Raytheon awarded $208M for Standard Missile-2 Block IIIB production, a sole-source contract

Contract Overview

Contract Amount: $208,165,682 ($208.2M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2011-09-23

End Date: 2014-11-30

Contract Duration: 1,164 days

Daily Burn Rate: $178.8K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: FY11 STANDARD MISSILE-2 (SM-2) BLOCK IIIB ALL UP ROUND (AUR) PRODUCTION

Place of Performance

Location: TUCSON, PIMA County, ARIZONA, 85756, UNITED STATES OF AMERICA

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $208.2 million to RAYTHEON COMPANY for work described as: FY11 STANDARD MISSILE-2 (SM-2) BLOCK IIIB ALL UP ROUND (AUR) PRODUCTION Key points: 1. Contract awarded at a firm fixed price, indicating cost certainty for the government. 2. Sole-source award suggests limited market alternatives or specific technological requirements. 3. Contract duration of 1164 days spans over three fiscal years, implying a sustained need. 4. Awarded by the Department of the Navy, aligning with naval defense procurement priorities. 5. The contract falls under Guided Missile and Space Vehicle Manufacturing, a specialized defense sector. 6. No small business set-aside was applied, suggesting the prime contractor is a large entity.

Value Assessment

Rating: fair

Benchmarking the value of this sole-source contract is challenging without comparable bids. The firm fixed price structure provides cost predictability. However, the absence of competition inherently limits the government's ability to secure the lowest possible price. Further analysis would require comparing unit costs to historical data for similar missile systems or to industry benchmarks for advanced munitions production.

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 single contractor possesses unique capabilities, intellectual property, or is the sole producer of a critical component. The lack of competition means the government did not benefit from price discovery through a bidding process.

Taxpayer Impact: For taxpayers, a sole-source award means the potential for higher costs compared to a competitive procurement, as there is no direct price pressure from rival bidders.

Public Impact

The primary beneficiaries are the U.S. Navy warfighters who will receive advanced missile defense capabilities. The contract delivers production of Standard Missile-2 (SM-2) Block IIIB All Up Rounds (AURs). The geographic impact is primarily within Arizona, where Raytheon's facility is located for production. Workforce implications include skilled manufacturing jobs in the aerospace and defense sector in Arizona.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source nature limits price competition, potentially leading to higher costs for taxpayers.
Lack of competition may reduce incentives for the contractor to innovate or improve efficiency.
Dependence on a single supplier for critical defense hardware poses a supply chain risk.

Positive Signals

Firm fixed price contract provides budget certainty and cost control for the government.
Production of advanced missile systems supports national defense and strategic deterrence.
Contract sustains critical manufacturing capabilities within the U.S. defense industrial base.

Sector Analysis

The defense sector for guided missiles and space vehicles is highly specialized, characterized by significant R&D investment, long production cycles, and stringent quality requirements. Market concentration is common due to high barriers to entry. This contract for SM-2 Block IIIB production fits within the broader strategic weapons systems category, where spending is driven by national security needs and technological advancements. Comparable spending benchmarks would involve other major missile system procurements by the Department of Defense.

Small Business Impact

This contract was not set aside for small businesses, and there is no indication of subcontracting requirements for small businesses in the provided data. The prime contractor, Raytheon Company, is a large defense corporation. This suggests that the primary focus is on the prime contractor's capabilities for producing these advanced missile systems, rather than leveraging the small business industrial base for this specific award.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Defense's contracting and program management offices. Accountability measures are embedded in the firm fixed price contract terms, requiring delivery of specified missile rounds. Transparency is generally limited for sole-source defense contracts due to national security considerations. Inspector General jurisdiction would apply to investigations of fraud, waste, or abuse.

Related Government Programs

Standard Missile Program
Naval Air and Missile Defense
Ballistic Missile Defense Systems
Aegis Combat System
Tactical Missiles

Risk Flags

Sole-source award
Lack of competition
Potential for cost overruns without competitive pressure
Supply chain dependency on a single manufacturer

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $208.2 million to RAYTHEON COMPANY. FY11 STANDARD MISSILE-2 (SM-2) BLOCK IIIB ALL UP ROUND (AUR) PRODUCTION

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 $208.2 million.

What is the period of performance?

Start: 2011-09-23. End: 2014-11-30.

What is the historical spending trend for Standard Missile-2 (SM-2) Block IIIB production by the Department of the Navy?

Analyzing historical spending for SM-2 Block IIIB production requires access to detailed procurement data over multiple fiscal years. Typically, such advanced missile systems involve multi-year procurements to achieve economies of scale and maintain production lines. Spending can fluctuate based on fleet readiness requirements, modernization programs, and the introduction of newer missile variants. Without specific historical data for this particular block and variant, it's difficult to establish a precise trend. However, sustained production contracts like this one suggest a consistent, albeit potentially fluctuating, demand driven by strategic defense needs and the lifecycle of naval platforms equipped with these missiles.

How does the unit cost of the SM-2 Block IIIB compare to other similar missile systems procured by the DoD?

Direct unit cost comparisons for highly specialized defense systems like the SM-2 Block IIIB are complex due to variations in configuration, production volume, and contract terms (e.g., firm fixed price vs. cost-plus). The SM-2 Block IIIB is an advanced surface-to-air missile designed for fleet air defense. Its cost would likely be higher than less sophisticated missiles but potentially competitive with other medium-range, advanced air defense interceptors. Benchmarking would involve comparing its per-unit price against systems like the Standard Missile-1, SM-6, or potentially foreign equivalents, adjusted for technological differences and procurement quantities. Given this is a sole-source award, the price may not reflect the lowest achievable market rate.

What are the primary risks associated with a sole-source contract for critical defense hardware like the SM-2 Block IIIB?

The primary risks of a sole-source contract for critical defense hardware are elevated costs due to lack of competition, potential for contractor complacency, and supply chain vulnerability. Without competitive pressure, the contractor may have less incentive to control costs or innovate. Furthermore, reliance on a single supplier creates a significant risk if that supplier faces production issues, financial instability, or geopolitical disruptions. For the SM-2 Block IIIB, this means the Navy is heavily dependent on Raytheon for a crucial defensive capability, making supply chain resilience and contractor performance monitoring paramount.

What is Raytheon's track record in producing advanced missile systems for the Department of the Navy?

Raytheon Company has a long and extensive track record of producing advanced missile systems for the Department of the Navy and other branches of the U.S. military. They are a prime contractor for numerous programs, including various Standard Missile variants (like the SM-2, SM-3, SM-6), Tomahawk cruise missiles, and others. Their experience spans decades, encompassing research, development, testing, and large-scale production. While specific performance metrics for every contract are not publicly detailed, Raytheon is generally considered a leading and capable supplier within the defense industrial base, consistently delivering complex weapon systems that meet stringent military specifications.

How does the duration of this contract (1164 days) impact the overall program and budget predictability?

A contract duration of 1164 days, approximately three years, provides significant budget predictability for the Department of the Navy regarding the production of SM-2 Block IIIB missiles. This extended period allows for better long-term planning of fleet modernization and operational readiness. It also enables the contractor, Raytheon, to maintain a stable production capability and potentially achieve economies of scale, which can help mitigate cost increases over time. For taxpayers, this predictability helps in budgeting defense expenditures more effectively, although the total cost is fixed upfront for the duration.

What are the potential implications if Raytheon were unable to fulfill this contract due to unforeseen circumstances?

If Raytheon were unable to fulfill this sole-source contract for SM-2 Block IIIB production, the implications for the Department of the Navy would be severe. Given the specialized nature of the missile and Raytheon's position as the sole producer, finding an immediate alternative supplier would be extremely difficult, if not impossible. This could lead to significant delays in missile delivery, impacting fleet readiness and air defense capabilities. The government might need to initiate an emergency sole-source procurement with another entity capable of standing up production, or potentially explore options for government production, both of which would likely be costly and time-consuming.

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: N0002411R5300

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: $219,906,778

Exercised Options: $210,489,651

Current Obligation: $208,165,682

Contract Characteristics

Cost or Pricing Data: YES

Timeline