Raytheon Company awarded $133M for AIM-9X Systems Improvement Program by Department of the Navy

Contract Overview

Contract Amount: $133,112,908 ($133.1M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2020-09-10

End Date: 2028-02-29

Contract Duration: 2,728 days

Daily Burn Rate: $48.8K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: AIM-9X SYSTEMS IMPROVEMENT PROGRAM

Place of Performance

Location: TUCSON, PIMA County, ARIZONA, 85756

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $133.1 million to RAYTHEON COMPANY for work described as: AIM-9X SYSTEMS IMPROVEMENT PROGRAM Key points: 1. Contract awarded to a single, established defense contractor, raising questions about competitive pricing. 2. Significant duration of the contract (over 2700 days) suggests a long-term need for system sustainment and upgrades. 3. The 'Cost Plus Fixed Fee' contract type may incentivize cost overruns, requiring close oversight. 4. Focus on guided missile manufacturing indicates a critical national defense capability. 5. The contract's value, while substantial, needs to be benchmarked against similar defense sustainment programs. 6. Potential for sole-source awards to limit innovation and drive up costs over time.

Value Assessment

Rating: questionable

The contract's 'Cost Plus Fixed Fee' structure, while common in complex defense programs, carries inherent risks of cost escalation. Without competitive bidding, it is difficult to benchmark the pricing against market rates or alternative solutions. The fixed fee component provides some cost control, but the overall value for money is uncertain due to the lack of competition. Further analysis would require comparing this contract's fee structure and total estimated cost to similar sustainment and improvement programs for missile systems.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning it was not competed among multiple vendors. This approach is typically justified when a specific contractor possesses unique capabilities or intellectual property essential for the requirement. However, the lack of competition limits price discovery and may result in higher costs for the government compared to a fully competed procurement. The government may have determined that only Raytheon Company could fulfill the specialized needs of the AIM-9X systems improvement program.

Taxpayer Impact: Sole-source awards can lead to higher prices for taxpayers as there is no competitive pressure to drive down costs. This limits the government's ability to secure the best possible value for its investment.

Public Impact

The primary beneficiaries are the U.S. Navy and potentially other branches of the military relying on the AIM-9X missile system for air-to-air combat capabilities. The contract will ensure the continued sustainment, modernization, and improvement of a critical defense asset. Geographic impact is primarily within Arizona, where Raytheon Company's facility is located, supporting local employment and the defense industrial base. Workforce implications include the retention and potential expansion of highly skilled jobs in aerospace engineering, manufacturing, and program management within the defense sector.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure, potentially leading to higher costs.
Cost Plus Fixed Fee contract type can incentivize cost overruns if not closely managed.
Long contract duration increases exposure to potential scope creep and evolving requirements.
Lack of transparency in pricing due to non-competitive nature.
Reliance on a single contractor could create supply chain vulnerabilities.

Positive Signals

Ensures continued availability and modernization of a critical defense system.
Leverages the incumbent contractor's established expertise and infrastructure for the AIM-9X system.
Provides long-term stability for a key defense capability.
Potential for streamlined execution due to contractor's familiarity with the system.

Sector Analysis

The AIM-9X Systems Improvement Program falls within the Guided Missile and Space Vehicle Manufacturing sector, a critical component of the broader aerospace and defense industry. This sector is characterized by high R&D investment, stringent quality control, and long product lifecycles. Spending in this area is driven by national security requirements and technological advancements. Comparable spending benchmarks would involve analyzing other major missile system sustainment and upgrade contracts within the Department of Defense, considering factors like system complexity, quantity, and technological maturity.

Small Business Impact

This contract does not appear to involve a small business set-aside. Given the sole-source nature and the specialized requirements of missile system improvement, it is unlikely that significant subcontracting opportunities for small businesses are mandated within this specific award. However, Raytheon Company, as a large prime contractor, may engage small businesses in its broader supply chain for components or services not directly tied to this sole-source contract.

Oversight & Accountability

Oversight for this contract would primarily reside with the Department of the Navy's contracting and program management offices. They are responsible for monitoring performance, ensuring compliance with contract terms, and managing financial expenditures. The 'Cost Plus Fixed Fee' structure necessitates rigorous financial oversight to scrutinize costs and prevent overruns. Transparency may be limited due to the sole-source nature, but internal government reviews and potentially Inspector General audits would provide accountability measures.

Related Government Programs

Missile Defense Systems
Air-to-Air Missile Programs
Naval Aviation Support
Defense Research and Development
Weapon System Sustainment

Risk Flags

Sole-source procurement
Cost-reimbursable contract type
Long contract duration
Lack of competitive benchmarking

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $133.1 million to RAYTHEON COMPANY. AIM-9X SYSTEMS IMPROVEMENT PROGRAM

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 $133.1 million.

What is the period of performance?

Start: 2020-09-10. End: 2028-02-29.

What is Raytheon Company's track record with the AIM-9X program and similar defense contracts?

Raytheon Company has a long-standing history as the prime contractor for the AIM-9X Sidewinder missile program, including its development and production. Their extensive experience with this specific weapon system suggests a deep understanding of its technical requirements, performance characteristics, and sustainment needs. The company is a major defense contractor with a broad portfolio of missile systems and aerospace products. Their track record typically involves delivering complex systems under challenging conditions, though like many large defense firms, they have faced scrutiny regarding cost, schedule, and performance on various programs. For the AIM-9X specifically, the program has generally been considered successful in delivering advanced capabilities, but continuous improvement programs like this one inherently involve ongoing cost and technical management.

How does the 'Cost Plus Fixed Fee' (CPFF) structure compare to other contract types for this type of work?

The Cost Plus Fixed Fee (CPFF) contract type is often used for research and development or complex system modifications where the scope of work is not precisely defined at the outset, or where significant uncertainties exist. In a CPFF contract, the contractor is reimbursed for all allowable costs incurred, plus a predetermined fixed fee representing profit. This differs from fixed-price contracts, where the price is set regardless of the final cost, offering greater cost certainty to the buyer but placing more risk on the contractor. It also differs from Cost Plus Incentive Fee (CPIF) contracts, which include incentives for meeting cost, schedule, or performance targets. While CPFF provides flexibility for evolving requirements, it places a greater burden on the government to meticulously monitor costs to prevent overruns, as the contractor has less financial incentive to control expenses compared to fixed-price arrangements.

What are the primary risks associated with a sole-source award for missile system improvements?

The primary risks associated with a sole-source award for missile system improvements include a lack of competitive pricing, which can lead to higher costs for the government. Without competing vendors, there is reduced pressure on the incumbent contractor to innovate or offer the most cost-effective solutions. This can also stifle competition within the broader defense industrial base, potentially limiting the development of alternative technologies or suppliers. Furthermore, reliance on a single source can create vulnerabilities in the supply chain and reduce the government's leverage in negotiations. There's also a risk that the contractor may not prioritize efficiency or cost control as rigorously as they would under a competitive environment, necessitating robust government oversight.

What is the historical spending pattern for the AIM-9X program or similar missile sustainment efforts?

Historical spending on the AIM-9X program and similar missile sustainment efforts within the Department of Defense typically shows consistent, significant investment over the lifecycle of the weapon system. These programs often involve multi-year contracts for production, upgrades, and ongoing maintenance. Annual spending can fluctuate based on production rates, modernization phases, and specific upgrade initiatives. For instance, the AIM-9X program has seen substantial funding allocated over the years for initial development, full-rate production, and subsequent enhancements to maintain its technological edge against evolving threats. Benchmarking this $133 million contract requires examining the total obligated amounts and annual expenditures for comparable missile programs, considering factors like the number of units procured, the complexity of upgrades, and the duration of sustainment activities.

How does the geographic location of the contractor (Arizona) impact the contract's execution and oversight?

The geographic location of Raytheon Company in Arizona impacts the contract's execution and oversight primarily through logistics, personnel, and the presence of a regional defense industrial base. Having the contractor located in Arizona means that oversight personnel from the Department of the Navy may need to conduct site visits and inspections at Raytheon's facilities in the state. This can involve travel costs and coordination efforts. The presence of a significant defense contractor in Arizona also contributes to the local economy and workforce, potentially ensuring a readily available pool of skilled labor for the program. While the physical location doesn't inherently change the contract's technical requirements or financial structure, it influences the practical aspects of government oversight, communication, and the integration of the contractor into the broader defense supply chain network.

Industry Classification

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

Product/Service Code: RESEARCH AND DEVELOPMENT › C – National Defense R&D Services

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0001919R0077

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

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: $136,345,757

Exercised Options: $136,345,757

Current Obligation: $133,112,908

Subaward Activity

Number of Subawards: 195

Total Subaward Amount: $32,723,837

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline