DoD's $123.6M Tomahawk missile contract awarded to Raytheon Company shows limited competition

Contract Overview

Contract Amount: $123,578,932 ($123.6M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2017-08-30

End Date: 2020-09-30

Contract Duration: 1,127 days

Daily Burn Rate: $109.7K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Official Description: MARITIME STRIKE TOMAHAWK

Place of Performance

Location: TUCSON, PIMA County, ARIZONA, 85756

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $123.6 million to RAYTHEON COMPANY for work described as: MARITIME STRIKE TOMAHAWK Key points: 1. Contract awarded via a sole-source justification, raising concerns about price discovery and potential overpayment. 2. The contract's cost-plus-incentive-fee structure may incentivize higher costs if not closely monitored. 3. A significant duration of 1127 days suggests a long-term need for these critical defense assets. 4. The award to a single vendor limits opportunities for smaller businesses to participate in this segment. 5. Geographic concentration in Arizona for manufacturing raises questions about supply chain resilience. 6. The absence of a competitive process means taxpayers may not be receiving the best possible value. 7. This contract falls under the 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' NAICS code.

Value Assessment

Rating: questionable

Benchmarking the value of this specific Tomahawk missile contract is challenging due to its sole-source nature and the specialized defense equipment involved. Without competitive bids, it's difficult to ascertain if the $123.6 million represents a fair market price. The cost-plus-incentive-fee (CPIF) pricing structure, while common in defense, can lead to costs exceeding initial estimates if performance incentives are not structured to strongly favor cost savings. Further analysis would require access to detailed cost breakdowns and comparisons with similar sole-source awards for comparable missile systems.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded using a sole-source justification, meaning only one vendor, Raytheon Company, was considered. This approach bypasses the standard competitive bidding process. While sole-source awards are sometimes necessary for unique capabilities or urgent needs, they inherently limit price discovery and can reduce the pressure on contractors to offer the most competitive pricing. The lack of multiple bidders means the government did not benefit from a range of proposals and price points.

Taxpayer Impact: The sole-source award means taxpayers may be paying a premium for these Tomahawk missiles, as there was no competitive pressure to drive down costs. This limits the government's ability to secure the best possible value for taxpayer dollars.

Public Impact

The primary beneficiaries are the U.S. Navy and potentially other allied forces requiring advanced maritime strike capabilities. The contract delivers critical Tomahawk cruise missiles, essential for naval power projection and strategic deterrence. Manufacturing is concentrated in Arizona, impacting the local economy and workforce within that state. This contract supports specialized jobs in aerospace and defense manufacturing, requiring skilled labor.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competition and potentially increases costs for taxpayers.
Cost-plus-incentive-fee structure requires rigorous oversight to ensure cost control.
Lack of small business set-aside or subcontracting information raises concerns about broader economic impact.
Geographic concentration in Arizona could pose supply chain risks.
Limited public data on performance metrics makes it difficult to assess effectiveness.

Positive Signals

Awarded to a known, experienced defense contractor (Raytheon) with a track record in missile systems.
Tomahawk missiles are a proven and critical capability for national defense.
The contract duration suggests a sustained commitment to a vital defense asset.
The incentive fee structure, if well-managed, can align contractor and government interests towards efficient performance.

Sector Analysis

The defense sector, particularly missile manufacturing, is characterized by high barriers to entry, significant R&D investment, and a limited number of prime contractors. This contract for Tomahawk missiles fits within the broader 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' industry. Spending in this area is driven by national security requirements and technological advancements. Comparable spending benchmarks are difficult to establish publicly due to the classified nature of some defense procurement and the specialized capabilities involved.

Small Business Impact

There is no indication from the provided data that this contract included small business set-asides or specific subcontracting goals. As a sole-source award to a large prime contractor, the opportunities for small businesses may be limited to indirect supply chain roles, rather than direct participation in the prime contract. Further investigation into Raytheon's subcontracting plans would be necessary to assess the full impact on the small business ecosystem.

Oversight & Accountability

Oversight for this Department of Defense contract would typically fall under the purview of the Department of the Navy's contracting command and potentially the Defense Contract Management Agency (DCMA). The cost-plus-incentive-fee structure necessitates robust financial oversight and performance monitoring to ensure costs are controlled and incentives are met. Transparency is often limited in defense procurements; however, Inspector General reports and Government Accountability Office (GAO) audits can provide insights into accountability measures.

Related Government Programs

Tomahawk Weapon System
Naval Surface Warfare
Missile Defense Systems
Department of Defense Procurement
Aerospace and Defense Manufacturing

Risk Flags

Sole-source award
Cost-plus-incentive-fee pricing
Lack of competition
Limited transparency on cost breakdowns
Potential for cost overruns

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $123.6 million to RAYTHEON COMPANY. MARITIME STRIKE TOMAHAWK

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 $123.6 million.

What is the period of performance?

Start: 2017-08-30. End: 2020-09-30.

What is Raytheon's track record with the Tomahawk missile program and similar defense contracts?

Raytheon Company has a long-standing and primary role as the sole producer of the Tomahawk cruise missile for the U.S. Navy and allied nations. Their track record with this specific program is extensive, spanning decades of production, upgrades, and sustainment. They are a major defense contractor with significant experience in complex weapon systems, including other missile technologies and aerospace components. While their expertise is well-established, the lack of competition on this particular contract means performance is assessed based on historical delivery and program execution rather than current market competitiveness. Past performance reviews and program execution data from the Navy would provide a more detailed picture of their specific performance on this contract.

How does the $123.6 million value compare to historical spending on Tomahawk missiles?

Directly comparing the $123.6 million value to historical spending requires context regarding the number of units procured, specific missile variants, and the contract type. This award covers a period of 1127 days, suggesting it's for ongoing production and potentially includes sustainment or upgrades. Historical data from the Department of Defense's budget requests and contract awards would show fluctuations in per-unit costs over time, influenced by factors like production volume, technological advancements, and inflation. Without knowing the exact quantity and type of missiles in this specific award, a precise historical comparison is difficult. However, given the sole-source nature and the advanced technology, the cost per missile is likely substantial, reflecting significant R&D and manufacturing complexity.

What are the primary risks associated with this sole-source, cost-plus-incentive-fee contract?

The primary risks stem from the sole-source award and the CPIF contract type. Sole-sourcing eliminates competitive pressure, potentially leading to higher prices than if multiple bidders were involved. Taxpayers may not be receiving the best value for their investment. The CPIF structure, while designed to incentivize performance, carries the risk of cost overruns if not meticulously managed and overseen. The contractor has less inherent motivation to aggressively control costs compared to fixed-price contracts, as cost increases can be passed on, albeit with potential reductions in incentive fees. Robust government oversight, detailed cost analysis, and clear performance metrics are crucial to mitigate these risks and ensure program success within budgetary constraints.

How effective is the Tomahawk missile system, and how does this contract contribute to its overall program effectiveness?

The Tomahawk missile system is widely regarded as a highly effective and versatile long-range, all-weather, subsonic cruise missile used for striking high-value land targets. Its effectiveness is demonstrated by its deployment in numerous military operations, providing significant standoff strike capability for naval forces. This contract, valued at $123.6 million and awarded to Raytheon, directly contributes to the continued production, sustainment, and potential modernization of the Tomahawk fleet. By ensuring a steady supply of these critical munitions, the contract supports the Navy's operational readiness and strategic deterrence posture. The program's effectiveness is intrinsically linked to the reliability and performance of the missiles produced under such agreements.

What are the historical spending patterns for Tomahawk missiles, and does this contract align with them?

Historical spending on Tomahawk missiles has been substantial, reflecting their strategic importance and ongoing modernization efforts. The Department of Defense consistently allocates significant funds for the procurement and sustainment of these weapons systems across multiple fiscal years. Spending patterns are influenced by geopolitical factors, fleet readiness requirements, and the introduction of new variants or upgrades. This $123.6 million contract, awarded under a sole-source justification, appears to be part of this ongoing, long-term investment in the Tomahawk program. While specific annual spending fluctuates, the consistent need for these missiles suggests this contract aligns with established patterns of sustained procurement and sustainment funding for strategic naval assets.

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: GUIDED MISSLES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE (V)

Evaluated Preference: NONE

Contractor Details

Parent Company: RTX Corp (UEI: 001344142)

Address: 2000 E EL SEGUNDO BLVD, EL SEGUNDO, CA, 90245

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: $124,469,560

Exercised Options: $124,469,560

Current Obligation: $123,578,932

Actual Outlays: $-2,267,856

Subaward Activity

Number of Subawards: 34

Total Subaward Amount: $19,093,920

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: N0001915G0003

IDV Type: BOA

Timeline