Raytheon Company awarded $28.3M for ESSM Block 1 Spares, with limited competition impacting price discovery

Contract Overview

Contract Amount: $28,319,230 ($28.3M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2019-09-30

End Date: 2022-12-31

Contract Duration: 1,188 days

Daily Burn Rate: $23.8K/day

Competition Type: NOT AVAILABLE FOR COMPETITION

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: ESSM BLOCK 1 SPARES

Place of Performance

Location: TUCSON, PIMA County, ARIZONA, 85756

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $28.3 million to RAYTHEON COMPANY for work described as: ESSM BLOCK 1 SPARES Key points: 1. Value for money is difficult to assess due to limited competition and lack of detailed cost breakdowns. 2. Competition dynamics show a sole-source award, raising concerns about potential overpricing and reduced innovation. 3. Risk indicators include reliance on a single contractor for critical spares, potentially leading to supply chain vulnerabilities. 4. Performance context is tied to the ESSM Block 1 missile system, a key component of naval defense. 5. Sector positioning is within the defense manufacturing industry, specifically missile and space vehicle parts.

Value Assessment

Rating: questionable

Benchmarking the value for money is challenging without comparable contract data or detailed cost information. The $28.3 million award for spares suggests a significant investment, but the lack of competitive bidding prevents a robust assessment of whether the pricing is fair and reasonable. Without transparency into the contractor's cost structure or comparisons to similar procurements for missile spares, it's difficult to ascertain if taxpayers are receiving optimal value.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one bidder, Raytheon Company, was considered. This approach is typically justified when a specific product or service is available only from a single source, or in cases of urgent need where competition is not feasible. The lack of competition limits the government's ability to leverage market forces to achieve the best possible pricing and terms.

Taxpayer Impact: Sole-source awards can lead to higher costs for taxpayers as there is no competitive pressure to drive down prices. This limits the government's negotiating power and potentially results in less efficient use of public funds.

Public Impact

The primary beneficiaries are the U.S. Navy, ensuring the operational readiness of the ESSM Block 1 missile system. Services delivered include the provision of spare parts essential for the maintenance and sustainment of naval defense capabilities. Geographic impact is national, supporting naval operations across various theaters. Workforce implications are primarily within the defense manufacturing sector, supporting jobs at Raytheon and its supply chain.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition and potentially increases costs.
Lack of transparency in cost breakdown hinders value-for-money assessment.
Dependence on a single supplier for critical spares poses supply chain risks.
Limited public data on performance metrics makes it hard to gauge effectiveness.

Positive Signals

Award supports critical naval defense capabilities, ensuring operational readiness.
Contract addresses the need for essential spare parts for a key missile system.
Firm Fixed Price contract type provides cost certainty for the government.

Sector Analysis

The defense sector, particularly the segment focused on missile systems and components, is characterized by high barriers to entry and significant research and development costs. Spending in this area is driven by national security requirements and technological advancements. Comparable spending benchmarks are difficult to establish precisely due to the specialized nature of missile spares, but overall defense procurement for weapon systems and components represents a substantial portion of the federal budget.

Small Business Impact

There is no indication of small business set-asides or subcontracting plans associated with this award. As a sole-source contract awarded to a large prime contractor, the direct impact on small businesses is likely minimal unless Raytheon actively engages them in its supply chain for these specific spares. Further analysis would be needed to determine subcontracting opportunities.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of the Navy's contracting and program management offices. Accountability measures would include contract performance monitoring, delivery schedules, and quality control of the spare parts. Transparency is limited due to the sole-source nature and the proprietary information often associated with defense manufacturing. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Missile Defense Systems
Naval Weapon Systems
Defense Logistics and Sustainment
Guided Missile Manufacturing
ESSM Program

Risk Flags

Sole-source award
Lack of competition
Limited transparency on pricing
Potential for cost overruns

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $28.3 million to RAYTHEON COMPANY. ESSM BLOCK 1 SPARES

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 $28.3 million.

What is the period of performance?

Start: 2019-09-30. End: 2022-12-31.

What is Raytheon Company's track record with the Department of Defense, particularly concerning sole-source awards for missile components?

Raytheon Company, now RTX Corporation, has a long-standing and extensive track record as a prime contractor for the Department of Defense, involved in numerous complex weapon systems, including missile technologies. Historically, large defense contractors like Raytheon are frequently involved in sole-source or limited-competition procurements, especially for highly specialized components, upgrades, or sustainment services where they possess unique technical expertise or intellectual property. While this is common in the defense industry due to the nature of the technology and existing systems, it necessitates robust government oversight to ensure fair pricing and value. Analyzing past sole-source awards to Raytheon for similar components could provide context for the pricing and terms of this ESSM Block 1 spares contract.

How does the $28.3 million award for ESSM Block 1 spares compare to historical spending on this system or similar missile spare parts?

Direct comparison of this $28.3 million award for ESSM Block 1 spares to historical spending is challenging without access to detailed historical contract data for this specific system and component type. However, the value suggests a significant procurement supporting the operational readiness of the ESSM Block 1. To benchmark effectively, one would need to analyze the quantity and type of spares procured, the period of performance, and compare these to previous awards for ESSM spares or similar missile components for other naval platforms. Factors such as inflation, technological obsolescence, and changes in demand would need to be considered. The lack of competition in this specific award also complicates direct value comparisons, as competitive bids typically drive prices down.

What are the primary risks associated with a sole-source award for critical missile spares like ESSM Block 1?

The primary risks associated with a sole-source award for critical missile spares are multifaceted. Firstly, there is a significant risk of inflated pricing, as the absence of competition removes the incentive for the contractor to offer the most competitive rates. Secondly, it can lead to reduced innovation and responsiveness, as the contractor may face less pressure to improve efficiency or develop cost-saving alternatives. Thirdly, it creates a dependency on a single supplier, which can result in supply chain vulnerabilities. If the sole-source provider experiences production issues, financial difficulties, or decides to discontinue the product line, the government could face severe operational disruptions and be forced into even more costly sole-source solutions or lengthy requalification processes for alternative suppliers.

What is the operational significance of the ESSM Block 1 missile system and the need for its spare parts?

The Evolved Sea Sparrow Missile (ESSM) Block 1 is a crucial short-to-medium range, all-weather, semi-active radar-guided missile designed for ship self-defense against anti-ship missiles, aircraft, and surface threats. It is a key component of the layered defense strategy for naval vessels. Ensuring the operational readiness and effectiveness of these missiles requires a consistent supply of high-quality spare parts for maintenance, repair, and sustainment. The need for these spares directly impacts the Navy's ability to maintain its combat effectiveness and protect its assets at sea. Therefore, timely and reliable procurement of ESSM Block 1 spares is vital for national security.

How does the 'Other Guided Missile and Space Vehicle Parts and Auxiliary Equipment Manufacturing' NAICS code relate to this contract and the broader industry landscape?

The North American Industry Classification System (NAICS) code 336419, 'Other Guided Missile and Space Vehicle Parts and Auxiliary Equipment Manufacturing,' accurately categorizes this contract. This code encompasses establishments primarily engaged in manufacturing parts and auxiliary equipment for guided missiles and space vehicles, excluding complete missiles or space vehicles themselves. This industry is highly specialized, technology-intensive, and dominated by a few large defense contractors due to the significant R&D, stringent quality control, and complex manufacturing processes involved. Companies operating under this NAICS code are critical suppliers to government defense programs, and their output directly supports national security objectives. The landscape is characterized by long-term contracts, high barriers to entry, and close relationships with government agencies.

Industry Classification

NAICS: Manufacturing › Aerospace Product and Parts Manufacturing › Other Guided Missile and Space Vehicle Parts and Auxiliary Equipment Manufacturing

Product/Service Code: GUIDED MISSLES

Competition & Pricing

Extent Competed: NOT AVAILABLE FOR COMPETITION

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0002418R5421

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: $28,319,230

Exercised Options: $28,319,230

Current Obligation: $28,319,230

Subaward Activity

Number of Subawards: 25

Total Subaward Amount: $2,284,686

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: N0002418G5421

IDV Type: BOA

Timeline