Raytheon Company awarded $251.6M for software engineering, with a 4949-day duration

Contract Overview

Contract Amount: $251,663,945 ($251.7M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2006-12-12

End Date: 2020-06-30

Contract Duration: 4,949 days

Daily Burn Rate: $50.9K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: COST NO FEE

Sector: Defense

Official Description: FINAL S/W ENGR FOR 0002

Place of Performance

Location: MCKINNEY, COLLIN County, TEXAS, 75071

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $251.7 million to RAYTHEON COMPANY for work described as: FINAL S/W ENGR FOR 0002 Key points: 1. Contract value of $251.6M over nearly 14 years suggests a long-term, critical need. 2. The 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' sector indicates a focus on advanced defense technology. 3. A definitive contract type implies a firm agreement on scope and price, though the cost-plus nature warrants scrutiny. 4. The contract's duration of 4949 days (approx. 13.5 years) is exceptionally long, raising questions about adaptability to evolving technological needs. 5. The absence of small business involvement suggests this contract is likely focused on large-scale, specialized capabilities. 6. The contract was awarded by the Defense Contract Management Agency, indicating a significant defense-related procurement.

Value Assessment

Rating: fair

The total award of $251.6M over nearly 14 years averages to approximately $18.6M annually. Without specific performance metrics or comparable contract data, it's difficult to definitively assess value for money. The 'COST NO FEE' (Cost Plus Fixed Fee) contract type can incentivize contractors to increase costs, though the fixed fee component aims to cap profit. Benchmarking this against similar long-term software engineering contracts for complex defense systems would be necessary for a more robust value assessment.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under 'FULL AND OPEN COMPETITION,' indicating that all responsible sources were permitted to submit a bid. The presence of two bids ('no': 2) suggests a competitive process, but the low number of bidders for such a substantial and long-term contract might indicate a specialized market or high barriers to entry. This level of competition is generally favorable for price discovery, but the specific details of the bidding process and the nature of the requirements would provide a clearer picture.

Taxpayer Impact: A full and open competition with multiple bidders is generally beneficial for taxpayers as it encourages competitive pricing and potentially leads to better value. However, with only two bidders, the potential for price inflation still exists compared to a scenario with more robust competition.

Public Impact

The primary beneficiaries are likely the Department of Defense, specifically units relying on advanced search, detection, navigation, and guidance systems. The contract delivers critical software engineering services essential for the development and maintenance of sophisticated defense instrumentation. The geographic impact is primarily within Texas ('st': 'TX', 'sn': 'TEXAS'), where the contractor, Raytheon Company, is located, suggesting a concentration of related economic activity. Workforce implications include the employment of highly skilled software engineers and related technical personnel within Raytheon's operations.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

The 'COST NO FEE' contract type, while common in defense, can lead to cost overruns if not meticulously managed.
The extremely long contract duration (nearly 14 years) poses a risk of technological obsolescence and potential misalignment with evolving defense requirements.
Limited competition (2 bidders) for a contract of this magnitude could indicate a lack of market dynamism or high barriers to entry for potential competitors.
The lack of specific performance metrics or clear value-for-money indicators in the provided data makes it challenging to assess the true efficiency of spending.

Positive Signals

Awarding under 'FULL AND OPEN COMPETITION' suggests an effort to ensure a broad range of potential contractors could participate.
The definitive contract type implies a structured agreement, providing a degree of certainty for both the government and the contractor.
The contractor, Raytheon Company, is a major defense contractor with a significant track record, suggesting established expertise in the required domain.
The contract's focus on critical defense systems like search, detection, and navigation indicates its strategic importance to national security.

Sector Analysis

The contract falls within the 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' industry, a specialized segment of the defense sector. This sector is characterized by high R&D investment, long product development cycles, and significant government procurement. Market size is substantial, driven by national defense budgets. Comparable spending benchmarks would involve analyzing other large, long-term contracts for similar complex defense systems, often in the hundreds of millions to billions of dollars range, reflecting the high cost of specialized defense technology development and sustainment.

Small Business Impact

The data indicates that this contract was not set aside for small businesses ('sb': false). Given the nature of the work (complex software engineering for defense systems) and the large contract value, it is unlikely that significant subcontracting opportunities for small businesses would be mandated or readily available, unless specifically structured into the contract. This suggests the contract primarily leverages the capabilities of large defense contractors.

Oversight & Accountability

Oversight for this contract would typically be managed by the Defense Contract Management Agency (DCMA), which is responsible for ensuring contractor performance and compliance. Accountability measures are inherent in the contract terms, particularly the 'COST NO FEE' structure, which links contractor profit to the fixed fee component. Transparency is generally facilitated through contract award databases, but detailed performance reports and cost breakdowns may be less publicly accessible for national security reasons. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse.

Related Government Programs

Defense Software Development Contracts
Navigation and Guidance System Procurement
Aeronautical and Nautical Instrument Manufacturing
Department of Defense Research and Development
Raytheon Company Defense Contracts

Risk Flags

Long Contract Duration
Cost Plus Contract Type
Limited Competition (2 Bidders)
Potential for Technological Obsolescence

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $251.7 million to RAYTHEON COMPANY. FINAL S/W ENGR FOR 0002

Who is the contractor on this award?

The obligated recipient is RAYTHEON COMPANY.

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Contract Management Agency).

What is the total obligated amount?

The obligated amount is $251.7 million.

What is the period of performance?

Start: 2006-12-12. End: 2020-06-30.

What is Raytheon Company's track record with similar large, long-term defense software engineering contracts?

Raytheon Company, now part of RTX Corporation, has a long and extensive history of executing large, complex defense contracts, including those involving software engineering for sophisticated systems. They are a prime contractor on numerous programs across various defense domains, such as radar, missile defense, command and control, and intelligence, surveillance, and reconnaissance (ISR). Their track record typically involves managing multi-year development and sustainment efforts, often with cost-plus or fixed-price incentive contract types. While specific details of past performance on contracts directly comparable in scope and duration to this $251.6M award would require deeper analysis of contract databases and historical performance reviews, Raytheon's position as a major defense industrial base supplier suggests a capacity to handle such significant undertakings. However, like any large contractor, they have also faced scrutiny and challenges on specific programs regarding cost, schedule, and performance.

How does the average annual spending of approximately $18.6M compare to similar long-term defense software contracts?

An average annual spending of approximately $18.6 million for a long-term defense software engineering contract, spanning nearly 14 years, falls within a moderate range for specialized defense procurements. However, 'similar' is a critical qualifier. If this contract is for foundational software development for a new, complex system (e.g., a next-generation radar or guidance system), $18.6M/year might be considered on the lower end, potentially indicating a focused scope or phased development. If it's for sustainment or incremental upgrades of existing systems, it could be average or even high, depending on the system's complexity and user base. Benchmarking requires comparing against contracts with identical North American Industry Classification System (NAICS) codes (334511), similar contract types (Cost Plus Fixed Fee), and comparable contract durations and agencies. Without such granular data, this figure serves as a basic indicator, but its true value-for-money context remains elusive.

What are the primary risks associated with a 'COST NO FEE' contract type over such an extended period?

The 'COST NO FEE' (Cost Plus Fixed Fee - CPFF) contract type, while common in R&D and complex development where scope is uncertain, carries inherent risks, especially over a long duration like 4949 days (approx. 13.5 years). The primary risk for the government is cost escalation; the contractor is reimbursed for all allowable costs incurred. While the 'fixed fee' component provides a ceiling on the contractor's profit, it doesn't cap the total contract cost. This can incentivize contractors to incur higher costs, as their fee remains constant regardless of the total expenditure. Over a long period, changes in labor rates, material costs, and unforeseen technical challenges can significantly inflate the total cost beyond initial projections. Effective oversight, stringent cost controls, and clear definition of allowable costs are crucial to mitigate these risks. The extended duration amplifies these risks by increasing the likelihood of scope creep, technological obsolescence, and the need for contract modifications.

Given the 'FULL AND OPEN COMPETITION' and only two bidders, what does this imply about the market for these specialized software engineering services?

The fact that this significant contract was competed 'FULL AND OPEN' but only attracted two bidders suggests a highly specialized and potentially concentrated market for the specific software engineering services required. This could be due to several factors: 1) High technical barriers to entry: The complexity of the systems (search, detection, navigation, guidance) may require unique expertise, intellectual property, or security clearances that only a few large, established defense contractors possess. 2) Significant R&D investment: Developing the capability to bid and perform on such contracts requires substantial upfront investment in technology, personnel, and facilities, deterring smaller or less specialized firms. 3) Limited number of prime contractors: In certain defense niches, the industrial base may naturally consolidate around a few key players. While 'full and open' competition is ideal, only two bidders limits the potential for robust price discovery and may indicate less dynamic market competition than desired, potentially leading to higher prices than if more bidders were present.

What are the potential implications of the 4949-day contract duration on technological relevance and adaptability?

A contract duration of 4949 days (approximately 13.5 years) for software engineering presents significant risks regarding technological relevance and adaptability. Software development, especially in rapidly evolving fields like defense technology, can become obsolete much faster than hardware. Over such a long period, the underlying technologies, programming languages, and even the operational environment may change drastically. This extended timeline increases the likelihood that the software developed or maintained under this contract could become outdated, less secure, or incompatible with newer systems. It also raises questions about the initial scope definition; a 13.5-year scope is exceptionally difficult to define accurately at the outset. The government may need to issue numerous modifications or re-compete parts of the work, potentially increasing administrative burden and costs, to ensure the software remains effective and aligned with current and future defense needs.

How does the NAICS code 334511 ('Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing') typically relate to federal spending patterns?

The NAICS code 334511 represents a critical segment of the defense and aerospace industrial base, focusing on the manufacturing of sophisticated systems and instruments used for navigation, guidance, detection, and search. Federal spending within this category is consistently substantial, driven by national security requirements and technological advancements in military platforms (aircraft, ships, ground vehicles) and intelligence gathering. Contracts under this code often involve high research and development costs, long production cycles, and significant integration efforts. Spending patterns here are characterized by large, multi-year procurements, often awarded through competitive bidding processes but frequently involving specialized requirements that limit the number of capable bidders. The value of individual contracts can range from tens of millions to billions of dollars, reflecting the complexity and strategic importance of these systems.

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: RESEARCH AND DEVELOPMENT › C – National Defense R&D Services

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: H9222206R0002

Offers Received: 2

Pricing Type: COST NO FEE (S)

Evaluated Preference: NONE

Contractor Details

Parent Company: RTX Corp

Address: 2501 W UNIVERSITY DR, MC KINNEY, TX, 75071

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $266,388,505

Exercised Options: $252,372,019

Current Obligation: $251,663,945

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline