Raytheon Company awarded $61.6M for missile development, a sole-source contract with a 706-day duration

Contract Overview

Contract Amount: $61,573,029 ($61.6M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2010-03-25

End Date: 2012-02-29

Contract Duration: 706 days

Daily Burn Rate: $87.2K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: A-KIT DEVELOPMENT

Place of Performance

Location: HUNTSVILLE, MADISON County, ALABAMA, 35806

State: Alabama Government Spending

Plain-Language Summary

Department of Defense obligated $61.6 million to RAYTHEON COMPANY for work described as: A-KIT DEVELOPMENT Key points: 1. Contract awarded on a cost-plus-fixed-fee basis, indicating potential for cost overruns. 2. Sole-source award limits competitive pressure, potentially impacting overall value for money. 3. Contract duration of 706 days suggests a significant development or production effort. 4. Focus on guided missile and space vehicle manufacturing places this within a critical defense sector. 5. Awarded by the Department of the Army, aligning with strategic defense procurement needs. 6. The contract value of $61.6 million represents a substantial investment in advanced weaponry.

Value Assessment

Rating: questionable

The contract's cost-plus-fixed-fee structure, combined with a sole-source award, raises concerns about cost control and value for money. Without competitive bidding, it is difficult to benchmark pricing against market rates or similar contracts. The fixed fee component provides some cost certainty for the contractor, but the overall cost to the government is subject to actual expenses incurred, which could exceed initial estimates. Further analysis would be needed to assess if the final costs align with industry norms for similar missile development projects.

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 approach is typically used when only one vendor possesses the necessary capabilities, technology, or security clearances. The lack of competition means that the government did not benefit from the price discovery mechanisms that typically occur in a competitive bidding process. This can lead to higher prices than might be achieved in an open market.

Taxpayer Impact: Taxpayers may have paid a premium due to the absence of competitive bidding. The government did not have the opportunity to solicit multiple proposals and negotiate the best possible price, potentially resulting in a less efficient use of public funds.

Public Impact

The primary beneficiaries are the Department of Defense and potentially U.S. military personnel who will utilize the developed missile systems. The contract delivers advanced guided missile and space vehicle technology, crucial for national defense capabilities. The geographic impact is primarily within Alabama, where Raytheon Company is located, potentially supporting local jobs and the regional economy. Workforce implications include specialized engineering, manufacturing, and technical roles within Raytheon and its supply chain.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure, potentially leading to higher costs.
Cost-plus-fixed-fee contract type can incentivize higher spending if not closely monitored.
Lack of transparency in the justification for sole-sourcing requires further scrutiny.
The specific nature of guided missile technology may limit the pool of qualified contractors.
Contract duration of over two years suggests a complex and potentially lengthy development cycle.

Positive Signals

Awarded to a known defense contractor, Raytheon Company, suggesting established capabilities.
Contract addresses a critical defense need for advanced missile systems.
The fixed fee component provides some level of cost predictability for the government.
The contract is for development, implying innovation and advancement in military technology.

Sector Analysis

This contract falls within the Defense Industrial Base sector, specifically focusing on guided missile and space vehicle manufacturing. This is a highly specialized and technologically advanced segment of the aerospace and defense industry. The market is characterized by high barriers to entry due to significant R&D investment, stringent quality control, and government security requirements. Comparable spending benchmarks would typically involve other major defense contracts for similar weapon systems, often awarded through competitive processes or sole-source justifications.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. Furthermore, there is no explicit mention of subcontracting goals for small businesses. This suggests that the primary contractor, Raytheon Company, will likely handle the majority of the work internally. The impact on the small business ecosystem is likely minimal unless Raytheon voluntarily engages small businesses in its supply chain for specific components or services.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Army's contracting and program management offices. Accountability measures would be tied to the terms of the Cost Plus Fixed Fee (CPFF) contract, including regular reporting on costs, progress, and adherence to specifications. Transparency might be limited due to the sole-source nature and the sensitive defense-related aspects of the work. Inspector General jurisdiction would apply to any allegations of fraud, waste, or abuse.

Related Government Programs

Missile Defense Systems
Guided Missile Manufacturing
Aerospace and Defense Procurement
Department of the Army Contracts
Cost-Plus-Fixed-Fee Contracts

Risk Flags

Sole-source award justification requires scrutiny.
Cost-plus-fixed-fee structure necessitates robust cost oversight.
Potential for cost overruns due to contract type.
Limited transparency inherent in sole-source defense contracts.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $61.6 million to RAYTHEON COMPANY. A-KIT DEVELOPMENT

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 $61.6 million.

What is the period of performance?

Start: 2010-03-25. End: 2012-02-29.

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

Raytheon Company, now part of RTX Corporation, has a long history of securing sole-source contracts with the U.S. Department of Defense for various defense systems, including missiles and aircraft components. Their track record often involves complex, high-value projects requiring specialized expertise and proprietary technology. While sole-source awards can raise concerns about competition, they are often justified by the unique capabilities or existing platform integration required. Analyzing past performance on similar sole-source contracts would involve reviewing cost performance reports, delivery schedules, and any documented issues or successes to assess Raytheon's reliability and efficiency in executing such agreements. Specific data on cost overruns or underruns, schedule adherence, and quality metrics from previous sole-source missile development contracts would provide valuable context for evaluating the current award.

How does the Cost Plus Fixed Fee (CPFF) pricing structure compare to other contract types for missile development?

The Cost Plus Fixed Fee (CPFF) contract type is common for research and development efforts where the scope of work can be uncertain or evolve. In a CPFF contract, the government reimburses the contractor for all allowable costs incurred, plus a predetermined fixed fee representing profit. This contrasts with fixed-price contracts, where the price is set upfront, and cost-reimbursement contracts with incentive fees, which aim to share risks and rewards more dynamically. For missile development, CPFF can be advantageous when technical uncertainties are high, allowing flexibility to adapt to new findings. However, it places a greater burden on the government to closely monitor costs to prevent overspending, as the contractor has less financial incentive to control expenses compared to fixed-price arrangements. Other contract types like Firm-Fixed-Price (FFP) or Fixed-Price Incentive (FPI) might offer better cost certainty if the requirements are well-defined from the outset.

What are the primary risks associated with sole-source awards in the defense sector?

Sole-source awards in the defense sector carry several inherent risks. The most significant is the potential for inflated pricing due to the lack of competitive pressure. Without competing bids, contractors may not feel compelled to offer their most competitive rates, leading to a higher cost for taxpayers. Another risk is reduced innovation; a competitive environment often spurs contractors to propose more efficient or advanced solutions to win the contract. Furthermore, sole-source awards can create vendor lock-in, making it difficult and costly to switch providers in the future. There's also a risk of complacency, where the incumbent contractor may not prioritize efficiency or quality as rigorously as they would under competitive scrutiny. Robust justification and oversight are critical to mitigate these risks.

What is the typical duration for guided missile development contracts of this magnitude?

The typical duration for guided missile development contracts can vary significantly based on the complexity of the system, the maturity of the technology, and the specific phase of development (e.g., research, design, prototyping, testing). A contract duration of 706 days, approximately 23 months, is within the expected range for a significant development effort. Shorter durations might be seen for upgrades or incremental improvements, while longer durations, spanning several years, are common for entirely new weapon systems requiring extensive research, design, integration, and rigorous testing phases. Factors such as the number of prototypes, the complexity of software integration, and the need for extensive field testing all contribute to the overall timeline. This 706-day duration suggests a substantial undertaking rather than a minor modification.

How does the $61.6 million contract value compare to historical spending on guided missile development by the Department of the Army?

The $61.6 million contract value for this specific A-KIT DEVELOPMENT by Raytheon Company represents a significant, but not extraordinary, investment within the broader context of Department of the Army (DA) spending on guided missile systems. The DA consistently allocates billions of dollars annually towards research, development, procurement, and sustainment of a wide array of missile technologies, from short-range tactical missiles to long-range strategic systems. While $61.6 million is a substantial sum for a single development contract, it is a fraction of the overall annual missile budget. To provide a precise comparison, one would need to analyze historical spending data for similar 'A-KIT DEVELOPMENT' or 'Guided Missile and Space Vehicle Manufacturing' contracts awarded by the DA over the past decade, looking at average contract values, the number of contracts awarded, and the total expenditure in this specific sub-category.

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

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Rockwell Collins Australia PTY Limited

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: $61,808,620

Exercised Options: $61,808,620

Current Obligation: $61,573,029

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline