Raytheon Company awarded $431M for CIWS production, a sole-source contract with a long performance period

Contract Overview

Contract Amount: $430,982,012 ($431.0M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2010-03-25

End Date: 2024-02-28

Contract Duration: 5,088 days

Daily Burn Rate: $84.7K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: FY10 CIWS PRODUCTION REQUIREMENTS

Place of Performance

Location: TUCSON, PIMA County, ARIZONA, 85756

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $431.0 million to RAYTHEON COMPANY for work described as: FY10 CIWS PRODUCTION REQUIREMENTS Key points: 1. Contract awarded to a single vendor, raising questions about price competitiveness. 2. Long contract duration of over 14 years suggests potential for cost escalation. 3. Firm Fixed Price contract type offers some cost certainty, but scope creep is a risk. 4. No small business set-aside indicates limited opportunities for smaller firms in this specific award. 5. The contract supports critical defense systems, aligning with national security objectives. 6. Performance is managed by the Defense Contract Management Agency, a standard oversight body.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to its sole-source nature and long duration. Without competitive bids, it's difficult to assess if the $431 million represents a fair market price. The firm fixed price structure provides some predictability, but the extended performance period (over 14 years) increases the risk of cost overruns if not meticulously managed. Comparisons to similar sole-source procurements for complex defense systems would be necessary for a more robust value assessment.

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 when urgency dictates a rapid award. The lack of competition means that price discovery through market forces was bypassed, potentially leading to higher costs for the government compared to a competitive procurement.

Taxpayer Impact: Taxpayers may be paying a premium due to the absence of competitive bidding. Without multiple offers, the government had limited leverage to negotiate the lowest possible price.

Public Impact

The primary beneficiaries are the U.S. Navy and potentially other allied forces relying on the Close-In Weapon System (CIWS). The contract delivers critical components and production for a vital naval defense system. The geographic impact is primarily centered in Arizona, where Raytheon Company's operations are located. This contract supports a specialized segment of the defense manufacturing workforce.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure on pricing.
Extended contract duration increases risk of cost escalation over time.
Lack of transparency in sole-source justification requires careful review.
Potential for vendor lock-in due to specialized nature of defense systems.

Positive Signals

Firm Fixed Price contract provides cost certainty for the base scope.
Award to an established defense contractor suggests technical capability.
Long performance period may indicate a stable, long-term need for the system.

Sector Analysis

The defense electronics manufacturing sector is characterized by high barriers to entry, significant R&D investment, and long product lifecycles. Contracts like this for critical weapon systems are typical within the industry. The market is dominated by a few large prime contractors who often hold sole-source positions for specialized components or systems due to proprietary technology or established production lines. Spending in this sub-sector is driven by national security requirements and technological advancements.

Small Business Impact

This contract does not appear to include a small business set-aside. As a sole-source award to a large prime contractor, it is unlikely to involve significant subcontracting opportunities for small businesses unless explicitly mandated by the prime. This limits the direct impact on the small business defense contracting ecosystem for this specific award.

Oversight & Accountability

Oversight for this contract is likely managed by the Defense Contract Management Agency (DCMA), which is responsible for ensuring contractor performance and compliance. Transparency is limited due to the sole-source nature of the award. Accountability measures would be embedded within the contract's terms and conditions, including performance metrics and payment schedules. Inspector General jurisdiction would apply to investigations of fraud, waste, or abuse.

Related Government Programs

Naval Surface Warfare Systems
Defense Production Act Investments
Weapon Systems Procurement
Ammunition Production

Risk Flags

Sole-source award
Long contract duration
Lack of competition

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $431.0 million to RAYTHEON COMPANY. FY10 CIWS PRODUCTION REQUIREMENTS

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 $431.0 million.

What is the period of performance?

Start: 2010-03-25. End: 2024-02-28.

What is the specific system being produced under the 'CIWS PRODUCTION REQUIREMENTS' contract?

CIWS stands for Close-In Weapon System. This contract likely pertains to the production, sustainment, or upgrade of the Phalanx CIWS, a self-defense weapon system used by the U.S. Navy and other naval forces to detect and destroy anti-ship missiles, aircraft, and other threats. The system typically comprises a radar-guided Gatling gun capable of firing thousands of rounds per minute. The specific requirements within this contract would detail the exact components, quantities, and services related to the production of this critical defense hardware.

Why was this contract awarded on a sole-source basis instead of being competed?

Sole-source awards are typically justified when only one responsible source is available or capable of meeting the government's needs. For complex defense systems like the CIWS, this could be due to proprietary technology, unique manufacturing capabilities held by Raytheon Company, or specific integration requirements with existing naval platforms. The government must document the justification for a sole-source award, often involving market research to confirm the lack of viable alternatives. Without this documentation, the award could be challenged.

What are the potential risks associated with a sole-source contract of this duration?

The primary risks associated with a sole-source contract of this length (over 14 years) include potential cost escalation, reduced incentive for innovation, and vendor lock-in. Without competitive pressure, the contractor may have less incentive to control costs or improve efficiency over time. The government's reliance on a single provider for such an extended period can make it difficult to switch suppliers or adopt newer technologies if they emerge. Robust contract management, including regular price reviews and performance monitoring, is crucial to mitigate these risks.

How does the Firm Fixed Price (FFP) contract type mitigate risk for the government?

A Firm Fixed Price (FFP) contract is generally considered the least risky for the government in terms of cost. Under an FFP agreement, the contractor agrees to a total price for a well-defined scope of work, and is responsible for all costs incurred to complete the contract. The contractor assumes the risk of cost overruns. This provides the government with cost certainty, as the price is fixed regardless of the contractor's actual costs. However, this benefit is most pronounced when the scope of work is clearly defined and unlikely to change significantly.

What is the historical spending pattern for CIWS production requirements with Raytheon Company?

Analyzing historical spending patterns for CIWS production requirements with Raytheon Company would involve reviewing past contract awards for similar goods and services. This would help establish a baseline for pricing and identify trends in contract values, durations, and types. Without access to specific historical contract data for this exact requirement, it's difficult to provide precise figures. However, defense procurement for major weapon systems often involves multi-year contracts with significant cumulative values, reflecting the long-term nature of defense needs and production cycles.

What is the significance of the North American Industry Classification System (NAICS) code 334511?

The NAICS code 334511, 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing,' signifies the industry sector this contract falls under. Companies classified under this code are involved in the design, development, and manufacturing of sophisticated electronic systems used for navigation, guidance, and detection. This includes radar systems, sonar systems, flight control systems, and related components. Contracts awarded under this NAICS code typically involve high-technology products and services critical for defense, aerospace, and maritime applications.

Industry Classification

NAICS: Manufacturing › Navigational, Measuring, Electromedical, and Control Instruments Manufacturing › Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing

Product/Service Code: WEAPONS

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0002410R5427

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: RTX Corp (UEI: 001344142)

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: $430,982,012

Exercised Options: $430,982,012

Current Obligation: $430,982,012

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline