Raytheon Company awarded $173M contract for guided missile manufacturing, with significant delivery order value

Contract Overview

Contract Amount: $17,322,263 ($17.3M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2024-09-27

End Date: 2028-02-29

Contract Duration: 1,250 days

Daily Burn Rate: $13.9K/day

Competition Type: NOT COMPETED

Pricing Type: COST NO FEE

Sector: Defense

Official Description: B&P FMS JA-P-CUT LINE 004

Place of Performance

Location: TUCSON, PIMA County, ARIZONA, 85756

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $17.3 million to RAYTHEON COMPANY for work described as: B&P FMS JA-P-CUT LINE 004 Key points: 1. Contract value represents a substantial investment in defense manufacturing capabilities. 2. Sole-source award raises questions about potential price efficiencies and market alternatives. 3. Long contract duration suggests a sustained need for these missile systems. 4. Performance risk is moderate given the specialized nature of guided missile production. 5. This contract positions Raytheon as a key supplier within the missile defense sector. 6. The award is a significant component of the Missile Defense Agency's procurement strategy.

Value Assessment

Rating: fair

The contract's total value of $173 million over approximately four years requires careful benchmarking. Without specific details on the units or services provided, a direct comparison to similar contracts is challenging. However, the 'COST NO FEE' pricing structure suggests that the government will reimburse the contractor for allowable costs plus a negotiated fee, which can sometimes lead to higher overall costs if not managed tightly. The absence of competition in this sole-source award further complicates a robust value assessment, as there is no market pressure to drive down prices.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one vendor, Raytheon Company, was solicited. This approach is typically used when only one responsible source is available or when there is a compelling justification for not seeking competitive proposals. The lack of competition means that the government did not benefit from the price discovery and potential cost savings that typically arise from multiple bidders vying for a contract. This can limit the government's ability to secure the best possible pricing.

Taxpayer Impact: For taxpayers, a sole-source award means there is a reduced likelihood of achieving the most cost-effective outcome. Without competitive pressure, the negotiated price may be higher than what could have been achieved in an open market, potentially leading to a less efficient use of public funds.

Public Impact

The primary beneficiaries are the Department of Defense and the Missile Defense Agency, ensuring the availability of critical missile systems. Services delivered include the manufacturing of guided missiles and space vehicles, essential for national defense. The geographic impact is primarily centered in Arizona, where Raytheon's facility is located, supporting local employment and economic activity. Workforce implications include the continued employment of skilled engineers, technicians, and manufacturing personnel involved in advanced weapons systems production.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition, potentially increasing costs for taxpayers.
Cost-plus fee structure requires diligent oversight to control expenditures.
Long-term contract duration may not adapt quickly to evolving technological needs or market shifts.
Lack of transparency in the sole-source justification could obscure potential alternatives.
Dependence on a single contractor for critical defense assets poses a strategic risk.

Positive Signals

Award ensures continued production of vital defense assets, supporting national security objectives.
Raytheon's established expertise in missile manufacturing suggests a lower technical risk for successful delivery.
Long-term contract provides stability for production planning and supply chain management.
Focus on a single, specialized area allows for deep expertise development.
Contract supports a key U.S. defense industrial base capability.

Sector Analysis

The guided missile and space vehicle manufacturing sector is a highly specialized and critical component of the defense industrial base. This industry is characterized by high barriers to entry due to complex technology, stringent quality requirements, and significant capital investment. Spending in this sector is driven by national security priorities, geopolitical tensions, and the need for advanced defense capabilities. Comparable spending benchmarks are difficult to establish precisely without knowing the specific missile type, but multi-billion dollar annual investments are common across the U.S. defense budget for missile systems and related technologies.

Small Business Impact

This contract does not appear to involve a small business set-aside, as indicated by 'sb': false. Given the sole-source nature and the specialized manufacturing requirements, it is unlikely that significant subcontracting opportunities for small businesses will be mandated or readily available within the primary scope of this award. The focus is on a large, established prime contractor. However, Raytheon may engage small businesses for specific components or services as part of its broader supply chain, but this is not explicitly detailed in the provided data.

Oversight & Accountability

Oversight for this contract will likely be managed by the Department of Defense, specifically the Missile Defense Agency, through contract officers and administrative contracting officers. Accountability measures will be tied to the terms of the 'COST NO FEE' contract, requiring Raytheon to document and justify all incurred costs. Transparency is limited due to the sole-source nature, but contract awards and basic details are typically made public. Inspector General jurisdiction would apply if any fraud, waste, or abuse is suspected.

Related Government Programs

Missile Defense Systems
Strategic Weapons Programs
Aerospace Manufacturing
Department of Defense Procurement
Guided Missile Manufacturing
Space Vehicle Production

Risk Flags

Sole-source award
Cost-reimbursement pricing structure
Long contract duration
Critical defense asset manufacturing

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $17.3 million to RAYTHEON COMPANY. B&P FMS JA-P-CUT LINE 004

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 $17.3 million.

What is the period of performance?

Start: 2024-09-27. End: 2028-02-29.

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

Raytheon Company has a long-standing and extensive track record of working with the Missile Defense Agency (MDA) and other Department of Defense entities on various missile defense programs. They are a primary contractor for several key systems, including the Patriot missile defense system and components of the Terminal High Altitude Area Defense (THAAD) system. Their history with MDA includes numerous sole-source and competitively awarded contracts for research, development, testing, and production of missile systems. While their performance has generally been considered strong, as evidenced by continued contract awards, specific past performance reviews and any past issues with sole-source awards would require deeper investigation into contract databases and agency reports. However, their sustained role indicates a high level of trust and capability from the MDA's perspective.

How does the 'COST NO FEE' pricing structure compare to other contract types for missile manufacturing?

The 'COST NO FEE' (Cost Plus Fixed Fee, where the fee is zero) contract type is less common for production than fixed-price contracts, but it is used when the level of risk or uncertainty in determining costs is high, or when the contractor has minimal profit incentive beyond covering costs. In missile manufacturing, fixed-price contracts (like FFP or FP-EPA) are often preferred by the government as they place cost risk on the contractor, incentivizing efficiency. However, for highly complex, developmental, or unique systems where costs are difficult to predict, a cost-reimbursement contract like 'COST NO FEE' might be chosen. This structure means the government reimburses the contractor's allowable costs but pays no additional profit. While it can facilitate production when cost certainty is low, it requires robust government oversight to prevent cost overruns and ensure value, as the contractor has less direct financial incentive to control expenses compared to fixed-price arrangements.

What are the primary risks associated with a sole-source award for critical defense components like guided missiles?

The primary risks associated with a sole-source award for critical defense components like guided missiles include: 1. **Higher Costs:** Without competition, the contractor may not be incentivized to offer the lowest possible price, potentially leading to higher expenditures for taxpayers. 2. **Reduced Innovation:** A lack of competitive pressure can stifle innovation, as the contractor may have less motivation to invest in developing more efficient or advanced manufacturing processes. 3. **Dependency and Lock-in:** The government becomes dependent on a single supplier, which can create vulnerabilities if that supplier faces production issues, financial instability, or decides to exit the market. 4. **Limited Oversight Effectiveness:** While oversight exists, the absence of competitive benchmarks makes it harder to definitively assess whether the government is receiving fair value for its investment. 5. **Potential for Complacency:** The contractor might become complacent due to the guaranteed business, potentially impacting quality or delivery schedules if not rigorously managed.

What is the typical lifecycle cost for guided missiles, and how does this contract fit into that?

The lifecycle cost for guided missiles is highly variable, depending on the type, complexity, quantity, and intended use (e.g., strategic, tactical, air-to-air, surface-to-air). It encompasses research and development (R&D), procurement (manufacturing), testing, deployment, sustainment (maintenance, upgrades, training), and eventual disposal. This contract, valued at $173 million and spanning approximately 4.5 years, primarily covers the procurement and manufacturing phase. It represents a significant investment in acquiring a specific quantity of missiles. To understand its place in the lifecycle cost, one would need to know the total planned quantity of missiles, the R&D investment already made, and the projected sustainment costs over the operational life of these weapons. This award likely funds a specific production run within a larger, multi-year missile program.

How does the geographic location (Arizona) impact the contract's execution and oversight?

The contract's execution and oversight are influenced by its geographic location in Arizona (st: AZ, sn: ARIZONA), where Raytheon Company's facility is situated. This location likely hosts the manufacturing operations, supply chain management, and quality control processes. Oversight by the Department of Defense (DoD) would involve personnel stationed at or near the contractor's facility to monitor production, inspect quality, audit costs, and ensure compliance with contract terms. Proximity can facilitate more direct and frequent oversight activities, potentially improving communication and issue resolution. However, the specific benefits or challenges related to Arizona's location would depend on factors like the local industrial base, workforce availability, logistical infrastructure, and any specific state-level regulations or incentives that might apply to defense manufacturing.

What are the implications of the contract's end date (2028-02-29) for future defense planning?

The contract's end date of February 29, 2028, has several implications for future defense planning. Firstly, it signals the planned completion of this specific procurement or production phase. Defense planners will need to anticipate the need for follow-on contracts, either for continued production of the same missile system if demand persists, or for the development and procurement of next-generation systems. Secondly, the expiration date necessitates early planning for potential transitions. If this missile system is nearing the end of its service life or if newer technologies are emerging, the DoD will need to initiate R&D and procurement processes well in advance of 2028 to ensure a seamless replacement or upgrade. Finally, it provides a defined period for budget allocation and resource planning, allowing the Missile Defense Agency to forecast expenditures and manage its portfolio of weapon systems effectively.

Industry Classification

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

Product/Service Code: MODIFICATION OF EQUIPMENT › MODIFICATION OF EQUIPMENT

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Pricing Type: COST NO FEE (S)

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: $17,322,263

Exercised Options: $17,322,263

Current Obligation: $17,322,263

Subaward Activity

Number of Subawards: 1

Total Subaward Amount: $140,562

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