Raytheon Company awarded $249M for R&D services, with a significant portion allocated to research in physical and engineering sciences

Contract Overview

Contract Amount: $24,912,060 ($24.9M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2013-09-30

End Date: 2019-12-02

Contract Duration: 2,254 days

Daily Burn Rate: $11.1K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 5

Pricing Type: COST PLUS FIXED FEE

Sector: R&D

Official Description: IGF::OT::IGF VISAR II

Place of Performance

Location: EL SEGUNDO, LOS ANGELES County, CALIFORNIA, 90245

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $24.9 million to RAYTHEON COMPANY for work described as: IGF::OT::IGF VISAR II Key points: 1. The contract's cost-plus-fixed-fee structure suggests potential for cost overruns, requiring close monitoring. 2. With 5 bidders, the competition level indicates a moderately contested market for these specialized R&D services. 3. The contract duration of over 2200 days points to a long-term commitment, potentially impacting budget predictability. 4. Performance in California suggests a concentration of high-tech R&D activities within a specific geographic region. 5. The R&D focus aligns with the Department of Defense's strategic goals for technological advancement.

Value Assessment

Rating: fair

The total award of $249 million for R&D services over approximately six years presents a substantial investment. Benchmarking this against similar large-scale defense R&D contracts is challenging without more granular cost breakdowns. However, the cost-plus-fixed-fee (CPFF) pricing structure inherently carries higher risk for the government compared to fixed-price contracts, as it allows for reimbursement of allowable costs plus a fixed fee. This necessitates robust oversight to ensure costs remain reasonable and the fixed fee adequately compensates the contractor for the effort.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, with five bids received. This level of competition is generally positive, suggesting that multiple capable contractors vied for the work, which can lead to better pricing and innovation. The presence of five bidders indicates a healthy, albeit not hyper-competitive, market for this specific type of advanced research and development.

Taxpayer Impact: The full and open competition with multiple bidders is beneficial for taxpayers as it likely drove down costs compared to a sole-source award and ensured the government secured services from a qualified provider at a competitive rate.

Public Impact

The primary beneficiaries are the Department of Defense, which gains access to advanced research and development capabilities. Services delivered include research and development in physical, engineering, and life sciences, excluding biotechnology. The contract's performance in California indicates a geographic impact on the state's high-tech and defense industry workforce. This contract supports specialized scientific and engineering roles within the defense sector.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost-plus-fixed-fee structure may lead to cost overruns if not closely managed.
Long contract duration (2254 days) could tie up significant funds and reduce budget flexibility.
Lack of specific performance metrics in the provided data makes it difficult to assess value for money beyond cost.
The 'Research and Development in the Physical, Engineering, and Life Sciences' category is broad, potentially masking specific areas of high or low value.
No small business subcontracting goals were explicitly mentioned, potentially limiting opportunities for smaller firms.

Positive Signals

Awarded through full and open competition, indicating a competitive bidding process.
Multiple bidders (5) suggest a healthy market and potential for good value.
Contractor (Raytheon Company) is a major defense contractor with extensive experience in R&D.
The contract supports critical research and development for national security objectives.
Performance in California may leverage a skilled regional workforce and established R&D ecosystem.

Sector Analysis

The contract falls within the Research and Development sector, specifically focusing on physical, engineering, and life sciences. This is a critical area for defense modernization, involving innovation in materials, systems, and technologies. The market for such specialized R&D is often dominated by large defense contractors like Raytheon, with significant government funding driving demand. Comparable spending benchmarks would typically be found within the broader DoD R&D budget, which allocates billions annually to advance technological superiority.

Small Business Impact

The provided data indicates that this contract was not set aside for small businesses (sb: false) and does not explicitly mention small business subcontracting goals. This suggests that the primary contractor, Raytheon, is expected to perform the majority of the work. While large prime contractors often engage small businesses as subcontractors, the absence of specific set-aside provisions or reporting requirements in this summary means the direct impact on the small business ecosystem is unclear and likely minimal for the prime award itself.

Oversight & Accountability

Oversight for this contract would typically be managed by the contracting officer and the relevant program executive office within the Department of the Air Force. The cost-plus-fixed-fee structure necessitates rigorous financial oversight to audit incurred costs and ensure the fixed fee remains appropriate. Transparency is generally maintained through contract reporting systems, though specific details of R&D progress and spending may be subject to security classifications. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Department of Defense Research and Development Programs
Air Force Science and Technology Investments
Advanced Technology Development Contracts
Systems Engineering and Integration Services
Applied Research and Experimental Development

Risk Flags

Cost-Plus-Fixed-Fee Structure
Long Contract Duration
Potential for Cost Overruns
Limited Transparency on Specific R&D Deliverables

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $24.9 million to RAYTHEON COMPANY. IGF::OT::IGF VISAR II

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 $24.9 million.

What is the period of performance?

Start: 2013-09-30. End: 2019-12-02.

What is Raytheon Company's track record with similar cost-plus-fixed-fee R&D contracts within the Department of Defense?

Raytheon Company, now part of RTX, has a long history of performing complex R&D contracts for the Department of Defense, including those utilizing cost-plus-fixed-fee (CPFF) structures. CPFF contracts are common for research and development where the final scope and costs are not fully defined at the outset. Raytheon's extensive experience means they are generally adept at managing the cost-reimbursement aspects and delivering on the fixed fee. However, like all CPFF contracts, they require diligent oversight from the government to manage allowable costs and ensure the contractor's performance aligns with the contract's objectives and fee structure. Historical data on Raytheon's specific performance on similar contracts would reveal trends in cost efficiency, adherence to schedules, and overall program success, which are crucial for assessing the value and risk associated with this particular award.

How does the $249 million award compare to other R&D contracts awarded by the Department of the Air Force in recent years?

The $249 million award to Raytheon Company for R&D services is a significant but not unprecedented sum for the Department of the Air Force (DAF). The DAF, like other branches of the DoD, invests heavily in research and development to maintain technological superiority. Large-scale R&D contracts, especially those spanning multiple years and involving advanced technologies, frequently reach into the hundreds of millions of dollars. For context, the DAF's annual R&D budget often exceeds tens of billions of dollars. Therefore, while substantial, this specific contract represents one component of a much larger R&D investment portfolio. Comparisons would be most meaningful when looking at contracts with similar North American Industry Classification System (NAICS) codes, such as 'Research and Development in the Physical, Engineering, and Life Sciences (except Biotechnology)' (541712), and considering the contract duration and specific technological focus.

What are the primary risks associated with a Cost Plus Fixed Fee (CPFF) contract for R&D services?

The primary risks associated with a Cost Plus Fixed Fee (CPFF) contract for R&D services are centered around cost control and potential for scope creep. For the government, the main risk is that the contractor may not have sufficient incentive to control costs, as all allowable costs are reimbursed. While the fixed fee provides some incentive for efficiency, it is applied to the estimated cost, and if actual costs significantly exceed estimates, the overall value proposition can diminish. There's also a risk that the contractor might prioritize activities that increase costs (and thus overhead recovery) over those that are most critical to the R&D objective, especially if the fixed fee is substantial. For the contractor, risks include underestimating the costs required to achieve the R&D goals, potentially leading to a lower-than-expected profit margin if the fixed fee is not adjusted, or facing government scrutiny over allowable costs.

How effective is the 'full and open competition' approach for specialized R&D contracts like this one?

The 'full and open competition' approach is generally considered the most effective method for acquiring specialized R&D services, as it maximizes the pool of potential offerors and encourages innovation and competitive pricing. By allowing any responsible source to submit a bid, the government increases its chances of finding the best possible solution at the best value. For specialized R&D, this means potentially uncovering novel approaches or technologies from a wider range of industry players, including both established large corporations and potentially innovative smaller firms (though large contracts often favor primes). The competitive process helps ensure that the selected contractor has the necessary technical expertise, management capability, and a cost-effective approach. However, the effectiveness is contingent on the clarity of the solicitation requirements and the rigor of the evaluation process to ensure the 'best' technical solution is chosen, not just the lowest price.

What are the historical spending patterns for R&D contracts under NAICS code 541712 by the Department of the Air Force?

Historical spending patterns for R&D contracts under NAICS code 541712 ('Research and Development in the Physical, Engineering, and Life Sciences (except Biotechnology)') by the Department of the Air Force (DAF) show a consistent and significant investment. The DAF, along with other military branches, relies heavily on this category to advance technologies crucial for national defense, covering areas from advanced materials and propulsion to sensor technology and cyber capabilities. Spending in this area typically fluctuates based on strategic priorities, technological breakthroughs, and budget allocations, but it remains a core component of the DAF's acquisition strategy. Over the past decade, billions of dollars have been awarded annually across the DoD for services falling under this NAICS code. Contracts are often long-term, awarded through various competition levels, and frequently utilize cost-reimbursement contract types due to the inherent uncertainties in R&D.

What are the implications of the contract being performed in California for the defense R&D sector?

The performance location in California has significant implications for the defense R&D sector. California is a major hub for technological innovation, boasting a large concentration of aerospace, defense, and technology companies, as well as leading research universities. Awarding R&D contracts to be performed in the state leverages this existing ecosystem, providing access to a highly skilled workforce, specialized research facilities, and a network of subcontractors and suppliers. This concentration can foster collaboration and accelerate development cycles. For the state, it means job creation in high-value scientific and engineering fields, increased economic activity, and reinforcement of its position as a leader in defense technology. However, it also highlights a potential geographic concentration of defense spending and R&D efforts.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Scientific Research and Development Services › Research and Development in the Physical, Engineering, and Life Sciences (except Biotechnology)

Product/Service Code: RESEARCH AND DEVELOPMENT › C – National Defense R&D Services

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: BASIC RESEARCH

Offers Received: 5

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Address: 2000 E EL SEGUNDO BLVD, EL SEGUNDO, CA, 90245

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: $28,275,533

Exercised Options: $24,912,060

Current Obligation: $24,912,060

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline