Raytheon Company awarded $60M for engineering services, including payload system technical data package development

Contract Overview

Contract Amount: $60,000,000 ($60.0M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2019-07-30

End Date: 2023-04-30

Contract Duration: 1,370 days

Daily Burn Rate: $43.8K/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 19-974, PAYLOAD SYSTEM TECHNICAL DATA PACKAGE DEVELOPMENT AND PLATFORM DEMONSTRATION

Place of Performance

Location: TUCSON, PIMA County, ARIZONA, 85756

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $60.0 million to RAYTHEON COMPANY for work described as: ENGINEERING SERVICES, CET 19-974, PAYLOAD SYSTEM TECHNICAL DATA PACKAGE DEVELOPMENT AND PLATFORM DEMONSTRATION Key points: 1. Contract value of $60 million for engineering services indicates a significant investment in specialized technical development. 2. The contract's focus on payload systems suggests a critical role in advanced defense technology. 3. A duration of 1370 days points to a long-term project requiring sustained engineering expertise. 4. The 'Cost Plus Fixed Fee' contract type suggests potential for cost overruns if not managed closely. 5. Full and open competition implies a robust bidding process, potentially leading to competitive pricing. 6. The award to Raytheon Company, a major defense contractor, highlights the concentration of specialized work within large industry players.

Value Assessment

Rating: good

The contract value of $60 million for engineering services, specifically for payload system technical data package development and platform demonstration, appears reasonable given the complexity and duration. Benchmarking against similar large-scale engineering contracts for defense systems suggests this price point is within expected ranges. The 'Cost Plus Fixed Fee' structure, while common for R&D-intensive projects, warrants close monitoring to ensure value for money and prevent uncontrolled cost escalation.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that multiple bidders were likely considered. The specific number of bidders is not provided, but this procurement method generally fosters a competitive environment, which should theoretically lead to more favorable pricing and better technical solutions for the government. The absence of limitations suggests a broad search for the best qualified contractor.

Taxpayer Impact: Full and open competition is beneficial for taxpayers as it maximizes the potential for cost savings through a wider range of proposals and encourages innovation among potential bidders.

Public Impact

The primary beneficiaries are the Department of Defense, which will receive advanced payload system technical data and platform demonstrations. This contract supports the development of critical defense technologies, enhancing national security capabilities. The geographic impact is primarily centered in Arizona, where Raytheon's operations are located, potentially creating or sustaining high-skilled jobs in the region. The project will likely involve a workforce of specialized engineers, technicians, and project managers, contributing to the skilled labor pool in the aerospace and defense sector.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost Plus Fixed Fee contract type can lead to higher final costs if not rigorously managed.
Long project duration increases the risk of scope creep and evolving technological requirements.
Reliance on a single large contractor may limit opportunities for smaller, innovative firms in future related work.

Positive Signals

Awarded through full and open competition, suggesting a competitive process that should yield good value.
The contract is for critical engineering services, indicating a focus on essential defense capabilities.
Raytheon Company is a well-established defense contractor with a proven track record in complex systems development.

Sector Analysis

This contract falls within the Engineering Services sector, a critical component of the broader aerospace and defense industry. The market for specialized engineering services supporting advanced defense platforms is substantial, driven by continuous technological evolution and national security requirements. Comparable spending benchmarks for similar payload system development projects can vary widely based on complexity, but a $60 million award for a multi-year effort is indicative of a significant undertaking.

Small Business Impact

There is no indication that this contract included a small business set-aside. Given the nature of the work and the prime contractor, it is likely that any subcontracting opportunities would be managed by Raytheon. The impact on the small business ecosystem would depend on Raytheon's subcontracting strategy, with potential for some opportunities if specialized services are outsourced.

Oversight & Accountability

Oversight for this contract would typically be managed by the Defense Microelectronics Activity (DMEA) within the Department of Defense. Accountability measures would be embedded in the contract's terms, including performance metrics, reporting requirements, and payment schedules tied to milestones. Transparency is generally maintained through contract awards databases, though specific project details may be sensitive. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Defense Microelectronics Activity Contracts
Aerospace Engineering Services
Payload Development Programs
Technical Data Package Generation
Platform Demonstration Contracts

Risk Flags

Cost Overrun Risk (CPFF)
Technological Obsolescence
Scope Creep Potential
Long-Term Project Management Challenges

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $60.0 million to RAYTHEON COMPANY. ENGINEERING SERVICES, CET 19-974, PAYLOAD SYSTEM TECHNICAL DATA PACKAGE DEVELOPMENT AND PLATFORM DEMONSTRATION

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 $60.0 million.

What is the period of performance?

Start: 2019-07-30. End: 2023-04-30.

What is Raytheon Company's track record with similar engineering services contracts for the Department of Defense?

Raytheon Company, now part of RTX, has an extensive track record with the Department of Defense, frequently securing large contracts for complex engineering, development, and manufacturing of defense systems. They are known for their work in areas such as missiles, radar, avionics, and cybersecurity. Historical data indicates Raytheon consistently performs on major defense contracts, though like any large contractor, they have faced scrutiny over specific project costs and timelines. Their experience in payload system development and technical data package generation is substantial, given their broad portfolio in aerospace and defense technologies. Analyzing past performance on similar Cost Plus Fixed Fee contracts would provide further insight into their ability to manage budgets and deliver within scope.

How does the $60 million contract value compare to similar payload system engineering contracts?

The $60 million contract value for payload system technical data package development and platform demonstration appears to be within a moderate range for such specialized engineering services within the defense sector. However, direct comparisons are challenging without knowing the specific technical scope, complexity, and duration of comparable contracts. Contracts for highly advanced or novel payload systems, especially those involving cutting-edge research and development or extensive testing, can easily exceed this amount, sometimes reaching hundreds of millions or even billions of dollars. Conversely, simpler or more incremental development efforts might be awarded for less. The 'Cost Plus Fixed Fee' structure also means the final cost could deviate from the initial $60 million estimate, making precise benchmarking difficult.

What are the primary risks associated with this Cost Plus Fixed Fee contract type?

The primary risk associated with a Cost Plus Fixed Fee (CPFF) contract is the potential for cost overruns. In a CPFF arrangement, the contractor is reimbursed for allowable costs plus a predetermined fixed fee representing profit. While the fee is fixed, the total cost is not. If the contractor incurs higher-than-expected costs due to inefficiencies, unforeseen technical challenges, or scope creep, the government bears the burden of these increased expenses, up to the contract's ceiling. This structure can disincentivize cost control by the contractor, as their profit margin (the fixed fee) remains constant regardless of the actual costs incurred. Effective oversight, detailed cost tracking, and robust change management are crucial to mitigate these risks.

What does the 'full and open competition' designation imply for program effectiveness?

The 'full and open competition' designation suggests that the Defense Microelectronics Activity sought proposals from all responsible sources and that no restrictions were placed on the number or types of offerors. This approach is generally intended to maximize competition, leading to the best possible technical solutions and pricing for the government. For program effectiveness, it implies that the selected contractor, Raytheon Company, was chosen based on a rigorous evaluation of their technical capabilities, past performance, and proposed approach, theoretically ensuring they are the most qualified entity to meet the program's objectives. It also suggests a broader market was tapped, potentially fostering innovation and ensuring the government receives optimal value.

How does the contract's duration (1370 days) impact project management and risk?

A contract duration of 1370 days (approximately 3.75 years) for engineering services indicates a long-term, complex project. This extended timeline presents several project management challenges and risks. Firstly, it increases the likelihood of technological obsolescence or the need for requirement changes as the defense landscape evolves. Secondly, maintaining consistent project focus and team continuity over such a long period can be difficult. Thirdly, the potential for scope creep is higher, as requirements may be added or modified over time. Effective risk management strategies, including regular reviews, adaptive planning, and strong communication channels, are essential to navigate these challenges and ensure the project remains on track and relevant throughout its lifecycle.

What is the significance of the 'Engineering Services' NAICS code (541330) in this context?

The North American Industry Classification System (NAICS) code 541330, 'Engineering Services,' signifies that the primary business activity covered by this contract involves the application of engineering principles and knowledge to provide services such as design, development, consulting, and project management. For this specific contract, it means the work focuses on the technical and analytical aspects of developing payload systems and demonstrating platform capabilities. This code is broad but accurately categorizes the core function, distinguishing it from manufacturing, research, or other service types. It helps in understanding the type of expertise required and allows for comparison with other government contracts classified under the same industry standard.

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: $61,329,072

Exercised Options: $61,329,072

Current Obligation: $60,000,000

Actual Outlays: $3,550,730

Subaward Activity

Number of Subawards: 2

Total Subaward Amount: $295,347

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: HQ072716D0006

IDV Type: IDC

Timeline