Raytheon's $781M MK 15 Phalanx CIWS contract awarded by the Navy shows limited competition and potential value concerns

Contract Overview

Contract Amount: $781,249,051 ($781.2M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2007-11-09

End Date: 2014-08-15

Contract Duration: 2,471 days

Daily Burn Rate: $316.2K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: MK 15 PHALANX CIWS BLOCK 1 BASELINE 2

Place of Performance

Location: LOUISVILLE, JEFFERSON County, KENTUCKY, 40201

State: Kentucky Government Spending

Plain-Language Summary

Department of Defense obligated $781.2 million to RAYTHEON COMPANY for work described as: MK 15 PHALANX CIWS BLOCK 1 BASELINE 2 Key points: 1. The contract's value of over $781 million for the MK 15 Phalanx CIWS Block 1 Baseline 2 system represents a significant investment in naval defense capabilities. 2. Awarded as a sole-source contract, the lack of open competition raises questions about price discovery and potential overpayment. 3. The duration of the contract, spanning over 2400 days, suggests a long-term commitment to this specific defense system. 4. The absence of small business set-asides or subcontracting requirements indicates limited direct benefit to the small business sector in this award. 5. The fixed-price nature of the contract aims to transfer some cost risk to the contractor, Raytheon Company. 6. The contract falls under the 'Small Arms, Ordnance, and Ordnance Accessories Manufacturing' industrial classification, highlighting its specific niche within defense procurement.

Value Assessment

Rating: questionable

Benchmarking the value of this specific system is challenging without detailed cost breakdowns and comparisons to similar sole-source procurements. However, the substantial dollar amount for a single system, especially when procured without competitive bidding, warrants scrutiny. The fixed-price contract type offers some protection against cost overruns, but the initial pricing could still be inflated due to the lack of market pressure. Further analysis would require access to detailed cost data and comparisons with alternative defense systems or previous iterations of the Phalanx CIWS.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning it was not competed among multiple vendors. This typically occurs when a specific system is deemed essential and only one contractor can provide it, or when there are unique circumstances justifying a non-competitive award. The lack of competition means that the Department of the Navy did not benefit from the price reductions and innovation that typically arise from a bidding process. This can lead to higher costs for the government and taxpayers.

Taxpayer Impact: Taxpayers may have paid a premium for this system due to the absence of competitive pressure. Without multiple bids, there is less incentive for the contractor to offer the lowest possible price.

Public Impact

The primary beneficiaries of this contract are the U.S. Navy, which receives advanced close-in weapon systems for fleet defense. The contract delivers critical defensive capabilities to protect naval vessels from anti-ship missiles and other airborne threats. The geographic impact is primarily focused on naval operations worldwide, enhancing the security of U.S. naval assets. The contract supports jobs within Raytheon Company and its supply chain, contributing to the defense industrial workforce.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition, potentially leading to higher costs for taxpayers.
Lack of transparency in sole-source procurements can obscure true value for money.
Long contract duration may indicate a lack of readily available alternatives or a need for specialized support.
No explicit small business subcontracting goals were identified, potentially limiting opportunities for smaller firms.

Positive Signals

Fixed-price contract type shifts some cost risk to the contractor.
The Phalanx CIWS is a critical and proven defense system for naval platforms.
The contract supports the modernization and readiness of the U.S. Navy fleet.

Sector Analysis

The defense sector, particularly naval weaponry, is characterized by high R&D costs, long procurement cycles, and significant government investment. Contracts for systems like the MK 15 Phalanx CIWS are crucial for maintaining military superiority. The market for such specialized defense equipment is often dominated by a few large prime contractors, with limited opportunities for new entrants due to stringent requirements and existing relationships. Spending benchmarks for similar advanced weapon systems can vary widely based on technological sophistication and quantity.

Small Business Impact

This contract does not appear to have included specific small business set-aside provisions, nor were explicit subcontracting requirements detailed in the provided data. The sole-source nature of the award further limits the opportunities for small businesses to participate directly as prime contractors. While Raytheon may engage small businesses in its supply chain, the direct impact on the small business ecosystem from this specific contract appears minimal based on the available information.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of the Navy's contracting and program management offices. Accountability measures are inherent in the fixed-price contract structure, which obligates Raytheon to deliver the specified systems within the agreed-upon price. Transparency is limited due to the sole-source nature of the award, but contract modifications and performance reports would be subject to internal government review and potentially oversight by the Government Accountability Office (GAO) or the Inspector General if specific concerns arise.

Related Government Programs

Naval Surface Warfare
Ordnance and Ammunition
Close-In Weapon Systems (CIWS)
Defense Procurement
Sole-Source Contracts
Raytheon Defense Contracts

Risk Flags

Sole-source award
Lack of competition
High contract value

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $781.2 million to RAYTHEON COMPANY. MK 15 PHALANX CIWS BLOCK 1 BASELINE 2

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 Navy).

What is the total obligated amount?

The obligated amount is $781.2 million.

What is the period of performance?

Start: 2007-11-09. End: 2014-08-15.

What is the historical spending trend for the MK 15 Phalanx CIWS program?

Historical spending data for the MK 15 Phalanx CIWS program, prior to this specific $781 million award, would reveal the cumulative investment in this defense system over time. Analyzing past contracts, including their values, durations, and competition levels, can provide context for the current award. For instance, if previous awards were also sole-source and of similar magnitude, it might indicate a consistent procurement strategy. Conversely, a shift from competitive to sole-source awards could signal changes in market dynamics or program requirements. Understanding the historical spending trajectory is crucial for assessing the long-term financial commitment and identifying potential trends in cost escalation or efficiency improvements.

How does the unit cost of the MK 15 Phalanx CIWS compare to similar defense systems?

Comparing the unit cost of the MK 15 Phalanx CIWS to similar defense systems is essential for evaluating value for money. However, such comparisons are complex due to variations in system capabilities, technological sophistication, and intended roles. For instance, comparing it to other close-in weapon systems (CIWS) or even different types of defensive armament on naval vessels would require a detailed analysis of performance metrics, threat mitigation capabilities, and operational effectiveness. Without access to specific unit cost data for the Phalanx CIWS and comparable systems, a precise benchmark is difficult. Generally, advanced, specialized military hardware procured through sole-source contracts tends to have higher unit costs than systems acquired through competitive bidding.

What are the specific performance metrics and capabilities of the MK 15 Phalanx CIWS Block 1 Baseline 2?

The MK 15 Phalanx CIWS (Close-In Weapon System) Block 1 Baseline 2 is designed as a rapid-fire, radar-guided gun system intended to provide a last line of defense against anti-ship missiles, aircraft, and other threats. Its primary capabilities include high firing rates (thousands of rounds per minute) and autonomous engagement. The 'Block 1 Baseline 2' designation suggests specific upgrades and enhancements over previous versions, likely involving improved radar, fire control, or integration capabilities. These upgrades aim to enhance its effectiveness against evolving threats. Detailed performance metrics, such as engagement range, reaction time, probability of kill against specific threat types, and system reliability, are critical for assessing its operational value and justifying its procurement cost.

What is Raytheon Company's track record with sole-source defense contracts?

Raytheon Company, now part of RTX, has a long and extensive history of securing defense contracts, many of which have been sole-source due to the specialized nature of the systems they produce. Their track record with sole-source awards is generally characterized by delivering complex, high-technology defense solutions to various branches of the U.S. military and allied nations. While these awards often reflect the company's technological expertise and established position in the defense industrial base, they also frequently draw scrutiny regarding pricing and competition. Analyzing Raytheon's past sole-source contracts can reveal patterns in contract value, duration, and any associated performance or cost issues, providing insight into the potential risks and benefits associated with this particular award.

What are the potential risks associated with a sole-source procurement of this magnitude?

The primary risk associated with a sole-source procurement of this magnitude ($781 million) is the potential for inflated pricing due to the lack of competitive bidding. Without market pressure, the contractor may not have sufficient incentive to offer the lowest possible price, leading to reduced value for taxpayer money. Another risk is a potential lack of innovation, as there is less pressure to improve the system or offer more cost-effective solutions. Furthermore, sole-source contracts can sometimes indicate a lack of viable alternatives or a dependency on a single supplier, which can create strategic vulnerabilities. Ensuring robust oversight and negotiation is critical to mitigate these risks.

Industry Classification

NAICS: Manufacturing › Other Fabricated Metal Product Manufacturing › Small Arms, Ordnance, and Ordnance Accessories Manufacturing

Product/Service Code: WEAPONS

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: 1151 E HERMANS RD, TUCSON, AZ, 85706

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $781,249,051

Exercised Options: $781,249,051

Current Obligation: $781,249,051

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline