Raytheon Company awarded $121M for Sea Dragon payload system, a critical defense initiative

Contract Overview

Contract Amount: $121,273,335 ($121.3M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2018-05-04

End Date: 2022-03-31

Contract Duration: 1,427 days

Daily Burn Rate: $85.0K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: ENGINEERING SERVICES, CET 18-830, SEA DRAGON PAYLOAD SYSTEM DESIGN, DEVELOPMENT AND DEMONSTRATION. THE PURPOSE OF THIS TASK IS TO DESIGN, DEVELOP, INTEGRATE AND DEMONSTRATE THE SEA DRAGON FOR COUNTERING EMERGING NEAR PEER THREATS, LEVERAGING EXISTING SYSTEMS TO DEMONSTRATE INNOVATIVE SYSTEMS IN THE NEAR TERM WHICH WILL LEAD TO ADDITIONAL RAPID FIELDING CAPABILITIES FOR THE WARFIGHTER.

Place of Performance

Location: TUCSON, PIMA County, ARIZONA, 85756

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $121.3 million to RAYTHEON COMPANY for work described as: ENGINEERING SERVICES, CET 18-830, SEA DRAGON PAYLOAD SYSTEM DESIGN, DEVELOPMENT AND DEMONSTRATION. THE PURPOSE OF THIS TASK IS TO DESIGN, DEVELOP, INTEGRATE AND DEMONSTRATE THE SEA DRAGON FOR COUNTERING EMERGING NEAR PEER THREATS, LEVERAGING EXISTING SYSTEMS TO DEMONSTRATE INNOVA… Key points: 1. Contract focuses on developing advanced systems to counter near-peer threats, enhancing warfighter capabilities. 2. Leverages existing systems for rapid fielding, indicating a strategy for cost-effective innovation. 3. The project's duration and cost suggest a complex, multi-year development effort. 4. Awarded by the Defense Microelectronics Activity, highlighting a focus on advanced technological solutions. 5. The use of Cost Plus Fixed Fee (CPFF) pricing introduces potential for cost overruns if not managed carefully. 6. This contract aligns with broader defense modernization efforts to maintain technological superiority.

Value Assessment

Rating: good

The contract value of $121.3 million for engineering services over approximately 3.7 years appears reasonable for a complex defense system development. Benchmarking against similar large-scale R&D and system integration contracts within the Department of Defense suggests this is within a typical range. The CPFF contract type, while carrying inherent risk, is often used for development efforts where scope is not fully defined, allowing for flexibility. However, rigorous oversight will be crucial to ensure value for money.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that multiple bidders had the opportunity to submit proposals. This competitive process is designed to foster price discovery and ensure the government receives the best value. The specific number of bidders is not provided, but the 'full and open' designation suggests a robust competitive environment was sought.

Taxpayer Impact: A full and open competition generally benefits taxpayers by driving down costs through market forces and encouraging innovation among a wider pool of potential contractors.

Public Impact

The primary beneficiaries are the U.S. military warfighters who will receive enhanced capabilities to counter emerging threats. Services delivered include design, development, integration, and demonstration of the Sea Dragon payload system. The geographic impact is national, supporting defense initiatives, with potential for workforce implications in Arizona where the contractor is based. This initiative contributes to national security by advancing defense technology and maintaining a technological edge.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost Plus Fixed Fee (CPFF) contract type can lead to cost overruns if not closely monitored.
The long duration of the contract (over 3 years) increases the risk of scope creep or changing technological requirements.
Reliance on existing systems might limit the novelty of the solution, potentially impacting long-term effectiveness against advanced threats.

Positive Signals

Awarded through full and open competition, suggesting a competitive pricing environment.
Focus on leveraging existing systems can lead to faster development and deployment, potentially reducing costs and time-to-market.
The project addresses critical defense needs related to emerging near-peer threats, indicating strategic importance and potential for future funding.

Sector Analysis

This contract falls within the Defense Engineering Services sector, a critical area for national security. The market for advanced defense systems is characterized by high R&D investment, long development cycles, and significant government spending. Companies like Raytheon are key players in this sector, competing on technological innovation and system integration capabilities. Comparable spending benchmarks in this area often involve multi-million dollar contracts for system design and development.

Small Business Impact

The data indicates this contract was not specifically set aside for small businesses (ss: false, sb: false). While Raytheon is a large prime contractor, there may be opportunities for small businesses to participate as subcontractors. The extent of small business subcontracting will depend on Raytheon's strategy and the specific needs of the Sea Dragon program.

Oversight & Accountability

Oversight for this contract would typically be managed by the Defense Microelectronics Activity and potentially the Department of Defense's Inspector General. Accountability measures would include adherence to contract milestones, performance metrics, and financial reporting. Transparency is generally maintained through contract awards databases and reporting requirements, though specific technical details may be classified.

Related Government Programs

Defense Advanced Research Projects Agency (DARPA) Projects
Missile Defense Agency Programs
Naval Systems Command Contracts
Air Force Research Laboratory Initiatives

Risk Flags

Potential for cost overruns due to CPFF contract type.
Risk of schedule delays in complex system integration.
Technological obsolescence if 'existing systems' are not sufficiently modern.
Dependency on specific contractor expertise (Raytheon).

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $121.3 million to RAYTHEON COMPANY. ENGINEERING SERVICES, CET 18-830, SEA DRAGON PAYLOAD SYSTEM DESIGN, DEVELOPMENT AND DEMONSTRATION. THE PURPOSE OF THIS TASK IS TO DESIGN, DEVELOP, INTEGRATE AND DEMONSTRATE THE SEA DRAGON FOR COUNTERING EMERGING NEAR PEER THREATS, LEVERAGING EXISTING SYSTEMS TO DEMONSTRATE INNOVATIVE SYSTEMS IN THE NEAR TERM WHICH WILL LEAD TO ADDITIONAL RAPID FIELDING CAPABILITIES FOR THE WARFIGHTER.

Who is the contractor on this award?

The obligated recipient is RAYTHEON COMPANY.

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Microelectronics Activity).

What is the total obligated amount?

The obligated amount is $121.3 million.

What is the period of performance?

Start: 2018-05-04. End: 2022-03-31.

What is the specific nature of the 'emerging near peer threats' that the Sea Dragon system is designed to counter?

The specific nature of the 'emerging near peer threats' is not detailed in the provided data, likely due to classification reasons inherent in defense contracting. However, in the context of defense strategy, 'near peer threats' generally refers to nations possessing military capabilities comparable to or rapidly advancing towards those of the United States. These threats often involve sophisticated electronic warfare, advanced missile systems, cyber capabilities, and integrated air defense networks. The Sea Dragon payload system is therefore likely being developed to provide a countermeasure or enhancement to existing platforms that can address these sophisticated and evolving challenges, ensuring U.S. military dominance in contested environments.

How does the Cost Plus Fixed Fee (CPFF) pricing structure compare to other contract types for similar defense development projects?

The Cost Plus Fixed Fee (CPFF) contract type is common for research and development efforts where the scope of work is not fully defined at the outset, making it difficult to establish a firm fixed price. In a CPFF contract, the contractor is reimbursed for allowable costs plus a predetermined fixed fee representing their profit. This contrasts with Firm-Fixed-Price (FFP) contracts, which are preferred when requirements are well-defined and offer the greatest cost certainty for the government but can be risky for contractors if costs escalate. Cost-Plus-Incentive-Fee (CPIF) contracts offer shared cost savings or overruns between the government and contractor, incentivizing efficiency. For complex, early-stage development like the Sea Dragon system, CPFF provides flexibility but necessitates robust government oversight to control costs and ensure the fixed fee remains reasonable relative to the effort.

What are the potential risks associated with leveraging 'existing systems' for the Sea Dragon payload development?

Leveraging existing systems for the Sea Dragon payload development offers potential benefits such as reduced development time and cost, and easier integration with current military platforms. However, it also presents risks. Firstly, existing systems may not be optimally designed for the new payload's specific requirements, potentially leading to performance compromises or the need for costly modifications. Secondly, the technology within existing systems might be aging, posing risks of obsolescence or compatibility issues with newer components or threats. Thirdly, integrating disparate systems can introduce unforeseen technical challenges and complexities, potentially delaying the project or increasing costs. Finally, relying on legacy components might limit the system's ability to counter the most advanced, cutting-edge threats if those threats exploit vulnerabilities not present in older systems.

What is the typical performance benchmark for engineering services contracts of this magnitude within the Department of Defense?

Performance benchmarks for engineering services contracts of this magnitude within the Department of Defense are multifaceted and depend heavily on the specific technical domain and program goals. For a system development and demonstration contract valued at over $121 million, key performance indicators (KPIs) often include adherence to schedule milestones, meeting defined technical performance specifications (e.g., accuracy, range, processing speed), successful integration of components, and effective demonstration of system capabilities. Contractor performance is typically evaluated through metrics such as on-time delivery, budget adherence (especially critical with CPFF), quality of deliverables, and responsiveness to government feedback. Past performance reviews and award fee evaluations from previous contracts also serve as benchmarks for assessing a contractor's reliability and capability in executing complex engineering tasks.

How does the Defense Microelectronics Activity's role in awarding this contract influence the project's focus and execution?

The Defense Microelectronics Activity (DMEA) is a unique entity within the Department of Defense focused on microelectronics research, development, and sustainment. Its involvement in awarding the Sea Dragon payload system contract suggests a strong emphasis on the microelectronic components and systems underpinning the payload's functionality. This likely means the project will prioritize advanced semiconductor technologies, integrated circuits, and potentially secure microelectronic supply chains. The DMEA's expertise ensures that the project benefits from specialized knowledge in this critical technological area, potentially leading to more resilient, high-performance, and secure microelectronic solutions tailored for defense applications. This focus could also imply closer collaboration with microelectronics industry partners and a rigorous approach to testing and validation of these sensitive components.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Architectural, Engineering, and Related Services › Engineering Services

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

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: SUBJECT TO MULTIPLE AWARD FAIR OPPORTUNITY

Solicitation ID: HQ072715R0001

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: RTX Corp

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: $121,273,335

Exercised Options: $121,273,335

Current Obligation: $121,273,335

Subaward Activity

Number of Subawards: 10

Total Subaward Amount: $2,114,595

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: HQ072716D0006

IDV Type: IDC

Timeline