DoD awards $708.8M contract for Lower Tier Air and Missile Defense System to Raytheon Company

Contract Overview

Contract Amount: $1,652,954,776 ($1.7B)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2024-07-31

End Date: 2030-12-19

Contract Duration: 2,332 days

Daily Burn Rate: $708.8K/day

Competition Type: NOT AVAILABLE FOR COMPETITION

Number of Offers Received: 1

Pricing Type: FIXED PRICE INCENTIVE

Sector: Defense

Official Description: UNDEFINITIED CONTRACT (UCA) FOR LOWER TIER AIR AND MISSILE DEFENSE SYSTEM (LTAMDS)

Place of Performance

Location: ANDOVER, ESSEX County, MASSACHUSETTS, 01810

State: Massachusetts Government Spending

Plain-Language Summary

Department of Defense obligated $1.65 billion to RAYTHEON COMPANY for work described as: UNDEFINITIED CONTRACT (UCA) FOR LOWER TIER AIR AND MISSILE DEFENSE SYSTEM (LTAMDS) Key points: 1. This contract is for the Lower Tier Air and Missile Defense System (LTAMDS). 2. The primary contractor is Raytheon Company, a major defense contractor. 3. The contract is a definitive contract with a fixed-price incentive pricing structure. 4. The contract duration is over 2300 days, indicating a long-term project. 5. The NAICS code 334511 suggests a focus on manufacturing search, detection, and navigation systems.

Value Assessment

Rating: questionable

The contract type is Fixed Price Incentive, which can lead to cost overruns if not managed carefully. The total award amount is substantial, but without a per-unit cost or comparison to similar systems, a definitive value assessment is difficult.

Cost Per Unit: N/A

Competition Analysis

Competition Level: limited

The contract is listed as 'NOT AVAILABLE FOR COMPETITION', indicating a limited competition or sole-source award. This lack of competition may impact price discovery and potentially lead to higher costs for the government.

Taxpayer Impact: The limited competition raises concerns about whether taxpayers are receiving the best possible price for this critical defense system.

Public Impact

This contract supports the Department of the Army's air and missile defense capabilities. The LTAMDS is a crucial component for protecting against aerial threats. The long-term nature of the contract suggests ongoing development and production. The award to Raytheon Company reinforces their significant role in the defense sector.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Limited competition raises cost concerns.
Fixed-price incentive contracts require careful oversight to manage potential overruns.
Lack of detailed cost breakdown makes value assessment difficult.

Positive Signals

Supports critical national defense capabilities.
Long-term contract provides stability for production and development.
Award to established prime contractor suggests technical expertise.

Sector Analysis

The defense sector, particularly in missile defense systems, involves complex technology and significant investment. Spending benchmarks for similar advanced radar and detection systems are typically in the hundreds of millions to billions of dollars over the life of a program.

Small Business Impact

There is no explicit mention of small business participation in the provided data. The prime contractor is a large corporation, and subcontracting opportunities for small businesses are not detailed here.

Oversight & Accountability

The definitive contract structure and fixed-price incentive type necessitate robust oversight from the Department of the Army to ensure performance, cost control, and adherence to contract terms throughout the project lifecycle.

Related Government Programs

Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing
Department of Defense Contracting
Department of the Army Programs

Risk Flags

Potential for cost overruns due to FPI contract type.
Lack of competitive bidding may lead to suboptimal pricing.
Long contract duration increases exposure to changing technological landscapes.
Dependence on a single prime contractor for a critical system.
Insufficient data to fully assess value for money.
Unclear small business participation.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $1.65 billion to RAYTHEON COMPANY. UNDEFINITIED CONTRACT (UCA) FOR LOWER TIER AIR AND MISSILE DEFENSE SYSTEM (LTAMDS)

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 $1.65 billion.

What is the period of performance?

Start: 2024-07-31. End: 2030-12-19.

What specific technological advancements does the LTAMDS offer compared to previous systems, and how do these justify the contract value?

The LTAMDS is designed to provide enhanced capabilities in detecting and tracking a wider range of aerial threats, including advanced missiles and aircraft, with improved accuracy and responsiveness. These advancements are crucial for modern air defense. However, without detailed technical specifications and performance metrics, it is difficult to definitively quantify how these advancements translate into the contract's value and justify the investment solely based on the provided data.

Given the limited competition, what measures are in place to ensure Raytheon Company is incentivized to control costs and deliver the system efficiently?

The contract utilizes a Fixed Price Incentive (FPI) structure, which includes target costs, target profits, and ceiling prices. This structure incentivizes the contractor to control costs by sharing in any savings below the target cost and sharing in any overruns up to the ceiling price. Additionally, the Department of the Army's program management and oversight are critical for monitoring performance, progress, and cost adherence, ensuring Raytheon remains accountable.

How will the effectiveness of the LTAMDS be measured and validated throughout its development and deployment phases?

Effectiveness will be measured through a series of rigorous testing and evaluation phases, including system integration tests, performance trials in simulated and live environments, and operational assessments. Key performance parameters (KPPs) related to detection range, tracking accuracy, engagement success rates, and system reliability will be tracked. Independent government testing and validation will ensure the system meets the specified requirements before full deployment.

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: FIRE CONTROL EQPT.

Competition & Pricing

Extent Competed: NOT AVAILABLE FOR COMPETITION

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: W31P4Q22R0003

Offers Received: 1

Pricing Type: FIXED PRICE INCENTIVE (L)

Evaluated Preference: NONE

Contractor Details

Parent Company: RTX Corp

Address: 350 LOWELL ST, ANDOVER, MA, 01810

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: $2,926,279,576

Exercised Options: $1,652,954,776

Current Obligation: $1,652,954,776

Subaward Activity

Number of Subawards: 214

Total Subaward Amount: $309,464,697

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline