DoD's $1.37B Raytheon TOW Missile Purchase: A Sole-Source Acquisition with Long-Term Delivery

Contract Overview

Contract Amount: $1,368,500,521 ($1.4B)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2012-09-19

End Date: 2019-06-30

Contract Duration: 2,475 days

Daily Burn Rate: $552.9K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: PURCHASE OF TOW MISSILES.

Place of Performance

Location: TUCSON, PIMA County, ARIZONA, 85756

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $1.37 billion to RAYTHEON COMPANY for work described as: PURCHASE OF TOW MISSILES. Key points: 1. Value for money is difficult to assess due to the sole-source nature of the contract, limiting direct price comparisons. 2. Competition dynamics were absent, as this was a sole-source award, potentially impacting price discovery. 3. Risk indicators are moderate, given the established nature of the TOW missile system and Raytheon's experience, but long contract duration presents some execution risk. 4. Performance context shows a long delivery period, suggesting a sustained need for these munitions. 5. Sector positioning places this contract within the defense manufacturing industry, specifically guided missile production.

Value Assessment

Rating: fair

Benchmarking the value for money on this sole-source contract is challenging without competitive bids. The firm-fixed-price structure provides some cost certainty for the government, but the absence of competition means there's no direct market validation of the pricing. The total award amount of over $1.3 billion over several years indicates a significant investment in a critical defense capability. Without comparable sole-source awards for similar missile systems, a precise value-for-money assessment remains elusive.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning Raytheon Company was the only source considered. This approach is typically used when a unique product or service is required, or when only one responsible source can provide the supplies or services. The lack of competition means that the government did not benefit from a bidding process that could have potentially driven down prices or spurred innovation from multiple vendors.

Taxpayer Impact: Taxpayers may have paid a premium due to the absence of competitive pressure. Without alternative bids, it's harder to ensure the most cost-effective solution was secured.

Public Impact

The primary beneficiaries are the U.S. Army, receiving essential anti-armor missile systems for ground operations. The services delivered include the production and delivery of TOW missiles, crucial for tactical engagements. The geographic impact is primarily within the United States, with manufacturing likely occurring at Raytheon facilities, and the missiles deployed globally with Army units. Workforce implications include sustained employment at Raytheon and its supply chain partners involved in missile manufacturing.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition and potential cost savings.
Long contract duration (2475 days) increases the risk of cost overruns or performance issues over time.
Lack of transparency in pricing due to non-competitive nature.

Positive Signals

Award to an established defense contractor (Raytheon) with a proven track record in missile systems.
Firm-fixed-price contract provides cost predictability for the government.
Sustained delivery of a critical defense capability ensures operational readiness.

Sector Analysis

This contract falls within the defense sector, specifically the manufacturing of guided missiles and space vehicles. The market for such munitions is dominated by a few large defense contractors. Spending in this area is driven by national security requirements and geopolitical factors. Comparable spending benchmarks would involve other large-scale missile system procurements by the Department of Defense, which often run into hundreds of millions or billions of dollars over multi-year periods.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. Furthermore, the 'ss': false flag suggests it was not a small business prime contractor. While Raytheon is a large prime contractor, there may be opportunities for small businesses to participate as subcontractors within Raytheon's supply chain for components or specialized services related to missile production. The extent of small business subcontracting is not detailed in the provided data.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contracting and program management offices. Accountability measures are embedded in the firm-fixed-price contract terms, requiring delivery of specified quantities and quality. Transparency is limited due to the sole-source nature, but contract awards and modifications are generally reported. The Inspector General of the Department of Defense would have jurisdiction to investigate any allegations of fraud, waste, or abuse related to this contract.

Related Government Programs

Department of the Army Missile Procurement
Guided Missile Manufacturing
Defense Ammunition Procurement
Raytheon Defense Contracts

Risk Flags

Sole-source award
Long contract duration
Lack of competitive bidding

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $1.37 billion to RAYTHEON COMPANY. PURCHASE OF TOW MISSILES.

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 $1.37 billion.

What is the period of performance?

Start: 2012-09-19. End: 2019-06-30.

What is the historical spending trend for TOW missiles by the Department of the Army?

Historical spending data for TOW missiles by the Department of the Army reveals a consistent and significant investment over many years. The provided data point of $1.37 billion for a contract spanning from 2012 to 2019 indicates a substantial, multi-year procurement. To understand the trend, one would need to examine contract awards for TOW missiles in preceding and subsequent fiscal years. Typically, such procurements are cyclical, influenced by operational tempo, inventory levels, and modernization programs. Analyzing annual spending figures would show whether this $1.37 billion award represents an increase, decrease, or continuation of previous spending patterns. Factors like the introduction of newer missile systems or changes in battlefield requirements could also influence these trends, potentially leading to fluctuations in demand and associated spending.

How does the per-unit cost of these TOW missiles compare to similar anti-armor missile systems?

Determining the precise per-unit cost for these TOW missiles is not possible with the provided data, as only the total contract value and quantity (implicitly, through the duration and nature of the purchase) are available. Furthermore, the sole-source nature of the award prevents direct comparison with competitively bid systems. However, general industry knowledge suggests that advanced anti-armor missile systems, especially those with sophisticated guidance and warhead capabilities like the TOW family, can range from tens of thousands to over $100,000 per unit, depending on the specific variant and associated support. Without knowing the exact number of missiles procured under this $1.37 billion contract, a direct per-unit calculation is speculative. Comparisons would ideally be made against other medium anti-tank weapon systems procured competitively by the DoD or allied nations, considering factors like range, penetration capability, and target set.

What are the key performance metrics and delivery milestones associated with this contract?

The provided data indicates a 'DEFINITIVE CONTRACT' with a duration of 2475 days (approximately 6.7 years) and an end date of June 30, 2019, starting from September 19, 2012. While specific performance metrics like missile reliability rates, accuracy standards, or defect thresholds are not detailed, the contract type (FIRM FIXED PRICE) implies that Raytheon Company is obligated to deliver a specified quantity of TOW missiles meeting agreed-upon quality standards by the contract's end date. Delivery milestones would typically be outlined in the contract's statement of work or delivery schedules, detailing phased deliveries over the contract's long duration. Failure to meet these milestones or quality standards would likely trigger contractual remedies, such as penalties or termination, as per the terms of the firm-fixed-price agreement.

What is Raytheon Company's track record with producing TOW missiles and similar defense systems?

Raytheon Company, now part of RTX Corporation, has a long and established track record in the defense industry, including extensive experience with the TOW (Tube-launched, Optically tracked, Wire-guided) missile system. Raytheon has been the prime contractor for TOW missiles for decades, continuously upgrading the system and fulfilling numerous domestic and international orders. Their expertise spans the design, development, manufacturing, and sustainment of complex guided munitions. This includes managing large-scale, multi-year production contracts similar to the one detailed. The company's history with TOW suggests a deep understanding of the technology, production processes, and supply chain management required to deliver these critical weapon systems reliably to the U.S. military and allied nations.

What are the potential risks associated with a sole-source award for a critical defense system like TOW missiles?

Sole-source awards for critical defense systems like TOW missiles carry several potential risks. Firstly, the absence of competition can lead to higher prices than might be achieved in a competitive bidding process, as the government lacks leverage to negotiate the best possible terms. Secondly, it can reduce the incentive for the sole contractor to innovate or improve efficiency, as there is no direct competitive pressure. Thirdly, it creates a dependency on a single supplier, which can be problematic if that supplier faces financial difficulties, production issues, or geopolitical challenges that disrupt supply. Finally, it can limit the government's options if the chosen system becomes obsolete or if a superior alternative emerges from another vendor, as transitioning away from a sole-source, deeply integrated system can be complex and costly.

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: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: RTX Corp

Address: 1151 E HERMANS RD, TUCSON, AZ, 85756

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: $1,580,626,539

Exercised Options: $1,368,500,521

Current Obligation: $1,368,500,521

Actual Outlays: $2,129,870

Subaward Activity

Number of Subawards: 5

Total Subaward Amount: $2,646,160

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline