Raytheon Company awarded $11.5M for SEPM Project Management, a sole-source sustainment contract

Contract Overview

Contract Amount: $11,548,978 ($11.5M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2024-07-01

End Date: 2026-03-31

Contract Duration: 638 days

Daily Burn Rate: $18.1K/day

Competition Type: NOT COMPETED

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: SEPM-PROJECT MANAGEMENT SKR SUSTAINMENT BASE YEAR

Place of Performance

Location: FOREST, SCOTT County, MISSISSIPPI, 39074

State: Mississippi Government Spending

Plain-Language Summary

Department of Defense obligated $11.5 million to RAYTHEON COMPANY for work described as: SEPM-PROJECT MANAGEMENT SKR SUSTAINMENT BASE YEAR Key points: 1. Contract awarded to a single vendor, raising questions about competitive pricing. 2. Sustainment contract indicates ongoing need for system support, potentially long-term. 3. Fixed-fee structure may incentivize cost control by the contractor. 4. Contract duration of over 2 years suggests significant project scope. 5. Awarded by U.S. Special Operations Command, implying a critical national security function. 6. No small business set-aside, suggesting focus on specialized capabilities.

Value Assessment

Rating: questionable

The contract value of $11.5 million for a 638-day period is difficult to benchmark without specific details on the services provided. As a sole-source award, there is no direct comparison to similar contracts obtained through competition. The Cost Plus Fixed Fee (CPFF) pricing structure means the government pays the actual costs plus a fixed fee, which can sometimes lead to higher overall costs if cost controls are not rigorously managed by the contractor. Further analysis of the fixed fee percentage and the baseline costs would be needed to assess value for money.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning it was not competed. This typically occurs when only one vendor possesses the necessary specialized skills, technology, or security clearances required for the project. The lack of competition means that the government did not benefit from a bidding process that could have driven down prices through market forces. The justification for sole-source procurement would need to be thoroughly reviewed to ensure it was appropriate.

Taxpayer Impact: Sole-source awards limit the government's ability to secure the best possible price through competition, potentially leading to higher costs for taxpayers. It also bypasses opportunities to foster a broader base of capable contractors.

Public Impact

The U.S. Special Operations Command benefits from sustained project management for critical systems. This contract ensures the continued operational readiness and effectiveness of specialized defense systems. The primary beneficiaries are the special operations forces who rely on these systems. The contract supports specialized technical expertise and project management roles within the defense sector.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may result in suboptimal pricing for taxpayers.
Sole-source awards can limit innovation by excluding potential new entrants.
CPFF contracts require robust government oversight to prevent cost overruns.

Positive Signals

Award to Raytheon Company, a known defense contractor with established capabilities.
Sustainment contract indicates a recognized need for ongoing support of critical systems.
Fixed fee component provides some predictability in contractor profit.

Sector Analysis

This contract falls within the aerospace and defense sector, specifically related to system sustainment and project management. The North American Industry Classification System (NAICS) code 334511 covers Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing. Spending in this area is substantial, driven by the need to maintain complex military hardware and software throughout its lifecycle. Comparable spending often involves long-term support contracts for major weapon systems.

Small Business Impact

The contract was not competed and does not appear to include a small business set-aside. This suggests that the specialized nature of the project management and sustainment services required likely favored large, established defense contractors. There is no indication of subcontracting opportunities for small businesses within the provided data, though this could be a possibility within the broader contract execution.

Oversight & Accountability

Oversight for this contract would primarily fall under the U.S. Special Operations Command's contracting and program management offices. As a sole-source award, rigorous oversight is crucial to ensure the contractor is managing costs effectively and delivering the required services within the agreed-upon scope and fee. Transparency would be enhanced by public reporting on contract performance and any modifications. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Special Operations Forces Support Contracts
Defense System Sustainment Programs
Project Management Services for Defense
Aerospace and Defense Manufacturing Support

Risk Flags

Sole-source award lacks competitive pricing.
CPFF structure requires diligent cost oversight.
Potential for cost overruns without strong controls.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $11.5 million to RAYTHEON COMPANY. SEPM-PROJECT MANAGEMENT SKR SUSTAINMENT BASE YEAR

Who is the contractor on this award?

The obligated recipient is RAYTHEON COMPANY.

Which agency awarded this contract?

Awarding agency: Department of Defense (U.S. Special Operations Command).

What is the total obligated amount?

The obligated amount is $11.5 million.

What is the period of performance?

Start: 2024-07-01. End: 2026-03-31.

What specific systems or programs does the SEPM Project Management sustainment cover?

The provided data does not specify the exact systems or programs covered by the SEPM (Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing) Project Management sustainment. However, given the award by U.S. Special Operations Command (SOCOM) and the NAICS code, it likely pertains to highly specialized equipment and platforms used by SOCOM for intelligence, surveillance, reconnaissance, or operational missions. These could range from advanced sensor suites on aircraft or unmanned systems to complex command and control software. The sustainment likely includes maintenance, upgrades, technical support, and lifecycle management to ensure these critical assets remain operational and effective for special operations forces.

What is the typical profit margin for Cost Plus Fixed Fee (CPFF) contracts in the defense sector?

The profit margin in Cost Plus Fixed Fee (CPFF) contracts, represented by the 'fixed fee' portion, can vary significantly based on the complexity of the work, the perceived risk, and the negotiating power of both the government and the contractor. In the defense sector, typical fixed fee percentages often range from 5% to 15% of the estimated cost. However, this is a broad generalization. For highly specialized or R&D-intensive projects, the fee might be higher, while for more routine sustainment or services, it might be lower. The government aims to negotiate a fee that is fair compensation for the contractor's effort and risk without being excessive, especially in sole-source situations where competition cannot drive down the fee.

How does the duration of this contract (638 days) compare to similar sustainment contracts?

A duration of 638 days, approximately 21 months or 1.75 years, is a moderate length for a sustainment contract. Many sustainment contracts for complex defense systems can extend for multiple years, often with options for renewal that can significantly lengthen the total period. Shorter durations might indicate a focus on specific maintenance cycles or upgrades, while longer durations suggest comprehensive lifecycle support. For a sole-source award like this, the duration is often determined by the perceived need for continuous support of a critical capability, and it may be structured to allow for re-evaluation or re-competition at its conclusion, depending on market conditions and evolving requirements.

What are the potential risks associated with a sole-source CPFF contract for project management?

Sole-source CPFF contracts for project management carry several risks. The primary risk is the lack of price competition, which can lead to the government paying more than necessary. The CPFF structure itself carries the risk of cost escalation, as the contractor is reimbursed for actual costs incurred. While the fixed fee provides some incentive for efficiency, if not properly managed, costs can still increase, leading to a higher total contract value. Furthermore, without competition, there's a reduced incentive for the contractor to innovate or seek efficiencies beyond what is contractually required. Robust government oversight, clear performance metrics, and stringent cost controls are essential to mitigate these risks.

What is Raytheon Company's track record with U.S. Special Operations Command?

Raytheon Company (now part of RTX Corporation) has a long-standing and extensive track record of contracting with the U.S. Department of Defense, including U.S. Special Operations Command (SOCOM). They are a major defense contractor known for providing a wide array of products and services, including advanced sensors, communication systems, weapons, and support services. SOCOM relies on contractors like Raytheon for specialized capabilities that support its unique missions. Raytheon has historically been awarded numerous contracts, including sole-source and competed awards, for various platforms and systems integral to special operations. Their extensive experience and established relationship with SOCOM likely played a role in the decision to award this sustainment contract.

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: MAINT, REPAIR, REBUILD EQUIPMENT › MAINT, REPAIR, REBUILD OF EQUIPMENT

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: H9240823R2000

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Rockwell Collins Australia PTY Limited

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: $33,685,734

Exercised Options: $11,978,649

Current Obligation: $11,548,978

Subaward Activity

Number of Subawards: 9

Total Subaward Amount: $667,682

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: H9240824D4343

IDV Type: IDC

Timeline