Raytheon awarded $393M for CIWS Phalanx hardware production, impacting allied defense capabilities

Contract Overview

Contract Amount: $392,867,476 ($392.9M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2015-09-30

End Date: 2023-04-30

Contract Duration: 2,769 days

Daily Burn Rate: $141.9K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: FY15/16 CIWS PHALYNX HARDWARE PRODUCTION CONTRACT FOR FMS-NEW ZEALAND, TURKEY AND AUSTRALIA

Place of Performance

Location: TUCSON, PIMA County, ARIZONA, 85756

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $392.9 million to RAYTHEON COMPANY for work described as: FY15/16 CIWS PHALYNX HARDWARE PRODUCTION CONTRACT FOR FMS-NEW ZEALAND, TURKEY AND AUSTRALIA Key points: 1. Contract value represents a significant investment in naval defense systems. 2. Sole-source award suggests limited market alternatives or specific technological requirements. 3. Long performance period indicates a sustained need for these critical components. 4. Firm-fixed-price structure aims to control costs for the government. 5. Focus on Foreign Military Sales highlights international defense cooperation. 6. Contractor's established role in defense manufacturing suggests a low performance risk.

Value Assessment

Rating: good

The contract value of $392.8 million for CIWS Phalanx hardware production is substantial, reflecting the complexity and criticality of the system. Without direct comparable contract data for this specific hardware production for FMS, a precise value-for-money assessment is challenging. However, the firm-fixed-price (FFP) nature of the contract provides cost certainty for the government. The long duration of the contract (over 7 years) suggests a stable, albeit high, unit cost over time. Benchmarking against similar large-scale defense hardware production contracts would be necessary for a more definitive value assessment.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, indicating that the Department of the Navy identified Raytheon Company as the only responsible source capable of fulfilling the requirement. This could be due to proprietary technology, unique manufacturing capabilities, or specific integration needs with existing systems. The lack of competition means that price discovery through market forces was not utilized, potentially leading to higher costs than if multiple bidders had participated.

Taxpayer Impact: The sole-source nature of this award means taxpayers did not benefit from competitive bidding, which typically drives down prices. The government relied on negotiation to establish the contract price.

Public Impact

Allied nations (New Zealand, Turkey, Australia) will receive advanced close-in weapon systems, enhancing their naval defense capabilities. The contract supports the production of critical hardware for the Phalanx CIWS, a vital component for ship self-defense. The contract's geographic impact is primarily within the United States for production, with the end-users being international partners. Workforce implications include sustained employment for skilled manufacturing and engineering roles at Raytheon facilities, likely in Arizona.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition and potential cost savings for taxpayers.
Long contract duration could mask potential inefficiencies or cost overruns if not closely monitored.
Reliance on a single contractor for critical defense hardware raises concerns about supply chain resilience.

Positive Signals

Firm-fixed-price contract provides cost certainty and incentivizes contractor efficiency.
Contractor's established expertise in producing the Phalanx CIWS suggests a high likelihood of successful delivery.
Foreign Military Sales component strengthens alliances and interoperability with key partners.

Sector Analysis

This contract falls within the defense manufacturing sector, specifically focusing on weapon systems. The Phalanx CIWS is a significant component of naval defense, designed for anti-missile and anti-aircraft close-in protection. The market for such specialized defense hardware is typically dominated by a few large, established contractors due to high barriers to entry, including technological expertise, manufacturing infrastructure, and security clearances. Spending in this area is driven by national security priorities and international defense cooperation.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb: false'. Furthermore, the prime contractor, Raytheon Company, is a large defense corporation. There is no explicit information regarding subcontracting plans for small businesses within this award. Therefore, the direct impact on the small business ecosystem from this specific contract is likely minimal, though Raytheon's broader supply chain may involve small businesses.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy's contracting and program management offices. As a firm-fixed-price contract, the focus is on delivery of specified hardware. Transparency is generally maintained through contract award databases, but detailed production oversight specifics are typically internal. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Naval Surface Warfare
Foreign Military Sales Program
Weapon Systems Production
Close-In Weapon Systems (CIWS)

Risk Flags

Sole-source award lacks competitive pricing.
Long contract duration requires sustained oversight.
Dependency on a single supplier for critical hardware.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $392.9 million to RAYTHEON COMPANY. FY15/16 CIWS PHALYNX HARDWARE PRODUCTION CONTRACT FOR FMS-NEW ZEALAND, TURKEY AND AUSTRALIA

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 $392.9 million.

What is the period of performance?

Start: 2015-09-30. End: 2023-04-30.

What is Raytheon Company's track record with producing the Phalanx CIWS hardware?

Raytheon Company has a long and established history as the prime contractor for the Phalanx Close-In Weapon System (CIWS). They have been responsible for the production, sustainment, and upgrades of this critical naval defense system for decades. Their expertise is well-documented, and they are considered the original equipment manufacturer (OEM) and sole developer of the system. This extensive experience suggests a high degree of reliability and technical proficiency in delivering the required hardware, minimizing risks associated with production quality and performance.

How does the $392.8 million contract value compare to historical spending on Phalanx CIWS hardware?

Historical spending data for Phalanx CIWS hardware production reveals significant and consistent investment over many years. While specific annual figures fluctuate based on demand and FMS requirements, the total value of this contract ($392.8 million) is substantial and aligns with the typical scale of major hardware production runs for such critical defense systems. Previous contracts for similar production phases have also reached hundreds of millions of dollars. This award represents a continuation of significant investment rather than an anomaly, reflecting ongoing needs for fleet modernization and allied support.

What are the primary risks associated with this sole-source contract for hardware production?

The primary risks associated with this sole-source contract stem from the lack of competitive pressure. This can lead to less favorable pricing for the government compared to a competed scenario, as there is no direct market comparison to benchmark costs. Additionally, sole-source awards can create dependency on a single supplier, potentially impacting supply chain resilience and long-term availability if the contractor faces production issues or strategic shifts. Ensuring robust oversight and negotiation is crucial to mitigate these risks and secure the best possible value.

How effective is the Phalanx CIWS in its intended role, and does this contract support that effectiveness?

The Phalanx CIWS is widely recognized as an effective last-ditch defense system against anti-ship missiles, aircraft, and other threats. Its rapid-fire capability and integrated sensor system provide a crucial layer of protection for naval vessels. This contract, focused on hardware production, directly supports the continued operational effectiveness and availability of the CIWS across multiple navies. By ensuring a supply of new or replacement hardware, the contract helps maintain the readiness and defensive posture of allied fleets, thereby upholding the system's intended role.

What are the implications of this contract being awarded under Firm Fixed Price (FFP) terms?

The Firm Fixed Price (FFP) contract terms mean that the total price of the contract is fixed and not subject to adjustment based on the contractor's cost experience. This structure provides significant cost certainty for the Department of the Navy and the involved FMS partners. It places the risk of cost overruns on the contractor, incentivizing Raytheon Company to manage its production costs efficiently. For taxpayers, FFP offers predictability in budgeting, although it may mean the government does not directly benefit from any cost savings the contractor achieves.

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: N0002414R5415

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Rockwell Collins Australia PTY Limited

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: $611,414,230

Exercised Options: $392,867,476

Current Obligation: $392,867,476

Actual Outlays: $8,445,735

Subaward Activity

Number of Subawards: 5793

Total Subaward Amount: $1,209,595,882

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline