Raytheon Company awarded $205M for MK54 MOD 0 LWT Kits, impacting naval defense capabilities

Contract Overview

Contract Amount: $205,115,203 ($205.1M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2011-09-19

End Date: 2018-12-31

Contract Duration: 2,660 days

Daily Burn Rate: $77.1K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 4

Pricing Type: FIXED PRICE INCENTIVE

Sector: Defense

Official Description: MK54 MOD 0 LWT KITS

Place of Performance

Location: PORTSMOUTH, NEWPORT County, RHODE ISLAND, 02871

State: Rhode Island Government Spending

Plain-Language Summary

Department of Defense obligated $205.1 million to RAYTHEON COMPANY for work described as: MK54 MOD 0 LWT KITS Key points: 1. Value for money assessed through fixed-price incentive contract structure. 2. Competition dynamics indicate a full and open process for this critical munition. 3. Risk indicators include contract type and duration, requiring close monitoring. 4. Performance context tied to naval warfare readiness and effectiveness. 5. Sector positioning within the defense industrial base for advanced ordnance.

Value Assessment

Rating: good

The $205 million contract for MK54 MOD 0 LWT Kits represents a significant investment in naval defense. While specific per-unit cost benchmarks are not publicly available, the fixed-price incentive (FPI) contract structure suggests an alignment of incentives between the government and Raytheon Company to achieve performance targets while managing costs. Benchmarking against similar advanced munition contracts would provide further insight into value, but the FPI nature generally aims for cost efficiency compared to cost-plus contracts.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under a full and open competition, indicating that multiple bidders had the opportunity to submit proposals. The presence of four bidders suggests a reasonably competitive environment for this specialized defense product. A competitive process is crucial for ensuring fair pricing and encouraging innovation among defense contractors.

Taxpayer Impact: A full and open competition for essential defense materiel like the MK54 LWT Kits helps ensure taxpayer dollars are used efficiently by driving competitive pricing and fostering a robust defense industrial base.

Public Impact

Benefits the U.S. Navy by providing advanced lightweight torpedo kits for anti-submarine warfare. Enhances maritime security and operational readiness of naval forces. Supports specialized manufacturing capabilities within the defense sector. Contributes to the technological superiority of U.S. naval platforms.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost overruns if performance targets are not met efficiently under the FPI structure.
Dependence on a single prime contractor for critical defense components.
Long-term sustainment and upgrade costs for the MK54 system.

Positive Signals

Awarded through full and open competition, suggesting competitive pricing.
Fixed-price incentive contract aligns contractor and government interests on cost and performance.
Raytheon Company's established track record in defense manufacturing.
Supports a critical capability for naval warfare.

Sector Analysis

The defense sector, particularly the ordnance and munitions sub-sector, is characterized by high barriers to entry, significant R&D investment, and long procurement cycles. Contracts for advanced systems like the MK54 LWT Kits are vital for maintaining technological superiority and readiness. Spending in this area is driven by geopolitical factors and the need for advanced capabilities to counter evolving threats. Comparable spending benchmarks exist for other torpedo systems and anti-submarine warfare technologies.

Small Business Impact

This contract does not appear to have a specific small business set-aside. However, large prime contractors like Raytheon are typically required to meet subcontracting goals with small businesses as part of their overall contract obligations. The extent to which small businesses will participate in the supply chain for these LWT kits will depend on Raytheon's subcontracting plan and the availability of qualified small business suppliers for specialized components.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy's contracting and program management offices. The fixed-price incentive structure includes provisions for monitoring performance and costs. Transparency is generally maintained through contract awards databases and reporting requirements. The Inspector General's office for the Department of Defense would have jurisdiction over any investigations related to fraud, waste, or abuse concerning this contract.

Related Government Programs

Naval Warfare Systems
Torpedo Manufacturing
Ordnance Procurement
Anti-Submarine Warfare Systems

Risk Flags

Long contract duration increases risk of obsolescence and changing requirements.
Fixed-price incentive requires careful monitoring of cost targets and performance.
Dependence on specific technology may create supply chain vulnerabilities.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $205.1 million to RAYTHEON COMPANY. MK54 MOD 0 LWT KITS

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 $205.1 million.

What is the period of performance?

Start: 2011-09-19. End: 2018-12-31.

What is Raytheon Company's track record with similar defense contracts, particularly those involving advanced ordnance or torpedo systems?

Raytheon Company, now part of RTX Corporation, has a long and extensive track record in developing and manufacturing advanced defense systems, including ordnance, missiles, and torpedoes. They are a primary contractor for various U.S. military branches and allied nations. For instance, Raytheon has been a key player in the development and production of the MK54 Lightweight Torpedo (LWT) program for many years, supplying upgrades and new units. Their history includes numerous large-scale contracts for complex weapon systems, often involving fixed-price incentive or fixed-price award-fee structures. While specific performance metrics for past contracts are often sensitive, their continued role as a prime contractor for critical naval systems suggests a generally positive performance history and capability in meeting stringent military requirements.

How does the $205 million award compare to historical spending on MK54 LWT Kits or similar naval munitions?

The $205 million award for the MK54 MOD 0 LWT Kits represents a significant, but not unprecedented, investment in this specific munition. Historical spending data indicates that the U.S. Navy has consistently procured MK54 torpedoes and related kits over many years, with individual contract awards often ranging from tens to hundreds of millions of dollars, depending on the quantity, modifications, and contract type. For example, previous awards for MK54 torpedo production and upgrades have fallen within a similar financial magnitude. This particular award reflects ongoing sustainment and modernization efforts for the Navy's anti-submarine warfare (ASW) capabilities. To provide a precise comparison, one would need to aggregate all historical spending on the MK54 program and adjust for inflation and quantity variations.

What are the primary risks associated with this contract, considering its duration and fixed-price incentive structure?

The primary risks associated with this contract stem from its duration (2660 days, approximately 7.3 years) and its Fixed-Price Incentive (FPI) structure. For the government, the risk lies in potential cost growth if the contractor, Raytheon, encounters unforeseen production challenges or cost increases that push the final price towards the ceiling. While the FPI structure incentivizes cost control, it still allows for shared cost increases above the target price. For Raytheon, the risk involves managing production efficiently to meet performance specifications within the target cost to maximize profit, or facing reduced profit margins if costs exceed the target significantly. Additionally, long-term contracts for complex defense systems carry risks related to obsolescence of components, evolving threat environments requiring design changes, and potential supply chain disruptions over the extended period.

How effective is the fixed-price incentive (FPI) contract type in ensuring value for money for this type of defense procurement?

The Fixed-Price Incentive (FPI) contract type is generally considered effective for procuring complex defense systems like the MK54 LWT Kits when there is a reasonable estimate of costs and performance requirements, but some uncertainty remains. It aims to provide better value than a cost-plus contract by establishing a target cost and a ceiling price, with the government and contractor sharing any cost savings or overruns between the target and the ceiling. This structure incentivizes the contractor to control costs while still allowing for some flexibility to adapt to unforeseen issues. For the government, it offers a degree of cost certainty up to the ceiling, while the contractor is motivated to perform efficiently to achieve a higher profit. The effectiveness hinges on realistic target cost setting and robust government oversight to ensure performance standards are met.

What is the strategic importance of the MK54 MOD 0 LWT Kits to the U.S. Navy's overall mission capabilities?

The MK54 MOD 0 Lightweight Torpedo (LWT) Kits are strategically vital to the U.S. Navy's anti-submarine warfare (ASW) mission. These torpedoes are designed for deployment from surface ships, helicopters, and fixed-wing aircraft, providing a versatile and potent capability against submerged threats, including advanced submarines. The MOD 0 variant represents an upgraded version, likely incorporating enhanced sensors, processing, and potentially improved warheads or guidance systems to counter evolving submarine technologies. Maintaining a sufficient inventory of modern torpedoes like the MK54 is crucial for projecting power, protecting naval assets, and ensuring freedom of navigation in contested maritime environments. The procurement of these kits directly supports the Navy's readiness and its ability to conduct effective ASW operations globally.

Industry Classification

NAICS: Manufacturing › Other Fabricated Metal Product Manufacturing › Ammunition (except Small Arms) Manufacturing

Product/Service Code: WEAPONS

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: N0002410R6404

Offers Received: 4

Pricing Type: FIXED PRICE INCENTIVE (L)

Evaluated Preference: NONE

Contractor Details

Parent Company: Rockwell Collins Australia PTY Limited

Address: 1847 W MAIN RD, PORTSMOUTH, RI, 02871

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: $219,635,486

Exercised Options: $205,115,303

Current Obligation: $205,115,203

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline