Raytheon Company awarded $226M for Standard Missile RDT&E, a sole-source engineering services contract

Contract Overview

Contract Amount: $226,467,351 ($226.5M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2007-01-30

End Date: 2012-12-31

Contract Duration: 2,162 days

Daily Burn Rate: $104.7K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS AWARD FEE

Sector: Defense

Official Description: ENGINEERING AND TECHNICAL SERVICES IN SUPPORT OF STANDARD MISSILE RDT&E PROGRAMS

Place of Performance

Location: TUCSON, PIMA County, ARIZONA, 85756

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $226.5 million to RAYTHEON COMPANY for work described as: ENGINEERING AND TECHNICAL SERVICES IN SUPPORT OF STANDARD MISSILE RDT&E PROGRAMS Key points: 1. Contract awarded on a sole-source basis, limiting price competition. 2. Cost-plus award fee structure incentivizes performance but can lead to higher costs. 3. Long contract duration of over 5 years suggests a stable, ongoing need. 4. The contract supports critical Standard Missile research, development, testing, and evaluation. 5. Geographic concentration in Arizona for contract performance. 6. No small business set-aside was included in this contract.

Value Assessment

Rating: fair

Benchmarking the value of this contract is challenging due to its sole-source nature and cost-plus award fee structure. Without competitive bids, it's difficult to definitively assess if the pricing represents optimal value for money. The cost-plus award fee (CPAF) mechanism aims to control costs by providing incentives for meeting performance targets, but it inherently carries a risk of cost overruns if not managed tightly. The total award value of $226 million over five years averages to approximately $45 million annually, which needs to be evaluated against the scope and complexity of the Standard Missile RDT&E programs.

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 unique capabilities, technology, or intellectual property required for the service. The lack of competition means that price discovery through market forces was absent, potentially leading to less favorable pricing for the government compared to a competitive procurement. The justification for sole-source awards requires rigorous documentation to ensure it serves the government's best interest.

Taxpayer Impact: Taxpayers may face higher costs due to the absence of competitive bidding. Without multiple offers, the government has less leverage to negotiate the lowest possible price, potentially resulting in a less efficient use of public funds.

Public Impact

The primary beneficiaries are the Department of Defense and its personnel who rely on advanced missile technology. Services delivered include critical research, development, testing, and evaluation for the Standard Missile program. Geographic impact is concentrated in Arizona, where the contractor is based and performance likely occurs. Workforce implications include employment for engineers, scientists, and technical staff at the contractor's facilities.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure on pricing.
Cost-plus award fee structure can lead to cost overruns if not managed effectively.
Lack of transparency in sole-source justification requires careful scrutiny.
Long contract duration may reduce flexibility to adopt newer technologies if not managed proactively.

Positive Signals

Contract supports critical national defense capabilities (Standard Missile RDT&E).
Cost-plus award fee structure incentivizes contractor performance and meeting technical objectives.
Long-term contract provides stability for essential RDT&E activities.
Contractor (Raytheon) is a well-established defense prime with significant experience in missile systems.

Sector Analysis

The defense sector, particularly missile systems RDT&E, is characterized by high barriers to entry, significant intellectual property, and long development cycles. This contract falls within the engineering services sub-sector, which is crucial for maintaining and advancing technological superiority in defense. Spending in this area is often driven by geopolitical factors and the need for continuous innovation. Comparable spending benchmarks would typically involve other large-scale, sole-source RDT&E contracts for complex weapon systems within the Department of Defense.

Small Business Impact

This contract does not appear to include any small business set-aside provisions, as indicated by the 'sb' field being false. Given the nature of advanced missile RDT&E and the sole-source award to a large prime contractor, it is unlikely that significant subcontracting opportunities for small businesses were mandated within this specific contract. The focus is on the prime contractor's capabilities, potentially limiting the direct impact on the small business ecosystem for this particular award.

Oversight & Accountability

Oversight for this contract would primarily fall under the Defense Contract Management Agency (DCMA) and the Department of Defense's program management offices. Accountability measures are embedded within the Cost Plus Award Fee (CPAF) structure, which links contractor payment to performance metrics. Transparency is a concern with sole-source awards; the justification for not competing the contract should be publicly accessible and rigorously reviewed. Inspector General jurisdiction would apply to any allegations of fraud, waste, or abuse related to the contract.

Related Government Programs

Standard Missile Program
Missile Defense Agency Contracts
Naval Air Systems Command Contracts
Air Force Research Laboratory Contracts
Defense Advanced Research Projects Agency (DARPA) Programs

Risk Flags

Sole-source award
Cost-plus award fee structure
Potential for cost overruns
Limited price competition

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $226.5 million to RAYTHEON COMPANY. ENGINEERING AND TECHNICAL SERVICES IN SUPPORT OF STANDARD MISSILE RDT&E PROGRAMS

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 $226.5 million.

What is the period of performance?

Start: 2007-01-30. End: 2012-12-31.

What is Raytheon Company's track record with similar sole-source RDT&E contracts for missile systems?

Raytheon Company, now part of RTX, has a long and extensive history of performing sole-source and competitively awarded RDT&E contracts for various missile systems for the Department of Defense and allied nations. Their track record includes major programs like the Patriot missile defense system, Tomahawk cruise missile, and various air-to-air and surface-to-air missile programs. These contracts often involve complex engineering, integration, testing, and sustainment activities. While specific performance metrics for past sole-source contracts are often proprietary, Raytheon's continued selection for critical defense programs suggests a perceived ability to meet demanding technical requirements and deliver complex weapon systems. However, the nature of sole-source awards means that direct comparisons of value-for-money against competitive bids are inherently limited.

How does the Cost Plus Award Fee (CPAF) structure typically impact overall contract cost compared to other contract types?

The Cost Plus Award Fee (CPAF) contract type is designed to provide flexibility for research and development efforts where the scope may evolve or be difficult to define precisely upfront. It reimburses the contractor for allowable costs incurred plus a fee that is composed of a base fee (typically a small percentage of estimated costs) and an award fee. The award fee is earned based on the government's evaluation of the contractor's performance against pre-defined criteria, such as technical achievement, schedule adherence, and cost control. Compared to fixed-price contracts, CPAF generally offers less cost certainty for the government, as costs are reimbursed. However, it aims to incentivize superior performance through the award fee component, potentially leading to better technical outcomes than a simple cost-plus contract. It is often seen as a middle ground between cost-reimbursement and fixed-price contracts, balancing flexibility with performance incentives.

What are the primary risks associated with sole-source procurements for complex defense systems like the Standard Missile RDT&E?

The primary risks associated with sole-source procurements for complex defense systems like the Standard Missile RDT&E are related to cost, competition, and innovation. Without competition, there is a reduced incentive for the contractor to minimize costs, potentially leading to higher prices for the government than could be achieved through a competitive process. The lack of multiple bidders can also stifle innovation, as there is less pressure to develop novel solutions or improve existing technologies. Furthermore, sole-source awards can create a dependency on a single supplier, which can be a strategic vulnerability. Ensuring robust oversight, clear performance metrics, and thorough justification for the sole-source determination are critical to mitigating these risks and ensuring the government receives the best possible value and capability.

Can the $226 million total award value be benchmarked against historical spending for the Standard Missile RDT&E program?

Benchmarking the $226 million total award value against historical spending for the Standard Missile RDT&E program requires access to detailed historical contract data for this specific program. The provided data indicates this contract ran from January 30, 2007, to December 31, 2012, spanning approximately five years. This averages to about $45 million per year. To provide a meaningful benchmark, one would need to compare this annual average to previous or subsequent RDT&E spending on the Standard Missile program, considering factors like inflation, technological advancements, and changes in program scope. Without that granular historical data, it's difficult to definitively state whether this award represents an increase, decrease, or stable level of investment relative to past efforts. However, the duration and value suggest a significant, ongoing commitment to the program's development.

What are the implications of the contract being performed in Arizona (ST: AZ, SN: ARIZONA)?

The indication that the contract performance is located in Arizona (ST: AZ, SN: ARIZONA) primarily has implications for regional economic impact and potentially for oversight logistics. For the local economy in Arizona, this contract represents job creation and revenue for the contractor and its potential subcontractors within the state. It signifies a concentration of defense-related engineering and technical expertise in that region. From an oversight perspective, it means that the Defense Contract Management Agency (DCMA) or other relevant government oversight bodies with a presence or jurisdiction in Arizona would be responsible for monitoring contract performance, ensuring compliance, and verifying deliverables. This geographic concentration can sometimes streamline oversight but also means that a significant portion of the contract's economic benefit is localized.

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: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0002406R5349

Offers Received: 1

Pricing Type: COST PLUS AWARD FEE (R)

Evaluated Preference: NONE

Contractor Details

Address: 1151 E HERMANS RD, TUCSON, AZ, 85706

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $235,631,068

Exercised Options: $227,449,727

Current Obligation: $226,467,351

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline