Raytheon Company awarded $444.5M for long lead materials for SM-2 Block IIIB missiles

Contract Overview

Contract Amount: $444,506,965 ($444.5M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2009-05-28

End Date: 2013-06-30

Contract Duration: 1,494 days

Daily Burn Rate: $297.5K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: LONG LEAD MATERIALS FY09 SM-2 BLOCK IIIB

Place of Performance

Location: TUCSON, PIMA County, ARIZONA, 85756

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $444.5 million to RAYTHEON COMPANY for work described as: LONG LEAD MATERIALS FY09 SM-2 BLOCK IIIB Key points: 1. Contract awarded for critical long lead materials, indicating a focus on future production capacity. 2. Sole-source award suggests potential lack of market competition or specialized capabilities required. 3. Contract duration of over 4 years points to a significant, long-term supply chain requirement. 4. Firm Fixed Price contract type aims to provide cost certainty for the government. 5. Awarded by the Department of Defense, highlighting its importance in national security. 6. Manufacturing occurs in Arizona, potentially impacting the regional defense industrial base.

Value Assessment

Rating: fair

The contract value of $444.5 million for long lead materials is substantial. Without specific benchmarks for this type of missile component, a direct value-for-money assessment is challenging. However, the firm fixed-price nature of the contract provides some cost control. The duration of the contract (over 4 years) suggests a significant investment in securing future production capabilities, which could be cost-effective if it prevents production delays and ensures availability of critical components.

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. This typically occurs when only one responsible source is available or when there is a compelling justification for not seeking competition. The lack of competition means that the government did not benefit from potential price reductions or innovative solutions that might arise from a competitive bidding process. This approach may be justified if Raytheon is the sole manufacturer or possesses unique intellectual property for these specific missile components.

Taxpayer Impact: For taxpayers, a sole-source award means there is a higher risk of paying a premium compared to a competitively bid contract. Without competitive pressure, the contractor may not have the same incentive to offer the lowest possible price.

Public Impact

The primary beneficiaries are the U.S. Navy and potentially allied nations that utilize the SM-2 Block IIIB missile system. The contract ensures the supply of essential long lead materials, critical for the continued production and readiness of advanced missile defense capabilities. The geographic impact is concentrated in Arizona, where the manufacturing and assembly will take place, supporting the local defense industrial workforce. This contract supports specialized jobs within the defense manufacturing sector, requiring skilled labor in advanced materials and missile production.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price discovery and potentially increases costs for taxpayers.
Long contract duration could expose the government to risks associated with inflation or changing technological requirements.
Dependence on a single contractor for critical components can create supply chain vulnerabilities.

Positive Signals

Firm Fixed Price contract provides cost certainty and limits the government's exposure to cost overruns.
Awarding long lead materials ensures timely production of vital defense assets.
Contract supports a key defense contractor, maintaining critical manufacturing capabilities.

Sector Analysis

This contract falls within the Guided Missile and Space Vehicle Manufacturing sector, a specialized segment of the aerospace and defense industry. This sector is characterized by high barriers to entry, significant R&D investment, and long production cycles. Spending in this area is driven by national defense priorities and geopolitical considerations. Comparable spending benchmarks would typically involve other major missile defense programs, where multi-year procurements for components are common.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. Given the specialized nature of long lead materials for advanced missile systems, it is likely that the prime contractor, Raytheon, will be responsible for fulfilling the majority of the work. There may be opportunities for small businesses to participate as subcontractors, but this is not explicitly detailed in the provided data. The impact on the small business ecosystem would depend on Raytheon's subcontracting strategy.

Oversight & Accountability

The Department of Defense, through agencies like the Defense Contract Management Agency (DCMA), provides oversight for this contract. Oversight mechanisms would include monitoring contract performance, ensuring compliance with terms and conditions, and verifying delivery of materials. The firm fixed-price nature of the contract simplifies some aspects of financial oversight. Transparency is generally maintained through contract databases, though specific details of performance and cost breakdowns may be limited.

Related Government Programs

SM-2 Missile Program
Missile Defense Systems
Naval Weapon Systems
Long Lead Time Materials Procurement
Defense Industrial Base Support

Risk Flags

Sole-source award may indicate limited competition.
Long contract duration could present risks related to cost escalation or obsolescence.
Dependence on a single contractor for critical components.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $444.5 million to RAYTHEON COMPANY. LONG LEAD MATERIALS FY09 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 $444.5 million.

What is the period of performance?

Start: 2009-05-28. End: 2013-06-30.

What is Raytheon Company's track record with Department of Defense contracts, particularly for missile systems?

Raytheon Company, now part of RTX Corporation, has a long and extensive history of contracting with the Department of Defense, particularly in the realm of missile systems. They are a primary developer and manufacturer of numerous advanced missile platforms, including air-to-air, surface-to-air, and land-attack missiles. Their track record includes major programs like the Patriot missile system, Tomahawk cruise missile, and various components for missile defense. While generally considered a reliable and capable contractor, like any large defense firm, they have faced scrutiny over contract performance, cost overruns, and technical issues on specific programs throughout their history. However, their consistent role in supplying critical defense capabilities underscores their importance and established presence within the DoD supply chain.

How does the $444.5 million value compare to similar contracts for long lead missile materials?

Assessing the $444.5 million value requires context specific to the SM-2 Block IIIB missile system and its long lead materials. This figure represents a significant investment, typical for advanced defense systems where specialized components and manufacturing processes are involved. Without access to proprietary cost data or direct comparisons of similar long lead material procurements for comparable missile systems (e.g., Standard Missile variants, other surface-to-air missiles), a precise benchmark is difficult. However, given the complexity and strategic importance of missile defense, such a value is not unusual for securing critical production inputs over a multi-year period. The firm fixed-price nature suggests an attempt to lock in costs, but the overall value is inherently tied to the specific technological requirements and market conditions for these specialized materials.

What are the primary risks associated with this sole-source contract for long lead materials?

The primary risks associated with this sole-source contract are centered around the lack of competition and potential supply chain dependencies. Without competitive bidding, there's an inherent risk that the government may not be achieving the best possible price, potentially leading to higher costs for taxpayers. Furthermore, relying solely on Raytheon for these critical long lead materials creates a dependency that could be exploited if the contractor faces production issues, financial instability, or decides to alter its strategic focus. This single point of failure in the supply chain could lead to significant delays in missile production if unforeseen problems arise. Additionally, the government has less leverage to drive innovation or cost-saving measures when dealing with a sole-source provider.

How effective is the firm fixed-price (FFP) contract type in managing costs for long lead materials?

The Firm Fixed-Price (FFP) contract type is generally considered effective in managing costs for long lead materials because it shifts the risk of cost overruns from the government to the contractor. Under an FFP agreement, the contractor is obligated to deliver the specified materials at the agreed-upon price, regardless of their actual costs. This provides the government with significant cost certainty and predictability, which is crucial for budgeting and financial planning, especially for long-term procurements. For long lead materials, where the cost of raw materials and manufacturing processes can be substantial and potentially volatile, the FFP structure incentivizes the contractor to manage their own costs efficiently to maintain profitability. However, it's important that the initial price negotiated is fair and reflects realistic cost estimates, as the government has limited recourse if the contractor's actual costs are lower than anticipated.

What is the historical spending pattern for SM-2 Block IIIB long lead materials or similar components?

Historical spending patterns for SM-2 Block IIIB long lead materials are not publicly detailed in a way that allows for granular analysis of this specific contract award. However, the SM-2 missile family has been a cornerstone of U.S. naval air defense for decades, implying consistent, substantial investment over many years. Procurements for long lead materials are typically part of multi-year buys or sustainment contracts designed to ensure continuous production. Spending would likely fluctuate based on fleet readiness requirements, modernization programs, and foreign military sales. Given the $444.5 million value for a single award covering over four years, it suggests a significant, ongoing commitment to maintaining and producing these vital missile systems, consistent with historical patterns of substantial defense spending on major weapon platforms.

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: N0002409R5301

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

Financial Breakdown

Contract Ceiling: $462,524,723

Exercised Options: $450,649,083

Current Obligation: $444,506,965

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline