Raytheon Company awarded $38.8M for non-recurring engineering on aircraft parts, a sole-source contract

Contract Overview

Contract Amount: $38,797,582 ($38.8M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2022-12-01

End Date: 2028-02-29

Contract Duration: 1,916 days

Daily Burn Rate: $20.2K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: PDS EED NON-RECURRING ENGINEERING

Place of Performance

Location: INDIANAPOLIS, MARION County, INDIANA, 46219

State: Indiana Government Spending

Plain-Language Summary

Department of Defense obligated $38.8 million to RAYTHEON COMPANY for work described as: PDS EED NON-RECURRING ENGINEERING Key points: 1. Contract awarded on a sole-source basis, limiting price competition. 2. Significant portion allocated to non-recurring engineering, suggesting upfront development costs. 3. Contract duration extends over five years, indicating a long-term need. 4. The contract type is Cost Plus Fixed Fee, which can lead to cost overruns. 5. Awarded by the Department of the Navy, a major defense spender. 6. The specific North American Industry Classification System (NAICS) code is 336413, related to aircraft parts manufacturing.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to its sole-source nature and focus on non-recurring engineering. Without competitive bids, it's difficult to ascertain if the fixed fee accurately reflects the effort required. The Cost Plus Fixed Fee structure introduces risk, as the government bears the cost of performance, and the contractor is incentivized to complete the work within the fixed fee. Comparing this to similar sole-source non-recurring engineering contracts within the Department of Defense would be necessary for a more precise value assessment.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was not competed, meaning there was no open solicitation for other companies to bid on the work. Sole-source awards are typically justified when only one responsible source can provide the required supplies or services. The lack of competition means that price discovery through market forces was absent, potentially leading to a higher price than if multiple bidders had vied for the contract.

Taxpayer Impact: Taxpayers may have paid a premium due to the absence of competitive bidding. The government did not benefit from the cost-saving pressures that typically arise from a competitive procurement process.

Public Impact

The Department of the Navy benefits from specialized engineering services for aircraft parts. This contract supports the development and refinement of critical aircraft components. The geographic impact is primarily within Indiana, where the contractor is located. The contract may indirectly support a specialized workforce in aerospace engineering and manufacturing.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing and potential cost savings for taxpayers.
Cost Plus Fixed Fee contract type carries inherent risk of cost overruns.
Lack of transparency in the justification for sole-source award.
Long contract duration could mask inefficiencies or scope creep over time.

Positive Signals

Award to a known entity, Raytheon Company, suggests potential for established expertise.
Focus on non-recurring engineering indicates investment in future capabilities or product improvement.
Contract supports a critical defense need for the Department of the Navy.

Sector Analysis

The aerospace and defense sector is characterized by high R&D investment and complex manufacturing processes. Contracts for non-recurring engineering are crucial for developing new technologies and improving existing platforms. The Department of Defense is a significant customer in this sector, often awarding large, specialized contracts. Benchmarks for similar non-recurring engineering efforts are highly specific to the technology and scope, making broad comparisons difficult.

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 focus on specialized engineering for a large prime contractor suggests that direct subcontracting opportunities for small businesses may be limited unless they are highly specialized suppliers within Raytheon's supply chain.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy's contracting and program management offices. Accountability measures would be tied to the Cost Plus Fixed Fee structure, requiring detailed cost reporting and performance monitoring. Transparency regarding the sole-source justification and the breakdown of costs would be key areas for oversight. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Department of Defense Aircraft Procurement
Naval Aviation Systems Development
Aerospace Engineering Services Contracts
Cost-Plus-Fixed-Fee Contracts

Risk Flags

Sole-source award
Cost Plus Fixed Fee contract type
Potential for cost overruns
Lack of competitive pricing

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $38.8 million to RAYTHEON COMPANY. PDS EED NON-RECURRING ENGINEERING

Who is the contractor on this award?

The obligated recipient is RAYTHEON COMPANY.

Which agency awarded this contract?

Awarding agency: Department of Defense (Department of the Navy).

What is the total obligated amount?

The obligated amount is $38.8 million.

What is the period of performance?

Start: 2022-12-01. End: 2028-02-29.

What is the specific justification provided by the Department of the Navy for awarding this contract on a sole-source basis to Raytheon Company?

The provided data indicates the contract was 'NOT COMPETED', which is synonymous with a sole-source award. However, the specific justification for this determination is not detailed in the provided data snippet. Typically, sole-source justifications are required under federal acquisition regulations (FAR) and must demonstrate that only one responsible source can satisfy the agency's needs. Reasons can include unique capabilities, urgent needs, or specific research and development requirements where competition is not feasible or practical. A thorough review of the contract award documentation, specifically the Justification for Other Than Full and Open Competition (JOFOC), would be necessary to understand the precise rationale.

How does the 'non-recurring engineering' cost component compare to typical contract values for similar aircraft parts or systems?

The data shows $38,797,582.18 allocated to 'PDS EED NON-RECURRING ENGINEERING'. Non-recurring engineering (NRE) costs are typically one-time expenses incurred during the design and development phase of a product or system, before production begins. These costs are distinct from recurring costs, which are associated with each unit produced. The proportion of NRE to the total contract value can vary significantly depending on the complexity of the item, the maturity of the technology, and whether it's a new development or an upgrade. Without knowing the specific aircraft part or system, and whether this is a new design or an improvement, it's difficult to benchmark this NRE amount directly. However, for complex defense systems, NRE can represent a substantial portion of the initial investment.

What are the potential risks associated with the 'COST PLUS FIXED FEE' contract type for this specific procurement?

The Cost Plus Fixed Fee (CPFF) contract type presents several risks for the government. In a CPFF contract, the contractor is reimbursed for all allowable costs incurred plus a fixed fee representing profit. The primary risk is that the contractor may have less incentive to control costs compared to fixed-price contracts, as the government absorbs cost overruns. While the fixed fee provides some incentive for the contractor to complete the work efficiently to maximize their profit margin relative to the fee, the overall cost to the government can escalate if actual costs significantly exceed initial estimates. This structure requires robust government oversight to monitor costs and ensure efficiency.

What is the significance of the contract duration (1916 days) in relation to the total contract value?

The contract has a duration of 1916 days, which is approximately 5.25 years, and a total value of $38,797,582.18. This translates to an average annual value of roughly $7.39 million ($38.8M / 5.25 years). A long duration for a non-recurring engineering contract suggests that the development or refinement process is expected to be extensive, potentially involving multiple phases, testing, and integration efforts. It also implies a sustained need for these engineering services by the Department of the Navy. The extended timeline could also be a factor in the overall cost, allowing for phased development and payment, but it necessitates ongoing oversight to ensure progress and prevent delays or scope creep.

How does the award to Raytheon Company align with historical spending patterns for aircraft parts and auxiliary equipment manufacturing by the Department of the Navy?

Raytheon Company is a major defense contractor with a long history of supplying various systems and components to the Department of Defense, including the Navy. The NAICS code 336413 ('Other Aircraft Parts and Auxiliary Equipment Manufacturing') falls within the defense industrial base. The Department of the Navy consistently spends billions of dollars annually on aircraft, related parts, maintenance, and upgrades. Awarding contracts, even sole-source ones for specialized engineering, to established prime contractors like Raytheon is a common practice within these historical spending patterns. The specific value of $38.8 million is significant but likely represents a fraction of the Navy's overall annual spending in this category.

Industry Classification

NAICS: Manufacturing › Aerospace Product and Parts Manufacturing › Other Aircraft Parts and Auxiliary Equipment Manufacturing

Product/Service Code: AEROSPACE CRAFT COMPONENTS AND ACCESSORIES

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

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: $47,674,491

Exercised Options: $43,032,902

Current Obligation: $38,797,582

Subaward Activity

Number of Subawards: 14

Total Subaward Amount: $8,920,239

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: N0001920G0007

IDV Type: BOA

Timeline