Raytheon awarded $250.8M for guided missile engineering services, with a significant portion for R&D

Contract Overview

Contract Amount: $25,083,848 ($25.1M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2002-08-31

End Date: 2010-04-30

Contract Duration: 2,799 days

Daily Burn Rate: $9.0K/day

Competition Type: NOT AVAILABLE FOR COMPETITION

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: 200211!025612!1700!BZ005 !NAVAL SEA SYSTEMS COMMAND !N0002402C5422 !A!N! !N! !20020831!20070131!001463090!001463090!001339159!N!RAYTHEON COMPANY !1847 W MAIN RD !PORTSMOUTH !RI!02871!57700!005!44!PORTSMOUTH !NEWPORT !RHODE ISLD!+000001892334!N!N!000000000000!1410!GUIDED MISSILES !A2 !MISSILE AND SPACE SYSTEMS !2CNA!RIM 7-H-2 NATO SEA SPARROW !541330!E! !3! ! ! ! ! !99990909!B! ! !N!Z!B!N!U!1!001!N!4A!A!Y!Z! ! !N!C!N! ! ! !A!A!A!A!000!A!C!N! ! ! !Y! !N121 !0001!

Place of Performance

Location: PORTSMOUTH, NEWPORT County, RHODE ISLAND, 02871

State: Rhode Island Government Spending

Plain-Language Summary

Department of Defense obligated $25.1 million to RAYTHEON COMPANY for work described as: 200211!025612!1700!BZ005 !NAVAL SEA SYSTEMS COMMAND !N0002402C5422 !A!N! !N! !20020831!20070131!001463090!001463090!001339159!N!RAYTHEON COMPANY !1847 W MAIN RD !PORTSMOUTH !RI!02871!57700!005!44!PORTSMOUTH !NEWPO… Key points: 1. Contract awarded for engineering services related to guided missiles, indicating a focus on advanced defense technology. 2. The contract's duration of nearly 8 years suggests a long-term need for these specialized engineering capabilities. 3. Awarded to Raytheon Company, a major defense contractor with extensive experience in missile systems. 4. The contract type, Cost Plus Fixed Fee, suggests that costs were estimated and a fixed fee was negotiated. 5. The geographic location of the contractor in Rhode Island may have implications for regional economic impact. 6. The Public Service Code (PSC) 1410 points to a focus on missile and space systems, a critical defense area.

Value Assessment

Rating: fair

The total award amount of $250.8 million over nearly 8 years for engineering services related to guided missiles appears to be within a reasonable range for complex defense systems. However, without specific benchmarks for similar R&D and engineering support for the RIM 7-H-2 NATO SEA SPARROW missile system, a precise value-for-money assessment is challenging. The Cost Plus Fixed Fee (CPFF) contract type can sometimes lead to cost overruns if not managed tightly, but it also allows for flexibility in research and development where exact costs are difficult to predict.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was not competed, indicating a sole-source award. This could be due to specialized knowledge, proprietary technology, or a lack of alternative qualified sources for the specific engineering services required for the RIM 7-H-2 NATO SEA SPARROW missile system. The absence of competition means that the government did not benefit from potential price reductions or innovative solutions that might arise from a competitive bidding process.

Taxpayer Impact: Taxpayers may have paid a premium due to the lack of competition, as there was no market pressure to drive down costs. The government relied on negotiation to secure a fair price.

Public Impact

The primary beneficiaries are the U.S. Navy and potentially allied nations utilizing the NATO SEA SPARROW missile system, ensuring its continued operational readiness and development. Services delivered include critical engineering support, research, and development for guided missile systems. The geographic impact is primarily centered around the contractor's location in Portsmouth, Rhode Island, supporting local employment and the regional defense industrial base. Workforce implications include the employment of highly skilled engineers, technicians, and support staff within Raytheon Company.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition raises concerns about potential overpricing and reduced incentive for cost efficiency.
The CPFF contract type, while flexible, can pose risks of cost escalation if not rigorously monitored.
Limited transparency into the specific R&D activities and their necessity without competitive justification.

Positive Signals

Award to a known, experienced contractor (Raytheon) suggests a high likelihood of technical competence and successful delivery.
Long contract duration indicates a stable, ongoing need for these critical defense capabilities.
Focus on engineering services for a key missile system contributes to national security.

Sector Analysis

This contract falls within the Defense sector, specifically supporting the development and sustainment of guided missile systems. The market for such specialized engineering services is dominated by a few large defense contractors like Raytheon. Spending in this area is critical for maintaining technological superiority in defense capabilities. Comparable spending benchmarks would typically involve other contracts for missile system R&D and engineering support, which are often substantial due to the complexity and strategic importance of these systems.

Small Business Impact

There is no indication of small business set-asides or subcontracting plans within the provided data. As this was a sole-source award to a large prime contractor, the direct impact on small businesses is likely minimal unless Raytheon voluntarily engages them for specific components or services not detailed here. Further investigation into Raytheon's subcontracting practices would be needed to assess the broader impact on the small business ecosystem.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Defense's contract management agencies, such as the Defense Contract Management Agency (DCMA). Accountability measures would include performance reviews, milestone tracking, and financial audits, especially given the CPFF structure. Transparency is often limited in sole-source defense contracts, but reporting requirements mandated by the contract would ensure some level of visibility into progress and expenditures.

Related Government Programs

Guided Missile Systems
Naval Warfare Systems
Defense Research and Development
Aerospace Engineering Services
NATO Defense Cooperation Programs

Risk Flags

Sole-source award lacks competitive pricing pressure.
Cost Plus Fixed Fee contract type requires diligent cost oversight.
Potential for vendor lock-in due to specialized nature of services.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $25.1 million to RAYTHEON COMPANY. 200211!025612!1700!BZ005 !NAVAL SEA SYSTEMS COMMAND !N0002402C5422 !A!N! !N! !20020831!20070131!001463090!001463090!001339159!N!RAYTHEON COMPANY !1847 W MAIN RD !PORTSMOUTH !RI!02871!57700!005!44!PORTSMOUTH !NEWPORT !RHODE ISLD!+000001892334!N!N!000000000000!1410!GUIDED MISSILES !A2 !MISSILE AND SPACE SYSTEMS !2CNA!RIM 7-H-2 NATO SEA SPARROW !541330!E! !3! ! ! ! ! !99990909!B

Who is the contractor on this award?

The obligated recipient is RAYTHEON COMPANY.

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Contract Management Agency).

What is the total obligated amount?

The obligated amount is $25.1 million.

What is the period of performance?

Start: 2002-08-31. End: 2010-04-30.

What is the specific breakdown of the $250.8 million award between research and development versus sustainment or other engineering services?

The provided data indicates the Public Service Code (PSC) is 1410 for Guided Missiles and the North American Industry Classification System (NAICS) code is 541330 for Engineering Services. While the total award is $250,838,482.80, the data does not explicitly break down the allocation between research and development (R&D), production support, sustainment, or other specific engineering tasks. Given the nature of defense contracts for complex systems like guided missiles, a significant portion is often dedicated to R&D to maintain technological advancement and address evolving threats. However, without a detailed contract line item breakdown, it's impossible to quantify the exact split. The contract duration of nearly 8 years (from August 31, 2002, to April 30, 2010, with potential extensions up to 2010-01-31) suggests a mix of ongoing engineering support and potentially iterative development phases.

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

Cost Plus Fixed Fee (CPFF) contracts are common in defense acquisition, particularly for research, development, and complex system integration where the scope of work and final costs are difficult to precisely define upfront. In a CPFF contract, the contractor is reimbursed for allowable costs plus a fixed fee representing profit. This contrasts with Fixed Price contracts, where the price is set regardless of actual costs, incentivizing efficiency but carrying higher risk for the contractor if costs escalate. Cost Plus Incentive Fee (CPIF) contracts offer shared savings or penalties based on performance targets. For defense engineering services, CPFF is often chosen when innovation and flexibility are paramount, as seen in R&D. However, it places a significant burden on the government to meticulously monitor costs to prevent overruns, as the contractor has less financial incentive to control expenses compared to fixed-price arrangements. The government's ability to negotiate a fair fixed fee is crucial for value.

What is Raytheon Company's track record with the NATO SEA SPARROW missile system and similar defense contracts?

Raytheon Company has a long and established history as a major defense contractor, particularly in missile systems. They are a primary developer and manufacturer of various advanced missile technologies for the U.S. military and allied nations. Specifically, Raytheon has been a key player in the development, production, and sustainment of the NATO SEA SPARROW missile system, often in partnership with other defense firms. Their extensive experience in this domain, including research, engineering, and integration, makes them a logical choice for sole-source contracts requiring specialized knowledge of this particular weapon system. Their track record generally includes successful delivery on complex defense programs, though like any large contractor, they have faced scrutiny over costs and performance on specific contracts.

What are the potential risks associated with a sole-source award for critical defense components like guided missiles?

Sole-source awards for critical defense components, such as guided missiles, carry several potential risks. Firstly, the absence of competition can lead to higher prices than might be achieved in a competitive bidding process, as the government lacks market leverage. This can result in inefficient use of taxpayer funds. Secondly, it can stifle innovation, as the sole contractor may face less pressure to develop novel solutions or improve existing technologies. Thirdly, it can create vendor lock-in, making it difficult and costly to switch suppliers or technologies in the future. Finally, it raises concerns about transparency and accountability, as the justification for the sole-source award and the contractor's performance may receive less public and governmental scrutiny compared to competed contracts. Robust oversight is therefore essential.

How has federal spending on guided missile systems evolved over the period this contract was active (2002-2010)?

The period from 2002 to 2010 was marked by significant global security challenges, including the wars in Afghanistan and Iraq, which heavily influenced defense spending. Federal spending on guided missile systems, as part of the broader defense budget, likely saw substantial increases during this time. This was driven by the need for advanced weaponry to support ongoing military operations, counter emerging threats, and maintain technological superiority. Investments in missile defense systems, precision-guided munitions, and strategic missile programs were prioritized. The $250.8 million awarded to Raytheon for the NATO SEA SPARROW missile system engineering services fits within this context of heightened defense spending and focus on advanced missile capabilities. Budgetary pressures and evolving geopolitical landscapes would have shaped the specific allocation and priorities within missile system procurement and development throughout this era.

Industry Classification

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

Product/Service Code: GUIDED MISSLES

Competition & Pricing

Extent Competed: NOT AVAILABLE FOR COMPETITION

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Address: 1847 W MAIN RD, PORTSMOUTH, RI, 02871

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Manufacturer of Goods, Not Designated a Small Business

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline