Raytheon Company awarded $85.9M for long lead time missile components, raising questions about competition and value

Contract Overview

Contract Amount: $85,934,310 ($85.9M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2025-05-09

End Date: 2030-05-29

Contract Duration: 1,846 days

Daily Burn Rate: $46.6K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: UCA - LONG LEAD ITEMS (NTE)

Place of Performance

Location: TUCSON, PIMA County, ARIZONA, 85756

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $85.9 million to RAYTHEON COMPANY for work described as: UCA - LONG LEAD ITEMS (NTE) Key points: 1. Contract awarded on a sole-source basis, limiting price discovery and potentially increasing costs. 2. Significant duration of the contract (over 5 years) suggests a need for long-term strategic sourcing. 3. Focus on long lead items indicates critical supply chain dependencies for defense readiness. 4. The contract's value, while substantial, needs benchmarking against similar sole-source procurements. 5. Potential for cost overruns exists due to the extended performance period and lack of competitive pressure. 6. Geographic concentration in Arizona for manufacturing raises questions about supply chain resilience.

Value Assessment

Rating: questionable

The contract value of $85.9 million for long lead time items is substantial. However, without a competitive bidding process, it is difficult to definitively assess value for money. Benchmarking against similar sole-source procurements for specialized defense components would be necessary to determine if the pricing is fair. The firm fixed-price structure offers some cost certainty, but the lack of competition means the government may not be benefiting from the lowest possible price.

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 a compelling justification exists for excluding full and open competition. The lack of multiple bidders means there was no direct price competition, which can lead to higher costs for the government compared to a competed contract.

Taxpayer Impact: Taxpayers may be paying a premium due to the absence of competitive pressure. The government's ability to negotiate the best possible price is diminished in a sole-source scenario.

Public Impact

The primary beneficiaries are the Department of the Navy, ensuring the supply of critical missile components. Services delivered include the manufacturing of long lead time items essential for guided missile and space vehicle propulsion units. The geographic impact is concentrated in Arizona, where Raytheon's manufacturing facilities are located. Workforce implications include job security and potential expansion at Raytheon's Arizona facilities.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing and potential cost savings for taxpayers.
Extended contract duration increases exposure to potential cost escalations over time.
Lack of transparency in the sole-source justification process.
Concentration of critical component manufacturing in a single geographic location (Arizona) poses supply chain risk.
The specific nature of 'long lead items' suggests potential bottlenecks if supply is disrupted.

Positive Signals

Firm fixed-price contract provides cost certainty for the awarded scope.
Award to an established contractor (Raytheon) suggests a degree of reliability in production.
Focus on long lead items addresses a critical and potentially time-consuming aspect of defense procurement.
Contract duration aligns with potential long-term defense needs for these components.

Sector Analysis

This contract falls within the Guided Missile and Space Vehicle Propulsion Unit and Propulsion Unit Parts Manufacturing sector, a highly specialized segment of the aerospace and defense industry. The market 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 defense priorities and technological advancements in missile systems. Comparable spending benchmarks are difficult to establish publicly due to the proprietary nature of defense contracting and the specialized components involved.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. Furthermore, the prime contractor, Raytheon Company, is a large aerospace and defense firm. While large prime contractors often have subcontracting plans that include small businesses, the absence of a specific set-aside for this particular contract suggests that opportunities for small businesses may be limited to subcontracting roles rather than direct prime contracting. The impact on the small business ecosystem would depend on Raytheon's subcontracting practices for this award.

Oversight & Accountability

Oversight for this contract will primarily fall under the Department of the Navy's contracting and program management offices. As a definitive contract with a firm fixed-price structure, accountability measures are built around delivery milestones and adherence to specifications. Transparency may be limited due to the sole-source nature of the award and the classified or sensitive aspects of defense procurement. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse.

Related Government Programs

Guided Missile Manufacturing
Space Vehicle Propulsion Systems
Defense Procurement
Long Lead Time Material Acquisition
Aerospace Component Manufacturing

Risk Flags

Sole-source award
Long contract duration
Potential lack of price competition
Geographic concentration of manufacturing

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $85.9 million to RAYTHEON COMPANY. UCA - LONG LEAD ITEMS (NTE)

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 $85.9 million.

What is the period of performance?

Start: 2025-05-09. End: 2030-05-29.

What is the specific justification for awarding this contract on a sole-source basis to Raytheon Company?

The provided data indicates the contract was 'NOT COMPETED' and awarded as a 'SOLE SOURCE'. While the specific justification is not detailed in the provided data snippet, common reasons for sole-source awards in the defense sector include: 1) Unique capabilities or proprietary technology possessed only by the contractor. 2) Urgent and compelling needs where only one source can reasonably fulfill the requirement in the necessary timeframe. 3) Compatibility or interoperability requirements with existing systems that only one contractor can meet. 4) Situations where a previous competitive procurement failed to result in a contract award. Without further documentation from the Department of the Navy, the precise rationale remains undisclosed, but it is likely tied to Raytheon's established role in producing specific missile propulsion components or technologies essential for the Navy's operational readiness.

How does the $85.9 million contract value compare to historical spending on similar long lead time missile components?

Direct comparison of this $85.9 million contract value to historical spending on similar long lead time missile components is challenging without access to detailed historical procurement data for specific missile systems and their associated long lead items. Publicly available data often aggregates spending by broader categories. However, given the nature of long lead time items (which often involve specialized materials, complex manufacturing processes, and extended production schedules), such values are not uncommon for critical defense systems. The 'br' (base price) of $46.552 million suggests that the total contract value includes options, escalation, or other cost factors beyond the initial base amount. A thorough analysis would require benchmarking against contracts for comparable components on different missile platforms or from different time periods, considering inflation and technological evolution.

What are the primary risks associated with a sole-source contract of this magnitude and duration?

The primary risks associated with a sole-source contract of this magnitude ($85.9M) and duration (over 5 years) include: 1) **Cost Overruns and Lack of Value for Money:** Without competition, the government has reduced leverage to negotiate the lowest possible price, potentially leading to higher costs than if multiple bidders were involved. 2) **Contractor Performance Issues:** Dependence on a single supplier means any performance issues, delays, or quality problems by Raytheon could significantly impact the Navy's program timelines and readiness. 3) **Stifled Innovation:** The absence of competitive pressure may reduce incentives for the contractor to innovate or improve efficiency. 4) **Supply Chain Vulnerability:** Relying on a single source for critical components concentrates risk; disruptions at Raytheon's facility or its own supply chain could have severe consequences. 5) **Potential for Complacency:** The contractor might become complacent due to the lack of competitive threat, potentially impacting responsiveness and service quality over the contract's life.

What performance metrics or oversight mechanisms are likely in place to ensure Raytheon meets its obligations under this contract?

While specific performance metrics are not detailed in the provided data, standard oversight mechanisms for a contract of this nature would include: 1) **Contract Data Requirements Lists (CDRLs):** Mandating the submission of specific data and reports related to production status, quality control, and material traceability. 2) **Earned Value Management (EVM):** If applicable, this system would track cost and schedule performance against a baseline plan. 3) **Quality Assurance Surveillance Plans (QASPs):** Government personnel would likely conduct inspections and audits to ensure compliance with technical specifications and quality standards. 4) **Regular Progress Meetings:** Scheduled meetings between the contractor and government representatives to discuss progress, address issues, and review performance. 5) **Acceptance Testing:** Final acceptance of components would be contingent upon successful completion of government-specified tests. The firm fixed-price nature implies that Raytheon is responsible for delivering the specified goods within the agreed price, with penalties or remedies for non-performance.

How does the 'long lead items' designation impact the overall defense acquisition timeline and strategy?

The designation of 'long lead items' is critical in defense acquisition as it signifies components that require significant time to manufacture or procure, often exceeding the assembly time of the end-product. This designation necessitates early identification and initiation of procurement, typically during the system design and development phases, to avoid delaying the overall program schedule. Strategies often involve placing orders for these long lead items well in advance, sometimes even before full program funding is secured, to mitigate schedule risks. This contract, valued at $85.9 million and spanning over five years, directly addresses this by securing the production of these time-intensive components, thereby aiming to ensure that the final missile systems can be produced and delivered according to strategic timelines. Failure to manage long lead items effectively can lead to significant program delays and cost increases.

What is the significance of the contract being awarded in Arizona (st: AZ, sn: ARIZONA)?

The geographic location of contract performance in Arizona (AZ) signifies that Raytheon Company's manufacturing facilities in that state will be the primary site for producing the long lead time missile components. This has several implications: 1) **Economic Impact:** It suggests job creation and economic activity within Arizona's aerospace and defense sector. 2) **Supply Chain Concentration:** It highlights a concentration of critical manufacturing capability within a specific region, which can be both an advantage (specialized workforce, infrastructure) and a risk (vulnerability to regional disruptions like natural disasters, labor strikes, or state-specific regulatory changes). 3) **Logistics:** It dictates the logistics chain for delivery of raw materials and shipment of finished components to subsequent assembly points. For a sole-source award, the government is essentially relying on the existing capabilities and infrastructure at Raytheon's Arizona facilities to meet its needs.

Industry Classification

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

Product/Service Code: GUIDED MISSLES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: M6785425R0110

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Rockwell Collins Australia PTY Limited

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: $412,519,000

Exercised Options: $412,519,000

Current Obligation: $85,934,310

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline