Raytheon Company awarded $43.3M for IOC heavy maintenance, a sole-source R&D contract

Contract Overview

Contract Amount: $43,321,220 ($43.3M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2008-03-06

End Date: 2012-05-19

Contract Duration: 1,535 days

Daily Burn Rate: $28.2K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: IOC - HEAVY MAINTENANCE CHECK

Place of Performance

Location: BURLINGTON, MIDDLESEX County, MASSACHUSETTS, 01803, UNITED STATES OF AMERICA

State: Massachusetts Government Spending

Plain-Language Summary

Department of Defense obligated $43.3 million to RAYTHEON COMPANY for work described as: IOC - HEAVY MAINTENANCE CHECK Key points: 1. Contract awarded on a sole-source basis, limiting price competition. 2. Research and Development focus suggests innovation rather than standard service delivery. 3. Cost Plus Fixed Fee structure can incentivize cost overruns. 4. Contract duration of over 4 years indicates a significant, long-term requirement. 5. The contract falls under the 'Research and Development in the Physical, Engineering, and Life Sciences' NAICS code. 6. Awarded by the Department of Defense, indicating a strategic national security interest.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to its sole-source nature and specific R&D focus. Without competitive bids, it's difficult to ascertain if the $43.3 million represents a fair market price. The Cost Plus Fixed Fee (CPFF) contract type, while common for R&D, carries inherent risks of cost escalation, as the contractor is reimbursed for all allowable costs plus a fixed fee. This structure may not be the most cost-effective for taxpayers compared to fixed-price contracts where risk is borne by the contractor.

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 among multiple vendors. This approach is typically used when only one vendor possesses the unique capabilities or technology required for the specific requirement, or in cases of urgent need. The lack of competition means that the government did not benefit from the price discovery mechanisms that arise from multiple bids, potentially leading to a higher price than if it had been competed.

Taxpayer Impact: Sole-source awards limit opportunities for other businesses to compete for government contracts and can result in higher costs for taxpayers due to the absence of competitive pressure on pricing.

Public Impact

The primary beneficiaries are likely the Department of Defense, receiving critical maintenance and R&D services for its Intelligence, Surveillance, and Reconnaissance (ISR) systems. Services delivered include heavy maintenance checks for Intelligence, Communications, and Operations (IOC) systems, alongside research and development activities. The geographic impact is primarily within the United States, supporting defense operations. Workforce implications include employment for specialized engineers, technicians, and support staff at Raytheon Company and potentially its subcontractors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost Plus Fixed Fee contract type increases risk of cost overruns.
Sole-source award limits competitive pricing and potential cost savings.
Long contract duration (over 4 years) may not adapt well to evolving technological needs.
R&D focus can be less transparent in terms of tangible deliverables compared to service contracts.

Positive Signals

Award to a major defense contractor (Raytheon) suggests access to specialized expertise.
Contract addresses critical maintenance for potentially sensitive defense systems (IOC).
R&D component indicates investment in future technological capabilities for the DoD.

Sector Analysis

This contract falls within the Aerospace and Defense sector, specifically focusing on Research and Development (NAICS 541712). The market for defense R&D and maintenance is characterized by high barriers to entry, significant government investment, and a limited number of large, specialized contractors like Raytheon. Spending in this area is driven by national security priorities and technological advancement. Comparable spending benchmarks are difficult to establish precisely due to the unique nature of R&D and sole-source awards, but overall DoD R&D spending is in the tens of billions annually.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb: false'. There is no explicit information regarding subcontracting plans for small businesses. The sole-source nature of the award further reduces the likelihood of small business participation unless they are direct subcontractors to Raytheon. This contract may not significantly impact the broader small business ecosystem unless Raytheon actively engages them for specialized support.

Oversight & Accountability

Oversight for this contract would typically be managed by the Defense Contract Management Agency (DCMA), which is listed as the 'sa' (servicing agency). They are responsible for ensuring contractor compliance with contract terms, cost controls, and performance standards. Transparency is generally limited for sole-source R&D contracts, with reporting requirements dictated by the contract's specific clauses. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Department of Defense Research and Development Contracts
Intelligence, Surveillance, and Reconnaissance (ISR) Systems Maintenance
Aerospace and Defense Contractor Services
Cost-Plus-Fixed-Fee Contracts
Sole-Source Defense Procurements

Risk Flags

Sole-source award
Cost Plus Fixed Fee contract type
Lack of small business subcontracting details

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $43.3 million to RAYTHEON COMPANY. IOC - HEAVY MAINTENANCE CHECK

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 $43.3 million.

What is the period of performance?

Start: 2008-03-06. End: 2012-05-19.

What is the specific nature of the 'IOC - HEAVY MAINTENANCE CHECK' and the associated R&D?

The 'IOC - HEAVY MAINTENANCE CHECK' likely refers to comprehensive, in-depth servicing and repair of Intelligence, Communications, and Operations (IOC) systems utilized by the Department of Defense. This could involve diagnostics, component replacement, system upgrades, and recalibration to ensure optimal performance and reliability. The 'Research and Development' aspect suggests that this contract may also involve efforts to improve existing IOC systems, develop new functionalities, or explore innovative maintenance techniques. Given the NAICS code (541712 - Research and Development in the Physical, Engineering, and Life Sciences), the R&D component is a significant part of the contract's objective, potentially focusing on enhancing the capabilities or lifespan of critical defense technologies.

How does the Cost Plus Fixed Fee (CPFF) structure compare to other contract types for R&D in the defense sector?

The Cost Plus Fixed Fee (CPFF) contract type is common for research and development (R&D) projects, especially when the scope of work is not fully defined or is expected to evolve. In a CPFF contract, the contractor is reimbursed for all allowable costs incurred, plus a predetermined fixed fee representing their profit. This contrasts with fixed-price contracts, where the contractor agrees to perform the work for a set price, bearing the risk of cost overruns. While CPFF offers flexibility for R&D, it shifts cost risk to the government. Other R&D contract types include Cost Plus Incentive Fee (CPIF), which adds incentives for meeting cost or performance targets, and Firm-Fixed-Price (FFP) contracts, used when R&D scope is very well-defined and predictable, though this is rare for true R&D.

What are the potential risks associated with a sole-source award for a contract of this magnitude?

Sole-source awards, like this $43.3 million contract to Raytheon Company, carry several potential risks. The primary risk is the lack of price competition, which can lead to the government paying a higher price than if multiple vendors had bid. Without competitive pressure, there is less incentive for the contractor to minimize costs. Furthermore, sole-source awards can stifle innovation from other companies that might offer alternative solutions or technologies. There's also a risk of contractor complacency or reduced efficiency due to the absence of competitive threats. Transparency can also be reduced, making it harder for external observers to assess value for money.

What is Raytheon Company's track record with similar Department of Defense R&D and maintenance contracts?

Raytheon Company (now RTX) has an extensive and long-standing track record of performing complex research, development, and maintenance services for the Department of Defense (DoD). As a major defense contractor, they are involved in numerous programs across various military branches, covering areas such as aerospace, defense electronics, cybersecurity, and weapons systems. Their history includes managing large-scale, high-value contracts, often involving advanced technologies and critical national security applications. While specific details of past performance on identical 'IOC - HEAVY MAINTENANCE CHECK' contracts are not provided here, Raytheon's overall profile suggests they possess the technical expertise, infrastructure, and security clearances necessary for such demanding work.

How does the contract's start date (2008) and end date (2012) reflect historical spending patterns for this type of service?

The contract period from March 2008 to May 2012 reflects a specific point in historical defense spending. During this era, the U.S. military was actively engaged in ongoing operations and modernization efforts. Significant investments were being made in maintaining and upgrading complex systems, including intelligence and communication platforms. The duration of over four years for a heavy maintenance and R&D contract is not unusual for specialized defense equipment. This period's spending patterns were influenced by evolving threats, technological advancements, and budget allocations, indicating a sustained need for the services provided by Raytheon to ensure the operational readiness of critical DoD assets.

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: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Address: 3 VAN DE GRAAF DR, BURLINGTON, MA, 01803

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $55,639,063

Exercised Options: $47,180,090

Current Obligation: $43,321,220

Contract Characteristics

Multi-Year Contract: Yes

Cost or Pricing Data: YES

Timeline