Raytheon Company awarded $130M for Tomahawk recertification, a sole-source defense contract

Contract Overview

Contract Amount: $129,963,588 ($130.0M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2020-03-27

End Date: 2022-03-31

Contract Duration: 734 days

Daily Burn Rate: $177.1K/day

Competition Type: NOT COMPETED

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Official Description: FIRST ORDER ON THE TOMAHAWK RECERTIFICATION CONTRACT

Place of Performance

Location: TUCSON, PIMA County, ARIZONA, 85756

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $130.0 million to RAYTHEON COMPANY for work described as: FIRST ORDER ON THE TOMAHAWK RECERTIFICATION CONTRACT Key points: 1. Contract awarded to a single supplier suggests limited market competition. 2. Cost-plus incentive fee structure may incentivize cost overruns. 3. Long contract duration (734 days) could indicate complex or extended service needs. 4. Focus on recertification points to maintenance and sustainment of existing assets. 5. Geographic concentration in Arizona for this contract. 6. No small business set-aside indicates a focus on large prime contractors.

Value Assessment

Rating: fair

The contract's value of $130 million for recertification services needs benchmarking against similar missile system maintenance contracts. Without comparative data on per-unit recertification costs or broader industry pricing for such specialized services, assessing value for money is challenging. The cost-plus incentive fee (CPIF) pricing model, while common in defense, carries inherent risks of cost escalation if not meticulously managed and audited. The absence of a competitive bidding process further complicates a direct value assessment.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning Raytheon Company was the only bidder considered. This approach is typically justified when only one responsible source can provide the required supplies or services. The lack of competition means there was no opportunity for price discovery through a bidding process, potentially leading to higher costs for the government compared to a competed contract.

Taxpayer Impact: Sole-source awards limit taxpayer value by removing the downward price pressure that competition typically provides. This can result in higher overall spending for essential defense services.

Public Impact

The primary beneficiaries are the U.S. Navy and potentially allied nations relying on Tomahawk missile systems. Services delivered include the recertification of existing Tomahawk missiles, ensuring their operational readiness. Geographic impact is concentrated in Arizona, where Raytheon's facility is located. Workforce implications include employment for specialized engineers, technicians, and support staff within Raytheon.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure on pricing.
Cost-plus incentive fee structure can lead to cost overruns if not managed.
Lack of transparency in pricing due to non-competitive nature.
Potential for vendor lock-in for critical missile sustainment.

Positive Signals

Ensures continued readiness of a critical strategic weapon system.
Leverages specialized expertise of the original equipment manufacturer.
Contract provides stability for a key defense supplier.

Sector Analysis

The defense industry, specifically the guided missile and space vehicle manufacturing sector, is characterized by high barriers to entry, significant R&D investment, and long product lifecycles. Contracts for sustainment and recertification are crucial for maintaining the operational readiness of complex weapon systems. Spending in this area is often dominated by a few large prime contractors due to the specialized nature of the technology and stringent security requirements. Benchmarking against other missile system sustainment contracts would be necessary for a comprehensive value assessment.

Small Business Impact

This contract was not competed with a small business set-aside. The prime contractor, Raytheon Company, is a large aerospace and defense firm. There is no direct indication of subcontracting opportunities for small businesses within the provided data, though large prime contractors often engage small businesses for various components and services.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Defense's contracting and program management structures, potentially involving the Defense Contract Management Agency (DCMA) for day-to-day administration and performance monitoring. Inspector General (IG) audits could be initiated to review cost efficiency and program execution. Transparency is limited due to the sole-source nature, but contract modifications and performance reports are usually available through federal procurement databases.

Related Government Programs

Tomahawk Weapon System Sustainment
Missile Production and Maintenance Contracts
Defense Logistics Agency (DLA) Support Contracts
Naval Air Systems Command (NAVAIR) Contracts

Risk Flags

Sole-source award
Cost-plus contract type
Lack of competition
Potential for cost overruns

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $130.0 million to RAYTHEON COMPANY. FIRST ORDER ON THE TOMAHAWK RECERTIFICATION CONTRACT

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 $130.0 million.

What is the period of performance?

Start: 2020-03-27. End: 2022-03-31.

What is Raytheon's track record with Tomahawk missile contracts?

Raytheon Company, now part of RTX, has been the prime contractor for the Tomahawk missile program for decades. Their track record includes development, production, and sustainment of the weapon system. Historically, they have managed numerous contracts for Tomahawk production, upgrades, and maintenance, often as the sole or primary source due to the system's complexity and proprietary nature. While specific performance metrics for individual contracts are not publicly detailed, their continued role as the incumbent suggests a perceived capability and reliability by the Department of Defense. However, long-term sole-source relationships can sometimes lead to concerns about cost control and innovation compared to competitive environments.

How does the $130 million value compare to similar missile recertification contracts?

Directly comparing the $130 million value of this Tomahawk recertification contract to similar missile recertification contracts is challenging without access to specific, comparable contract data. Missile recertification costs can vary significantly based on the missile type, age, complexity of the required maintenance, quantity being serviced, and the specific services included (e.g., diagnostics, component replacement, software updates). Contracts for larger, more complex strategic missiles or those involving significant upgrades might command higher values. Conversely, recertification for smaller or less complex munitions could be substantially less. Given the Tomahawk's strategic importance and sophisticated nature, $130 million over approximately two years appears within a plausible range for sustainment, but a definitive value assessment requires detailed benchmarking against analogous sole-source or competed contracts for similar weapon systems.

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

The primary risks associated with this sole-source, cost-plus incentive fee (CPIF) contract are twofold. Firstly, the sole-source nature eliminates competitive pressure, potentially leading to higher prices than might be achieved in a competitive bidding environment. The government lacks the benefit of market forces driving down costs. Secondly, the CPIF structure, while designed to incentivize efficiency by sharing cost savings or overruns between the contractor and the government, carries inherent risks. If the target costs are set too high or if oversight is insufficient, the contractor may not be adequately motivated to control expenses, potentially leading to cost overruns that are ultimately borne by the taxpayer. Effective government oversight and robust auditing are critical to mitigating these risks.

How effective is the Cost Plus Incentive Fee (CPIF) contract type for ensuring program effectiveness?

The Cost Plus Incentive Fee (CPIF) contract type aims to improve program effectiveness by aligning the contractor's financial incentives with the government's objectives, particularly regarding cost, schedule, and performance targets. When structured correctly with well-defined targets and appropriate sharing formulas, CPIF can encourage the contractor to manage costs efficiently and meet performance goals. However, its effectiveness is highly dependent on the accuracy of the initial cost estimates and the clarity of the performance metrics. If targets are unrealistic or poorly defined, the incentive may be weak or misaligned. Furthermore, the complexity of CPIF contracts requires significant government oversight to ensure fair pricing and prevent manipulation. In the context of missile recertification, CPIF can be effective if the technical challenges are well understood and measurable performance improvements can be clearly defined.

What are historical spending patterns for Tomahawk missile sustainment?

Historical spending patterns for Tomahawk missile sustainment, including recertification, have been substantial, reflecting the weapon system's long service life and strategic importance to the U.S. Navy. As the prime contractor, Raytheon (now RTX) has consistently received significant funding for sustainment activities, which encompass not only recertification but also upgrades, repairs, and logistical support. Annual spending can fluctuate based on the number of missiles requiring service, the scope of planned maintenance, and the introduction of new technologies or variants. Over the past decade, total contract obligations for the Tomahawk program, including procurement and sustainment, have likely amounted to billions of dollars. This specific $130 million delivery order represents a portion of that ongoing sustainment expenditure.

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: N0001917R0122

Pricing Type: COST PLUS INCENTIVE FEE (V)

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: $130,060,920

Exercised Options: $130,060,920

Current Obligation: $129,963,588

Actual Outlays: $13,415,073

Subaward Activity

Number of Subawards: 2

Total Subaward Amount: $1,274,350

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: N0001920D0008

IDV Type: IDC

Timeline