Raytheon Company awarded $564M for SM-2 BLOCK IIIB missile defense systems, with a 2008 completion date

Contract Overview

Contract Amount: $564,005,273 ($564.0M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2005-12-30

End Date: 2011-06-30

Contract Duration: 2,008 days

Daily Burn Rate: $280.9K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: SM-2 BLOCK IIIB

Place of Performance

Location: TUCSON, PIMA County, ARIZONA, 85734

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $564.0 million to RAYTHEON COMPANY for work described as: SM-2 BLOCK IIIB Key points: 1. Contract value of $564M indicates a significant investment in advanced defense capabilities. 2. Sole-source award suggests limited market alternatives or specific technological requirements. 3. Long performance period (2005-2011) implies a complex, multi-year development or sustainment effort. 4. Firm Fixed Price contract type aims to control costs and provide budget certainty. 5. Awarded by the Department of Defense, highlighting its strategic importance in national security. 6. The contract falls under 'All Other Professional, Scientific, and Technical Services' NAICS code. 7. A single award suggests a concentrated relationship with the contractor for this specific system.

Value Assessment

Rating: fair

Benchmarking the value of this $564M contract is challenging without specific performance metrics or comparable sole-source awards for similar advanced missile systems. The firm fixed-price structure is a positive indicator for cost control. However, the lack of competition inherently limits the ability to assess if the pricing represents the best possible value for taxpayers.

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 typically occurs when a specific contractor possesses unique capabilities, intellectual property, or is the sole provider of a critical component or technology. The absence of competition means that price discovery through market forces was not utilized, potentially leading to higher costs than if multiple bids were solicited.

Taxpayer Impact: Sole-source awards mean taxpayers may not benefit from competitive pricing, potentially resulting in higher expenditure for the defense system.

Public Impact

The primary beneficiaries are the U.S. Navy and potentially allied nations requiring advanced missile defense capabilities. The contract delivers critical components and/or services for the SM-2 BLOCK IIIB missile defense system. The contract's performance was managed by the Defense Contract Management Agency, indicating federal oversight. The geographic impact is primarily within the defense industrial base, with potential implications for national security posture.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition raises concerns about potential cost overruns and suboptimal value for taxpayer dollars.
Sole-source awards can create contractor dependency and reduce future market competition.
The long duration of the contract could introduce risks related to technological obsolescence or changing defense needs.

Positive Signals

Firm Fixed Price contract type provides cost certainty and incentivizes contractor efficiency.
Award to a major defense contractor like Raytheon suggests access to specialized expertise and established supply chains.
The contract addresses a critical national security need for missile defense.

Sector Analysis

The defense sector, particularly missile defense, is characterized by high R&D costs, long development cycles, and significant government investment. Contracts like this are crucial for maintaining technological superiority and national security. The market is often dominated by a few large, specialized contractors due to the complexity and security requirements. Spending benchmarks for similar advanced weapon systems can range from hundreds of millions to billions of dollars.

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, it is unlikely to directly benefit small businesses through set-asides. However, Raytheon may engage small businesses as subcontractors, though the extent of this subcontracting is not detailed in the provided data.

Oversight & Accountability

Oversight for this contract would have been managed by the Department of Defense, likely through the Defense Contract Management Agency (DCMA). Accountability measures would include contract milestones, quality assurance, and adherence to the firm fixed-price terms. Transparency for sole-source contracts can be limited compared to competed ones, but reporting requirements would still apply.

Related Government Programs

Missile Defense Systems
Naval Warfare Systems
Advanced Weaponry Procurement
Department of Defense Contracts
Raytheon Defense Contracts

Risk Flags

Sole-source award limits price competition.
Long contract duration may introduce obsolescence risk.
Lack of public performance data hinders value assessment.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $564.0 million to RAYTHEON COMPANY. SM-2 BLOCK IIIB

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 $564.0 million.

What is the period of performance?

Start: 2005-12-30. End: 2011-06-30.

What is the historical spending trend for SM-2 BLOCK IIIB systems by the Department of Defense?

Analyzing the historical spending trend for the SM-2 BLOCK IIIB system requires access to comprehensive contract databases and budget reports beyond this single award. This $564 million contract represents a significant, but likely not the entirety, of the DoD's investment in this particular missile defense capability. To understand the trend, one would need to examine all contracts awarded for the SM-2 BLOCK IIIB, including research, development, production, and sustainment, over multiple fiscal years. This would reveal whether spending has been consistent, increasing, or decreasing, and identify any major program milestones or shifts in procurement strategy that influenced spending levels. Without this broader context, it's difficult to ascertain if this award is part of a sustained program or a one-time major procurement.

How does the awarded price compare to similar sole-source missile defense contracts?

Directly comparing the $564 million awarded price for the SM-2 BLOCK IIIB to similar sole-source missile defense contracts is challenging without specific details on the scope of work, system capabilities, and the specific threat environment each contract addressed. Sole-source awards inherently lack a competitive benchmark. However, for context, major missile defense programs and their associated contracts, especially those involving advanced technology and sole-source arrangements, often run into hundreds of millions or even billions of dollars. Factors like the number of units procured, the complexity of integration, and the maturity of the technology significantly influence pricing. A detailed analysis would require identifying contracts for comparable systems (e.g., other Aegis-compatible missiles, advanced surface-to-air systems) awarded under similar sole-source conditions to Raytheon or its competitors.

What are the key performance indicators (KPIs) associated with the SM-2 BLOCK IIIB system that this contract supports?

The specific Key Performance Indicators (KPIs) for the SM-2 BLOCK IIIB system, which this $564 million contract supports, are typically classified or detailed in program-specific documentation. However, generally, for advanced missile defense systems like the SM-2 BLOCK IIIB, KPIs would focus on critical operational metrics such as intercept probability against various threat types (e.g., cruise missiles, ballistic missiles), maximum engagement range, altitude limits, guidance accuracy, system reliability (mean time between failures), and operational readiness rates. The contract's firm fixed-price nature suggests that Raytheon was obligated to meet defined performance standards to receive full payment, implying that these KPIs were likely contractually defined, even if not publicly disclosed.

What is Raytheon's track record with the SM-2 BLOCK IIIB program prior to this award?

Raytheon Company has a long-standing history and significant expertise in developing and producing advanced missile systems, including the Standard Missile (SM) family. Prior to this specific $564 million award, Raytheon was the prime contractor responsible for the research, development, and production of various iterations of the SM-2, including variants like the SM-2 BLOCK IIIA and IIIB. Their track record would involve successful testing, integration with naval platforms, and delivery of these systems to the U.S. Navy and allied partners. This contract likely represents a continuation or expansion of that established relationship, building upon years of program experience and technological refinement.

What are the potential risks associated with a sole-source award for a critical defense system like the SM-2 BLOCK IIIB?

The primary risk associated with a sole-source award for a critical defense system like the SM-2 BLOCK IIIB is the lack of competitive pressure, which can lead to inflated prices and reduced incentives for innovation or efficiency. Taxpayers may end up paying more than necessary because there is no market comparison to benchmark costs. Furthermore, sole-source contracts can foster contractor dependency, making it difficult to switch providers or introduce new technologies in the future. There's also a risk that without the scrutiny of a competitive bidding process, potential inefficiencies or quality control issues might be overlooked. The long-term strategic risk involves potentially limiting the development of alternative solutions or capabilities from other manufacturers.

How does this contract fit into the broader U.S. missile defense strategy?

This $564 million contract for the SM-2 BLOCK IIIB missile defense system is a component of the U.S. Navy's layered defense strategy. The SM-2 is a key weapon system deployed on Aegis-equipped cruisers and destroyers, designed to counter a variety of threats, including aircraft, anti-ship missiles, and, in some configurations, ballistic missiles. The SM-2 BLOCK IIIB represents an upgraded variant, likely incorporating enhanced capabilities for improved performance against evolving threats. This contract signifies the continued investment in maintaining and modernizing the Navy's fleet defense capabilities, ensuring its ability to operate in contested environments and protect naval assets and forces.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Other Professional, Scientific, and Technical Services › All Other Professional, Scientific, and Technical Services

Product/Service Code: GUIDED MISSLES

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, 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: $601,569,284

Exercised Options: $564,108,614

Current Obligation: $564,005,273

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline