Raytheon Company awarded $482M for Close-In Weapon System production, serving Navy and Army needs

Contract Overview

Contract Amount: $482,217,164 ($482.2M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2018-09-27

End Date: 2024-11-15

Contract Duration: 2,241 days

Daily Burn Rate: $215.2K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: FY18 PRODUCTION FOR CLOSE-IN WEAPON SYSTEM REQUIREMENTS INCLUDING USN, ARMY, AND FMS CUSTOMERS.

Place of Performance

Location: LOUISVILLE, JEFFERSON County, KENTUCKY, 40214

State: Kentucky Government Spending

Plain-Language Summary

Department of Defense obligated $482.2 million to RAYTHEON COMPANY for work described as: FY18 PRODUCTION FOR CLOSE-IN WEAPON SYSTEM REQUIREMENTS INCLUDING USN, ARMY, AND FMS CUSTOMERS. Key points: 1. Contract awarded to a single, established provider, limiting potential for competitive price discovery. 2. Long-term contract duration of over 6 years suggests potential for sustained cost escalation. 3. Firm Fixed Price contract type offers cost certainty for the government, but may limit contractor flexibility for innovation. 4. Significant value indicates a critical defense capability being sustained. 5. Focus on production requirements suggests a mature system rather than new development. 6. Geographic location of performance in Kentucky may have local economic implications.

Value Assessment

Rating: fair

The contract value of $482 million over approximately 6 years for Close-In Weapon System production is substantial. Benchmarking this against similar sole-source defense production contracts is challenging due to the specialized nature of the system. However, the lack of competition inherently raises concerns about whether the government is achieving optimal value for its investment. The firm fixed-price structure provides cost predictability, but the absence of competitive bidding means there's no direct market comparison to assess pricing efficiency.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was not competed, indicating a sole-source award. This typically occurs when a specific system is proprietary, requires unique expertise, or is deemed essential with only one viable supplier. The lack of competition means that the government did not benefit from multiple bids to drive down costs or encourage innovative solutions. This approach can lead to higher prices compared to a competitive environment.

Taxpayer Impact: Taxpayers may be paying a premium due to the absence of competitive pressure. Without competing the requirement, there is less assurance that the price reflects the lowest possible cost for the goods and services provided.

Public Impact

The U.S. Navy and Army benefit from the continued production of critical Close-In Weapon Systems, enhancing their defensive capabilities. This contract ensures the availability of essential defense hardware for national security. The primary geographic impact is in Kentucky, where the contractor is located, potentially supporting local jobs and the regional economy. The contract supports the defense industrial base, ensuring the continued operation and workforce of a key defense manufacturer.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition and may result in higher costs for taxpayers.
Long contract duration could lead to cost overruns if not managed effectively.
Lack of transparency in the sole-source justification process can obscure potential inefficiencies.
Dependence on a single contractor creates supply chain risk if the contractor faces production issues.

Positive Signals

Firm Fixed Price contract provides cost certainty for the government.
Award to an established contractor with likely proven performance in this system.
Ensures continued availability of a critical defense asset.
Potential for long-term relationship to foster efficiency in production and sustainment.

Sector Analysis

The defense sector, particularly within naval and ground force armaments, relies on specialized systems like the Close-In Weapon System (CIWS). This contract falls within the broader category of defense manufacturing and engineering services. The market for such systems is often characterized by high barriers to entry, significant R&D investment, and a limited number of qualified suppliers, frequently leading to sole-source or limited competition awards. Spending in this area is driven by national security priorities and the need to maintain technological superiority.

Small Business Impact

The data indicates that small business participation was not a primary consideration for this contract, as the 'sb' field is false. There is no explicit small business set-aside. Subcontracting opportunities for small businesses may exist within Raytheon's supply chain, but this is not guaranteed or mandated by the contract terms provided. The overall impact on the small business ecosystem is likely indirect, depending on Raytheon's procurement practices.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Defense's contract management agencies, such as the Defense Contract Management Agency (DCMA), which is listed as the 'sa'. Accountability measures are inherent in the firm fixed-price contract type, which obligates the contractor to deliver specified goods within the agreed price. Transparency is limited due to the sole-source nature of the award, but contract modifications and performance reports are usually available through federal procurement databases. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Naval Surface Warfare
Army Combat Systems
Defense Procurement
Weapon System Manufacturing
Close-In Weapon Systems (CIWS)

Risk Flags

Sole-source award
Lack of competition
Potential for cost overruns
Long-term contract duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $482.2 million to RAYTHEON COMPANY. FY18 PRODUCTION FOR CLOSE-IN WEAPON SYSTEM REQUIREMENTS INCLUDING USN, ARMY, AND FMS CUSTOMERS.

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 $482.2 million.

What is the period of performance?

Start: 2018-09-27. End: 2024-11-15.

What is the historical spending trend for Close-In Weapon Systems by the Department of Defense?

Analyzing historical spending on Close-In Weapon Systems (CIWS) requires examining procurement data over multiple fiscal years. While this specific contract represents a significant outlay in FY18, understanding the broader trend involves looking at prior awards for CIWS production and sustainment. Typically, spending on such critical defense systems can fluctuate based on modernization cycles, geopolitical threats, and budget allocations. A detailed analysis would involve aggregating data for similar contracts awarded to Raytheon and potentially other manufacturers over the past 5-10 years to identify patterns of investment, potential increases or decreases in demand, and the overall lifecycle cost of these systems. Without access to a comprehensive historical database, it's difficult to provide precise figures, but sustained investment is common for essential defense capabilities.

How does the unit cost of this Close-In Weapon System compare to similar systems or previous procurements?

Determining the precise unit cost for this contract is challenging without knowing the exact quantity of systems procured under the $482 million award. The contract is for 'production requirements,' implying a variable quantity over its duration. However, if we were to estimate a unit cost based on a hypothetical quantity, it would need to be benchmarked against comparable systems. Given this is a sole-source award, direct comparison to competitively procured systems is difficult. Historically, specialized defense systems often have high unit costs due to complex technology, stringent quality requirements, and limited production runs. Any comparison would need to account for system variants, upgrades, and the specific customer (Navy vs. Army) as these factors influence cost.

What are the specific performance metrics and Key Performance Indicators (KPIs) associated with this contract?

The provided data does not detail the specific performance metrics or Key Performance Indicators (KPIs) for this Close-In Weapon System production contract. Typically, such contracts would include clauses related to delivery schedules, system reliability, operational readiness rates, and adherence to technical specifications. For a weapon system, performance might also be measured by factors like engagement success rates, response times, and maintainability. The firm fixed-price nature suggests that meeting these defined performance standards is crucial for the contractor to receive full payment. Further details on these KPIs would likely be found within the contract's statement of work (SOW) or associated technical exhibits.

What is Raytheon Company's track record with producing Close-In Weapon Systems for the U.S. military?

Raytheon Company has a well-established and extensive track record in producing defense systems, including weapon platforms. They are a primary contractor for various advanced defense technologies. Specifically concerning Close-In Weapon Systems (CIWS), Raytheon has been a long-standing provider, notably for the Phalanx CIWS used by the U.S. Navy and other allied forces. Their history with this particular system suggests a deep understanding of its technical requirements, production processes, and sustainment needs. This long-standing relationship and demonstrated capability likely contributed to the sole-source nature of this contract, as they possess the specialized knowledge and infrastructure required for its continued production.

Are there any identified risks associated with the sole-source nature of this contract?

Yes, there are inherent risks associated with the sole-source nature of this contract. The primary risk is the potential for inflated pricing due to the lack of competitive bidding. Without competing the requirement, the government has less leverage to negotiate the best possible price. Another risk is complacency on the part of the contractor; without the threat of losing future business to competitors, there might be less incentive to innovate or aggressively pursue cost efficiencies. Furthermore, sole-source contracts can create a dependency on a single supplier, making the government vulnerable if that supplier experiences production issues, financial instability, or decides to discontinue the product line. This dependency also limits the government's options for acquiring upgrades or alternative solutions.

What is the projected sustainment and lifecycle cost associated with these Close-In Weapon Systems beyond the initial production contract?

The provided data focuses solely on the initial production contract value and duration, offering no direct insight into the projected sustainment and lifecycle costs of the Close-In Weapon Systems. However, for complex military hardware like CIWS, sustainment costs (maintenance, repair, spare parts, upgrades) often significantly exceed the initial procurement costs over the system's operational lifespan. These costs are typically managed through separate sustainment contracts, service agreements, or by purchasing spare parts and technical data. Given the long-term nature of defense assets, lifecycle costs are a critical consideration, and agencies usually budget for these separately. A comprehensive analysis would require examining future sustainment plans and associated funding.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Architectural, Engineering, and Related Services › Engineering Services

Product/Service Code: WEAPONS

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0002416R5466

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: $482,217,164

Exercised Options: $482,217,164

Current Obligation: $482,217,164

Actual Outlays: $33,952,505

Subaward Activity

Number of Subawards: 3651

Total Subaward Amount: $1,130,176,309

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline