Raytheon awarded $143.3M contract for Kuwaiti guided missile systems, highlighting foreign military sales

Contract Overview

Contract Amount: $143,300,000 ($143.3M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2010-12-20

End Date: 2014-07-31

Contract Duration: 1,319 days

Daily Burn Rate: $108.6K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: KUWAIT, GUIDENCE ENHANCED MISSILES, FOREIGN MILITARY SALES

Place of Performance

Location: ANDOVER, ESSEX County, MASSACHUSETTS, 01810

State: Massachusetts Government Spending

Plain-Language Summary

Department of Defense obligated $143.3 million to RAYTHEON COMPANY for work described as: KUWAIT, GUIDENCE ENHANCED MISSILES, FOREIGN MILITARY SALES Key points: 1. Contract value represents a significant investment in foreign military sales for missile defense. 2. Sole-source award suggests limited market alternatives or specific technological requirements. 3. Long contract duration (1319 days) indicates a complex, multi-year project. 4. Fixed-price contract type shifts cost risk to the contractor. 5. This procurement supports U.S. foreign policy objectives and partner defense capabilities. 6. The award falls within the 'Other Guided Missile and Space Vehicle Parts' manufacturing sector.

Value Assessment

Rating: fair

The contract value of $143.3 million for guided missile parts is substantial. Without specific benchmarks for comparable foreign military sales of this nature, a precise value-for-money assessment is challenging. However, the fixed-price contract type is generally favorable for the government, as it caps potential cost overruns. The award to Raytheon, a major defense contractor, suggests a reliance on established suppliers for critical defense equipment.

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 Army determined only Raytheon Company could fulfill the requirement. This could be due to proprietary technology, unique capabilities, or specific interoperability needs with existing Kuwaiti defense systems. The lack of competition means that price discovery through a bidding process was bypassed, potentially leading to a higher price than if multiple vendors had competed.

Taxpayer Impact: Sole-source awards limit opportunities for competitive pricing, potentially resulting in less favorable terms for taxpayers compared to a competed contract. This approach prioritizes specific capabilities over cost savings derived from market competition.

Public Impact

The primary beneficiary is the government of Kuwait, which will receive enhanced guided missile systems to bolster its defense capabilities. The contract supports the delivery of critical defense articles and services, contributing to regional security. The geographic impact is focused on Kuwait, enhancing its military readiness. Workforce implications are likely within Raytheon's manufacturing and support facilities, primarily in Massachusetts, where the contract was awarded.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source nature limits competitive pressure on pricing.
Lack of competition may obscure potential cost efficiencies.
Foreign Military Sales can be complex to manage and oversee effectively.

Positive Signals

Fixed-price contract shifts cost risk to the contractor.
Award to a major defense contractor suggests established expertise.
Supports U.S. foreign policy and partner defense initiatives.

Sector Analysis

This contract falls within the aerospace and defense sector, specifically the manufacturing of guided missile and space vehicle parts. The market for such specialized defense equipment is dominated by a few large, established contractors like Raytheon. Foreign Military Sales (FMS) are a significant component of this sector, enabling allies to procure U.S. defense articles and services, thereby supporting U.S. industrial capacity and foreign policy objectives. Spending in this niche is driven by geopolitical considerations and the defense needs of allied nations.

Small Business Impact

This contract was not competed and there is no indication of small business set-asides or subcontracting requirements. As a sole-source award to a large prime contractor, the direct impact on small businesses within the federal contracting ecosystem is likely minimal, unless Raytheon engages them as subcontractors for specific components or services not covered by the primary award.

Oversight & Accountability

Oversight for this Foreign Military Sales contract would primarily reside with the Department of the Army's contracting and program management offices, as well as the Defense Contract Management Agency (DCMA). Transparency is facilitated through contract award databases, but the specifics of sole-source justifications and performance monitoring may be less publicly detailed than for competed contracts. Inspector General involvement would typically be triggered by allegations of fraud, waste, or abuse.

Related Government Programs

Foreign Military Sales Program
Guided Missile Systems Procurement
Defense Article Exports
Raytheon Company Contracts

Risk Flags

Sole-source award limits price competition.
Potential for cost overruns if initial estimates are inaccurate.
Dependency on a single supplier for critical defense components.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $143.3 million to RAYTHEON COMPANY. KUWAIT, GUIDENCE ENHANCED MISSILES, FOREIGN MILITARY SALES

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 Army).

What is the total obligated amount?

The obligated amount is $143.3 million.

What is the period of performance?

Start: 2010-12-20. End: 2014-07-31.

What is Raytheon's track record with Foreign Military Sales of guided missile systems?

Raytheon Company has a long and extensive history of supplying guided missile systems and related components to international partners through the Foreign Military Sales (FMS) program. They are a primary contractor for numerous U.S. allies, providing systems like the Patriot, Standard Missile, and various air-to-air and air-to-ground missiles. Their track record generally indicates a capacity to deliver complex defense systems and provide ongoing support. However, specific performance metrics for individual FMS contracts, including delivery timelines, cost adherence, and system effectiveness in operational environments, are often classified or not publicly disclosed in detail due to national security and foreign policy considerations. The $143.3 million award for Kuwaiti systems is one of many such transactions, reflecting their established role in this market.

How does the $143.3 million contract value compare to similar FMS contracts for guided missile systems?

Comparing the $143.3 million value of this specific contract to other Foreign Military Sales (FMS) contracts for guided missile systems requires access to detailed FMS transaction data, which is not always publicly available in a granular, comparable format. However, based on general knowledge of major defense procurements, $143.3 million is a significant but not extraordinary sum for advanced missile systems or components, especially when considering the full lifecycle support, training, and integration often included in FMS packages. Larger FMS deals for complete systems can run into billions of dollars. This particular award likely represents a specific set of components or a particular missile variant for Kuwait, fitting within the typical range for such specialized defense articles when viewed as a discrete procurement action.

What are the primary risks associated with this sole-source contract for guided missile parts?

The primary risks associated with this sole-source contract are related to cost and potential lack of innovation. Without competition, there is a reduced incentive for the contractor, Raytheon, to offer the most competitive pricing, potentially leading to a higher cost for the U.S. government (and ultimately the Kuwaiti government through FMS pricing mechanisms) than if multiple bidders were involved. There's also a risk of complacency, where the lack of competitive pressure might slow down innovation or responsiveness. Furthermore, sole-source awards can create dependency on a single supplier, making future procurements or sustainment efforts potentially more challenging and expensive if alternative solutions are not explored. Ensuring robust oversight and clear performance metrics becomes crucial to mitigate these risks.

How effective is the fixed-price contract type in managing costs for this type of defense procurement?

The Firm Fixed Price (FFP) contract type is generally considered effective in managing costs for procurements where the scope of work is well-defined, as is often the case with manufactured goods like missile parts. Under an FFP contract, the contractor, Raytheon, assumes the majority of the cost risk. This means that if Raytheon's costs exceed the agreed-upon price, their profit margin decreases, but the government's payment obligation does not increase. Conversely, if their costs are lower than anticipated, their profit increases. This structure incentivizes the contractor to control costs efficiently and deliver the product within the agreed budget. For the government, it provides cost certainty, making budgeting more predictable. However, it's crucial that the initial price negotiated is fair and reflects realistic cost estimates.

What are the historical spending patterns for guided missile parts through FMS by the Department of the Army?

Historical spending patterns for guided missile parts through Foreign Military Sales (FMS) by the Department of the Army show a consistent and significant investment in equipping allied nations with advanced air defense and offensive missile capabilities. The Army, through its FMS program, procures a wide array of missile systems, from short-range air defense to long-range strategic assets. Spending fluctuates based on geopolitical demands, regional security concerns, and the modernization priorities of partner nations. While specific annual totals for 'guided missile parts' can vary, the overall trend indicates a sustained demand, driven by the need for allies to maintain technological parity and defensive readiness. Raytheon, as a major supplier, consistently features prominently in these spending patterns, reflecting its dominant position in the guided missile market.

What are the implications of awarding this contract to Raytheon Company for market competition in the long term?

Awarding this contract to Raytheon Company, a dominant player in the defense industry, reinforces its market position in the guided missile sector. For this specific sole-source award, the immediate implication is the absence of direct competition. In the long term, such sole-source awards, especially for specialized defense systems, can contribute to market concentration. While Raytheon possesses unique capabilities, relying heavily on a single supplier for critical defense components can limit future competitive opportunities for other firms, potentially impacting innovation and price dynamics in subsequent procurements. However, the FMS program itself is designed to meet specific allied needs, and sometimes sole-sourcing is deemed necessary for interoperability or unique technological requirements, balancing competition concerns with strategic objectives.

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 COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 350 LOWELL ST, ANDOVER, MA, 06

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: $143,300,000

Exercised Options: $143,300,000

Current Obligation: $143,300,000

Subaward Activity

Number of Subawards: 2

Total Subaward Amount: $144,283

Contract Characteristics

Cost or Pricing Data: YES

Timeline