Raytheon Company awarded $78.2M for Missile Defense Agency simulation support, a cost-plus award fee contract

Contract Overview

Contract Amount: $78,232,249 ($78.2M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2020-07-01

End Date: 2023-04-28

Contract Duration: 1,031 days

Daily Burn Rate: $75.9K/day

Competition Type: FULL AND OPEN COMPETITION

Pricing Type: COST PLUS AWARD FEE

Sector: Defense

Official Description: OSM/OSI MODELS AND SIMULATION SUPPORT - TASK ORDER 0004 AWARD

Place of Performance

Location: WOBURN, MIDDLESEX County, MASSACHUSETTS, 01801

State: Massachusetts Government Spending

Plain-Language Summary

Department of Defense obligated $78.2 million to RAYTHEON COMPANY for work described as: OSM/OSI MODELS AND SIMULATION SUPPORT - TASK ORDER 0004 AWARD Key points: 1. Contract value represents significant investment in advanced simulation capabilities. 2. Full and open competition suggests a potentially competitive bidding process. 3. Cost-plus award fee structure incentivizes performance but requires careful oversight. 4. Contract duration of over 1000 days indicates a long-term need for these services. 5. Focus on engineering services highlights the technical complexity of missile defense systems.

Value Assessment

Rating: fair

The contract's value of $78.2 million for simulation and modeling support is substantial. Benchmarking against similar contracts for complex engineering services within the defense sector is crucial. The cost-plus award fee (CPAF) structure, while common for R&D and complex services, can lead to higher costs if not managed tightly, as the contractor is reimbursed for costs plus a fee that is tied to performance. Without detailed performance metrics and fee structures, it's difficult to definitively assess value for money, but the CPAF model inherently carries a higher risk of cost overruns compared to fixed-price contracts.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that all responsible sources were permitted to submit offers. The specific number of bidders is not provided, but this procurement method generally fosters a competitive environment, which can lead to better pricing and innovation. The Missile Defense Agency's decision to use full and open competition suggests confidence in the market's ability to provide the required simulation and modeling support.

Taxpayer Impact: Full and open competition is generally favorable for taxpayers as it increases the likelihood of receiving competitive pricing and encourages a wider range of solutions, potentially leading to cost savings and improved service delivery.

Public Impact

The Department of Defense, specifically the Missile Defense Agency, benefits from enhanced simulation and modeling capabilities. Services delivered include support for OSM/OSI models and simulation, crucial for testing and validating missile defense systems. The geographic impact is primarily within the defense sector, supporting national security objectives. Workforce implications include employment for engineers and technical specialists involved in simulation and defense systems.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost-plus award fee contracts can lead to higher final costs if performance targets are not rigorously defined and monitored.
Lack of specific bidder count makes it difficult to fully assess the degree of competition achieved.
The long contract duration necessitates sustained oversight to ensure continued value and alignment with evolving defense needs.

Positive Signals

Awarded under full and open competition, suggesting a robust market response.
The contract supports critical national security functions within the Missile Defense Agency.
The use of an award fee structure, if well-implemented, can incentivize high performance from the contractor.

Sector Analysis

This contract falls within the Engineering Services sector (NAICS 541330), a critical component of the broader aerospace and defense industry. The market for simulation and modeling support is highly specialized, driven by the complex requirements of advanced technology development, particularly in defense. Spending in this area is often characterized by long-term, high-value contracts due to the intricate nature of the systems being developed and tested. Comparable spending benchmarks would typically involve other large-scale defense contracts for system design, integration, and testing.

Small Business Impact

The data indicates this contract was not set aside for small businesses (SS: false, SB: false). Raytheon Company is a large prime contractor. While the contract itself does not appear to have a small business set-aside component, large prime contractors are often required to meet subcontracting goals with small businesses. The extent to which Raytheon will utilize small businesses for subcontracting under this specific task order is not detailed here, but it is a common practice within the defense industry to leverage the small business ecosystem for specialized services.

Oversight & Accountability

Oversight for this contract would primarily reside with the Missile Defense Agency and the Department of Defense contracting and program management offices. The cost-plus award fee structure necessitates robust performance monitoring and evaluation to determine the award fee. Transparency is typically managed through contract reporting requirements and oversight by the Government Accountability Office (GAO) and potentially the Inspector General, depending on the nature of any issues that may arise. The contract's duration suggests ongoing oversight will be critical.

Related Government Programs

Missile Defense Systems
Simulation and Modeling Services
Aerospace Engineering Support
Department of Defense Research and Development
Cost-Plus Contracts

Risk Flags

Cost-plus contract type requires diligent oversight to manage costs.
Performance metrics for award fee must be clearly defined and measurable.
Long contract duration necessitates sustained government monitoring.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $78.2 million to RAYTHEON COMPANY. OSM/OSI MODELS AND SIMULATION SUPPORT - TASK ORDER 0004 AWARD

Who is the contractor on this award?

The obligated recipient is RAYTHEON COMPANY.

Which agency awarded this contract?

Awarding agency: Department of Defense (Missile Defense Agency).

What is the total obligated amount?

The obligated amount is $78.2 million.

What is the period of performance?

Start: 2020-07-01. End: 2023-04-28.

What is Raytheon Company's track record with the Missile Defense Agency and similar simulation support contracts?

Raytheon Company, now RTX, has a long and extensive history of supporting the Missile Defense Agency (MDA) and other Department of Defense (DoD) entities with complex systems engineering, integration, and simulation capabilities. They are a primary contractor for numerous critical missile defense programs, including radar systems, interceptors, and command and control systems. Their experience spans decades, involving significant R&D, testing, and sustainment efforts. For simulation support specifically, Raytheon has been involved in developing and maintaining sophisticated modeling and simulation environments essential for designing, testing, and training for missile defense scenarios. This includes high-fidelity simulations of threats, countermeasures, and system performance. Their track record generally indicates a strong technical capability, though like any large defense contractor, they have faced scrutiny on specific program costs and performance metrics over the years. This particular contract builds upon that established relationship and technical expertise.

How does the $78.2 million award compare to historical spending on similar simulation and modeling support for missile defense?

The $78.2 million award for OSM/OSI Models and Simulation Support (Task Order 0004) represents a significant, but not unprecedented, investment in this specialized area. Historical spending by the Missile Defense Agency (MDA) on simulation, modeling, analysis, and testing (SMAT) has consistently been in the billions of dollars annually. This specific task order, awarded in 2020 and ending in 2023, is one component of a larger contracting effort. For context, the MDA's overall budget often exceeds $10 billion per year, with a substantial portion allocated to research, development, testing, and evaluation (RDT&E). Contracts for simulation support, system integration, and engineering services frequently range from tens to hundreds of millions of dollars, depending on their scope, duration, and complexity. Therefore, while $78.2 million is a substantial sum for a single task order, it aligns with the typical scale of investment required for advanced simulation capabilities within major defense programs like missile defense.

What are the primary risks associated with a Cost Plus Award Fee (CPAF) contract for simulation support?

The primary risks associated with a Cost Plus Award Fee (CPAF) contract for simulation support, like the one awarded to Raytheon, revolve around cost control and performance definition. For the government, the main risk is that costs could escalate beyond initial projections, as the contractor is reimbursed for allowable costs incurred. The 'award fee' component introduces another layer of complexity; it incentivizes performance but requires the government to establish clear, objective, and measurable performance criteria. If these criteria are poorly defined, subjective, or not rigorously monitored, the government may end up paying higher fees than warranted, or conversely, fail to adequately reward exceptional performance. For the contractor, the risk lies in managing costs effectively to ensure a reasonable profit margin after the fee is determined, and in meeting or exceeding the performance standards set by the government to maximize their award fee. Effective oversight, robust performance metrics, and clear communication are crucial to mitigate these risks.

How does the 'full and open competition' procurement method impact the value and innovation for this missile defense simulation contract?

The 'full and open competition' method used for this contract is designed to maximize value and foster innovation by allowing any responsible source to submit an offer. This broadens the potential pool of bidders, increasing the likelihood that the Missile Defense Agency (MDA) receives competitive proposals that offer the best combination of technical approach, past performance, and price. By opening the competition widely, the MDA increases the chances of discovering innovative solutions or more cost-effective approaches that might not emerge from a more restricted procurement. This competitive pressure can drive down prices and encourage contractors to propose cutting-edge technologies and methodologies to win the contract. Furthermore, it provides a strong basis for the government to negotiate favorable terms, knowing that multiple capable companies are vying for the work. The ultimate impact on value and innovation depends on the specific requirements outlined in the solicitation and the quality of the proposals received.

What are the potential implications of this contract on the broader missile defense simulation and modeling market?

This contract, awarded to a major incumbent like Raytheon (RTX), reinforces the existing market structure for high-end missile defense simulation and modeling. It signifies continued demand for sophisticated simulation capabilities within the MDA, likely involving proprietary models and extensive datasets. The 'full and open competition' aspect suggests that while incumbents are strong, new entrants or smaller specialized firms could potentially compete if they possess unique capabilities or offer compelling value propositions. However, the high barriers to entry—including technical expertise, security clearances, and established relationships—often favor large, experienced defense contractors. The contract's duration and value indicate a stable, long-term need, which can influence R&D investments by companies seeking to align their offerings with MDA requirements. It also highlights the critical role of simulation in the lifecycle of defense systems, from design and development through sustainment and training.

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: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: HQ014716R0051

Pricing Type: COST PLUS AWARD FEE (R)

Evaluated Preference: NONE

Contractor Details

Parent Company: Rockwell Collins Australia PTY Limited

Address: 225 PRESIDENTIAL WAY, WOBURN, MA, 01801

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: $101,289,943

Exercised Options: $99,284,391

Current Obligation: $78,232,249

Actual Outlays: $38,992,546

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: HQ014718D0003

IDV Type: IDC

Timeline