Raytheon Company awarded $30.6M for missile defense A-kits, a sole-source contract with limited competition

Contract Overview

Contract Amount: $30,561,904 ($30.6M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2016-04-29

End Date: 2017-12-31

Contract Duration: 611 days

Daily Burn Rate: $50.0K/day

Competition Type: NOT COMPETED

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: TASK ORDER 0001 FOR INTEGRATED AIR AND MISSILE DEFENSE A-KIT

Place of Performance

Location: HUNTSVILLE, MADISON County, ALABAMA, 35806

State: Alabama Government Spending

Plain-Language Summary

Department of Defense obligated $30.6 million to RAYTHEON COMPANY for work described as: TASK ORDER 0001 FOR INTEGRATED AIR AND MISSILE DEFENSE A-KIT Key points: 1. Contract awarded on a cost-plus-fixed-fee basis, which can incentivize cost overruns. 2. The contract was not competed, raising questions about price discovery and potential overpayment. 3. Limited competition suggests potential risks related to contractor lock-in and reduced innovation. 4. The contract duration of 611 days is relatively short, indicating a specific, defined need. 5. Awarded to Raytheon Company, a major defense contractor with extensive experience in this sector. 6. The contract falls under Guided Missile and Space Vehicle Manufacturing, a specialized defense niche.

Value Assessment

Rating: questionable

Benchmarking the value of this specific task order is challenging due to its sole-source nature and the specialized equipment involved. Without competitive bids, it's difficult to ascertain if the pricing reflects fair market value. The cost-plus-fixed-fee structure means the government pays for incurred costs plus a predetermined fee, which can sometimes lead to higher overall costs compared to fixed-price contracts if not managed tightly. Further analysis would require access to detailed cost breakdowns and comparisons with similar, competitively awarded contracts for missile defense components.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded as a sole-source, meaning it was not competed among multiple vendors. This approach is typically used when only one vendor possesses the necessary capabilities, technology, or when urgency dictates a rapid award. The lack of competition means that the government did not benefit from the price reductions and innovation that typically arise from a competitive bidding process. This raises concerns about whether the government secured the best possible price and terms.

Taxpayer Impact: For taxpayers, a sole-source award means there is a higher risk of paying a premium for goods or services, as the contractor faces no direct price pressure from competitors. This can lead to less efficient use of public funds.

Public Impact

The primary beneficiaries are the Department of the Army and potentially other branches of the U.S. military requiring integrated air and missile defense capabilities. The services delivered involve the provision of A-kits (Air-launchable Anti-missile Kits) for missile defense systems. The geographic impact is primarily within the United States, specifically Alabama where the contractor is located, but the ultimate deployment of the defense systems could be global. Workforce implications include employment at Raytheon Company and its subcontractors, supporting specialized manufacturing and engineering roles within the defense industrial base.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition, potentially leading to higher costs for taxpayers.
Cost-plus-fixed-fee contract type can incentivize higher spending if not rigorously overseen.
Lack of transparency in the procurement process due to non-competitive award.
Reliance on a single contractor for critical defense components can create supply chain vulnerabilities.
Specialized nature of the product may limit future transition to more cost-effective solutions.

Positive Signals

Awarded to a prime contractor with proven expertise in missile defense systems.
Contract addresses a critical national security need for integrated air and missile defense.
Fixed fee component provides some cost certainty for the contractor's profit margin.
Specific task order suggests a defined scope of work within a larger program.
Contracting agency is a major defense entity with established oversight processes.

Sector Analysis

The Guided Missile and Space Vehicle Manufacturing sector is a highly specialized and critical segment of the defense industry. It involves complex engineering, advanced materials, and stringent quality control. Spending in this area is driven by national security priorities and technological advancements in threat detection and response. Comparable spending benchmarks are difficult to establish precisely due to the proprietary nature of many defense technologies and the unique specifications of missile defense systems. However, the overall defense budget allocates significant resources to maintaining and advancing these capabilities.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. Furthermore, the prime contractor, Raytheon Company, is a large defense corporation. While large prime contractors are often required to subcontract a portion of their work to small businesses, the specific subcontracting plan for this task order is not detailed here. The absence of a direct set-aside means that small businesses did not have a primary opportunity to bid on this specific contract, though they may participate as subcontractors.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Army and the Department of Defense. As a sole-source award, scrutiny might be higher to ensure fair pricing and necessity. Accountability measures would involve contract performance monitoring, milestone tracking, and financial audits. Transparency is limited due to the non-competitive nature, but contract award data is publicly available. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Missile Defense Systems
Air Defense Systems
Guided Missile Manufacturing
Space Vehicle Manufacturing
Department of Defense Procurement
Army Aviation and Missile Command Contracts

Risk Flags

Sole-source award
Cost-plus contract type
Lack of competition
Potential for cost overruns
Critical defense component

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $30.6 million to RAYTHEON COMPANY. TASK ORDER 0001 FOR INTEGRATED AIR AND MISSILE DEFENSE A-KIT

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 $30.6 million.

What is the period of performance?

Start: 2016-04-29. End: 2017-12-31.

What is the track record of Raytheon Company in delivering similar missile defense components?

Raytheon Company, now part of RTX Corporation, has a long and extensive track record in developing and manufacturing advanced missile defense systems and components for the U.S. military and allied nations. They are a prime contractor on numerous major defense programs, including Patriot missile systems, THAAD (Terminal High Altitude Area Defense), and various radar and command-and-control systems. Their experience spans decades, encompassing research, development, production, and sustainment of complex defense technologies. While this specific task order is for 'A-kits,' it falls within their core competencies. Historical performance data for Raytheon on similar contracts would typically be available through government contract databases and performance assessment reports (e.g., Contractor Performance Assessment Reporting System - CPARS), which would provide insights into their delivery timeliness, quality, and cost control on past projects.

How does the cost-plus-fixed-fee (CPFF) contract type compare to other contract types in terms of value for money?

The Cost-Plus-Fixed-Fee (CPFF) contract type is often used for research and development or when the scope of work is not well-defined, making it difficult to estimate costs accurately upfront. In a CPFF contract, the government reimburses the contractor for all allowable costs incurred, plus a fixed fee representing the contractor's profit. While this structure allows flexibility and encourages innovation, it carries a higher risk of cost overruns compared to fixed-price contracts, as the contractor has less incentive to control costs once the fee is fixed. For value for money, fixed-price contracts generally offer better price certainty and encourage cost efficiency. However, for highly specialized or uncertain projects like advanced missile defense components, CPFF might be deemed necessary, but it requires robust government oversight to manage costs effectively and ensure the fee remains commensurate with the effort and risk.

What are the primary risks associated with a sole-source award for critical defense components?

Sole-source awards for critical defense components present several significant risks. Firstly, the lack of competition means the government likely pays a higher price than it would in a competitive environment, as there is no downward price pressure from rival bidders. Secondly, it can lead to contractor lock-in, where the government becomes dependent on a single supplier, potentially limiting future options and flexibility. This dependency can also reduce the incentive for the sole-source provider to innovate or improve efficiency. Thirdly, transparency is diminished, making it harder for the public and oversight bodies to verify that the government is receiving fair value. Finally, there's a risk of complacency or reduced responsiveness from the contractor, knowing they are the only option.

What is the typical duration and value range for similar missile defense component contracts?

The duration and value of missile defense component contracts can vary significantly based on the complexity, quantity, and technological maturity of the item. Task orders like this one, with a duration of approximately 611 days (about 20 months) and a value around $30.6 million, are common for specific production runs or development phases of specialized components. Larger, more comprehensive programs involving system integration, full-scale production, or long-term sustainment can span multiple years and involve hundreds of millions or even billions of dollars. However, specific 'A-kits' might have shorter lifecycles or be part of larger, multi-year contracts. Benchmarking requires detailed comparison of the specific component, its technological sophistication, and the scope of work (e.g., R&D vs. production vs. sustainment).

How does the 'Guided Missile and Space Vehicle Manufacturing' category align with broader defense spending trends?

The 'Guided Missile and Space Vehicle Manufacturing' category is a crucial and consistently funded segment within the overall defense budget, reflecting ongoing national security priorities. Spending in this area is driven by the need to counter evolving threats, maintain technological superiority, and support strategic deterrence. Trends often show increased investment in areas like hypersonic missiles, missile defense against advanced threats (ballistic, cruise, and air-breathing missiles), and space-based defense capabilities. This sector is characterized by high R&D investment, long development cycles, and significant reliance on a few large, specialized defense contractors. Broader defense spending trends indicate a sustained focus on modernizing and expanding these capabilities, making this category a significant and enduring part of the defense industrial base.

What are the implications of the contract being awarded in Alabama (AL)?

The contract being awarded to a vendor located in Alabama (AL) has several implications. Firstly, it signifies the presence of significant defense manufacturing capabilities within that state, contributing to the local and state economy through job creation, investment, and tax revenue. Alabama has a well-established aerospace and defense industry cluster. Secondly, it means that oversight and logistical coordination might be managed through regional defense commands or facilities located in or near Alabama. For the contractor, it implies operating within the state's regulatory environment and potentially leveraging local supply chains and workforce expertise. The specific location doesn't inherently affect the contract's technical merit or value but highlights the geographic distribution of defense industrial capacity.

Industry Classification

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

Product/Service Code: GUIDED MISSLES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Address: 401 JAN DAVIS DR NW, HUNTSVILLE, AL, 35806

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: $30,561,904

Exercised Options: $30,561,904

Current Obligation: $30,561,904

Contract Characteristics

Multi-Year Contract: Yes

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: W31P4Q16D0020

IDV Type: IDC

Timeline