Raytheon awarded $211.7M for JSOW missiles, with limited competition impacting price discovery

Contract Overview

Contract Amount: $211,731,580 ($211.7M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2015-07-24

End Date: 2019-09-12

Contract Duration: 1,511 days

Daily Burn Rate: $140.1K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: USN JSOW FRP LOT 11 (FY15) AND KSA FMS JSOW BLOCK III C PROCUREMENT

Place of Performance

Location: TUCSON, PIMA County, ARIZONA, 85756

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $211.7 million to RAYTHEON COMPANY for work described as: USN JSOW FRP LOT 11 (FY15) AND KSA FMS JSOW BLOCK III C PROCUREMENT Key points: 1. Contract awarded to a single source, raising concerns about potential overpayment and lack of competitive pressure. 2. The contract's duration of over 4 years suggests a long-term commitment, requiring careful performance monitoring. 3. Focus on guided missile manufacturing indicates a critical defense capability, but the lack of competition warrants scrutiny. 4. The firm-fixed-price structure aims to control costs, but its effectiveness is diminished without competitive bidding. 5. Limited competition for this significant procurement may not yield the best value for taxpayer dollars. 6. The contract's value places it in the upper tier of defense procurements, emphasizing the need for robust oversight.

Value Assessment

Rating: questionable

Given the sole-source nature of this award, a direct comparison to similar contracts is challenging. However, the absence of competition suggests that Raytheon may not have been incentivized to offer the most competitive pricing. The firm-fixed-price contract type offers some cost certainty, but without a competitive bidding process, it's difficult to ascertain if the $211.7 million represents a fair market value. Further analysis would require benchmarking against historical sole-source awards for similar missile systems or exploring potential alternative suppliers.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one bidder, Raytheon Company, was considered. There is no indication of a competitive solicitation process being conducted. This approach is typically reserved for situations where only one responsible source can fulfill the requirement, such as unique capabilities or urgent needs. The lack of competition means that taxpayers did not benefit from the price discovery mechanisms inherent in a multi-bidder environment.

Taxpayer Impact: Sole-source awards limit the government's ability to negotiate the best possible price, potentially leading to higher costs for taxpayers. Without competing offers, there is less pressure on the contractor to reduce their bid, and the government may end up paying more than necessary.

Public Impact

The primary beneficiaries are the U.S. Navy and potentially the Royal Saudi Air Force (KSA FMS) through foreign military sales, receiving advanced guided missile systems. The contract delivers Joint Standoff Weapon (JSOW) missiles, a key component of air-to-ground warfare capabilities. The geographic impact is primarily within the United States, with Raytheon's manufacturing facilities in Arizona. This contract supports jobs within the defense manufacturing sector, specifically in guided missile production.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition and potentially increases costs for taxpayers.
Lack of transparency in the justification for a sole-source award.
Long contract duration (over 4 years) increases the risk of cost overruns if not managed effectively.
Reliance on a single supplier for critical defense assets can create supply chain vulnerabilities.

Positive Signals

Firm-fixed-price contract type provides cost certainty for the government.
Award to an established defense contractor with a track record in missile production.
Procurement of advanced weaponry enhances national defense capabilities.

Sector Analysis

This contract falls within the Guided Missile and Space Vehicle Manufacturing sector, a specialized segment of the aerospace and defense industry. This sector is characterized by high research and development costs, stringent quality control, and significant government procurement. The market is dominated by a few large defense contractors. Spending in this area is driven by national security requirements and technological advancements in weaponry. Comparable spending benchmarks would involve analyzing other large-scale missile system procurements by the Department of Defense.

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 are often required to subcontract a portion of their work to small businesses, the specific subcontracting plan for this contract is not detailed here. The absence of a set-aside suggests that opportunities for small businesses may be limited to the subcontracting tier, if at all.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contracting and program management offices. The firm-fixed-price nature of the contract implies that cost oversight might be less intensive than for cost-plus contracts, focusing more on schedule adherence and performance specifications. Transparency is limited due to the sole-source nature of the award. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

JSOW Missile Programs
Air-to-Ground Munitions Procurement
Foreign Military Sales (FMS) - Saudi Arabia
Department of Defense Missile Manufacturing Contracts
Naval Air Systems Command (NAVAIR) Contracts

Risk Flags

Sole Source Justification
Potential for Price Inflation
Lack of Competitive Bidding
Long-Term Contract Duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $211.7 million to RAYTHEON COMPANY. USN JSOW FRP LOT 11 (FY15) AND KSA FMS JSOW BLOCK III C PROCUREMENT

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 $211.7 million.

What is the period of performance?

Start: 2015-07-24. End: 2019-09-12.

What is Raytheon Company's track record with sole-source defense contracts, particularly for missile systems?

Raytheon Company, now part of RTX, has a long history of securing defense contracts, including sole-source awards, due to its specialized capabilities in areas like missile systems. Analyzing their historical performance on similar sole-source procurements would involve reviewing contract databases for past awards, delivery performance, and any associated cost variances or contract modifications. While sole-source awards are often justified by unique technical requirements or the lack of viable alternatives, a pattern of sole-source awards without robust justification can raise concerns about market competition and potential price inflation. Examining specific instances where Raytheon has been awarded sole-source contracts for comparable missile systems would provide insight into the government's rationale and the contractor's performance under such arrangements.

How does the $211.7 million value of this JSOW missile contract compare to other similar procurements, both competed and sole-source?

Benchmarking the $211.7 million value requires comparing it to other procurements of Joint Standoff Weapons (JSOW) or similar air-to-ground missiles. If this contract was competed, we could analyze the number of bids received and the range of proposed prices. Since it was sole-source, the comparison becomes more challenging. We would look at historical JSOW procurements by the U.S. Navy or other allied nations, noting the year of award, quantity, and specific variant to ensure comparability. If previous JSOW procurements were competed and resulted in significantly lower per-unit costs, it would suggest that the current sole-source award may not represent the best value. Conversely, if similar sole-source awards for advanced missile systems fall within this price range, it might indicate market conditions or specialized requirements driving the cost.

What are the specific risks associated with a sole-source award for critical defense assets like the JSOW missile?

The primary risk of a sole-source award for critical defense assets like the JSOW missile is the potential for inflated pricing due to the absence of competitive pressure. Without competing bids, the government may pay more than necessary, impacting overall defense budget efficiency. Another significant risk is a reduced incentive for the sole-source provider to innovate or improve efficiency, as they face no direct competition for future awards. Furthermore, reliance on a single supplier can create supply chain vulnerabilities; if the sole provider experiences production issues, delays, or financial instability, it could disrupt the availability of critical munitions. This also limits the government's leverage in negotiating terms and conditions, potentially leading to less favorable contract structures.

What is the historical spending pattern for JSOW missiles by the Department of Defense, and how does this contract fit within that trend?

Historical spending on JSOW missiles by the Department of Defense has been substantial, reflecting their importance as a key air-to-ground weapon system. The DoD has procured various lots and variants of the JSOW over several fiscal years. This $211.7 million contract for Lot 11 (FY15) and KSA FMS JSOW Block III C represents a significant, but not unprecedented, investment. Analyzing past procurements would reveal trends in quantity, cost per unit, and the competitive nature of those awards. If previous lots were awarded competitively at lower per-unit costs, this sole-source award warrants closer examination. Understanding the historical context helps assess whether this contract aligns with established spending patterns or represents a deviation, potentially due to evolving threats, technological upgrades, or changes in procurement strategy.

What are the implications of the 'DEFINITIVE CONTRACT' type and 'FIRM FIXED PRICE' terms for cost control and contractor performance?

A 'Definitive Contract' is a standard contract type used when the terms are sufficiently defined. The 'FIRM FIXED PRICE' (FFP) pricing structure means that the contractor agrees to a total price for a well-defined product or service. This shifts the risk of cost overruns from the government to the contractor. For cost control, FFP is generally preferred as it provides the most price certainty for the government. However, the effectiveness of FFP in controlling costs is maximized when coupled with robust competition. In a sole-source scenario, while the government knows the final price, that price might be higher than it would have been under competition. For contractor performance, FFP incentivizes the contractor to manage their costs efficiently to maximize profit, but it can also lead to potential quality compromises if not carefully monitored, as the contractor may cut corners to stay within the fixed price.

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: N0001914R1006

Offers Received: 1

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: $211,731,580

Exercised Options: $211,731,580

Current Obligation: $211,731,580

Subaward Activity

Number of Subawards: 405

Total Subaward Amount: $260,582,827

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline