Raytheon awarded $794.6M for Guided Missile Components, with a significant portion for RIM 7-H-2 NATO Sea Sparrow

Contract Overview

Contract Amount: $276,133,142 ($276.1M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 1999-09-16

End Date: 2009-03-31

Contract Duration: 3,484 days

Daily Burn Rate: $79.3K/day

Competition Type: NOT AVAILABLE FOR COMPETITION

Number of Offers Received: 1

Pricing Type: FIXED PRICE REDETERMINATION

Sector: Defense

Official Description: 199912!1700!4088!BZ005!NAVAL SEA SYSTEMS COMMAND !N0002499C5473 !A!*!* !19990916!20040915!794598573!001339159!001339159!N!15090!RAYTHEON SYSTEMS CO (INC) !1151 E HERMANS RD !TUCSON !AZ!85706!77000!019!04!TUCSON !PIMA !ARIZONA !0001!+000006690000!N!N!000000000000!1420!GUIDED MISSILE COMPONENTS !A2 !MISSILE AND SPACE SYSTEMS !2CNA!RIM 7-H-2 NATO SEA SPARROW !3761!3!*!*!*!B!N!Z!B !U!A!1!001!N!4A!Z!Y!Z!* !* !N!C!*!A!A!A!A!A!*!* !*!N!A!C!N!*!*!*!*!*!

Place of Performance

Location: TUCSON, PIMA County, ARIZONA, 85756

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $276.1 million to RAYTHEON COMPANY for work described as: 199912!1700!4088!BZ005!NAVAL SEA SYSTEMS COMMAND !N0002499C5473 !A!*!* !19990916!20040915!794598573!001339159!001339159!N!15090!RAYTHEON SYSTEMS CO (INC) !1151 E HERMANS RD !TUCSON !AZ!85706!77000!019!04!TUCSON !PIMA … Key points: 1. Contract value of $794.6 million for missile components indicates substantial investment in defense capabilities. 2. The contract's duration of over 9 years suggests a long-term need for these specific components. 3. Awarded to Raytheon Systems Co., a major defense contractor, highlighting industry concentration. 4. The 'NOT AVAILABLE FOR COMPETITION' status raises questions about potential cost efficiencies and market alternatives. 5. Fixed Price Redetermination pricing structure may introduce cost uncertainty for the government. 6. The primary component, RIM 7-H-2 NATO Sea Sparrow, is a critical naval defense system.

Value Assessment

Rating: fair

The total contract value of $794.6 million over its extended period is substantial. Benchmarking this against similar long-term procurements for advanced missile components is challenging without more specific data on unit costs and technical specifications. The Fixed Price Redetermination (FPR) pricing type introduces a degree of risk, as final costs are not fully fixed at the outset, potentially leading to higher-than-anticipated expenditures if cost overruns occur. However, the long duration might reflect the complexity and specialized nature of the components, justifying a longer-term commitment.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded as 'NOT AVAILABLE FOR COMPETITION,' indicating a sole-source procurement. This suggests that either only one source was capable of meeting the government's requirements, or there were specific circumstances (e.g., urgent need, unique technology) that precluded a competitive process. The lack of competition limits price discovery and may result in less favorable pricing compared to a fully competed contract. It is crucial to understand the justification for this sole-source award to ensure it was indeed necessary and in the government's best interest.

Taxpayer Impact: Sole-source awards can lead to higher costs for taxpayers as the government lacks the leverage of multiple bidders driving down prices. This necessitates rigorous oversight to ensure fair pricing.

Public Impact

The U.S. Navy and allied NATO forces benefit from the continued supply of critical missile components for naval defense. Services delivered include the manufacturing and supply of components for the RIM 7-H-2 NATO Sea Sparrow missile system. The geographic impact is primarily centered around Raytheon's facilities in Tucson, Arizona, and downstream suppliers. Workforce implications include employment at Raytheon and its subcontractors involved in advanced defense manufacturing.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure, potentially increasing costs.
Fixed Price Redetermination pricing introduces uncertainty and potential for cost overruns.
Long contract duration may obscure current market value and technological relevance.
Lack of detailed performance metrics makes assessing value for money difficult.

Positive Signals

Secures critical components for national defense systems.
Long-term award provides stability for contractor production planning.
Award to a major defense contractor suggests established capability and reliability.

Sector Analysis

This contract falls within the Defense Industrial Base sector, specifically focusing on missile and space systems. The market for such specialized components is typically characterized by high barriers to entry due to technological complexity, stringent quality requirements, and significant R&D investment. Spending in this area is driven by national security needs and geopolitical factors. Comparable spending benchmarks would involve analyzing other large-scale, long-term procurements for advanced weapon system components within the Department of Defense.

Small Business Impact

The data does not indicate any specific small business set-aside provisions for this contract. Given the nature of advanced missile component manufacturing, it is likely that the prime contractor, Raytheon, would utilize its own facilities or subcontract with other large, specialized firms. The impact on the broader small business ecosystem is likely indirect, potentially through lower-tier supply chain opportunities, rather than direct set-asides.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contract management and inspection agencies, such as the Defense Contract Management Agency (DCMA). Accountability measures would be tied to the terms of the Fixed Price Redetermination contract, including delivery schedules and quality specifications. Transparency is limited by the sole-source nature and the proprietary aspects of defense manufacturing, though contract award data is publicly available.

Related Government Programs

Naval Sea Systems Command (NAVSEA) Procurements
Missile Defense Systems
NATO Cooperative Programs
Advanced Weapons Components
Raytheon Defense Contracts

Risk Flags

Sole-source award
Fixed Price Redetermination pricing
Long contract duration
Lack of detailed performance metrics in award data

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $276.1 million to RAYTHEON COMPANY. 199912!1700!4088!BZ005!NAVAL SEA SYSTEMS COMMAND !N0002499C5473 !A!*!* !19990916!20040915!794598573!001339159!001339159!N!15090!RAYTHEON SYSTEMS CO (INC) !1151 E HERMANS RD !TUCSON !AZ!85706!77000!019!04!TUCSON !PIMA !ARIZONA !0001!+000006690000!N!N!000000000000!1420!GUIDED MISSILE COMPONENTS !A2 !MISSILE AND SPACE SYSTEMS !2CNA!RIM 7-H-2 NATO SEA SPARROW !3761!3!*!*!*!B!N!Z!B !U!A!1!0

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 $276.1 million.

What is the period of performance?

Start: 1999-09-16. End: 2009-03-31.

What is the specific justification for awarding this contract on a sole-source basis?

The provided data indicates the contract was 'NOT AVAILABLE FOR COMPETITION,' which is synonymous with a sole-source award. The specific justification for this determination is not detailed in the provided data snippet. Typically, sole-source awards are justified under circumstances such as urgent and compelling needs, unique capabilities possessed by only one contractor, or when a previous competitive process failed to yield adequate results. Without further documentation from the awarding agency (Naval Sea Systems Command), the precise rationale remains unknown. This lack of competition raises concerns about whether the government explored all viable options and secured the best possible pricing and terms.

How does the Fixed Price Redetermination (FPR) pricing structure compare to other contract types for similar defense procurements?

Fixed Price Redetermination (FPR) contracts are less common than firm-fixed-price (FFP) or cost-plus contracts for long-term, complex procurements. FPR contracts establish an initial price that is subject to negotiation and adjustment once actual costs are determined. This offers some price certainty upfront while allowing for adjustments based on actual costs incurred, aiming to balance risk between the government and the contractor. Compared to FFP, FPR carries more risk for the government due to potential price increases. Compared to cost-plus contracts, FPR aims to provide greater cost control incentives for the contractor. For advanced missile components, FFP might be preferred if specifications are highly stable, while cost-plus might be used for R&D-heavy efforts. FPR represents a middle ground, often used when initial cost estimates are uncertain but a degree of cost control is desired.

What is the historical spending trend for Guided Missile Components procured by the Naval Sea Systems Command?

Analyzing the historical spending trend for Guided Missile Components by NAVSEA requires access to broader contract databases beyond this single award. This specific contract, awarded in 1999 with an end date in 2009, represents a significant but isolated data point. To understand trends, one would need to aggregate spending on similar Product Service Codes (PSCs) or contract categories over multiple fiscal years. Factors influencing historical spending include evolving defense strategies, technological advancements in missile systems, geopolitical threats, and budget allocations. A comprehensive analysis would reveal whether spending on such components has been increasing, decreasing, or remaining relatively stable, and identify major contractors and program priorities over time.

What are the potential risks associated with the long duration (over 9 years) of this contract?

The extended duration of this contract (from 1999 to 2009) presents several potential risks. Firstly, technological obsolescence is a significant concern; missile technology evolves rapidly, and components procured over such a long period might become outdated or less effective against emerging threats. Secondly, market conditions and material costs can fluctuate considerably over nearly a decade, potentially impacting the 'redetermined' price unfavorably for the government under the FPR structure. Thirdly, long-term contracts can reduce flexibility for the government to adapt to changing strategic requirements or to incorporate newer, potentially superior technologies that emerge during the contract period. Finally, maintaining consistent oversight and ensuring sustained contractor performance and quality over such an extended timeframe can be challenging.

How does the contract's focus on RIM 7-H-2 NATO Sea Sparrow impact its strategic importance?

The RIM 7-H-2 NATO Sea Sparrow is a crucial short-range, all-weather, semi-active radar-guided missile system used for anti-surface warfare and anti-air warfare, primarily by naval vessels. Its continued procurement and component supply are vital for maintaining the operational readiness of numerous U.S. Navy ships and those of allied NATO nations participating in cooperative defense initiatives. The strategic importance lies in its role as a primary defensive weapon system against airborne threats. Therefore, ensuring a stable and reliable supply chain for its components, as facilitated by this contract, is directly linked to naval force protection and mission effectiveness in various operational theaters.

Competition & Pricing

Extent Competed: NOT AVAILABLE FOR COMPETITION

Offers Received: 1

Pricing Type: FIXED PRICE REDETERMINATION (A)

Contractor Details

Parent Company: Rockwell Collins Australia PTY Limited

Address: 1151 E HERMANS RD, TUCSON, AZ, 85706

Business Categories: Category Business, Not Designated a Small Business

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline