Raytheon [RTN] was 193 Advanced Medium-Range Air-to-Air Missiles (AMRAAM) behind schedule when it was due in January to deliver its entire order to the Air Force, forcing the service to fine the company more than a half-billion dollars, according to an Air Force spokesman.
As of Feb. 29, Raytheon delivered 359 AIM-120Ds against 552 required by contract—a difference of 193, Air Force Lt. Col. Jack Miller said in an email. Miller said the service fined the company $621 million–$419 million (in fiscal year 2010 dollars) suspended Feb. 3 in response to the delays and an additional $202 million (from FY ’07-’09) withheld due to late contract deliveries.
“At this time, the government believes the suspension of payments is an appropriate and measured response to incentivize Raytheon contract compliance,” Miller said in an email. “Payments will resume after consistent delivery of functional missiles. In addition, the government is actively engaged in a joint industry/government team production improvement effort.”
Miller said there is a difference between withholding and suspending payment. Withholding payment means Raytheon, “as stated specifically in the contract terms,” he said, will not be paid until it meets the Performance Based Payments (PBP) event or contract criteria. He gave an example of 10 percent being withheld from the FY ’07 contract until the company delivers the remaining contracted missiles (a PBP event).
Suspending payments means Raytheon will not receive any additional funding associated with the FY ’10 contract until it demonstrates an ability to constantly deliver all-up rounds, Miller said.
Miller said due to the complexity of rocket motor manufacturing, Raytheon’s subcontractor, ATK [ATK], has had difficulty for the past year “consistently producing rocket motors to specification requirements,” he said. Miller added “the rocket motor is the only part preventing deliveries of all up rounds. Deliveries of captive air training missiles are meeting contractual deliveries.”
Miller said all efforts are being made by the companies and the government to resume motor production and to recover to contract commitment.
Air Force Service Acquisition Executive David Van Buren said the service was “way behind” in AMRAAM deliveries March 8 at a Credit Suisse conference held in Arlington, Va.