Raytheon Company awarded $58.3M for missile defense systems, with a significant portion for proposal preparation

Contract Overview

Contract Amount: $58,261,823 ($58.3M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2023-06-16

End Date: 2027-10-31

Contract Duration: 1,598 days

Daily Burn Rate: $36.5K/day

Competition Type: NOT COMPETED

Pricing Type: COST PLUS AWARD FEE

Sector: Defense

Official Description: PROPOSAL PREP

Place of Performance

Location: WOBURN, MIDDLESEX County, MASSACHUSETTS, 01801

State: Massachusetts Government Spending

Plain-Language Summary

Department of Defense obligated $58.3 million to RAYTHEON COMPANY for work described as: PROPOSAL PREP Key points: 1. The contract's substantial allocation for proposal preparation suggests a complex or lengthy bidding process. 2. As a sole-source award, the absence of competition may limit price negotiation advantages. 3. The cost-plus award fee structure incentivizes contractor performance but requires robust oversight to manage costs. 4. The contract duration extends over four years, indicating a long-term need for these missile defense capabilities. 5. This award falls within the 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' sector, highlighting its specialized nature. 6. The contract's value, while significant, needs to be benchmarked against similar missile defense system procurements for a full value-for-money assessment.

Value Assessment

Rating: fair

The contract's value of $58.3 million over approximately four years requires careful scrutiny. A significant portion is allocated to proposal preparation, which is unusual for a delivery order and may indicate inefficiencies or a complex pre-award phase. The cost-plus award fee (CPAF) structure, while allowing for performance incentives, can lead to cost overruns if not managed tightly. Benchmarking this against similar missile defense system contracts is crucial to determine if the pricing is competitive and reflects true value for money.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning there was no open competition. This approach is typically used when only one source is capable of meeting the government's needs, often due to proprietary technology, unique capabilities, or urgent requirements. The lack of competition means that the government did not benefit from the price discovery and potential cost savings that multiple bidders could have provided.

Taxpayer Impact: Taxpayers may have paid a premium due to the absence of competitive bidding. Without competing offers, there is less pressure on the contractor to offer the lowest possible price.

Public Impact

The primary beneficiaries are the Department of Defense and the Missile Defense Agency, receiving critical systems for national security. The contract supports the development, integration, and sustainment of advanced missile defense capabilities. The geographic impact is national, contributing to the overall defense posture of the United States. The award supports highly skilled jobs in the aerospace and defense industry, particularly in Massachusetts.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure on pricing.
Cost-plus award fee structure necessitates stringent cost control and oversight to prevent overruns.
Significant allocation to 'proposal preparation' within a delivery order is atypical and warrants investigation into its necessity and efficiency.
Long contract duration requires ongoing monitoring of performance and evolving requirements.

Positive Signals

Award to a major defense contractor (Raytheon) suggests access to established expertise and technology.
Missile Defense Agency's focus indicates a critical national security requirement being addressed.
The contract duration allows for sustained development and integration of complex systems.

Sector Analysis

The contract falls within the 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' industry, a highly specialized segment of the defense sector. This sector is characterized by high R&D investment, long product development cycles, and significant barriers to entry due to technical complexity and security requirements. Spending in this area is driven by national security imperatives and technological advancements in threat detection and response. Comparable spending benchmarks would likely involve other major defense procurements for advanced radar, sensor, or guidance systems.

Small Business Impact

This contract does not appear to have a small business set-aside component (ss: false, sb: false). As a sole-source award to a large prime contractor, there is a potential for subcontracting opportunities for small businesses within Raytheon's supply chain. However, the extent of these opportunities and whether they are actively pursued would require further investigation into Raytheon's subcontracting plan and performance.

Oversight & Accountability

Oversight for this contract will primarily reside with the Missile Defense Agency (MDA) and the Department of Defense. Given the Cost Plus Award Fee (CPAF) structure, rigorous financial oversight and performance monitoring are essential to ensure costs are controlled and award fees are justified. Transparency may be limited due to the sole-source nature and the classified aspects often associated with defense systems. The Inspector General's office for the Department of Defense would have jurisdiction for audits and investigations.

Related Government Programs

Missile Defense Systems
Ballistic Missile Defense Program
Advanced Radar Systems
Guidance and Navigation Systems
Department of Defense Procurement

Risk Flags

Sole-source award
Cost-plus contract type
Potential for cost overruns
Lack of competitive benchmarking

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $58.3 million to RAYTHEON COMPANY. PROPOSAL PREP

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 $58.3 million.

What is the period of performance?

Start: 2023-06-16. End: 2027-10-31.

What is the specific nature of the 'proposal preparation' costs included in this award, and why are they allocated as a significant line item within a delivery order?

The inclusion of a substantial amount for 'proposal preparation' within a delivery order, especially for a sole-source award, is atypical. Typically, proposal preparation costs are incurred by the contractor prior to contract award and are not separately itemized or funded within the contract itself, particularly not as a significant portion of the total award value. This suggests several possibilities: 1) The 'proposal preparation' might be a misnomer or a placeholder for specific pre-delivery integration, testing, or customization efforts required before the system can be delivered or operationalized. 2) It could reflect costs associated with a complex, multi-stage development or modification process that was initiated before the formal award but is now being funded through this mechanism. 3) There might be an administrative or accounting classification that requires these costs to be tracked separately. Further clarification from the awarding agency (Missile Defense Agency) would be necessary to understand the precise nature and justification of these costs and to ensure they represent legitimate government expenses and not an inefficient allocation of funds.

How does the $58.3 million award compare to historical spending on similar missile defense system components or services by the Missile Defense Agency?

Benchmarking this $58.3 million award against historical spending requires access to detailed procurement data for comparable missile defense systems or components. Without specific data points on similar contracts (e.g., for radar systems, interceptor components, or command and control software), a direct comparison is difficult. However, the Missile Defense Agency (MDA) manages a portfolio of programs that often involve multi-billion dollar investments over many years. A $58.3 million award for a specific component or service, especially over a four-year period, would likely represent a mid-tier or specialized procurement within the MDA's overall budget. To provide a precise comparison, one would need to identify contracts with similar scope, technology, and duration awarded to other prime contractors or even to Raytheon itself for related work. This would help ascertain if the current award is within the expected range for such specialized defense systems.

What are the potential risks associated with a sole-source award for critical missile defense technology, particularly concerning innovation and long-term cost-effectiveness?

Sole-source awards for critical technologies like missile defense systems carry inherent risks. The primary risk is the lack of competitive pressure, which can lead to higher prices than might be achieved in an open market. Without competing bids, there is less incentive for the contractor to innovate aggressively to reduce costs or improve performance beyond the contract's minimum requirements. Furthermore, reliance on a single source can create vulnerabilities if that contractor faces financial difficulties, production issues, or strategic shifts. Long-term cost-effectiveness can be compromised if the government becomes locked into a particular technology or vendor without exploring alternative solutions that might emerge from a competitive environment. While sole-sourcing is sometimes necessary for unique capabilities, it necessitates robust government oversight to mitigate these risks and ensure value.

What is Raytheon Company's track record with the Missile Defense Agency and the Department of Defense regarding performance and cost control on similar contracts?

Raytheon Company is a major defense contractor with a long-standing relationship with the Department of Defense and the Missile Defense Agency (MDA). They are a key player in numerous missile defense programs, including systems like the Patriot, THAAD, and Aegis BMD. Their track record generally includes successful delivery of complex systems, but like many large contractors, they have also faced scrutiny regarding cost overruns and schedule delays on certain programs. Performance reviews and contract histories available through federal procurement databases (like FPDS or SAM.gov) would provide specific data on their past performance ratings, any incurred cost overruns, and the effectiveness of their cost control measures on prior MDA contracts. Understanding this history is crucial for assessing the risk associated with this new award.

Given the Cost Plus Award Fee (CPAF) structure, what specific performance metrics and award criteria are likely being used to evaluate Raytheon's performance?

For a Cost Plus Award Fee (CPAF) contract, the performance metrics and award criteria are critical for determining the contractor's fee. While the exact criteria are defined in the contract's 'Incentive Fee Evaluation Guide' or similar documentation, they typically focus on areas crucial to program success. For missile defense systems, these could include: technical performance (e.g., system reliability, accuracy, integration success), schedule adherence (meeting key milestones), cost control (managing expenses within projected budgets, though the 'cost plus' aspect means costs are reimbursed), and quality of deliverables. The 'award fee' portion is determined by a subjective evaluation by the government contracting officer, based on how well the contractor meets or exceeds these pre-defined criteria. The government aims to incentivize superior performance by offering higher fees for exceptional results, while lower fees (or no fee) are given for merely adequate or poor performance.

Industry Classification

NAICS: Manufacturing › Navigational, Measuring, Electromedical, and Control Instruments Manufacturing › Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing

Product/Service Code: TRANSPORT, TRAVEL, RELOCATION › OTHER TRANSPORT, TRAVEL, RELOCAT SV

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: HQ014717R0012

Pricing Type: COST PLUS AWARD FEE (R)

Evaluated Preference: NONE

Contractor Details

Parent Company: RTX Corp

Address: 225 PRESIDENTIAL WAY, WOBURN, MA, 01801

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: $105,093,349

Exercised Options: $81,733,543

Current Obligation: $58,261,823

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: HQ014718D0002

IDV Type: IDC

Timeline