DoD's $16.3M Raytheon contract for missile recertification and repairs raises value concerns

Contract Overview

Contract Amount: $16,319,437 ($16.3M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2024-08-30

End Date: 2026-12-18

Contract Duration: 840 days

Daily Burn Rate: $19.4K/day

Competition Type: NOT COMPETED

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Official Description: RECERTIFICATION AND KNOWN REPAIRS

Place of Performance

Location: TUCSON, PIMA County, ARIZONA, 85756

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $16.3 million to RAYTHEON COMPANY for work described as: RECERTIFICATION AND KNOWN REPAIRS Key points: 1. The contract's cost-plus-incentive-fee structure may lead to cost overruns. 2. Lack of competition for this critical missile defense component limits price discovery. 3. The sole-source nature of the award warrants scrutiny of its necessity. 4. Performance risks are moderate given the specialized nature of missile maintenance. 5. This contract falls within the Guided Missile and Space Vehicle Manufacturing sector. 6. The contract duration of 840 days suggests a significant, ongoing need.

Value Assessment

Rating: questionable

Benchmarking the value of this specific recertification and repair contract is challenging due to its specialized nature and sole-source award. However, the cost-plus-incentive-fee (CPIF) pricing structure, while common for complex defense work, inherently carries a risk of exceeding initial estimates if cost controls are not rigorously applied. Without competitive bids, it's difficult to ascertain if the proposed pricing reflects fair market value or if there are opportunities for cost savings through alternative approaches or vendors.

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 justified when a specific capability or technology is unique to a single provider, or in cases of urgent and compelling need where competition is not feasible. The lack of competition means that taxpayers do not benefit from the price reductions that can arise from a competitive bidding process.

Taxpayer Impact: The absence of competition for this contract means taxpayers may be paying a premium. Without competing offers, there is less pressure on the contractor to offer the most cost-effective solution, potentially leading to higher overall government expenditure.

Public Impact

The primary beneficiaries are the Department of Defense and its operational readiness, ensuring critical missile defense systems remain functional. Services delivered include recertification and known repairs for guided missile systems. The geographic impact is primarily within Arizona, where Raytheon's facility is located, but the ultimate impact is national defense. Workforce implications include continued employment for specialized engineers and technicians at Raytheon.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost-plus-incentive-fee structure could incentivize higher costs if not managed tightly.
Sole-source award limits opportunities for competitive pricing and potential savings.
Lack of transparency in the sole-source justification requires careful review.
Potential for scope creep in 'known repairs' without clear competitive baseline.

Positive Signals

Award to an established contractor (Raytheon) with a track record in defense.
Focus on recertification and repair ensures operational readiness of critical assets.
Incentive fee structure aims to align contractor performance with government objectives.
Contract duration suggests a sustained commitment to maintaining vital defense capabilities.

Sector Analysis

The Guided Missile and Space Vehicle Manufacturing sector is a highly specialized and critical segment of the aerospace and defense industry. It involves the design, development, production, and sustainment of advanced weaponry. Spending in this sector is often characterized by long development cycles, high R&D costs, and significant government investment due to national security imperatives. Contracts are frequently awarded on a sole-source or limited-competition basis due to the proprietary nature of technologies and the specialized expertise required, making direct spending benchmarks difficult without specific system context.

Small Business Impact

This contract does not appear to include a small business set-aside, as indicated by the 'sb' field being false. Furthermore, the contractor, Raytheon Company, is a large business. While large defense contractors are often required to subcontract portions of their work to small businesses, the specific subcontracting plan for this delivery order is not detailed here. The absence of a direct set-aside means small businesses are unlikely to be the primary recipients of this specific contract's funding.

Oversight & Accountability

Oversight for this contract will primarily fall under the Department of Defense's contracting and program management offices, specifically within the Missile Defense Agency. The cost-plus-incentive-fee structure necessitates close monitoring of costs and performance to ensure the government receives value. Inspector General (IG) jurisdiction would apply in cases of fraud, waste, or abuse. Transparency is limited by the sole-source nature, but contract modifications and performance reports would be subject to internal DoD review and potentially public reporting through systems like FPDS.

Related Government Programs

Missile Defense Systems
Guided Missile Manufacturing
Aerospace Defense Contracts
Department of Defense Procurement
Cost-Plus Contracts

Risk Flags

Sole-source award requires justification review.
Cost-plus-incentive-fee pricing needs close monitoring for cost control.
Potential for contractor lock-in due to specialized nature of work.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $16.3 million to RAYTHEON COMPANY. RECERTIFICATION AND KNOWN REPAIRS

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 $16.3 million.

What is the period of performance?

Start: 2024-08-30. End: 2026-12-18.

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

Raytheon Company is a major defense contractor with a long-standing relationship with the Department of Defense, including the Missile Defense Agency (MDA). They are a primary developer and producer of various missile defense systems, such as the Patriot missile system and components of the Terminal High Altitude Area Defense (THAAD) system. Their history with the MDA involves numerous contracts, many of which are sole-source or limited-competition due to the specialized and often proprietary nature of the technologies involved. While this indicates a high level of expertise and familiarity with MDA requirements, it also underscores the consistent reliance on Raytheon for critical capabilities, reinforcing the need for robust oversight to ensure fair pricing and value, especially in sole-source scenarios.

How does the cost-plus-incentive-fee (CPIF) structure compare to other contract types for this type of service?

The Cost-Plus-Incentive-Fee (CPIF) contract type is often used for research and development or complex services where the final costs are uncertain, and performance objectives are critical. In a CPIF contract, the final profit is adjusted based on the contractor's performance against pre-determined targets (e.g., cost, schedule, performance). Compared to a firm-fixed-price contract, CPIF offers more flexibility for the government if requirements change or unforeseen technical challenges arise, and it incentivizes the contractor to control costs. However, it carries more risk of cost growth than fixed-price contracts if targets are not met or if the government's oversight is insufficient. For recertification and known repairs, a fixed-price contract might be feasible if the scope is very well-defined, but CPIF allows for managing the inherent uncertainties in diagnosing and rectifying issues on complex missile systems.

What are the primary risks associated with a sole-source award for missile recertification and repairs?

The primary risk associated with a sole-source award for missile recertification and repairs is the potential for inflated pricing due to the lack of competition. Without competing bids, the government loses the leverage to negotiate the best possible price, potentially leading to higher expenditures than if multiple vendors were considered. Another risk is reduced innovation; a sole-source provider may have less incentive to invest in process improvements or cost-saving technologies if they are guaranteed the contract regardless of efficiency. Furthermore, it can create vendor lock-in, making it difficult and costly to switch providers in the future, even if performance or pricing becomes unsatisfactory. Ensuring the necessity of the sole-source justification and conducting thorough price analyses are critical mitigation strategies.

What is the historical spending pattern for missile recertification and repairs within the Department of Defense?

Historical spending on missile recertification and repairs within the Department of Defense (DoD) is substantial and generally follows trends in defense budgets and the lifecycle of weapon systems. As missile systems age, the need for maintenance, upgrades, and recertification increases, driving consistent demand for these services. Spending often concentrates on major platforms and strategic assets, with significant portions allocated to prime contractors like Raytheon, Lockheed Martin, and Northrop Grumman, who are typically the original equipment manufacturers. The nature of these contracts can fluctuate; while some repairs might be competitively bid, critical recertification or upgrades requiring specialized knowledge or proprietary data are frequently sole-sourced. Overall, this category represents a significant, ongoing investment necessary for maintaining military readiness and operational capability.

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, where Raytheon Company's relevant facilities are situated. This means that on-site inspections, progress reviews, and technical discussions would likely occur at Raytheon's Arizona-based operations. For the Missile Defense Agency (MDA), having the contractor located in a specific state facilitates focused oversight activities, potentially allowing for more frequent or direct engagement with the contractor's personnel and facilities. However, it also means that the government's ability to easily access alternative facilities or personnel in case of issues might be limited. The MDA would need to ensure robust communication and reporting mechanisms are in place, regardless of location, to effectively manage the contract and mitigate risks associated with the sole-source award and CPIF structure.

Industry Classification

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

Product/Service Code: MAINT, REPAIR, REBUILD EQUIPMENT › MAINT, REPAIR, REBUILD OF EQUIPMENT

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: 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: $16,319,437

Exercised Options: $16,319,437

Current Obligation: $16,319,437

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