DoD awards Raytheon $188.8M for missile engineering support, a sole-source, cost-plus contract

Contract Overview

Contract Amount: $188,798,867 ($188.8M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2021-11-26

End Date: 2025-12-31

Contract Duration: 1,496 days

Daily Burn Rate: $126.2K/day

Competition Type: NOT COMPETED

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: FY22 LOT 3 RECERTIFIED/MODERNIZED MISSILE & DEPOT. THE PURPOSE OF THIS ACTION IS TO ORDER ENGINEERING SUPPORT SERVICES.

Place of Performance

Location: TUCSON, PIMA County, ARIZONA, 85756

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $188.8 million to RAYTHEON COMPANY for work described as: FY22 LOT 3 RECERTIFIED/MODERNIZED MISSILE & DEPOT. THE PURPOSE OF THIS ACTION IS TO ORDER ENGINEERING SUPPORT SERVICES. Key points: 1. Contract awarded on a sole-source basis, raising questions about price competition. 2. Cost-plus contract type may incentivize higher spending without strict cost controls. 3. Long duration (nearly 5 years) suggests a critical, ongoing need for services. 4. Focus on engineering support for missile systems indicates a specialized, high-value requirement. 5. Contractor is a major defense prime, suggesting established capabilities but potentially limited market alternatives. 6. Geographic location in Arizona may have implications for local workforce and economic impact.

Value Assessment

Rating: questionable

Benchmarking the value of this specific engineering support contract is challenging due to its sole-source nature and specialized focus on missile systems. The cost-plus fixed fee structure, while common for complex R&D, can lead to costs exceeding initial estimates if not closely managed. Without competitive bids, it's difficult to ascertain if the pricing reflects fair market value or if there are opportunities for cost savings through alternative providers or more stringent performance incentives.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning the Department of the Navy did not solicit bids from multiple potential contractors. This approach is typically justified when only one contractor possesses the necessary specialized skills, technology, or security clearances. However, the lack of competition limits price discovery and may result in higher costs for the government compared to a fully competed procurement.

Taxpayer Impact: Taxpayers may be paying a premium due to the absence of competitive pressure to drive down costs. The government relies on the contractor's good faith in managing costs under the cost-plus structure.

Public Impact

The Department of Defense, specifically the Navy, benefits from continued engineering support for critical missile systems. This contract ensures the modernization and recertification of missile systems, contributing to national defense capabilities. The primary geographic impact is in Arizona, where Raytheon's operations are located, potentially supporting local jobs and the defense industrial base. The contract supports a highly specialized engineering workforce within Raytheon, contributing to the retention of critical skills in 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 contract type can incentivize increased spending if not rigorously managed.
Lack of transparency in the justification for sole-source award.
Long contract duration may mask inefficiencies or scope creep over time.

Positive Signals

Award to a known, experienced defense contractor (Raytheon) suggests a high likelihood of successful technical execution.
Focus on missile systems indicates a critical national security requirement being met.
Contract supports modernization and recertification, ensuring operational readiness of key assets.

Sector Analysis

The defense sector, particularly missile manufacturing and support, is characterized by high barriers to entry, significant R&D investment, and long product lifecycles. Spending in this area is often driven by national security imperatives rather than market demand. Contracts are frequently sole-source or limited competition due to the specialized nature of the technology and the established relationships between government agencies and prime defense contractors. Comparable spending benchmarks are difficult to establish due to the unique nature of missile systems and their support requirements.

Small Business Impact

This contract does not appear to include a small business set-aside. Given the sole-source nature and the prime contractor being Raytheon, a large defense firm, the likelihood of significant subcontracting opportunities for small businesses is uncertain and depends on Raytheon's internal subcontracting strategy. Without specific set-aside goals, the direct impact on the small business defense ecosystem may be minimal, though Raytheon's supply chain could indirectly benefit small businesses.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy's contracting and program management offices. The cost-plus fixed fee structure necessitates robust financial oversight to ensure costs are reasonable and allocable. Transparency is limited due to the sole-source nature. Inspector General jurisdiction would apply to investigations of fraud, waste, or abuse related to the contract.

Related Government Programs

Missile Defense Systems
Naval Aviation Support
Defense Engineering Services
Guided Missile Manufacturing
Department of Defense R&D Contracts

Risk Flags

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

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $188.8 million to RAYTHEON COMPANY. FY22 LOT 3 RECERTIFIED/MODERNIZED MISSILE & DEPOT. THE PURPOSE OF THIS ACTION IS TO ORDER ENGINEERING SUPPORT SERVICES.

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 $188.8 million.

What is the period of performance?

Start: 2021-11-26. End: 2025-12-31.

What is Raytheon's track record with similar sole-source, cost-plus engineering support contracts for the Department of the Navy?

Raytheon Company, now part of RTX, has a long history of performing complex engineering and sustainment services for the Department of the Navy, often under sole-source or limited-competition contracts due to the specialized nature of defense systems. Their track record typically involves large-scale, multi-year programs requiring significant technical expertise. While specific performance metrics for past cost-plus contracts are often not publicly detailed, the continued awarding of such contracts suggests a generally satisfactory performance history in meeting technical requirements. However, cost overruns and schedule delays have been historical challenges across the defense industry, including for major primes like Raytheon, necessitating diligent government oversight.

How does the $188.8 million contract value compare to historical spending on missile engineering support by the Navy?

The $188.8 million awarded to Raytheon for FY22 LOT 3 represents a significant investment in missile engineering support. To provide a precise comparison, historical spending data for similar missile systems and engineering services procured by the Department of the Navy would be required. However, given the complexity and critical nature of missile systems, annual spending in the tens to hundreds of millions of dollars for sustainment, modernization, and engineering support is not uncommon for major defense programs. This specific award appears to be a delivery order under a larger indefinite-delivery/indefinite-quantity (IDIQ) contract, suggesting it is part of a broader, ongoing procurement strategy rather than a standalone expenditure.

What are the primary risks associated with a sole-source, cost-plus fixed fee contract for missile engineering services?

The primary risks associated with this contract structure are twofold. Firstly, the sole-source nature eliminates competitive pressure, potentially leading to higher prices than might be achieved in a competed environment. The government relies heavily on the contractor's integrity and the effectiveness of its own cost accounting and oversight. Secondly, the cost-plus fixed fee (CPFF) structure, while providing flexibility for evolving requirements, can incentivize the contractor to incur higher costs to increase the fixed fee, which is a percentage of the actual costs. This necessitates rigorous government oversight of all incurred costs to ensure they are reasonable, allocable, and allowable, and that the contractor is making efficient use of resources.

What is the expected effectiveness of these engineering services in ensuring the readiness and modernization of missile systems?

The effectiveness of these engineering services is expected to be high, given the specialized nature of the work and the contractor's presumed expertise. The contract's purpose is to order engineering support services for the recertification and modernization of missile systems. This directly contributes to ensuring that these critical assets remain operational, safe, and technologically relevant. Successful execution of these services should enhance the reliability and performance of the missile systems, thereby supporting the Navy's mission readiness and deterrence capabilities. The long duration of the contract (through 2025) suggests a commitment to sustained support.

How does this contract fit into the broader context of Department of the Navy's spending on weapon systems sustainment and modernization?

This contract represents a component of the Department of the Navy's broader strategy for weapon systems sustainment and modernization. The Navy, like other branches of the military, invests heavily in ensuring its platforms and associated systems remain effective throughout their lifecycle. Missile systems are particularly critical and costly to maintain. Awards like this, even if sole-source, are often necessary to leverage unique capabilities or address specific technological requirements that cannot be met through open competition. This spending aligns with the overall defense budget priorities focused on maintaining technological superiority and operational readiness in key strategic areas.

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 FIXED FEE (U)

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: $188,798,867

Exercised Options: $188,798,867

Current Obligation: $188,798,867

Actual Outlays: $-56,946

Subaward Activity

Number of Subawards: 5

Total Subaward Amount: $1,212,597

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