Raytheon Company awarded $123.4M for Guided Missiles, with a significant portion allocated to manufacturing

Contract Overview

Contract Amount: $123,378,064 ($123.4M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2008-09-11

End Date: 2010-12-10

Contract Duration: 820 days

Daily Burn Rate: $150.5K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: FIXED PRICE INCENTIVE

Sector: Defense

Official Description: GUIDED MISSILES

Place of Performance

Location: TUCSON, PIMA County, ARIZONA, 85756

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $123.4 million to RAYTHEON COMPANY for work described as: GUIDED MISSILES Key points: 1. Contract value indicates substantial investment in advanced missile systems. 2. Competition dynamics for this contract are not detailed but are crucial for price discovery. 3. Performance risk is moderate given the nature of guided missile development and production. 4. This contract falls within the defense sector, specifically focusing on missile manufacturing. 5. The contract's duration suggests a long-term commitment to acquiring these defense assets.

Value Assessment

Rating: good

The contract value of $123.4 million for guided missiles appears to be within a reasonable range for complex defense systems. Benchmarking against similar contracts for missile development and production would provide a clearer picture of value for money. The fixed-price incentive structure suggests an effort to control costs while incentivizing performance, which is a positive sign for cost-effectiveness.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that multiple vendors had the opportunity to bid. The presence of two bidders suggests a competitive environment, which typically leads to better pricing and innovation. However, the specific details of the bidding process and the number of proposals received would offer a more comprehensive understanding of the competition's intensity.

Taxpayer Impact: Full and open competition generally benefits taxpayers by fostering a market where contractors are incentivized to offer competitive prices and superior products.

Public Impact

The primary beneficiaries are the U.S. Department of Defense, enhancing national security capabilities. The services delivered include the manufacturing of guided missiles and space vehicles. The geographic impact is primarily within Arizona, where Raytheon's facility is located. Workforce implications include employment opportunities in advanced manufacturing and engineering roles within the defense industry.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost overruns if incentive targets are not met efficiently.
Dependence on a single contractor for critical defense components could pose supply chain risks.

Positive Signals

Awarded through full and open competition, suggesting competitive pricing.
Fixed-price incentive contract type aims to balance cost control with performance.
Long contract duration indicates a stable, long-term need for the product.

Sector Analysis

This contract operates within the aerospace and defense sector, specifically in the manufacturing of guided missiles and space vehicles. This is a highly specialized and capital-intensive industry characterized by long development cycles, stringent quality requirements, and significant government investment. The market size for such defense systems is substantial, driven by national security needs and technological advancements. Raytheon is a major player in this sector.

Small Business Impact

While this contract is with a large prime contractor, Raytheon, there is potential for subcontracting opportunities for small businesses involved in component manufacturing or specialized services. The extent of small business participation would depend on Raytheon's subcontracting plan and adherence to federal small business goals. Further analysis would be needed to determine the specific impact on the small business ecosystem.

Oversight & Accountability

Oversight for this contract would typically be managed by the Defense Contract Management Agency (DCMA), ensuring compliance with contract terms, quality standards, and delivery schedules. Accountability measures are embedded in the fixed-price incentive structure, which links contractor profit to performance outcomes. Transparency is generally maintained through contract awards databases and reporting requirements, though specific program details may be sensitive.

Related Government Programs

Missile Defense Systems
Air-to-Ground Munitions
Naval Warfare Systems
Strategic Weapons Programs

Risk Flags

Potential for cost overruns
Supply chain dependencies
Technical performance uncertainty

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $123.4 million to RAYTHEON COMPANY. GUIDED MISSILES

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 $123.4 million.

What is the period of performance?

Start: 2008-09-11. End: 2010-12-10.

What is Raytheon's track record with similar guided missile contracts?

Raytheon Company has a long and extensive history of developing and manufacturing guided missiles for various U.S. military branches and international allies. They are a prime contractor on numerous programs, including the Tomahawk, Patriot, and Sidewinder missile systems, among others. Their track record generally includes successful program execution, though like many large defense contractors, they have faced scrutiny over cost, schedule, and performance on specific projects. Analyzing past performance on comparable fixed-price incentive contracts would provide deeper insights into their ability to manage costs and meet delivery targets for this specific award.

How does the awarded amount compare to the total market for guided missiles?

The awarded amount of approximately $123.4 million represents a significant investment in guided missile technology. However, it is a fraction of the overall global and U.S. defense spending on missile systems. The total market for guided missiles is in the tens of billions of dollars annually, encompassing a wide range of platforms from short-range tactical missiles to long-range strategic systems. This specific contract likely pertains to a particular type or quantity of missile, and its value should be assessed within the context of that specific program's scope and complexity rather than the entire market.

What are the primary risks associated with this contract?

The primary risks associated with this contract include technical performance risks, as guided missile technology is complex and requires high reliability. Schedule risks are also present, given the potential for development or production delays. Cost risks, despite the fixed-price incentive structure, can arise from unforeseen technical challenges, material cost fluctuations, or changes in program requirements. Furthermore, supply chain risks for specialized components and geopolitical factors influencing defense spending could also impact contract execution.

How effective is the fixed-price incentive (FPI) contract type for this acquisition?

The Fixed-Price Incentive (FPI) contract type is generally considered effective for acquisitions where there is a reasonable estimate of the final costs but some uncertainty remains, and where cost control is a high priority. It incentivizes the contractor to control costs by establishing a target cost and a target profit. If the final cost is below the target, both the contractor and the government share in the savings. Conversely, if costs exceed the target, profits are reduced. This structure aims to balance the government's need for cost containment with the contractor's need for a reasonable profit, encouraging efficiency and performance.

What is the historical spending trend for guided missiles by the Department of Defense?

Historical spending by the Department of Defense on guided missiles has been substantial and generally increasing over the past two decades, driven by evolving threats, technological advancements, and strategic modernization efforts. Major budget allocations are consistently made for various missile programs, including air-to-air, air-to-ground, surface-to-air, and strategic ballistic missiles. Factors such as geopolitical tensions, the development of new adversarial capabilities, and the need to replace aging inventories contribute to sustained or growing investment in this area. Specific spending figures fluctuate annually based on program priorities and congressional appropriations.

What is the significance of the contract being awarded in Arizona?

The contract being awarded to a facility in Arizona signifies the state's role as a hub for defense manufacturing and aerospace industries. Raytheon, now RTX, has a significant presence in Arizona, contributing to the state's economy through high-tech jobs, research and development, and advanced manufacturing capabilities. This award reinforces Arizona's position within the defense industrial base and highlights the concentration of specialized expertise and infrastructure available in the region for complex defense projects.

Industry Classification

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

Product/Service Code: GUIDED MISSLES

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: W31P4Q08R0184

Offers Received: 2

Pricing Type: FIXED PRICE INCENTIVE (L)

Evaluated Preference: NONE

Contractor Details

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: $123,479,230

Exercised Options: $123,479,230

Current Obligation: $123,378,064

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline