Raytheon Company awarded $135M for obsolescence mitigation activities for guided missiles

Contract Overview

Contract Amount: $135,224,527 ($135.2M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2024-08-28

End Date: 2028-01-28

Contract Duration: 1,248 days

Daily Burn Rate: $108.4K/day

Competition Type: NOT COMPETED

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: AWARD NEW IIA OBSOL TO CONTINUE IIA OBSOL MITIGATION ACTIVIES BEYOND 2024. TO PROCUREMENT INCLUDES BUY OF 63,357.2 HOURS OF OBSOL MIT ACTIVITES.

Place of Performance

Location: HUNTSVILLE, MADISON County, ALABAMA, 35898

State: Alabama Government Spending

Plain-Language Summary

Department of Defense obligated $135.2 million to RAYTHEON COMPANY for work described as: AWARD NEW IIA OBSOL TO CONTINUE IIA OBSOL MITIGATION ACTIVIES BEYOND 2024. TO PROCUREMENT INCLUDES BUY OF 63,357.2 HOURS OF OBSOL MIT ACTIVITES. Key points: 1. Contract focuses on sustaining critical missile defense capabilities through 2028. 2. High number of hours procured suggests significant obsolescence challenges. 3. Sole-source award warrants scrutiny of pricing and justification. 4. Long contract duration may indicate ongoing sustainment needs. 5. Geographic concentration in Alabama for a critical defense function.

Value Assessment

Rating: fair

The contract's value of $135.2 million for 63,357.2 hours of obsolescence mitigation activities is substantial. Without specific benchmarks for similar obsolescence mitigation efforts on guided missile systems, it is difficult to definitively assess value for money. The Cost Plus Fixed Fee (CPFF) contract type can sometimes lead to higher costs if not managed tightly, as contractor incentives are aligned with completing the work rather than minimizing cost. Further analysis of the fixed fee and the contractor's historical performance on similar contracts would be needed for a more precise valuation.

Cost Per Unit: Approximately $2,134 per hour. This figure needs to be benchmarked against industry standards for specialized engineering and technical services related to missile system sustainment, which can vary widely based on skill sets and complexity.

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning it was not competed among multiple vendors. The justification for a sole-source award typically involves unique capabilities, proprietary technology, or urgent needs where only one vendor can fulfill the requirement. The lack of competition means that the Missile Defense Agency did not benefit from a competitive bidding process, which could potentially lead to higher prices and less innovation compared to a competed contract.

Taxpayer Impact: For taxpayers, a sole-source award means there is a reduced opportunity to ensure the government is receiving the best possible price. Robust oversight and negotiation are critical to ensure fair pricing when competition is absent.

Public Impact

The primary beneficiaries are the Department of Defense and the Missile Defense Agency, ensuring the continued operational readiness of guided missile systems. Services delivered include critical obsolescence mitigation activities, which are essential for maintaining the effectiveness and safety of aging defense assets. The geographic impact is concentrated in Alabama, where Raytheon Company's facilities are located, potentially supporting local employment and the defense industrial base in that region. Workforce implications include the utilization of specialized engineers, technicians, and program managers with expertise in missile systems and obsolescence management.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition, potentially increasing costs for taxpayers.
CPFF contract type requires careful oversight to manage costs effectively.
Long contract duration (over 4 years) necessitates continuous monitoring for performance and efficiency.
Reliance on a single contractor for critical sustainment activities poses a risk if performance degrades.

Positive Signals

Focus on obsolescence mitigation is crucial for maintaining readiness of vital defense assets.
Raytheon Company is a major defense contractor with significant experience in missile systems.
The contract aims to extend the life and capability of existing missile defense infrastructure.

Sector Analysis

This contract falls within the Defense Industrial Base sector, specifically focusing on the sustainment and modernization of guided missile systems. The market for defense sustainment services is characterized by long-term relationships, specialized expertise, and significant barriers to entry. Spending in this area is driven by the need to maintain aging platforms and adapt to evolving threats. Comparable spending benchmarks would typically involve other sustainment contracts for major defense platforms, where costs are influenced by system complexity, required service levels, and the availability of alternative solutions.

Small Business Impact

This contract was not awarded to a small business, nor does it appear to have specific small business set-aside provisions. 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 specialized small businesses capable of performing specific tasks related to obsolescence mitigation. Without explicit set-asides or reporting on subcontracting goals, the direct impact on the small business ecosystem is unclear.

Oversight & Accountability

Oversight for this contract will primarily reside with the Missile Defense Agency and the Department of Defense contracting and program management offices. Given the Cost Plus Fixed Fee structure, rigorous financial oversight and performance monitoring will be essential to ensure that costs are controlled and that the contractor meets all performance objectives. Transparency may be limited due to the sole-source nature and the classified or sensitive aspects of missile defense systems. Inspector General jurisdiction would apply to investigations of fraud, waste, or abuse.

Related Government Programs

Missile Defense Systems Sustainment
Strategic Weapon Systems Maintenance
Aerospace and Defense Logistics
Government Weapon System Procurement
Defense Logistics Agency Support Contracts

Risk Flags

Sole-source award requires strong justification and oversight.
Cost Plus Fixed Fee contract type necessitates diligent cost control.
Long contract duration increases the importance of performance monitoring.
Potential for vendor lock-in due to sole-source nature.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $135.2 million to RAYTHEON COMPANY. AWARD NEW IIA OBSOL TO CONTINUE IIA OBSOL MITIGATION ACTIVIES BEYOND 2024. TO PROCUREMENT INCLUDES BUY OF 63,357.2 HOURS OF OBSOL MIT ACTIVITES.

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 $135.2 million.

What is the period of performance?

Start: 2024-08-28. End: 2028-01-28.

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

Raytheon Company, now RTX, has a long-standing relationship with the Missile Defense Agency (MDA) and has been a key contractor for various missile defense programs. While specific details on past obsolescence mitigation contracts are often sensitive, RTX's extensive experience in developing, producing, and sustaining complex missile systems suggests a deep understanding of the challenges involved. Performance reviews and past performance evaluations from the MDA would provide a more granular assessment of their track record. However, given the sole-source nature of this award, it implies that MDA has confidence in RTX's unique capabilities and past performance to address these critical obsolescence issues effectively.

How does the hourly rate of $2,134 compare to industry benchmarks for specialized engineering and technical services in defense sustainment?

The calculated hourly rate of approximately $2,134 for obsolescence mitigation activities is high, reflecting the specialized nature of the work, the expertise required, and the defense sector context. Benchmarking this rate is challenging without specific details on the labor categories involved (e.g., senior engineers, technicians, program managers) and the complexity of the systems being supported. However, rates for highly specialized defense engineering and technical services can range from several hundred to over a thousand dollars per hour, especially when factoring in overhead, profit, and the unique demands of military-grade systems. The Cost Plus Fixed Fee structure means that while the direct labor hours are reimbursed, the fixed fee is negotiated, and the overall cost-effectiveness depends on efficient execution and management by the contractor.

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

The primary risks associated with a sole-source award for critical missile defense sustainment include a lack of competitive pressure, which can lead to inflated pricing and reduced incentives for efficiency and innovation. There's also a risk of vendor lock-in, where the government becomes overly reliant on a single provider, potentially limiting future flexibility and negotiation power. Furthermore, without competitive benchmarking, it can be more difficult to ensure that the government is receiving the best value for its investment. Robust contract management, stringent oversight, and thorough negotiation are crucial to mitigate these risks when a sole-source procurement is deemed necessary.

What is the expected impact of this contract on the operational readiness of US missile defense capabilities?

This contract is expected to have a positive impact on the operational readiness of US missile defense capabilities by directly addressing obsolescence issues in guided missile systems. Obsolescence, the state of a component or system becoming outdated and no longer supported by the manufacturer, can lead to reliability problems, safety concerns, and reduced effectiveness. By procuring dedicated activities to mitigate these issues, the MDA aims to ensure that these critical defense assets remain functional, reliable, and capable of meeting their mission requirements through their intended service life. This proactive approach is vital for maintaining a robust and effective missile defense posture against evolving threats.

How has spending on missile defense sustainment evolved over the past five years, and how does this award fit into that trend?

Spending on missile defense sustainment has generally been on an upward trend, driven by the need to maintain and modernize a complex and aging portfolio of missile defense systems. Factors such as geopolitical tensions, the development of new threats, and the increasing cost of maintaining legacy systems contribute to this trend. This $135 million award for obsolescence mitigation activities fits within this broader context, representing a significant investment in ensuring the continued viability of specific guided missile components or systems. It highlights the ongoing commitment to addressing the lifecycle management challenges inherent in sophisticated defense hardware, ensuring long-term readiness and capability.

Industry Classification

NAICS: Manufacturing › Aerospace Product and Parts Manufacturing › Guided Missile and Space Vehicle Manufacturing

Product/Service Code: QUALITY CONTROL, TEST, INSPECTION › OTHER QUALITY, TEST, INSPECT SVCS

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: HQ027619R0001

Pricing Type: COST PLUS FIXED FEE (U)

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: $156,820,581

Exercised Options: $156,820,581

Current Obligation: $135,224,527

Subaward Activity

Number of Subawards: 5

Total Subaward Amount: $1,678,805

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