Raytheon Company awarded $377M for CIWS Production, a sole-source definitive contract

Contract Overview

Contract Amount: $377,343,844 ($377.3M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2024-07-31

End Date: 2028-12-29

Contract Duration: 1,612 days

Daily Burn Rate: $234.1K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: CIWS PRODUCTION FY24

Place of Performance

Location: TUCSON, PIMA County, ARIZONA, 85756

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $377.3 million to RAYTHEON COMPANY for work described as: CIWS PRODUCTION FY24 Key points: 1. This contract represents a significant investment in naval defense systems. 2. The sole-source nature warrants scrutiny regarding price justification and potential alternatives. 3. Long-term contract duration suggests a sustained need for these critical systems. 4. Fixed-price contract type shifts performance risk to the contractor. 5. Geographic concentration in Arizona for production may have local economic implications. 6. The absence of small business set-asides is noted.

Value Assessment

Rating: fair

Benchmarking the value of this sole-source contract is challenging without competitive data. The firm fixed-price structure aims to control costs, but the absence of competition means there's no direct market comparison to assess if the price is optimal. The obligated amount of $377 million over approximately 4.5 years requires careful monitoring to ensure it aligns with production needs and avoids cost overruns. Further analysis would involve comparing unit costs to historical data or similar systems if available.

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 meeting the requirements. This approach bypasses the standard competitive bidding process. While it can expedite acquisition for specialized or critical systems, it limits price discovery and potentially leads to higher costs for taxpayers compared to a fully competed contract. The justification for sole-source procurement should be thoroughly documented and reviewed.

Taxpayer Impact: Sole-source awards limit opportunities for other businesses to compete and can result in higher prices for the government, meaning taxpayers may not be getting the best possible value.

Public Impact

The primary beneficiaries are the U.S. Navy, receiving critical Close-In Weapon Systems (CIWS) for fleet defense. This contract ensures the continued production and delivery of advanced weapon systems essential for national security. The contract's performance is primarily located in Arizona, potentially supporting local jobs and the regional economy. The workforce implications include skilled manufacturing and engineering roles within Raytheon and its supply chain.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure on pricing.
Lack of small business participation may reduce broader economic impact.
Long contract duration requires robust oversight to manage scope and cost changes.

Positive Signals

Firm fixed-price contract shifts cost risk to the contractor.
Long-term award provides production stability for a critical defense system.
Sole-source award ensures continuity for a specialized, essential capability.

Sector Analysis

The Close-In Weapon System (CIWS) falls within the defense manufacturing sector, specifically focusing on naval combat systems. This market is characterized by high barriers to entry due to technological complexity, stringent quality requirements, and long development cycles. Spending in this area is driven by national security priorities and fleet modernization efforts. Comparable spending benchmarks would typically involve other major defense platforms and weapon system procurements, often in the hundreds of millions to billions of dollars annually.

Small Business Impact

This contract does not appear to include specific small business set-asides. The sole-source nature of the award inherently limits opportunities for small businesses to directly participate as prime contractors. Subcontracting opportunities may exist, but their extent and accessibility for small businesses would depend on Raytheon's internal procurement practices and any flow-down requirements from the government. The absence of set-asides means the direct economic benefit to the small business ecosystem from this specific contract is likely minimal.

Oversight & Accountability

Oversight for this contract will likely be managed by the Department of the Navy's contracting and program management offices. Accountability measures are embedded within the contract terms, including performance milestones and payment schedules tied to delivery. Transparency is typically maintained through contract award databases and reporting requirements. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse.

Related Government Programs

Naval Ship Systems
Defense Weapon Systems
Ammunition Production
Missile Defense Systems
Naval Aviation Support Equipment

Risk Flags

Sole-source award requires justification.
Potential for price escalation without competition.
Long-term contract requires sustained oversight.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $377.3 million to RAYTHEON COMPANY. CIWS PRODUCTION FY24

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 $377.3 million.

What is the period of performance?

Start: 2024-07-31. End: 2028-12-29.

What is the historical spending trend for CIWS production by the Department of the Navy?

Analyzing historical spending on CIWS production is crucial for understanding the long-term investment in this capability. While specific figures for prior fiscal years are not provided in this data snippet, the current award of $377 million for FY24 suggests a significant and ongoing commitment. Typically, such systems require continuous production runs to maintain fleet readiness and replace aging units. Historical data would reveal if this award represents an increase, decrease, or stable level of funding compared to previous years. It would also help in assessing the cumulative investment over the system's lifecycle and identifying any trends in production costs or contract values over time. Understanding these patterns is key to evaluating the sustained financial commitment to CIWS.

How does the unit cost of the CIWS under this contract compare to previous awards or similar systems?

Determining the unit cost comparison requires breaking down the total contract value by the number of units procured. The provided data indicates 1 CIWS production award, but not the quantity of systems. Without the quantity, calculating a precise unit cost is impossible. If we assume this $377 million covers a batch of systems, comparing that implied unit cost to prior contracts for the same system or to comparable systems from other manufacturers would be essential. A higher unit cost than historical data or competitors could indicate rising production expenses, reduced competition benefits, or scope changes. Conversely, a stable or lower unit cost might suggest efficient production or favorable contract terms. This comparison is vital for assessing value for money.

What specific risks are associated with a sole-source award for critical defense systems like CIWS?

Sole-source awards for critical defense systems like CIWS present several risks. The primary risk is the potential for inflated pricing due to the lack of competitive pressure, which can lead to suboptimal value for taxpayer money. Another risk is reduced innovation, as the incumbent contractor may have less incentive to invest in cost-saving technologies or process improvements. There's also a dependency risk; the government becomes reliant on a single supplier, which can be problematic if that supplier faces production issues, financial instability, or strategic shifts. Furthermore, the justification process for sole-source awards can be complex and subject to scrutiny, potentially leading to protests or delays if not adequately documented. Ensuring robust oversight and performance management becomes even more critical in sole-source scenarios.

What is the expected performance and reliability of the CIWS systems being produced under this contract?

The expected performance and reliability of the CIWS systems are dictated by the technical specifications and requirements outlined in the contract. As a critical defense system, the CIWS is designed for specific operational roles, likely involving target detection, tracking, and engagement capabilities against anti-ship missiles, aircraft, and other threats. Reliability metrics, such as Mean Time Between Failures (MTBF) or operational availability rates, would be key performance parameters. The contract likely includes stringent testing, quality assurance, and acceptance criteria to ensure these systems meet or exceed military standards. Performance data from previous deployments and operational feedback would inform the requirements for this new production run, aiming to maintain or enhance the system's effectiveness and readiness.

Are there any known issues or past performance concerns with Raytheon Company regarding similar defense production contracts?

Assessing Raytheon Company's past performance on similar defense production contracts is crucial for evaluating the risk associated with this award. While the provided data doesn't detail specific past performance records, government contracting agencies typically maintain performance evaluations (e.g., Contractor Performance Assessment Reporting System - CPARS). These reports would cover aspects like quality of product/service, cost control, schedule adherence, and management of technical/cost risks. Any documented issues, such as production delays, quality defects, cost overruns, or contract disputes on previous CIWS programs or comparable weapon systems, would be significant indicators of potential future risks. Conversely, a history of strong performance would provide greater confidence in Raytheon's ability to deliver successfully.

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: N0002423R5406

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: $438,057,776

Exercised Options: $387,626,844

Current Obligation: $377,343,844

Subaward Activity

Number of Subawards: 23

Total Subaward Amount: $7,150,699

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline