings from competition.

Public Impact

The primary beneficiaries are the U.S. military and its allies who rely on the SM-3 Block IIA missile defense system for protection against ballistic missile threats. The services delivered include the mitigation of obsolescence in critical components, ensuring the system's continued functionality and reliability. The geographic impact is national, supporting U.S. strategic defense capabilities, with potential global implications for allied defense. Workforce implications include the retention of specialized engineering, manufacturing, and technical expertise within Raytheon Company.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure, potentially impacting cost-effectiveness.
Cost Plus Incentive Fee contracts can lead to cost overruns if not closely monitored.
Obsolescence mitigation can be a complex and unpredictable process, potentially leading to scope creep.
Reliance on a single contractor for critical defense components poses a strategic risk.

Positive Signals

Award ensures the continued operational readiness of a vital missile defense system.
CPIF contract structure incentivizes contractor performance and cost control.
Raytheon's established expertise in missile defense systems suggests a high likelihood of successful execution.
Long contract duration allows for sustained focus on addressing obsolescence challenges.

Sector Analysis

The contract falls within the defense sector, specifically focusing on missile defense systems. The market for such advanced defense technologies is highly specialized, dominated by a few large prime contractors. Spending in this area is driven by national security priorities and geopolitical threats. Comparable spending benchmarks are difficult to establish due to the unique nature of missile defense components and the proprietary technologies involved. The Missile Defense Agency (MDA) is a key entity within the Department of Defense responsible for developing and fielding such systems.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. There is no explicit mention of subcontracting goals for small businesses. This suggests that the primary focus is on the prime contractor's capabilities, and the impact on the small business ecosystem is likely indirect, potentially through Raytheon's own supply chain management. Further analysis would be needed to determine if Raytheon has established subcontracting plans with small businesses for this specific effort.

Oversight & Accountability

Oversight for this contract will likely be managed by the Missile Defense Agency, a component of the Department of Defense. Accountability measures are embedded within the Cost Plus Incentive Fee (CPIF) contract type, which links contractor profit to performance and cost targets. Transparency may be limited due to the classified nature of some defense programs, but contract awards and basic details are typically made public. The Inspector General of the Department of Defense would have jurisdiction over potential fraud, waste, or abuse related to this contract.

Related Government Programs

SM-3 Missile Program
Ballistic Missile Defense System
Missile Defense Agency Contracts
Raytheon Defense Contracts
Aerospace and Defense Manufacturing

Risk Flags

Sole-source award
Potential for cost overruns in CPIF contracts
Dependency on a single contractor for critical technology

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $22.6 million to RAYTHEON COMPANY. SM-3 BLOCK IIA OBSOLESCENCE MITIGATION

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 $22.6 million.

What is the period of performance?

Start: 2022-03-11. End: 2026-09-29.

What is Raytheon Company's track record with the Missile Defense Agency and similar contracts?

Raytheon Company, now part of RTX, has a long and extensive history of working with the Missile Defense Agency (MDA) and the Department of Defense on various missile defense programs. They are a primary contractor for several key components of the U.S. missile defense architecture, including the Standard Missile (SM) family. Their track record includes development, production, and sustainment of complex systems like the SM-3 and SM-6 missiles, as well as radar systems. While specific performance metrics for past contracts are often not publicly detailed, Raytheon's continued selection as a prime contractor for critical and high-value programs by the MDA suggests a generally positive and capable performance history. However, like many large defense contractors, they have faced scrutiny and contract modifications on occasion due to performance or cost issues, which is typical for the complexity and scale of their work.

How does the value of this contract compare to other obsolescence mitigation efforts for similar defense systems?

Direct comparisons for obsolescence mitigation contracts are challenging due to the highly specialized nature of defense systems and the proprietary information surrounding their components. Obsolescence mitigation often involves significant research, redesign, and testing to identify and replace aging parts with modern equivalents while maintaining system compatibility and performance. The $22.6 million awarded to Raytheon for the SM-3 Block IIA is likely reflective of the complexity and criticality of this specific system. For context, sustainment and modernization efforts for major defense platforms can range from tens to hundreds of millions of dollars over their lifecycle. Without access to specific scope-of-work details and comparable contract data from other agencies or for different missile defense systems, a precise value benchmark is difficult to establish. However, the value appears proportionate to the advanced technological nature of the SM-3 Block IIA.

What are the primary risks associated with this sole-source contract for obsolescence mitigation?

The primary risks associated with this sole-source contract are centered around cost and dependency. Without competition, there is a reduced incentive for the contractor (Raytheon) to offer the lowest possible price, potentially leading to higher costs for the government and taxpayers. The government becomes heavily reliant on Raytheon's expertise, timelines, and pricing, creating a dependency that could be exploited if not managed carefully. Furthermore, sole-source awards can sometimes indicate a lack of available alternative solutions or a limited market, which itself can be a strategic risk. Effective risk mitigation requires robust government oversight, clear performance metrics, and strong negotiation strategies to ensure value for money despite the lack of competitive pressure.

How effective is the Cost Plus Incentive Fee (CPIF) contract type in managing costs for this type of work?

The Cost Plus Incentive Fee (CPIF) contract type is designed to provide a balance between cost control and contractor motivation for complex projects where the final costs are uncertain. In a CPIF contract, the final profit is adjusted based on whether the final costs are below or above a target cost, with pre-defined sharing arrangements. This incentivizes the contractor to manage costs efficiently to achieve a higher profit. For obsolescence mitigation, where technical challenges and unforeseen issues can arise, CPIF can be effective because it allows for flexibility while still pushing the contractor to meet cost and performance goals. However, its effectiveness hinges on the government's ability to establish realistic target costs and performance metrics, and to diligently monitor the contractor's progress and expenditures.

What is the historical spending trend for SM-3 Block IIA obsolescence mitigation or related sustainment activities?

Detailed historical spending specifically for SM-3 Block IIA obsolescence mitigation is not readily available in the public domain. However, the SM-3 Block IIA is a relatively newer development within the broader SM-3 program, which has seen significant investment over many years. Spending on missile defense systems, including sustainment, upgrades, and modernization, represents a substantial portion of the Missile Defense Agency's budget. As systems mature and components age, obsolescence mitigation becomes an increasingly critical and costly aspect of sustainment. Given the $22.6 million award for this specific mitigation effort, it suggests that such activities are becoming more prominent for the SM-3 Block IIA as it enters a phase where components may be nearing the end of their service life or becoming obsolete. Overall MDA spending has been in the billions annually, with sustainment and modernization being key drivers.

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: HQ027619R0001

Pricing Type: COST PLUS INCENTIVE FEE (V)

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: $22,566,138

Exercised Options: $22,566,138

Current Obligation: $22,566,138

Actual Outlays: $9,702,596

Subaward Activity

Number of Subawards: 1

Total Subaward Amount: $118,544

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: HQ085121D0001

IDV Type: IDC

Timeline