Raytheon Company awarded $149M for missile modernization, a sole-source contract with a significant duration

Contract Overview

Contract Amount: $149,151,529 ($149.2M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2021-01-01

End Date: 2024-06-30

Contract Duration: 1,276 days

Daily Burn Rate: $116.9K/day

Competition Type: NOT COMPETED

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Official Description: FY21 LOT 2 RECERTIFIED/MODERNIZED MISSILE & DEPOT

Place of Performance

Location: TUCSON, PIMA County, ARIZONA, 85756

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $149.2 million to RAYTHEON COMPANY for work described as: FY21 LOT 2 RECERTIFIED/MODERNIZED MISSILE & DEPOT Key points: 1. Contract awarded to a single, established provider, raising questions about competitive pricing. 2. Long contract duration suggests a need for sustained support or a complex, multi-year effort. 3. The 'cost plus incentive fee' structure aims to control costs but requires careful monitoring. 4. Missile modernization is critical for national defense, indicating a high-priority requirement. 5. Geographic concentration in Arizona may point to specific facility capabilities or strategic importance.

Value Assessment

Rating: fair

Benchmarking the value of this $149 million contract is challenging without comparable sole-source missile modernization efforts. The 'cost plus incentive fee' (CPIF) contract type allows for cost savings if targets are met, but it also carries inherent risk of cost overruns if not managed diligently. The pricing will depend heavily on the specific modernization scope and the efficiency achieved by Raytheon. Without competitive bids, it's difficult to definitively assess if the government is receiving optimal value for money.

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 used when only one vendor possesses the necessary capabilities, technology, or security clearances, or in cases of urgent need. The lack of competition means there was no direct price comparison from alternative providers, potentially leading to higher costs for the government compared to a competed scenario.

Taxpayer Impact: Sole-source awards limit the government's ability to leverage market competition to drive down prices, potentially resulting in less favorable terms for taxpayers.

Public Impact

The U.S. Department of the Navy benefits from modernized missile systems, enhancing its operational capabilities. This contract supports the sustainment and modernization of critical defense assets. The primary geographic impact is in Arizona, likely related to Raytheon's manufacturing or support facilities. The contract supports a specialized workforce within the defense industrial base, particularly in missile systems engineering and manufacturing.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition, potentially increasing costs for taxpayers.
CPIF contract type requires robust oversight to ensure cost efficiency and prevent overruns.
Long contract duration (over 3 years) increases exposure to potential scope creep or changing requirements.
Lack of transparency in sole-source justification could mask underlying issues.
Dependence on a single contractor for critical missile modernization poses supply chain risk.

Positive Signals

Award to Raytheon, a known defense contractor with extensive experience in missile systems.
CPIF structure incentivizes contractor performance and cost control.
Modernization of missile systems is essential for maintaining national security and technological superiority.
Contract duration aligns with the long lifecycle of defense systems.
Focus on recertification and modernization suggests an effort to extend the life of existing assets.

Sector Analysis

The defense sector, specifically guided missile and space vehicle manufacturing, is characterized by high barriers to entry, significant R&D investment, and long product development cycles. This contract falls within a critical sub-sector focused on maintaining and upgrading advanced weaponry. Spending in this area is driven by national security imperatives and technological advancements. Comparable spending benchmarks are difficult to establish due to the specialized nature of missile systems and the prevalence of sole-source or limited competition awards for such critical assets.

Small Business Impact

This contract does not appear to have a small business set-aside component (ss=false, sb=false). As a sole-source award to a large prime contractor, the primary implications for small businesses would be through potential subcontracting opportunities. Raytheon Company may engage small businesses for specialized components, services, or manufacturing support. However, the extent of small business participation is not detailed in the provided data and would depend on Raytheon's subcontracting plan.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy's contracting and program management offices. Given the sole-source nature and CPIF structure, rigorous oversight is crucial to monitor costs, performance, and adherence to contract terms. The Inspector General for the Department of Defense may also have jurisdiction for audits and investigations into potential fraud, waste, or abuse. Transparency is limited due to the sole-source award, but contract modifications and performance reports would be key oversight documents.

Related Government Programs

Guided Missile Manufacturing
Defense Procurement
Naval Weapons Systems
Missile Modernization Programs
Cost Plus Incentive Fee Contracts

Risk Flags

Sole-source award
Long contract duration
Cost-plus contract type
Lack of competition

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $149.2 million to RAYTHEON COMPANY. FY21 LOT 2 RECERTIFIED/MODERNIZED MISSILE & DEPOT

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 $149.2 million.

What is the period of performance?

Start: 2021-01-01. End: 2024-06-30.

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

Raytheon Company, now RTX, has a long history of securing sole-source and limited-competition contracts for defense systems, including missiles. This is often due to their established expertise, proprietary technology, and existing infrastructure. While this provides continuity and leverages existing capabilities, it also means that the government relies heavily on Raytheon's performance and pricing without the direct pressure of competitive bidding. Analyzing past sole-source awards to Raytheon for similar missile programs would reveal trends in cost, schedule adherence, and performance metrics, offering insights into their reliability and value proposition in non-competitive scenarios. However, specific data on their sole-source track record requires deeper dives into contract databases and historical performance reviews.

How does the 'Cost Plus Incentive Fee' (CPIF) structure compare to other contract types for missile modernization, and what are its typical risks?

The Cost Plus Incentive Fee (CPIF) contract is designed to incentivize the contractor to control costs by sharing in any savings or overruns against a target cost. If the contractor performs below the target cost, both the government and contractor share in the savings (often at a pre-defined ratio). Conversely, if costs exceed the target, both parties share in the overrun. This differs from fixed-price contracts, which place cost risk on the contractor, and cost-plus-fixed-fee (CPFF) contracts, where the contractor receives a fixed fee regardless of cost efficiency. The primary risk with CPIF is that it still places significant cost risk on the government, and requires robust government oversight to ensure the target costs are realistic and that the contractor is genuinely motivated to achieve efficiencies rather than simply passing costs through. Inadequate target setting or monitoring can lead to cost overruns that are still borne by the government.

What are the potential risks associated with a sole-source award for critical defense systems like missiles?

Sole-source awards for critical defense systems like missiles carry several inherent risks. Firstly, the lack of competition can lead to inflated prices, as the government cannot leverage market forces to secure the best possible value. Secondly, it can foster complacency in the contractor, reducing the incentive to innovate or improve efficiency beyond what is contractually required. Thirdly, it creates a dependency on a single supplier, making the government vulnerable to supply chain disruptions, price hikes, or even the contractor's financial instability. For critical systems, this dependency can have significant national security implications if the contractor fails to deliver or maintain the systems adequately. Finally, sole-source justifications can sometimes be used to bypass competitive processes for less critical reasons, masking inefficiencies or poor planning.

How does the duration of this contract (1276 days) impact its overall value and risk profile?

A contract duration of 1276 days (approximately 3.5 years) for missile modernization suggests a complex, multi-phase effort requiring sustained support, development, or integration. From a value perspective, a longer duration can allow for economies of scale and more efficient planning if the requirements are stable. It can also provide continuity for specialized technical teams. However, it significantly increases the risk profile. Longer contracts are more susceptible to scope creep, where requirements evolve or expand over time, leading to cost increases. They also expose the government to greater price volatility if market conditions or material costs change significantly during the contract period. Furthermore, maintaining effective oversight and ensuring continued contractor performance and motivation over such an extended period requires sustained effort and resources from the government.

What are the implications of this contract being awarded to Raytheon Company in Arizona?

Awarding this $149 million missile modernization contract to Raytheon Company in Arizona has several implications. Raytheon is a major defense contractor with significant operations in Arizona, particularly in Tucson, which is a hub for missile systems development and manufacturing. This means the contract likely leverages existing infrastructure, specialized workforce, and established supply chains within the state. For Arizona, it signifies continued economic activity and job creation in the high-tech defense sector. From a national perspective, it concentrates critical missile modernization capabilities within a specific geographic region, which could be a strategic advantage but also poses a risk if that region faces disruptions. The presence of Raytheon's facilities in Arizona likely played a role in the sole-source justification, citing proximity and existing capabilities.

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: $149,281,114

Exercised Options: $149,281,114

Current Obligation: $149,151,529

Subaward Activity

Number of Subawards: 1

Total Subaward Amount: $62,717

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