Raytheon Company awarded $273.7M for engineering services, with a significant portion spent on cost-plus-fixed-fee contracts

Contract Overview

Contract Amount: $273,674,585 ($273.7M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2008-09-30

End Date: 2014-03-29

Contract Duration: 2,006 days

Daily Burn Rate: $136.4K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: SSDS PSEA

Place of Performance

Location: SAN DIEGO, SAN DIEGO County, CALIFORNIA, 92123

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $273.7 million to RAYTHEON COMPANY for work described as: SSDS PSEA Key points: 1. Contract value of $273.7M over its period of performance. 2. Primarily utilized Cost Plus Fixed Fee (CPFF) pricing structure. 3. Awarded by the Department of Defense, managed by DCMA. 4. Contract duration spanned from 2008 to 2014. 5. No small business set-aside was applied. 6. Engineering services (NAICS 541330) were the primary focus.

Value Assessment

Rating: fair

The total award of $273.7M for engineering services over a six-year period represents a substantial investment. The use of Cost Plus Fixed Fee (CPFF) contracts, while common for complex R&D or services where costs are uncertain, can present a higher risk of cost overruns compared to fixed-price contracts. Benchmarking the value requires detailed analysis of the specific engineering services rendered and comparison to similar DoD contracts for comparable scope and complexity. Without more granular data on deliverables and performance metrics, a precise value-for-money assessment is challenging.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, indicating that competition was either not sought or deemed impractical. Sole-source awards can limit price discovery and potentially lead to higher costs for the government compared to a fully competed contract. The absence of a competitive bidding process means that the government did not benefit from multiple vendors proposing solutions and pricing, which is a key mechanism for ensuring fair market value.

Taxpayer Impact: Sole-source awards mean taxpayers may not be receiving the most cost-effective solution, as the government did not leverage competitive pressures to drive down prices.

Public Impact

The Department of Defense benefits from specialized engineering services essential for its operations. Services delivered likely supported various defense programs and technological advancements. The geographic impact is primarily associated with the contractor's operations in California. The contract supported a workforce of engineers and technical specialists.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing and potentially increases costs for taxpayers.
CPFF structure carries inherent risks of cost overruns if not closely managed.
Lack of transparency in the sole-source justification process.
Long contract duration without clear performance benchmarks could obscure efficiency.

Positive Signals

Award to a large, established defense contractor suggests potential for reliable service delivery.
Engineering services are critical for national defense infrastructure and modernization.
The contract provided consistent work for a significant period, supporting specialized labor.

Sector Analysis

This contract falls within the Engineering Services sector (NAICS 541330), a critical component of the broader defense industrial base. The market for defense engineering services is characterized by high barriers to entry, specialized expertise, and significant government procurement. Spending in this sector is often driven by national security requirements, technological innovation, and the sustainment of complex defense systems. Comparable spending benchmarks would involve analyzing other large-scale engineering service contracts awarded by the DoD to prime contractors.

Small Business Impact

This contract was not set aside for small businesses, and there is no indication of subcontracting requirements for small businesses. The absence of small business participation means that opportunities for smaller, specialized firms to contribute to this significant defense contract were likely missed. This could limit the broader impact on the small business defense ecosystem and reduce opportunities for innovation that often comes from smaller, agile companies.

Oversight & Accountability

Oversight was likely managed by the Defense Contract Management Agency (DCMA), responsible for ensuring contractor performance and compliance. Accountability measures would be tied to the terms of the Cost Plus Fixed Fee contract, including cost reporting and milestone achievement. Transparency is limited due to the sole-source nature of the award and the proprietary nature of engineering services. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Department of Defense Research and Development Contracts
Defense Engineering and Technical Services
Raytheon Company Defense Contracts
Cost Plus Fixed Fee Contracts
Sole Source Defense Procurements

Risk Flags

Sole-source award may indicate lack of competition, potentially leading to higher costs.
Cost-plus-fixed-fee contract type carries inherent risk of cost overruns.
Long contract duration without clear performance metrics could obscure efficiency.
No small business participation noted.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $273.7 million to RAYTHEON COMPANY. SSDS PSEA

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 $273.7 million.

What is the period of performance?

Start: 2008-09-30. End: 2014-03-29.

What specific engineering services were provided under this contract?

The contract data indicates the provision of engineering services under NAICS code 541330. While the specific nature of these services is not detailed in the provided summary, engineering services for the Department of Defense typically encompass a wide range of activities. These can include research and development support, systems engineering, design and integration, testing and evaluation, technical analysis, and lifecycle support for various defense platforms and technologies. Given the contractor (Raytheon) and the agency (DoD), these services likely supported advanced defense systems, aerospace technologies, or complex weapon platforms, requiring specialized expertise in areas such as electrical, mechanical, or aerospace engineering.

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

The Cost Plus Fixed Fee (CPFF) structure is often used when the scope of work is not well-defined, or when there is significant uncertainty in the costs associated with performance, such as in research and development or complex system integration. In a CPFF contract, the contractor is reimbursed for allowable costs plus a fixed fee representing profit. Compared to fixed-price contracts, CPFF offers less cost certainty for the government and can incentivize higher spending by the contractor, as costs are passed through. However, it provides flexibility for evolving requirements. For well-defined engineering services, fixed-price or cost-plus-incentive-fee contracts might offer better value and cost control for the government.

What are the implications of a sole-source award for taxpayer value?

Sole-source awards, like the one to Raytheon Company for $273.7M, generally have negative implications for taxpayer value. When a contract is not competed, the government foregoes the opportunity to benefit from competitive bidding, which typically drives down prices and encourages innovation among multiple vendors. Without competition, the awarded contractor faces less pressure to offer the most cost-effective solution. This can lead to higher prices than might be achieved in a competitive environment, meaning taxpayers may pay more for the same or similar services. Furthermore, sole-source awards can limit the government's access to a broader range of innovative solutions that might be offered by other qualified companies.

What was the historical spending pattern for this specific contract or similar services?

The provided data covers a single definitive contract awarded on September 30, 2008, and ending on March 29, 2014, with a total value of $273,674,584.95. This represents the entire spending for this specific contract over its duration. To understand historical spending patterns for similar services, one would need to analyze broader Department of Defense procurement data for NAICS code 541330 (Engineering Services) and potentially specific defense programs or platforms that Raytheon supports. Analyzing trends in contract types (e.g., CPFF vs. fixed-price), competition levels, and average award values over multiple fiscal years would be necessary to establish a comprehensive historical context for spending in this category.

What is Raytheon Company's track record with the Department of Defense for engineering services?

Raytheon Company (now RTX) has a long-standing and extensive track record as a major defense contractor for the Department of Defense (DoD). They are a prime contractor on numerous large-scale programs across various defense domains, including aerospace, missile defense, command and control, and intelligence systems. Their history with the DoD involves delivering complex engineering, manufacturing, and technical services. While specific performance details for individual contracts are often not publicly available, Raytheon's continued success in securing substantial DoD contracts suggests a generally positive assessment of their capabilities, reliability, and past performance by the agency, despite the inherent complexities and potential challenges in large defense procurements.

Industry Classification

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

Product/Service Code: IT AND TELECOM - INFORMATION TECHNOLOGY AND TELECOMMUNICATIONS › ADP AND TELECOMMUNICATIONS

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0002408R5122

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Address: 8680 BALBOA AVE, SAN DIEGO, CA, 92123

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

Financial Breakdown

Contract Ceiling: $274,657,859

Exercised Options: $274,657,859

Current Obligation: $273,674,585

Actual Outlays: $24,190

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline