Raytheon Systems Co. awarded $794.6M for MK15 Close-In Weapon Systems, a sole-source contract for ordnance

Contract Overview

Contract Amount: $76,928,744 ($76.9M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 1999-10-28

End Date: 2002-09-30

Contract Duration: 1,068 days

Daily Burn Rate: $72.0K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: 200001!1700!000382!BZ005 !NAVAL SEA SYSTEMS COMMAND !N0002400C5401 !A!*!* !19991028!20011028!794598573!794598573!001339159!N!15090!RAYTHEON SYSTEMS CO (INC) !1151 E HERMANS RD !TUCSON !AZ!85706!77000!019!04!TUCSON !PIMA !ARIZONA !0001!+000003500000!N!N!000000000000!1005!GUNS, THROUGH 30 MM !A5 !WEAPONS !2EBE!MK15 CLOSE IN WPN SYS !3489!1!*!*!*!B!N!Z!D !U!J!1!001!N!1A!A!N!A!* !* !N!C!*!A!A!A!A!A!A!* !*!N!A!C!N!*!*!*!*!*!

Place of Performance

Location: SUNNYVALE, SANTA CLARA County, CALIFORNIA, 94085

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $76.9 million to RAYTHEON COMPANY for work described as: 200001!1700!000382!BZ005 !NAVAL SEA SYSTEMS COMMAND !N0002400C5401 !A!*!* !19991028!20011028!794598573!794598573!001339159!N!15090!RAYTHEON SYSTEMS CO (INC) !1151 E HERMANS RD !TUCSON !AZ!85706!77000!019!04!TUCSON !PIM… Key points: 1. Contract awarded on a sole-source basis, raising questions about price discovery and potential for overpayment. 2. Significant funding allocated for a critical defense system, indicating high strategic importance. 3. Contract duration of nearly three years suggests a substantial, ongoing need for these weapon systems. 4. The award represents a large portion of the total contract value, highlighting the scale of this procurement. 5. Focus on a specific weapon system (MK15 CIWS) points to specialized defense needs. 6. The 'Other Ordnance and Accessories Manufacturing' NAICS code suggests a broad category, but the specific PSC points to a focused product.

Value Assessment

Rating: questionable

The contract value of $794.6 million for the MK15 Close-In Weapon System is substantial. Without comparable sole-source awards or detailed cost breakdowns, it is difficult to definitively benchmark the value for money. However, sole-source procurements inherently carry a higher risk of inflated pricing due to the lack of competitive pressure. Further analysis of the contractor's cost proposals and historical pricing for similar systems would be necessary to provide a more precise assessment of value.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning that only one contractor, Raytheon Systems Co. (Inc.), was solicited. This approach bypasses the competitive bidding process, which typically leads to better price discovery and potentially lower costs for the government. The lack of competition here suggests that either there are unique capabilities possessed by Raytheon, or the circumstances of the procurement did not allow for a full and open competition.

Taxpayer Impact: Sole-source awards can lead to higher costs for taxpayers as there is no competitive pressure to drive down prices. This necessitates robust oversight to ensure fair pricing.

Public Impact

The primary beneficiaries are the U.S. Navy, which utilizes the MK15 Close-In Weapon System for defense. The contract delivers critical defensive weapon systems essential for naval operations and force protection. The geographic impact is primarily within the defense industrial base, with potential for ripple effects in Tucson, Arizona, where the contractor is located. Workforce implications include employment for engineers, technicians, and manufacturing personnel at Raytheon and its subcontractors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive opportunities and potentially increases costs.
Lack of transparency in pricing due to non-competitive nature.
Potential for contractor to leverage unique position for favorable terms.

Positive Signals

Award to a known defense contractor with established capabilities.
Focus on a critical defense system indicates a strong, albeit sole-source, demand.
Contract duration suggests a stable, long-term relationship for a vital capability.

Sector Analysis

The defense industry, particularly the segment focused on ordnance and weapon systems manufacturing, is characterized by high barriers to entry and significant R&D investment. Raytheon Systems Co. is a major player in this sector. This contract for the MK15 Close-In Weapon System fits within the broader category of naval defense procurement, which is a substantial part of the overall defense budget. Comparable spending benchmarks would typically involve other large-scale weapon system procurements for naval or air defense.

Small Business Impact

As a sole-source award, this contract does not appear to have a small business set-aside component. There is no explicit information provided regarding subcontracting plans for small businesses. Without a competitive solicitation, the typical mechanisms for ensuring small business participation, such as subcontracting goals, may not be as robustly applied. Further investigation into Raytheon's subcontracting practices would be needed to assess the impact on the small business ecosystem.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contract management agencies, such as the Defense Contract Management Agency (DCMA). Accountability measures are inherent in the contract terms, including delivery schedules and performance specifications. Transparency is limited due to the sole-source nature, but contract awards are generally reported in federal databases. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Naval Ship Systems
Ordnance and Ammunition
Defense Weapon Systems
Naval Surface Warfare
Missile Defense Systems

Risk Flags

Sole-source award
Lack of competitive bidding
Potential for cost overruns
Reliance on a single supplier

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $76.9 million to RAYTHEON COMPANY. 200001!1700!000382!BZ005 !NAVAL SEA SYSTEMS COMMAND !N0002400C5401 !A!*!* !19991028!20011028!794598573!794598573!001339159!N!15090!RAYTHEON SYSTEMS CO (INC) !1151 E HERMANS RD !TUCSON !AZ!85706!77000!019!04!TUCSON !PIMA !ARIZONA !0001!+000003500000!N!N!000000000000!1005!GUNS, THROUGH 30 MM !A5 !WEAPONS !2EBE!MK15 CLOSE IN WPN SYS !3489!1!*!*!*!B!N!Z!D !U!J!

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 $76.9 million.

What is the period of performance?

Start: 1999-10-28. End: 2002-09-30.

What is the historical spending trend for the MK15 Close-In Weapon System with Raytheon Systems Co. or its predecessors?

Analyzing historical spending for the MK15 Close-In Weapon System (CIWS) with Raytheon Systems Co. requires examining contract data over several years. While this specific award is for $794.6 million, it's crucial to understand if this represents an increase, decrease, or consistent level of spending compared to previous periods. Factors influencing historical spending include system upgrades, fleet expansion or modernization, and the competitive landscape at the time of prior awards. Without access to a comprehensive historical database for this specific system, it's difficult to provide precise figures. However, large sole-source awards for established weapon systems often indicate continued sustainment and modernization efforts rather than entirely new procurements. The duration of this contract (nearly three years) suggests a sustained need, implying that past spending was likely significant and ongoing.

How does the per-unit cost of the MK15 CIWS under this contract compare to industry benchmarks or previous contracts?

Determining the per-unit cost of the MK15 CIWS under this $794.6 million contract is challenging without knowing the exact number of units being procured. The contract value represents the total funding allocated, which could cover manufacturing, support, training, and other associated costs. To establish a per-unit benchmark, we would need the quantity of systems or major components being delivered. Furthermore, as this is a sole-source award, direct comparison to market rates or competitive bids is not feasible. Benchmarking would rely on analyzing historical per-unit costs from previous contracts, if available, or comparing it to similar defensive weapon systems, which is complex due to varying capabilities and scales. The lack of competition inherently limits the ability to assess if the per-unit cost is competitive.

What specific risks are associated with this sole-source contract for the MK15 CIWS, and how are they being mitigated?

The primary risk associated with this sole-source contract is the potential for inflated pricing due to the absence of competition. Without competing bids, the government has less leverage to negotiate the best possible price. Another risk is contractor performance; if Raytheon Systems Co. underperforms or faces production issues, it could significantly impact the Navy's defensive capabilities, given the lack of alternative suppliers. Mitigation strategies typically involve robust government oversight, including detailed cost analysis, performance monitoring, and potentially incorporating incentive clauses into the contract. The Department of Defense often employs technical and contracting experts to scrutinize sole-source proposals to ensure fair and reasonable pricing. However, the inherent limitations of sole-source procurement mean that some level of price risk remains.

What is the strategic importance of the MK15 Close-In Weapon System to the U.S. Navy, and how does this contract support that role?

The MK15 Close-In Weapon System (CIWS), often referred to as 'Phalanx,' is a critical component of the U.S. Navy's layered defense strategy. Its primary role is to provide a last line of defense against anti-ship missiles, aircraft, and other threats that may penetrate outer defense layers. The system's rapid-fire capability and autonomous targeting make it essential for protecting naval vessels in high-threat environments. This $794.6 million contract, awarded on a sole-source basis to Raytheon Systems Co., underscores the ongoing strategic importance of the MK15 CIWS. The substantial funding and multi-year duration indicate the Navy's commitment to maintaining, modernizing, and potentially expanding its fleet of these vital defensive systems, ensuring its operational readiness and survivability at sea.

What are the potential implications of this contract on the broader defense industrial base, particularly concerning ordnance manufacturing?

This contract for the MK15 Close-In Weapon System has several implications for the defense industrial base. Firstly, it represents significant revenue for Raytheon Systems Co., reinforcing its position as a key supplier of naval ordnance. Secondly, as a sole-source award, it may limit opportunities for other companies in the ordnance manufacturing sector to compete for this specific business, potentially concentrating market share. However, it also signals continued demand for advanced defensive weapon systems, which could spur investment and innovation within the broader industry. The contract's value suggests a sustained need for such capabilities, potentially influencing future R&D priorities and strategic planning among defense contractors. It also highlights the importance of specialized manufacturing capabilities within the U.S. industrial base.

Industry Classification

NAICS: Manufacturing › Other Fabricated Metal Product Manufacturing › Other Ordnance and Accessories Manufacturing

Product/Service Code: WEAPONS

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 1151 E HERMANS RD, TUCSON, AZ, 85706

Business Categories: Category Business, Not Designated a Small Business

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline