Navy awards $46M for ship interdiction system production, with Raytheon Company as the sole provider

Contract Overview

Contract Amount: $46,041,673 ($46.0M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2024-04-30

End Date: 2027-03-31

Contract Duration: 1,065 days

Daily Burn Rate: $43.2K/day

Competition Type: NOT AVAILABLE FOR COMPETITION

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: NAVY MARINE EXPEDITIONARY SHIP INTERDICTION SYSTEM - LAUNCHER PRODUCTION - LOW RATE INITIAL PRODUCTION

Place of Performance

Location: TUCSON, PIMA County, ARIZONA, 85756

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $46.0 million to RAYTHEON COMPANY for work described as: NAVY MARINE EXPEDITIONARY SHIP INTERDICTION SYSTEM - LAUNCHER PRODUCTION - LOW RATE INITIAL PRODUCTION Key points: 1. This contract focuses on low-rate initial production, suggesting a developmental stage for the system. 2. The firm-fixed-price contract type aims to control costs for the government. 3. The sole-source nature of this award warrants scrutiny regarding potential price inflation and lack of competitive pressure. 4. Production is slated for Arizona, indicating a specific geographic concentration of this defense manufacturing activity. 5. The duration of the contract extends over two years, covering a significant period for production ramp-up. 6. This award falls under the Guided Missile and Space Vehicle Manufacturing sector, a critical area for defense capabilities.

Value Assessment

Rating: fair

Benchmarking the value for this specific system is challenging without more detailed cost breakdowns or comparisons to similar production runs. The firm-fixed-price structure is a positive indicator for cost control. However, the lack of competition means there's no external market validation of the pricing. Further analysis would require understanding the unit costs and comparing them to industry standards for similar complex defense manufacturing.

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 typically occurs when a system is unique, proprietary, or requires specialized expertise that only one contractor possesses. While it ensures the use of a specific, potentially proven technology, it eliminates the benefits of competitive bidding, such as potentially lower prices and innovative solutions from multiple offerors.

Taxpayer Impact: The sole-source nature means taxpayers may not be receiving the most cost-effective solution, as competitive pressures that drive down prices are absent.

Public Impact

The U.S. Navy benefits from the acquisition of a critical capability for ship interdiction. This contract supports the production of the Expeditionary Ship Interdiction System, enhancing naval defense. The primary geographic impact is in Arizona, where the production activities will take place. This award will likely sustain or create jobs within the defense manufacturing sector, particularly in Arizona.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing and potentially increases costs for taxpayers.
Lack of competition may reduce incentives for the contractor to innovate or improve efficiency.
Production of advanced defense systems can carry inherent risks related to technological maturity and integration.

Positive Signals

Firm-fixed-price contract provides cost certainty for the government.
Awarding to Raytheon Company, a known defense contractor, suggests a reliance on established capabilities.
The contract supports a specific, critical defense capability for the U.S. Navy.

Sector Analysis

The Guided Missile and Space Vehicle Manufacturing sector is a highly specialized and capital-intensive segment of the aerospace and defense industry. Companies in this sector are involved in the design, development, and production of complex weapon systems. Spending in this area is driven by national security priorities and technological advancements. Comparable spending benchmarks are difficult to ascertain without specific system details, but contracts for missile and space vehicle production often represent significant investments due to the high-technology nature and stringent quality requirements.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb: false'. Furthermore, the contractor, Raytheon Company, is a large defense prime. There is no explicit information regarding subcontracting plans for small businesses within this specific award notice. Without such details, the direct impact on the small business ecosystem is unclear, though large prime contracts often involve a tiered subcontracting structure where small businesses may participate.

Oversight & Accountability

Oversight for this contract will primarily fall under the Department of the Navy and the Department of Defense. The firm-fixed-price contract type provides a degree of financial oversight by establishing a set price. Transparency regarding specific production milestones and quality control would be managed through contract administration. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Naval Ship Production
Missile Systems Manufacturing
Defense Procurement
Guided Missile Manufacturing
Space Vehicle Manufacturing

Risk Flags

Sole-source award
Potential for cost overruns due to lack of competition
LRIP phase may indicate ongoing development risks

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $46.0 million to RAYTHEON COMPANY. NAVY MARINE EXPEDITIONARY SHIP INTERDICTION SYSTEM - LAUNCHER PRODUCTION - LOW RATE INITIAL PRODUCTION

Who is the contractor on this award?

The obligated recipient is RAYTHEON COMPANY.

Which agency awarded this contract?

Awarding agency: Department of Defense (Department of the Navy).

What is the total obligated amount?

The obligated amount is $46.0 million.

What is the period of performance?

Start: 2024-04-30. End: 2027-03-31.

What is the historical spending pattern for the Expeditionary Ship Interdiction System, and how does this award compare?

Detailed historical spending data for the specific 'Expeditionary Ship Interdiction System - Launcher Production - Low Rate Initial Production' is not readily available in the provided data. However, the current award of $46,041,673.32 represents the initial low-rate production phase. Typically, initial production phases are smaller in scale compared to full-rate production. Future awards for this system could significantly exceed this amount if it progresses through development and enters full-rate manufacturing. Analyzing past contracts for similar naval weapon systems could provide a broader context for the potential lifecycle cost and scale of this program.

What specific risks are associated with the sole-source procurement of this defense system?

The primary risk associated with a sole-source procurement is the lack of competitive pressure, which can lead to inflated prices and reduced incentives for efficiency and innovation. Taxpayers may end up paying more than necessary for the system. Additionally, sole-source awards can create vendor lock-in, making it difficult and costly to switch providers or technologies in the future. There's also a potential risk if the sole-source contractor faces production issues, supply chain disruptions, or financial instability, as there are no immediate alternative suppliers.

How does the firm-fixed-price contract type mitigate risks for the government in this sole-source award?

The firm-fixed-price (FFP) contract type is beneficial for the government, especially in sole-source situations, as it establishes a ceiling on the total cost the government will pay. The contractor assumes most of the risk for cost overruns. This provides significant cost certainty for the Navy and helps prevent unexpected budget increases. While it doesn't address the potential for the initial price being too high due to lack of competition, it ensures that the agreed-upon price will not increase unless there are formal contract modifications, which are typically subject to strict review and approval processes.

What is Raytheon Company's track record with similar defense manufacturing contracts?

Raytheon Company (now RTX) has an extensive and long-standing track record in defense manufacturing, including the production of missiles, guided weapons, and space systems. They are a major prime contractor for the U.S. Department of Defense and numerous international allies. Their experience spans various complex defense platforms, suggesting a high level of technical expertise and manufacturing capability. While specific details of past performance on identical systems are not provided, their general profile indicates a capacity to handle large-scale, technologically advanced defense production contracts.

What are the potential performance implications of awarding this contract on a low-rate initial production (LRIP) basis?

Awarding on a Low-Rate Initial Production (LRIP) basis signifies that the system is likely still in a developmental or early operational testing phase. LRIP contracts are typically used to establish a production base, refine manufacturing processes, and produce a limited quantity of systems for initial fielding and testing. This approach allows the government to gain experience with the system in a real-world environment before committing to full-rate production. Potential performance implications include the possibility of design changes based on testing feedback, which could impact production schedules and costs, but it also allows for iterative improvements and risk reduction before mass production.

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 AVAILABLE FOR COMPETITION

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: M6785422R1000

Pricing Type: FIRM FIXED PRICE (J)

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: $48,041,673

Exercised Options: $46,041,673

Current Obligation: $46,041,673

Subaward Activity

Number of Subawards: 4

Total Subaward Amount: $1,331,647

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: M6785422D1000

IDV Type: IDC

Timeline