Raytheon Company awarded $162.5M for missile manufacturing, a sole-source contract with a 5-year duration

Contract Overview

Contract Amount: $162,475,618 ($162.5M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2015-12-31

End Date: 2020-05-31

Contract Duration: 1,613 days

Daily Burn Rate: $100.7K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: BLOCK 2 FY16 GMRP

Place of Performance

Location: TUCSON, PIMA County, ARIZONA, 85756

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $162.5 million to RAYTHEON COMPANY for work described as: BLOCK 2 FY16 GMRP Key points: 1. Contract awarded to a single supplier, raising questions about price competitiveness. 2. Long-term contract (5 years) may indicate a need for sustained supply or specialized capabilities. 3. Focus on guided missile and space vehicle manufacturing aligns with significant defense sector needs. 4. Contract value of $162.5M falls within a typical range for major defense procurement. 5. Fixed-price contract structure shifts cost risk to the contractor, potentially stabilizing government expenditure. 6. The contract is not set aside for small businesses, suggesting a focus on large prime contractors.

Value Assessment

Rating: fair

Benchmarking the value of this $162.5M contract is challenging without specific details on the missiles or services procured. However, given the sole-source nature, it's difficult to assess if the government secured the best possible price. The firm fixed-price structure offers some cost certainty, but the absence of competitive bidding means there's no direct market comparison to gauge value for money. Further analysis would require understanding the specific technical requirements and comparing them to similar sole-source procurements in the defense sector.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one vendor, Raytheon Company, was solicited. This typically occurs when a unique capability or proprietary technology is required, or in situations where only one source is available. The lack of competition means there was no opportunity for other companies to bid, which can limit price discovery and potentially lead to higher costs for the government compared to a competed contract.

Taxpayer Impact: Taxpayers may be paying a premium due to the absence of competitive pressure. Without multiple bids, there's less incentive for the contractor to offer the lowest possible price.

Public Impact

The primary beneficiaries are the Department of Defense, which receives critical missile systems for national security. Services delivered include the manufacturing of guided missiles and space vehicles, essential for military operations. The contract's geographic impact is centered in Arizona, where Raytheon's facility is located. Workforce implications include job creation and retention within the aerospace and defense manufacturing sector in Arizona.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition and potentially increases costs for taxpayers.
Long contract duration could lock in potentially suboptimal pricing if market conditions change.
Lack of small business set-aside means limited direct opportunities for smaller firms in this specific contract.

Positive Signals

Firm fixed-price contract provides cost certainty for the government.
Award to Raytheon, a major defense contractor, suggests access to established expertise and production capabilities.
Contract supports critical defense capabilities, contributing to national security objectives.

Sector Analysis

The guided missile and space vehicle manufacturing sector is a critical component of the broader aerospace and defense industry. This sector is characterized by high technological barriers to entry, significant R&D investment, and long production cycles. Major players like Raytheon are key suppliers to government defense agencies. Spending in this area is often driven by geopolitical factors and the need for advanced military hardware. Comparable spending benchmarks would typically involve other large-scale missile system procurements, which can run into hundreds of millions or billions of dollars.

Small Business Impact

This contract was not set aside for small businesses, nor does it appear to have specific subcontracting requirements for them mentioned in the provided data. As a sole-source award to a large prime contractor, the direct impact on the small business ecosystem is likely minimal unless Raytheon voluntarily includes small businesses in its supply chain. This contract does not appear to leverage small business capabilities as a primary objective.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contract management agencies, such as the Defense Contract Management Agency (DCMA). Accountability measures are inherent in the firm fixed-price structure, which holds the contractor responsible for cost overruns. Transparency is limited due to the sole-source nature, but contract awards are generally reported. Inspector General (IG) jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Missile Defense Systems
Strategic Weapons Programs
Aerospace Manufacturing Contracts
Department of Defense Procurement

Risk Flags

Sole-source award may indicate limited competition.
Contract duration is substantial, requiring long-term commitment.
Lack of specific PSC code hinders detailed benchmarking.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $162.5 million to RAYTHEON COMPANY. BLOCK 2 FY16 GMRP

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 $162.5 million.

What is the period of performance?

Start: 2015-12-31. End: 2020-05-31.

What is Raytheon Company's track record with the Department of Defense for similar missile manufacturing contracts?

Raytheon Company, now part of RTX, has a long and extensive history of contracting with the Department of Defense for a wide array of defense systems, including missiles and related technologies. They are a prime contractor for numerous programs such as the Patriot air defense system, Tomahawk cruise missile, and various advanced missile variants. Their track record generally indicates a capacity to deliver complex weapon systems, though like any large defense contractor, they have faced scrutiny over cost, performance, and delivery timelines on specific programs. The $162.5M value of this specific contract is substantial but falls within the typical range for major sub-system or component production runs for larger missile programs.

How does the $162.5M contract value compare to other sole-source missile manufacturing contracts awarded by the DoD?

The $162.5M value for this contract is significant but not exceptionally large in the context of major sole-source defense procurements. Sole-source awards for complex weapon systems or critical components can range from tens of millions to several billion dollars, depending on the scope, technology, and duration. For instance, contracts for developing new missile platforms or procuring large quantities of advanced munitions often exceed this amount. This contract's value suggests it might be for a specific variant, a mid-life upgrade, or a component of a larger system, rather than an entirely new program initiation. Without knowing the exact nature of the 'Guided Missile and Space Vehicle Manufacturing,' direct comparison is difficult, but it sits within a common tier for substantial, single-source defense supply agreements.

What are the primary risks associated with a sole-source, firm-fixed-price contract for missile manufacturing?

The primary risks associated with this contract type are twofold. For a sole-source award, the main risk is the potential for inflated pricing due to the lack of competitive bidding, as the government cannot leverage market forces to secure the best value. The contractor may have less incentive to innovate or reduce costs aggressively. For a firm-fixed-price (FFP) contract, the risk is primarily borne by the contractor; they are obligated to deliver the specified goods or services at the agreed-upon price, regardless of their actual costs. If their costs exceed the fixed price, their profit margins shrink or they incur a loss. For the government, the risk with FFP is ensuring the contractor has the capability and incentive to maintain quality and meet delivery schedules without compromising on specifications to control their own costs.

What does the 5-year duration (2015-2020) imply about the nature of the missile systems being manufactured?

A 5-year duration for a missile manufacturing contract, especially one awarded in late 2015 with an end date in mid-2020, suggests a need for sustained production of established systems or components, rather than rapid development of new technology. Such durations are common for programs requiring consistent output over several fiscal years, potentially to meet ongoing operational requirements, replenish inventories, or fulfill multi-year production plans. It implies a level of maturity in the missile system's design and manufacturing process, allowing for predictable production schedules and costs over an extended period. It also indicates a long-term commitment from the Department of Defense to this particular capability.

How does the PSC code (or lack thereof) and NAICS code inform the analysis of this contract?

The provided data indicates NAICS code 336414 for 'Guided Missile and Space Vehicle Manufacturing,' which clearly defines the industry sector. However, the Product and Service Code (PSC) is listed as blank (''). This is unusual for a definitive contract. PSC codes are crucial for categorizing the specific goods or services procured. A blank PSC might indicate an administrative oversight in the data reporting or that the system used did not assign a specific code for this particular type of manufacturing output. Typically, PSCs like '5640' (Missiles and Related Equipment) or similar would be expected. The absence of a PSC makes it harder to precisely categorize the procured item and benchmark it against similar specific defense articles.

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: N0002415R5400

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: $162,475,618

Exercised Options: $162,475,618

Current Obligation: $162,475,618

Subaward Activity

Number of Subawards: 102

Total Subaward Amount: $117,905,599

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline