Raytheon Company awarded over $5.6 billion in engineering services contracts by the Department of Defense

Contract Overview

Contract Amount: $5,668,542,889 ($5.7B)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2005-05-25

End Date: 2019-09-29

Contract Duration: 5,240 days

Daily Burn Rate: $1.1M/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS AWARD FEE

Sector: Defense

Place of Performance

Location: TEWKSBURY, MIDDLESEX County, MASSACHUSETTS, 01876

State: Massachusetts Government Spending

Plain-Language Summary

Department of Defense obligated $5.67 billion to RAYTHEON COMPANY for work described as: Key points: 1. Contract value significantly exceeds typical engineering service awards, warranting scrutiny of scope and necessity. 2. Sole-source award suggests potential lack of market competition, possibly leading to inflated costs. 3. Long contract duration (over 14 years) indicates a sustained, potentially entrenched relationship. 4. Cost-plus award fee structure can incentivize spending, requiring robust oversight to control costs. 5. Engineering services are critical for defense, but the scale here suggests a major program component. 6. The absence of small business participation raises questions about broader economic impact.

Value Assessment

Rating: questionable

The total award amount of over $5.6 billion for engineering services is substantial. Without comparable sole-source contracts of this magnitude for similar services, it is difficult to benchmark value. The cost-plus award fee (CPAF) pricing structure, while common for complex R&D or services where cost is uncertain, carries inherent risks of cost overruns if not meticulously managed. The long duration and significant funding suggest a critical, long-term need, but the lack of competition makes a definitive value assessment challenging.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning it was not competed among multiple vendors. This approach is typically justified when only one vendor possesses the necessary capabilities, proprietary technology, or when urgency precludes a competitive process. The lack of competition limits price discovery and may result in higher costs for the government compared to a fully competed scenario. It also raises questions about whether alternative solutions or contractors were adequately explored.

Taxpayer Impact: Sole-source awards mean taxpayers do not benefit from competitive bidding, potentially leading to higher overall expenditure for the services rendered. This reduces the government's leverage in negotiating favorable terms and prices.

Public Impact

The Department of Defense benefits from specialized engineering expertise crucial for its operations. Services likely encompass design, development, testing, and sustainment of complex defense systems. Geographic impact is likely concentrated around Raytheon facilities and DoD installations, with potential for national security implications. Workforce implications include employment for engineers, technicians, and support staff within Raytheon and its supply chain.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure, potentially increasing costs for taxpayers.
Cost-plus award fee structure can incentivize higher spending if not tightly controlled.
Long contract duration may indicate a lack of flexibility or opportunity for new entrants.
Absence of small business set-aside or participation noted.

Positive Signals

Significant investment in critical engineering services for national defense.
Long-term commitment suggests stability and sustained support for defense programs.
Award to a major defense contractor implies access to established expertise and infrastructure.

Sector Analysis

This contract falls within the Engineering Services sector, a critical component of the broader aerospace and defense industry. The market for defense engineering services is characterized by high barriers to entry, specialized knowledge, and significant government investment. Spending in this area is driven by the need for advanced technological capabilities and ongoing sustainment of complex military platforms. Comparable spending benchmarks would typically involve other large-scale engineering support contracts awarded by defense agencies to prime contractors.

Small Business Impact

The contract details indicate no small business set-aside (ss=false) and no indication of small business participation (sb=false). This suggests that the prime contractor, Raytheon Company, is a large business and that subcontracting opportunities for small businesses were either not mandated or not pursued in this specific award. This lack of direct small business involvement means potential benefits to the small business ecosystem are limited for this particular contract, though the prime may engage small businesses indirectly.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contracting and program management offices. The Cost-Plus Award Fee (CPAF) structure necessitates rigorous performance monitoring and evaluation to determine award fees, providing a degree of oversight on performance. Transparency is generally limited for sole-source, high-value defense contracts. Inspector General jurisdiction would apply to investigations of fraud, waste, or abuse.

Related Government Programs

Defense Engineering Services
Aerospace and Defense Contracting
Department of the Navy Procurement
Raytheon Company Contracts
Cost-Plus Award Fee Contracts

Risk Flags

Sole-source award
Cost-plus award fee structure
Long contract duration
Lack of small business participation

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $5.67 billion 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 (Department of the Navy).

What is the total obligated amount?

The obligated amount is $5.67 billion.

What is the period of performance?

Start: 2005-05-25. End: 2019-09-29.

What specific engineering services were procured under this contract, and how did their scope justify a sole-source award of this magnitude?

The provided data does not detail the specific engineering services. However, given the scale ($5.6B+) and the contractor (Raytheon), these likely encompass highly specialized, complex engineering support for major defense platforms or systems. Sole-source justification for such large awards often hinges on unique capabilities, proprietary technology, or the need for continuity on an existing, critical program where switching contractors would be prohibitively expensive or disruptive. The specific justification would be documented in the contract's Justification for Other Than Full and Open Competition (JOFOC).

How does the Cost-Plus Award Fee (CPAF) structure typically function, and what are the inherent risks and benefits for the government in this contract?

A CPAF contract provides for reimbursement of allowable estimated costs plus a fee that includes an incentive component. The fee is composed of a base fee (fixed or target) and an award fee earned based on performance against pre-defined criteria. Benefits for the government include flexibility in complex projects where performance metrics are hard to define upfront. Risks include potential for cost overruns if performance targets are not well-defined or if contractor incentives are misaligned, leading to higher costs than a fixed-price contract. Robust government oversight is crucial to manage these risks.

What is the historical spending pattern for engineering services by the Department of the Navy, and how does this award compare?

The provided data only includes one contract. To assess historical patterns, one would need to analyze the Navy's total obligations for NAICS code 541330 (Engineering Services) over multiple fiscal years. This single award of over $5.6 billion is exceptionally large for engineering services and likely represents a significant portion of the Navy's annual spending in this category, potentially indicating a major platform development or sustainment effort.

What is Raytheon Company's track record with the Department of Defense, particularly concerning large-scale engineering service contracts?

Raytheon Company (now RTX) is a major defense contractor with a long history of performing extensive engineering services for the Department of Defense across various branches. They are known for their work on complex systems, including aircraft, missiles, radar, and command and control systems. Their track record typically involves large, multi-year contracts, often awarded on a sole-source or limited-competition basis due to the specialized nature of their offerings and existing platform integration. Performance reviews and contract histories would provide detailed insights into their past success rates and cost management.

Given the sole-source nature and CPAF structure, what are the primary risk indicators for this contract?

The primary risk indicators are the lack of competition, which limits price negotiation leverage, and the CPAF structure, which can incentivize higher costs if not managed diligently. The long duration (over 14 years) also presents risks related to technological obsolescence, changing requirements, and potential contractor lock-in. Furthermore, the absence of small business participation might indicate a missed opportunity for innovation and cost savings that small businesses could bring.

Industry Classification

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

Product/Service Code: RESEARCH AND DEVELOPMENT › General Science and Technology R&D Services

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: COST PLUS AWARD FEE (R)

Evaluated Preference: NONE

Contractor Details

Parent Company: Rockwell Collins Australia PTY Limited

Address: 50 APPLE HILL DR, TEWKSBURY, MA, 01876

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $5,673,294,633

Exercised Options: $5,673,294,633

Current Obligation: $5,668,542,889

Actual Outlays: $6,178

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline