DoD's $257M Multi-Year Missile Production Contract with Raytheon Faces Scrutiny for Lack of Competition

Contract Overview

Contract Amount: $256,826,170 ($256.8M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2016-05-12

End Date: 2022-06-30

Contract Duration: 2,240 days

Daily Burn Rate: $114.7K/day

Competition Type: NOT AVAILABLE FOR COMPETITION

Number of Offers Received: 1

Pricing Type: COST NO FEE

Sector: Defense

Official Description: IGF::OT:: IGF ESSM BLK I MULTI-YEAR PRODUCTION

Place of Performance

Location: TUCSON, PIMA County, ARIZONA, 85756

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $256.8 million to RAYTHEON COMPANY for work described as: IGF::OT:: IGF ESSM BLK I MULTI-YEAR PRODUCTION Key points: 1. Significant spending on guided missile production by the Department of the Navy. 2. Sole-source award to Raytheon Company raises questions about competitive pricing. 3. Contract duration of 2240 days suggests long-term commitment and potential for cost overruns. 4. The Guided Missile and Space Vehicle Manufacturing sector is critical for defense capabilities.

Value Assessment

Rating: questionable

The contract's 'Cost No Fee' (CNF) structure, combined with a lack of available competition data, makes a direct pricing assessment difficult. Without benchmarks or competitive bids, it's challenging to determine if the $257 million obligated represents fair value.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

The contract was awarded on a sole-source basis, meaning there was no open competition. This limits price discovery and potentially leads to higher costs for taxpayers as the contractor does not face market pressure to offer the most competitive price.

Taxpayer Impact: The lack of competition in this sole-source award may result in taxpayers paying more than necessary for these guided missiles.

Public Impact

Taxpayers may be overpaying for essential defense equipment due to a lack of competitive bidding. The long-term nature of the contract could lock the government into potentially inefficient production methods. Dependence on a single supplier for critical missile systems could pose a supply chain risk.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award
Lack of competition
Cost-plus contract type (implied by CNF)
Long contract duration

Positive Signals

Essential defense procurement
Long-term production capability established

Sector Analysis

This contract falls within the Guided Missile and Space Vehicle Manufacturing sector, a critical component of national defense. Spending in this area is often characterized by high R&D costs and specialized production, but competitive bidding is still crucial for cost efficiency.

Small Business Impact

There is no indication in the provided data that small businesses were involved in this contract, either as prime contractors or subcontractors. Further investigation would be needed to determine any small business participation.

Oversight & Accountability

The sole-source nature of this contract warrants close oversight to ensure costs are reasonable and performance meets expectations. Accountability mechanisms should be robust given the significant taxpayer investment and lack of competitive pressure.

Related Government Programs

Guided Missile and Space Vehicle Manufacturing
Department of Defense Contracting
Department of the Navy Programs

Risk Flags

Lack of competition
Potential for inflated costs
Limited transparency in pricing
Long-term commitment without competitive validation
Sole-source dependency

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $256.8 million to RAYTHEON COMPANY. IGF::OT:: IGF ESSM BLK I MULTI-YEAR 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 $256.8 million.

What is the period of performance?

Start: 2016-05-12. End: 2022-06-30.

What specific justifications were provided for awarding this contract on a sole-source basis, and were alternative competitive strategies considered?

The justification for a sole-source award typically involves unique capabilities, urgent needs, or lack of viable alternatives. Without access to the specific justification documentation, it's impossible to confirm the reasons. However, the absence of competition inherently limits the government's ability to explore alternative strategies that could potentially yield better pricing or innovation.

How does the 'Cost No Fee' (CNF) structure impact contractor incentives for cost control and efficiency in this multi-year production contract?

In a 'Cost No Fee' (CNF) contract, the contractor is reimbursed for allowable costs but receives no fee or profit. This structure incentivizes the contractor to control costs, as any savings directly benefit their bottom line. However, it can also lead to a lack of motivation for innovation or exceeding performance expectations, as there is no additional reward for doing so.

What are the long-term strategic implications of relying on a single supplier for this critical missile system, particularly concerning supply chain resilience and potential future price increases?

Sole-sourcing a critical defense system creates a significant dependency on one supplier, potentially exposing the government to supply chain disruptions if that supplier faces issues. It also removes competitive pressure, which could allow the supplier to increase prices in future contract modifications or renewals without readily available alternatives for the government to pursue.

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 AVAILABLE FOR COMPETITION

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0002415R5424

Offers Received: 1

Pricing Type: COST NO FEE (S)

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: $260,473,334

Exercised Options: $257,660,014

Current Obligation: $256,826,170

Actual Outlays: $2,027,316

Subaward Activity

Number of Subawards: 391

Total Subaward Amount: $656,407,342

Contract Characteristics

Multi-Year Contract: Yes

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline