DoD's $189M engineering services contract with Raytheon Company awarded in 2004, with a 1503-day duration

Contract Overview

Contract Amount: $189,283,546 ($189.3M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2004-08-19

End Date: 2008-09-30

Contract Duration: 1,503 days

Daily Burn Rate: $125.9K/day

Competition Type: FOLLOW ON TO COMPETED ACTION

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Place of Performance

Location: TUCSON, PIMA County, ARIZONA, 85756

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $189.3 million to RAYTHEON COMPANY for work described as: Key points: 1. The contract's value of $189.3 million over its 1503-day term suggests a significant investment in engineering services. 2. Awarded as a follow-on to a competed action, this indicates a potential for competitive pricing in the initial award. 3. The Cost Plus Fixed Fee (CPFF) contract type carries inherent risk of cost overruns, requiring robust oversight. 4. The duration of over four years suggests a long-term need for these engineering services within the Department of Defense. 5. The North American Industry Classification System (NAICS) code 541330 points to a focus on engineering services, a critical component of defense procurement. 6. The contract was awarded to Raytheon Company, a major defense contractor with a substantial track record.

Value Assessment

Rating: fair

Benchmarking the value of this contract is challenging without specific deliverables or performance metrics. However, the CPFF structure suggests that the government bears the risk of cost increases, which can lead to less favorable value if not managed tightly. Comparing this to similar long-term engineering service contracts within the DoD would be necessary for a more precise value assessment. The fixed fee component provides some cost certainty for the contractor's profit, but the overall cost to the government is variable.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded as a 'FOLLOW ON TO COMPETED ACTION,' implying that the original contract was subject to full and open competition. This suggests that multiple bidders likely participated in the initial procurement, which generally leads to more competitive pricing. However, the specifics of the follow-on nature and whether it was re-competed or awarded under different terms are not detailed here.

Taxpayer Impact: A competitive initial award is generally beneficial for taxpayers as it helps ensure fair market prices are achieved, preventing overpayment for services.

Public Impact

The primary beneficiaries are likely the various branches and agencies within the Department of Defense requiring specialized engineering expertise. The services delivered are engineering solutions crucial for defense systems development, maintenance, or upgrades. The contract's geographic impact is noted as Arizona (AZ), suggesting a concentration of work or contractor presence in that state. The contract supports a workforce of engineers and technical professionals, contributing to employment in the defense sector.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

The CPFF contract type can incentivize higher spending as the contractor is reimbursed for costs plus a fixed fee, potentially leading to less cost-consciousness.
Long contract durations (1503 days) can increase the risk of scope creep or evolving requirements that may not be optimally priced from the outset.
Lack of specific performance metrics or deliverables in the provided data makes it difficult to assess the true value and effectiveness of the engineering services.
The follow-on nature, while stemming from a competed action, might limit direct competition for subsequent phases if not re-competed explicitly.

Positive Signals

Awarded as a follow-on to a competed action, indicating a foundation of competitive pricing from the initial award.
Raytheon Company is a large, established defense contractor with significant experience and resources, suggesting a higher likelihood of successful project execution.
The contract addresses a clear need for engineering services within the Department of Defense, a critical function for national security.
The fixed fee component of the CPFF contract provides a defined profit margin for the contractor, offering some predictability.

Sector Analysis

The engineering services sector within the defense industry is highly specialized and critical for maintaining technological superiority. This contract falls under the broader umbrella of defense contracting, which represents a significant portion of federal spending. Comparable spending benchmarks would involve analyzing other large-scale engineering support contracts awarded by the DoD or other federal agencies for similar types of services, considering factors like duration, complexity, and specific technical requirements.

Small Business Impact

The provided data indicates that this contract was not set aside for small businesses (ss: false, sb: false). As a large contract awarded to a major prime contractor, Raytheon Company, the primary impact on small businesses would likely be through subcontracting opportunities. The extent to which Raytheon engages small businesses as subcontractors would determine the contract's overall effect on the small business ecosystem.

Oversight & Accountability

Oversight for this contract would typically be managed by the Defense Contract Management Agency (DCMA), as indicated by the 'sa' field. They are responsible for ensuring contract compliance, monitoring performance, and verifying costs. The CPFF structure necessitates close financial oversight to manage reimbursable expenses. Transparency would depend on the agency's reporting practices and any specific clauses related to public disclosure of contract details and performance.

Related Government Programs

Defense Engineering Services
Raytheon Company Contracts
Department of Defense Procurement
Cost Plus Fixed Fee Contracts
Follow-on Contracts

Risk Flags

Cost Plus Fixed Fee contract type carries inherent risk of cost overruns.
Long contract duration may lead to scope creep or outdated requirements if not managed proactively.
Lack of specific performance metrics hinders objective value assessment.
Follow-on nature requires verification of competition for the subsequent action.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $189.3 million to RAYTHEON COMPANY. See the official description on USAspending.

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 $189.3 million.

What is the period of performance?

Start: 2004-08-19. End: 2008-09-30.

What specific engineering services were provided under this contract?

The provided data identifies the contract as being for 'Engineering Services' under NAICS code 541330. However, it does not detail the specific nature of these services. Typically, engineering services in the defense sector can encompass a wide range of activities, including research and development support, systems design and integration, testing and evaluation, technical analysis, program management support, and lifecycle engineering for military platforms and equipment. Without further documentation, the precise scope of work remains unspecified.

How does the $189.3 million value compare to similar DoD engineering contracts?

Comparing the $189.3 million value requires context regarding the contract's duration (1503 days, approx. 4 years) and the specific services rendered. Large-scale, long-term engineering support contracts for major defense programs can easily reach or exceed this value. For instance, contracts for developing new weapon systems, providing sustainment engineering for aircraft fleets, or supporting complex IT infrastructure modernization often involve hundreds of millions of dollars over several years. This contract's value appears substantial but within the expected range for significant, multi-year engineering efforts within the DoD.

What are the primary risks associated with a Cost Plus Fixed Fee (CPFF) contract of this magnitude?

The primary risk with a CPFF contract is that the government bears the cost risk. While the contractor's profit is fixed, there is less incentive for them to control costs rigorously, as all allowable costs are reimbursed. This can lead to cost overruns if not managed effectively through stringent oversight, detailed audits, and clear performance metrics. For a contract valued at $189.3 million over four years, the potential for significant cost escalation is a key concern that requires robust government monitoring of expenditures and contractor performance.

What does 'FOLLOW ON TO COMPETED ACTION' imply for cost and competition?

This designation suggests that the original contract that this one succeeded was awarded through a competitive bidding process. This generally implies that the initial award was made after evaluating multiple proposals, leading to a more competitive price. However, for the 'follow-on' action itself, it could mean several things: it might have been awarded competitively again, or it could have been a sole-source modification or extension if the follow-on work was unique or closely tied to the original effort. Without more detail, we assume the initial award benefited from competition, but the terms of the follow-on award itself require further scrutiny.

What is the significance of the contract being awarded to Raytheon Company?

Raytheon Company (now part of RTX Corporation) is one of the largest defense contractors globally, with extensive experience in various defense technologies and engineering services. Awarding a contract of this size to such a prime contractor suggests the work is complex and requires significant technical expertise and resources. It also implies a level of trust and established relationship between the contractor and the Department of Defense. While large contractors can offer economies of scale and deep expertise, it also means a significant portion of defense spending is concentrated among a few major players.

How does the contract's duration (1503 days) impact its assessment?

A duration of 1503 days, approximately four years, indicates a long-term requirement for the engineering services. This extended period allows for deeper integration of services and potentially more complex project execution. However, it also increases the risk associated with changing technological landscapes, evolving military requirements, and potential cost growth over time, especially under a CPFF structure. Long-term contracts require continuous oversight and potential adjustments to ensure they remain aligned with current needs and provide good value throughout their lifecycle.

Industry Classification

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

Product/Service Code: GUIDED MISSLES

Competition & Pricing

Extent Competed: FOLLOW ON TO COMPETED ACTION

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Address: 1151 EAST HERMANS ROAD, TUCSON, AZ, 85706

Business Categories: Category Business, Not Designated a Small Business

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline