Raytheon awarded $1.37B for AIM-9X missile production, facing no competition

Contract Overview

Contract Amount: $1,368,878,887 ($1.4B)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2021-06-30

End Date: 2026-09-30

Contract Duration: 1,918 days

Daily Burn Rate: $713.7K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIXED PRICE INCENTIVE

Sector: Defense

Official Description: AIM-9X LOT 21-23 PRODUCTION

Place of Performance

Location: TUCSON, PIMA County, ARIZONA, 85756

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $1.37 billion to RAYTHEON COMPANY for work described as: AIM-9X LOT 21-23 PRODUCTION Key points: 1. This contract represents a significant investment in air-to-air missile capabilities. 2. The sole-source nature raises questions about potential price inflation and limited innovation. 3. Long-term contract duration suggests sustained demand for this specific weapon system. 4. Geographic concentration of performance in Arizona warrants attention for supply chain resilience. 5. The fixed-price incentive contract type aims to balance cost control with performance. 6. Lack of small business participation is noted, with no set-aside provisions.

Value Assessment

Rating: questionable

Benchmarking the value of this sole-source contract is challenging due to the absence of competitive bids. The fixed-price incentive structure suggests an agreed-upon target cost with incentives for Raytheon to stay below it, but without market comparisons, assessing true value-for-money is difficult. The historical spending on AIM-9X variants, while substantial, does not inherently validate current pricing without understanding evolving production costs and technological advancements.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning Raytheon was the only bidder considered. This typically occurs when a specific technology or capability is unique to a single provider, or in cases of urgent need where competition is not feasible. The lack of competition limits the government's ability to leverage market forces to drive down prices and encourages reliance on a single supplier.

Taxpayer Impact: Taxpayers are potentially exposed to higher costs due to the absence of competitive pressure. Without alternative bids, the government relies on Raytheon's proposed pricing, which may not reflect the lowest achievable cost.

Public Impact

The U.S. Navy and other allied air forces benefit from the continued supply of advanced air-to-air missiles. This contract ensures the production of the AIM-9X missile, a critical component for air superiority. Performance is concentrated in Arizona, impacting the local aerospace and defense workforce. The availability of these missiles supports national defense readiness and power projection capabilities.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price discovery and potential cost savings.
Long contract duration could lead to complacency in cost management.
Concentration of production in one state poses supply chain risks.
No small business set-aside may limit opportunities for smaller firms in the supply chain.

Positive Signals

Fixed-price incentive contract aims to control costs while ensuring performance.
Sustained production ensures availability of a critical defense asset.
Raytheon is an established provider with a track record in missile systems.

Sector Analysis

The guided missile and space vehicle manufacturing sector is a highly specialized and capital-intensive industry dominated by a few large defense contractors. This contract falls within the realm of tactical missile production, a key component of national defense spending. The market is characterized by long-term government procurement cycles and significant barriers to entry due to technological complexity and regulatory requirements. Spending benchmarks for similar missile production contracts can vary widely based on quantity, complexity, and technological upgrades.

Small Business Impact

This contract does not include any small business set-aside provisions, and the prime contractor, Raytheon, is a large business. While large defense contracts often involve extensive subcontracting, the absence of specific set-asides means that small businesses are not guaranteed a portion of this work. The overall impact on the small business ecosystem depends on Raytheon's subcontracting strategy and whether they actively seek out and engage small business suppliers for components or services.

Oversight & Accountability

Oversight for this contract will primarily reside with the Department of the Navy's contracting officers and program managers. The contract type, Fixed Price Incentive, includes provisions for monitoring costs against targets and incentivizing efficiency. Transparency is facilitated through contract awards databases, but detailed cost breakdowns and performance metrics are often considered sensitive. The Inspector General for the Department of Defense may conduct audits or investigations into specific aspects of contract performance or pricing if concerns arise.

Related Government Programs

Air-to-Air Missile Programs
Naval Aviation Procurement
Defense Production Contracts
Raytheon Defense Contracts
Guided Missile Manufacturing

Risk Flags

Sole-source award
Lack of competition
Potential for cost overruns
Supply chain concentration risk

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $1.37 billion to RAYTHEON COMPANY. AIM-9X LOT 21-23 PRODUCTION

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 $1.37 billion.

What is the period of performance?

Start: 2021-06-30. End: 2026-09-30.

What is the historical spending trend for the AIM-9X missile program?

Historical spending on the AIM-9X missile program has been substantial, reflecting its critical role in air defense. While specific figures for prior lots are not detailed here, the cumulative investment over multiple production runs indicates a consistent demand and commitment to this weapon system. The current award for Lots 21-23 at $1.37 billion continues this trend of significant, multi-year funding. Analyzing past contract awards for earlier lots would reveal the program's lifecycle cost and the evolution of production volumes and associated expenditures over time, providing context for the scale of this current award.

How does the fixed-price incentive (FPI) contract type aim to control costs compared to other contract types?

A Fixed-Price Incentive (FPI) contract establishes a target cost, a target profit, and a price ceiling. The final price is determined by the relationship between the final incurred cost and the target cost, with both the government and contractor sharing in any savings or overruns within a defined range. This structure incentivizes the contractor (Raytheon) to control costs to achieve a higher profit margin if they can deliver below the target cost, while also protecting the government with a price ceiling. This contrasts with Firm-Fixed-Price (FFP) contracts where the contractor bears all cost risk, or Cost-Plus contracts where the government bears most of the cost risk.

What are the potential risks associated with a sole-source award for a major defense system like the AIM-9X?

The primary risk of a sole-source award for the AIM-9X is the potential for inflated pricing due to the lack of competitive pressure. Without competing bids, the government has less leverage to negotiate the best possible price. This can lead to higher costs for taxpayers over the life of the contract. Additionally, sole-source awards can reduce incentives for the contractor to innovate or improve efficiency, as there is no direct market competition to spur such efforts. It also creates a dependency on a single supplier, which can pose supply chain risks if that supplier faces production issues or geopolitical challenges.

What is Raytheon's track record with producing the AIM-9X missile system?

Raytheon Company has a well-established track record as the prime contractor for the AIM-9X missile system. They have been responsible for its development, production, and sustainment through multiple previous lots. The company possesses the necessary technical expertise, manufacturing capabilities, and security clearances required for this advanced defense program. Their long-standing relationship with the Department of Defense on this specific missile indicates a history of successful deliveries and program execution, making them the incumbent and logical sole-source provider.

Are there any known performance issues or concerns with the AIM-9X missile that this contract aims to address?

This contract, covering production lots 21-23, is primarily focused on the continued manufacturing and delivery of existing AIM-9X missile systems. It does not appear to be directly tied to addressing specific, newly identified performance issues or major upgrades, but rather ensures the ongoing supply of a proven capability. The AIM-9X is generally regarded as a highly effective short-range, high off-boresight air-to-air missile. However, like all advanced weapon systems, continuous sustainment, minor improvements, and ensuring readiness are ongoing efforts that this production contract supports.

What is the significance of the contract performance location in Arizona?

The performance location being primarily in Arizona (ST: AZ, SN: ARIZONA) signifies the concentration of Raytheon's AIM-9X production facilities in that state. This has implications for the regional economy, including job creation and the utilization of local supply chains within Arizona's aerospace and defense sector. From a national perspective, concentrating production in a single geographic area can present supply chain risks. Diversifying production locations could enhance resilience against natural disasters, geopolitical events, or other disruptions that might affect a single site.

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: N0001920R0008

Offers Received: 1

Pricing Type: FIXED PRICE INCENTIVE (L)

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: $1,420,048,677

Exercised Options: $1,368,878,887

Current Obligation: $1,368,878,887

Subaward Activity

Number of Subawards: 588

Total Subaward Amount: $1,195,737,531

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline