DoD's $704M Tomahawk Missile Buy Faces Limited Competition, Long-Term Delivery

Contract Overview

Contract Amount: $704,479,566 ($704.5M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2012-06-07

End Date: 2030-07-31

Contract Duration: 6,628 days

Daily Burn Rate: $106.3K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Defense

Official Description: PROCURE FY12 TOMAHAWK BLOCK IV MISSILES

Place of Performance

Location: TUCSON, PIMA County, ARIZONA, 85756

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $704.5 million to RAYTHEON COMPANY for work described as: PROCURE FY12 TOMAHAWK BLOCK IV MISSILES Key points: 1. Significant investment in advanced missile technology. 2. Sole reliance on Raytheon Company for Tomahawk Block IV production. 3. Extended contract duration raises questions about long-term pricing and innovation. 4. Defense sector spending on guided missiles is substantial.

Value Assessment

Rating: questionable

The contract's fixed price with economic price adjustment (EPA) structure can lead to cost overruns, especially over its long duration. Benchmarking against similar missile contracts is difficult due to the lack of competitive bids.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was not competed, indicating a sole-source award to Raytheon Company. This lack of competition limits price discovery and potentially leads to higher costs for taxpayers.

Taxpayer Impact: The absence of competition for a high-value defense procurement likely results in a higher overall cost to taxpayers than a competitively awarded contract.

Public Impact

Ensures continued availability of a key strategic weapon system for the U.S. Navy. Supports Raytheon Company's manufacturing capabilities and associated workforce. Long-term contract may impact modernization efforts if not managed carefully.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award
Long contract duration (18 years)
Economic price adjustment clause

Positive Signals

Procures critical defense asset
Establishes long-term supply chain

Sector Analysis

This procurement falls within the Defense sector, specifically guided missile manufacturing. Spending in this area is driven by national security needs and technological advancements, often involving high unit costs and long development cycles.

Small Business Impact

The contract data does not indicate any specific provisions or set-asides for small businesses. Given the specialized nature of guided missile manufacturing, prime contracts are typically awarded to large defense contractors.

Oversight & Accountability

The Department of Defense, through the Defense Contract Management Agency, is responsible for overseeing this contract. The long duration and sole-source nature necessitate robust oversight to ensure fair pricing and performance.

Related Government Programs

Guided Missile and Space Vehicle Manufacturing
Department of Defense Contracting
Defense Contract Management Agency Programs

Risk Flags

Sole-source award limits competition and price negotiation.
Long contract duration (18 years) increases risk of cost escalation and obsolescence.
Economic Price Adjustment (EPA) clause transfers cost risk to the government.
Lack of transparency in per-unit cost benchmarking.
Potential for contractor complacency due to lack of competitive pressure.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $704.5 million to RAYTHEON COMPANY. PROCURE FY12 TOMAHAWK BLOCK IV MISSILES

Who is the contractor on this award?

The obligated recipient is RAYTHEON COMPANY.

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Contract Management Agency).

What is the total obligated amount?

The obligated amount is $704.5 million.

What is the period of performance?

Start: 2012-06-07. End: 2030-07-31.

What is the projected cost per missile under this contract, and how does it compare to historical or alternative missile systems?

The total award value is $704,479,566.12 over approximately 18 years. Without a per-unit cost or competitive data, it's challenging to benchmark. However, the economic price adjustment clause suggests potential for cost increases beyond initial projections, making direct cost comparisons difficult and potentially unfavorable to taxpayers.

What are the specific risks associated with a sole-source, long-duration contract for a critical weapon system like the Tomahawk?

Key risks include potential for inflated pricing due to lack of competition, reduced incentive for contractor innovation, and vulnerability to supply chain disruptions over the extended period. Furthermore, the government may be locked into a system that could become technologically obsolete without competitive pressure to upgrade or replace it.

How does the economic price adjustment (EPA) clause impact the government's ability to control costs and ensure value for money?

The EPA clause allows for price increases based on economic factors, such as inflation. While intended to protect contractors from unforeseen cost increases, it shifts significant cost risk to the government. This can erode cost control and make it difficult to ascertain true value for money, especially in a sole-source context.

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 COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0001910R0027

Offers Received: 1

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT (K)

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: $705,586,326

Exercised Options: $705,586,326

Current Obligation: $704,479,566

Subaward Activity

Number of Subawards: 1

Total Subaward Amount: $10,350,073

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline