Raytheon Company awarded $162.3M for engineering services to support critical defense systems

Contract Overview

Contract Amount: $162,303,411 ($162.3M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2019-05-28

End Date: 2022-07-31

Contract Duration: 1,160 days

Daily Burn Rate: $139.9K/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 19-959, MULTIPLE ENHANCED TERMINAL EFFECTOR OPERATIONAL RAPID RESPONSE (METEOR)

Place of Performance

Location: TUCSON, PIMA County, ARIZONA, 85756

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $162.3 million to RAYTHEON COMPANY for work described as: ENGINEERING SERVICES, CET 19-959, MULTIPLE ENHANCED TERMINAL EFFECTOR OPERATIONAL RAPID RESPONSE (METEOR) Key points: 1. Contract awarded via full and open competition, suggesting a robust market. 2. Services are for engineering support of the Multiple Enhanced Terminal Effector Operational Rapid Response (METEOR) program. 3. Contract type is Cost Plus Fixed Fee, which can incentivize cost overruns if not managed carefully. 4. Performance period spans over three years, indicating a long-term need for these services. 5. The contract was awarded to a single vendor, Raytheon Company, for a specific set of services. 6. The value of the contract is significant, reflecting the complexity and importance of the METEOR program.

Value Assessment

Rating: good

The contract value of $162.3 million for engineering services appears reasonable given the scope of supporting a critical defense program like METEOR. Benchmarking against similar large-scale engineering support contracts for advanced defense systems would provide further context. The Cost Plus Fixed Fee (CPFF) structure necessitates close monitoring to ensure cost efficiency, as it allows for reimbursement of costs plus a fixed fee, potentially leading to higher final costs if not managed diligently. The base award amount of $1.4 million suggests an initial scope, with the total value representing the potential ceiling for the contract duration.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that multiple qualified vendors had the opportunity to bid. The specific number of bidders is not provided, but the designation suggests a competitive process was initiated. A full and open competition generally leads to better price discovery and potentially more innovative solutions as contractors vie for the award. The fact that it resulted in a single delivery order to Raytheon Company implies they were the selected awardee from this competitive pool.

Taxpayer Impact: Taxpayers benefit from a competitive process that aims to secure the best value for the government. Full and open competition increases the likelihood of receiving competitive pricing and ensures that public funds are used efficiently by leveraging market forces.

Public Impact

The primary beneficiaries are the Department of Defense and its personnel who rely on the METEOR program for critical operational capabilities. The services delivered will ensure the continued functionality, maintenance, and potential upgrades of the METEOR system. The geographic impact is likely concentrated within defense installations and operational theaters where the METEOR system is deployed. Workforce implications include specialized engineering roles within Raytheon Company and potentially at government oversight agencies.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost Plus Fixed Fee (CPFF) contract type can lead to cost overruns if not rigorously managed.
Lack of specific bidder count from the full and open competition makes it difficult to assess the true level of competition.
The long performance period (over 3 years) increases the risk of scope creep or evolving requirements impacting cost and schedule.
Limited information on specific performance metrics makes it challenging to evaluate the contractor's past performance objectively.

Positive Signals

Awarded under full and open competition, indicating a structured procurement process.
Contract supports a critical defense program (METEOR), suggesting strategic importance and likely robust oversight.
The contractor, Raytheon Company, is a major defense contractor with extensive experience in similar programs.
The contract has a defined end date, providing a clear timeframe for service delivery.

Sector Analysis

This contract falls within the Engineering Services sector, specifically supporting defense-related technology. The market for defense engineering services is substantial, driven by the continuous need for modernization, maintenance, and development of advanced military systems. Companies like Raytheon are key players in this sector, competing for significant government contracts. Spending in this area is often characterized by long-term, high-value contracts due to the complexity and strategic importance of the systems involved.

Small Business Impact

The data indicates this contract was not set aside for small businesses (ss: false, sb: false). As a large prime contract awarded to Raytheon Company, there may be opportunities for small businesses to participate as subcontractors. However, the extent of small business subcontracting is not detailed in the provided information. Analysis of subcontracting plans would be necessary to determine the impact on the small business ecosystem.

Oversight & Accountability

Oversight for this contract would typically be managed by the Department of Defense's contracting officers and program managers. The Cost Plus Fixed Fee structure necessitates stringent financial oversight to monitor costs and ensure the fixed fee is justified. Transparency is generally maintained through contract reporting requirements, though specific public-facing transparency measures are not detailed here. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Defense Engineering Services
Advanced Weapons Systems Support
Department of Defense Procurement
Major Defense Contractor Support

Risk Flags

Cost Plus Fixed Fee contract type requires diligent oversight to manage costs.
Long performance period increases potential for scope creep and cost escalation.
Limited public information on specific performance metrics and bidder count.
Potential for contractor to prioritize fee over cost savings in CPFF structure.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $162.3 million to RAYTHEON COMPANY. ENGINEERING SERVICES, CET 19-959, MULTIPLE ENHANCED TERMINAL EFFECTOR OPERATIONAL RAPID RESPONSE (METEOR)

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 $162.3 million.

What is the period of performance?

Start: 2019-05-28. End: 2022-07-31.

What is the historical spending pattern for engineering services related to the METEOR program or similar defense systems?

Analyzing historical spending for the METEOR program or comparable defense systems is crucial for understanding cost trends and identifying potential anomalies. Without specific historical data for METEOR, we can look at broader trends in defense engineering services. The Department of Defense consistently allocates billions of dollars annually to engineering and technical support for its vast array of platforms and systems. Factors influencing this spending include the lifecycle stage of the systems (development, sustainment, modernization), technological advancements, geopolitical threats, and budget appropriations. For instance, major platform upgrades or the introduction of new capabilities often trigger significant increases in engineering service contracts. Benchmarking this $162.3 million award against the average annual spend for similar system support over the past five to ten years would provide valuable context on whether this represents a typical, elevated, or reduced level of investment.

How does the Cost Plus Fixed Fee (CPFF) structure for this contract compare to other engineering service contracts within the Department of Defense?

The Cost Plus Fixed Fee (CPFF) contract type is common within the Department of Defense, particularly for research, development, and complex services where the scope may evolve or is not fully defined at the outset. In a CPFF contract, the contractor is reimbursed for allowable costs plus a fixed fee representing profit. This structure aims to provide flexibility while incentivizing the contractor to control costs to protect their fee. Compared to fixed-price contracts, CPFF carries higher cost risk for the government. However, it can be more appropriate than fixed-price when technical uncertainties are high. Other common contract types include Firm Fixed Price (FFP), where the contractor bears most of the cost risk, and Cost Plus Incentive Fee (CPIF), which adjusts the fee based on performance against targets. The choice of CPFF for this METEOR engineering services contract suggests a recognition of potential uncertainties in the scope or technical requirements, necessitating a balance between flexibility and cost control.

What is Raytheon Company's track record with Cost Plus Fixed Fee contracts, particularly within the Department of Defense?

Raytheon Company, now part of RTX, has an extensive history of performing Cost Plus Fixed Fee (CPFF) contracts with the Department of Defense across a wide range of programs. As a major defense contractor, their experience with various contract types, including CPFF, is substantial. CPFF contracts are often utilized for complex, long-term projects where requirements may evolve, such as system sustainment, upgrades, or development phases. Raytheon's performance on such contracts is generally evaluated based on factors like cost control, schedule adherence, quality of deliverables, and technical execution. While specific performance metrics for all past CPFF contracts are not publicly available, the company's continued success in securing large defense contracts suggests a generally positive track record in managing these types of agreements. However, like any large contractor, there may be instances of cost overruns or performance issues that are subject to government review and oversight.

What are the key performance indicators (KPIs) used to assess the success of this engineering services contract?

Key Performance Indicators (KPIs) for engineering services contracts, especially those supporting critical defense systems like METEOR, are typically established within the contract's Performance Work Statement (PWS) or Statement of Objectives (SOO). While the specific KPIs for this Raytheon contract are not detailed in the provided data, common metrics include technical performance (e.g., system reliability, accuracy, response time), schedule compliance (e.g., meeting milestones for design reviews, testing, or delivery), cost control (e.g., managing expenditures within allocated budgets, especially relevant for CPFF), and quality assurance (e.g., defect rates, adherence to standards). For a program like METEOR, KPIs might also focus on the effectiveness of engineering solutions in enhancing operational capabilities or ensuring system readiness. The government contracting officer and technical representatives monitor these KPIs throughout the contract period to ensure the contractor is meeting its obligations and delivering value.

How does the $162.3 million contract value compare to the overall budget allocated for the METEOR program?

Determining how the $162.3 million contract value compares to the overall budget for the METEOR program requires access to specific program budget documents, which are typically not publicly disclosed in detail. The METEOR program likely has a broader lifecycle budget encompassing research, development, procurement, sustainment, and associated services. This $162.3 million award represents a significant portion allocated for engineering services over its performance period (approximately three years). To assess its proportion, one would need to know the total allocated budget for METEOR during the contract's duration and potentially its total program cost over its entire lifespan. Without this broader program financial context, it's challenging to definitively state if this contract value is high or low relative to the overall program funding. However, given the nature of advanced defense systems, such engineering support contracts are often substantial components of a program's sustainment or upgrade costs.

What are the potential risks associated with the 'multiple enhanced terminal effector operational rapid response' (METEOR) system itself, and how do these engineering services mitigate them?

The 'Multiple Enhanced Terminal Effector Operational Rapid Response' (METEOR) system likely involves complex hardware and software designed for rapid deployment and engagement in tactical environments. Potential risks associated with such systems could include technological obsolescence, integration challenges with existing military networks, cybersecurity vulnerabilities, reliability issues under demanding operational conditions, and the need for continuous upgrades to counter evolving threats. The engineering services procured under this contract are intended to mitigate these risks. This could involve activities such as system diagnostics, performance analysis, software updates, hardware maintenance, reliability improvements, cybersecurity hardening, and potentially the development of new capabilities or modifications. By providing ongoing technical expertise, the engineering services aim to ensure the METEOR system remains effective, secure, and operationally relevant throughout its lifecycle, thereby reducing the risk of system failure or diminished capability.

Industry Classification

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

Product/Service Code: MODIFICATION OF EQUIPMENT › MODIFICATION OF EQUIPMENT

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: $162,303,411

Exercised Options: $162,303,411

Current Obligation: $162,303,411

Actual Outlays: $173,901

Subaward Activity

Number of Subawards: 20

Total Subaward Amount: $6,735,330

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: HQ072716D0006

IDV Type: IDC

Timeline