Raytheon Company awarded $131.8M for Reaper MQ-9 sensor program CLS, with limited competition

Contract Overview

Contract Amount: $131,824,259 ($131.8M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2022-05-01

End Date: 2026-04-30

Contract Duration: 1,460 days

Daily Burn Rate: $90.3K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: CONTRACTOR LOGISTICS SUPPORT (CLS) AND SERVICES APPLICABLE TO THE REAPER MQ-9 SENSOR PROGRAM.

Place of Performance

Location: MCKINNEY, COLLIN County, TEXAS, 75071

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $131.8 million to RAYTHEON COMPANY for work described as: CONTRACTOR LOGISTICS SUPPORT (CLS) AND SERVICES APPLICABLE TO THE REAPER MQ-9 SENSOR PROGRAM. Key points: 1. Contract provides essential logistics and services for the MQ-9 Reaper sensor program. 2. Sole-source award raises concerns about price discovery and potential overpayment. 3. Long contract duration (4 years) may limit flexibility and opportunities for competitive re-evaluation. 4. Cost-plus-fixed-fee structure incentivizes cost incurrence, requiring robust oversight. 5. Program supports critical defense capabilities, indicating high strategic importance. 6. Geographic location in Texas may offer some local economic benefits.

Value Assessment

Rating: questionable

The contract value of $131.8 million over four years for contractor logistics support (CLS) and services for the Reaper MQ-9 sensor program appears high, especially given the lack of competition. Without comparable sole-source contracts or detailed cost breakdowns, it is difficult to benchmark the value for money. The cost-plus-fixed-fee (CPFF) pricing structure, while common for complex systems, can lead to higher costs if not managed tightly, as the contractor is reimbursed for costs plus a fixed fee. The absence of competitive bidding means taxpayers are not benefiting from potential cost savings that could arise from a more open procurement process.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning there was no open competition. This typically occurs when a specific contractor possesses unique capabilities or intellectual property essential for the requirement, or in cases of urgent need where competition is not feasible. The lack of multiple bidders means the government did not benefit from the price discovery mechanisms inherent in a competitive environment, potentially leading to a higher price than if multiple firms had vied for the contract.

Taxpayer Impact: The sole-source nature of this award means taxpayers are likely paying a premium, as the government could not leverage competition to drive down costs. This limits the government's ability to secure the best possible price for these critical logistics and services.

Public Impact

The primary beneficiaries are the U.S. Air Force and Department of Defense, who receive essential support for the MQ-9 Reaper drone program. Services include contractor logistics support (CLS), ensuring the operational readiness and maintenance of the Reaper's sensor systems. The contract's performance is centered in Texas, potentially creating or sustaining jobs within the state's aerospace and defense sector. This contract directly supports the intelligence, surveillance, and reconnaissance (ISR) capabilities of the U.S. military.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition and may result in higher costs for taxpayers.
Cost-plus-fixed-fee contract structure can incentivize cost growth if not rigorously managed.
Long contract duration (4 years) reduces opportunities for reassessment and potential cost savings through re-competition.
Lack of transparency in the sole-source justification could mask inefficiencies or missed opportunities.
Potential for contractor lock-in due to specialized nature of support for advanced sensor systems.

Positive Signals

Contract ensures continued operational readiness of critical MQ-9 Reaper sensor systems.
Raytheon Company is an established defense contractor with significant experience in aerospace systems.
The contract supports a vital intelligence, surveillance, and reconnaissance (ISR) platform for national security.
Fixed fee component provides some cost predictability for the government, despite cost reimbursement.

Sector Analysis

The contract falls within the aerospace and defense sector, specifically focusing on unmanned aerial vehicle (UAV) support systems. The MQ-9 Reaper is a significant platform for intelligence, surveillance, and reconnaissance (ISR) missions. Spending on CLS for such advanced platforms is substantial across the defense industry, often involving complex technical requirements and specialized expertise. Benchmarking this specific contract is challenging due to its sole-source nature, but overall defense spending on UAVs and associated support services represents a multi-billion dollar market annually.

Small Business Impact

This contract was not competed and there is no indication of small business set-asides or subcontracting plans mentioned in the provided data. As a sole-source award to a large prime contractor, it is unlikely to directly benefit small businesses through set-aside provisions. However, Raytheon may engage small businesses as subcontractors for specific components or services, but this is not explicitly detailed. The absence of a competitive bidding process limits the visibility into potential subcontracting opportunities for the broader small business ecosystem.

Oversight & Accountability

Oversight for this Cost Plus Fixed Fee (CPFF) contract would primarily fall under the Department of the Air Force's contracting and program management offices. Robust oversight is crucial to monitor incurred costs, ensure the fixed fee is justified, and verify that the contractor is meeting performance requirements. Transparency is limited due to the sole-source nature. Inspector General jurisdiction would apply if fraud, waste, or abuse were suspected. The long duration necessitates continuous performance monitoring and financial audits.

Related Government Programs

MQ-9 Reaper Program
Unmanned Aerial Vehicle (UAV) Logistics Support
Defense Sensor Systems
Aerospace Contractor Logistics Services
Department of Defense Procurement

Risk Flags

Sole Source Award
Cost-Plus Contract Type
Long Contract Duration
Lack of Competition

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $131.8 million to RAYTHEON COMPANY. CONTRACTOR LOGISTICS SUPPORT (CLS) AND SERVICES APPLICABLE TO THE REAPER MQ-9 SENSOR PROGRAM.

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 Air Force).

What is the total obligated amount?

The obligated amount is $131.8 million.

What is the period of performance?

Start: 2022-05-01. End: 2026-04-30.

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

Raytheon Company, now part of RTX, has a long history of securing sole-source contracts within the Department of Defense, particularly for advanced technology systems where they possess unique capabilities or are the incumbent provider. Analyzing their past performance on similar sole-source awards would involve reviewing contract histories for cost overruns, delivery performance, and any instances of contract disputes or audits. While specific data on all sole-source contracts is not publicly itemized, their extensive portfolio suggests a pattern of being awarded such contracts due to technological expertise and established program relationships. A deeper dive would require examining specific contract vehicles and their associated performance metrics, which are often classified or not readily available in public databases.

How does the cost-plus-fixed-fee (CPFF) structure compare to other contract types for logistics support, and what are the implications for value?

The Cost-Plus-Fixed-Fee (CPFF) contract type reimburses the contractor for all allowable costs incurred, plus a predetermined fixed fee representing profit. This contrasts with fixed-price contracts, where the contractor agrees to a set price regardless of costs, incentivizing efficiency. For complex, evolving, or R&D-intensive services like advanced sensor logistics, CPFF can be advantageous as it allows flexibility to adapt to unforeseen technical challenges and ensures the contractor is willing to undertake the work without bearing excessive cost risk. However, it places a significant burden on the government to meticulously audit costs and manage scope to prevent cost escalation. The fixed fee, while predictable, does not directly reward cost savings, meaning the government may not achieve the lowest possible price compared to a well-defined fixed-price contract or a competitively negotiated agreement.

What are the specific risks associated with a sole-source award for critical defense systems like the MQ-9 Reaper sensor program?

The primary risk of a sole-source award for critical defense systems is the lack of competitive pressure, which can lead to inflated pricing and reduced incentive for the contractor to innovate or optimize costs. Taxpayers may overpay for the services and support provided. Another significant risk is contractor dependency; the government can become reliant on a single provider, making it difficult and costly to switch vendors even if performance is subpar or prices increase substantially. This 'vendor lock-in' can also stifle technological advancement if the sole provider does not proactively invest in upgrades or alternative solutions. Furthermore, without the scrutiny of multiple bidders, there's a higher potential for inefficiencies or less rigorous quality control if oversight mechanisms are not exceptionally robust.

What is the historical spending trend for Contractor Logistics Support (CLS) for the MQ-9 Reaper program or similar UAV platforms?

Historical spending data for CLS on the MQ-9 Reaper program and similar UAV platforms generally shows a consistent and increasing trend, reflecting the growing reliance on unmanned systems for military operations. As these platforms become more sophisticated and their operational tempo increases, the demand for specialized maintenance, repair, and logistical support also grows. Specific figures for the MQ-9 Reaper's CLS spending over past years would require detailed analysis of historical contract awards. However, it is common for CLS costs to represent a significant portion of a platform's total lifecycle cost, often rivaling or exceeding the initial acquisition cost over decades of service. This trend underscores the importance of competitive contracting and effective cost management for long-term sustainment.

How does the geographic location (Texas) potentially impact the cost and efficiency of this contract?

The contract's performance location in Texas (ST: TX, SN: TEXAS) could have several impacts on cost and efficiency. Texas has a significant aerospace and defense industry presence, which may mean access to a skilled workforce and established supply chains, potentially aiding efficiency and reducing mobilization costs. However, labor costs and cost of living in certain areas of Texas might be higher than in other regions, potentially increasing personnel expenses. Proximity to military bases or operational hubs could reduce transportation and logistical overhead. Without specific details on the exact location within Texas and the nature of the support provided, it's difficult to definitively assess whether this location offers a cost advantage or disadvantage compared to alternative sites.

Industry Classification

NAICS: Manufacturing › Navigational, Measuring, Electromedical, and Control Instruments Manufacturing › Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing

Product/Service Code: SUPPORT SVCS (PROF, ADMIN, MGMT) › PROFESSIONAL SERVICES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: FA857721R0001

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: RTX Corp

Address: 2501 W UNIVERSITY DR, MCKINNEY, TX, 75071

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: $171,279,868

Exercised Options: $131,824,259

Current Obligation: $131,824,259

Actual Outlays: $1,008,224

Subaward Activity

Number of Subawards: 35

Total Subaward Amount: $4,065,544

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline