Raytheon Company awarded $38M for engineering services, with a significant portion allocated to turbine generator set manufacturing

Contract Overview

Contract Amount: $38,007,572 ($38.0M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2011-10-06

End Date: 2018-09-30

Contract Duration: 2,551 days

Daily Burn Rate: $14.9K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: ENGINEERING SERVICES

Place of Performance

Location: TEWKSBURY, MIDDLESEX County, MASSACHUSETTS, 01876

State: Massachusetts Government Spending

Plain-Language Summary

Department of Defense obligated $38.0 million to RAYTHEON COMPANY for work described as: ENGINEERING SERVICES Key points: 1. Contract value of $38M over approximately 7 years indicates a substantial, long-term commitment. 2. The contract's focus on turbine and turbine generator set units suggests a critical role in energy or defense infrastructure. 3. Awarded under full and open competition, this contract likely benefited from a competitive bidding process. 4. The Cost Plus Fixed Fee (CPFF) pricing structure may present cost control challenges if not closely monitored. 5. The contract's duration of 2551 days (approx. 7 years) suggests a need for sustained engineering support. 6. The North American Industry Classification System (NAICS) code 336311 points to engine manufacturing, specifically for turbine applications.

Value Assessment

Rating: fair

Benchmarking the value of this $38M contract is challenging without specific service details or comparable contracts. The CPFF structure can lead to costs exceeding initial estimates if not managed diligently. However, the full and open competition suggests an attempt to secure competitive pricing. The contract's duration implies a significant need for these services, potentially justifying the investment if performance is satisfactory.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that multiple bidders were likely invited to submit proposals. This approach generally fosters price discovery and allows the government to select the most advantageous offer. The presence of multiple bidders suggests a healthy market for these specialized engineering services.

Taxpayer Impact: Full and open competition is generally favorable for taxpayers as it promotes a competitive environment, which can lead to lower prices and better value for the government.

Public Impact

The Department of Defense is the primary beneficiary, likely receiving critical engineering services for turbine and turbine generator sets. This contract supports the maintenance, upgrade, or development of essential power generation or propulsion systems. The geographic impact is centered in Massachusetts, where the contract was managed. The contract likely supports a specialized engineering workforce within Raytheon Company and potentially its subcontractors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost Plus Fixed Fee (CPFF) contracts can incentivize contractors to increase costs to maximize profit, requiring robust oversight.
The long duration of the contract (approx. 7 years) increases the risk of cost overruns due to unforeseen market changes or technical challenges.
Lack of specific details on the 'engineering services' provided makes it difficult to assess performance risks and value.
The NAICS code 336311 (Turbine and Turbine Generator Set Units Manufacturing) suggests a focus on production, which may have different risk profiles than pure R&D or maintenance.

Positive Signals

Awarded under full and open competition, suggesting a competitive process that should yield fair pricing.
The contract is with a large, established defense contractor (Raytheon Company), implying a degree of reliability and experience.
The contract's duration suggests a stable, ongoing need for these services, indicating potential program importance.
The definitive contract type provides a clear framework for the agreement and deliverables.

Sector Analysis

This contract falls within the manufacturing sector, specifically related to turbine and turbine generator set units, often critical components in defense platforms and energy infrastructure. The market for such specialized engineering and manufacturing services is typically dominated by large, established aerospace and defense companies. Spending in this area is often driven by national security requirements or energy independence initiatives. Comparable spending benchmarks would depend on the specific application of the turbine technology.

Small Business Impact

There is no indication that this contract included a small business set-aside. Given the nature of the work and the prime contractor, it is possible that small businesses could be involved as subcontractors, but this is not explicitly stated. The impact on the small business ecosystem would depend on the subcontracting opportunities generated.

Oversight & Accountability

Oversight for this contract would typically be provided by the Defense Contract Management Agency (DCMA), which is responsible for ensuring contractor performance and compliance. Accountability measures are inherent in the contract terms, including performance standards and payment schedules. Transparency is facilitated through contract databases, though specific performance metrics may not be publicly disclosed. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Defense Logistics Agency (DLA) procurement for engine components
Naval Sea Systems Command (NAVSEA) contracts for propulsion systems
Air Force Materiel Command (AFMC) contracts for aircraft engine support
Department of Energy (DOE) contracts for power generation equipment

Risk Flags

Cost Overrun Risk (CPFF)
Long Duration Performance Risk
Scope Definition Ambiguity
Market Fluctuation Impact

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $38.0 million to RAYTHEON COMPANY. ENGINEERING SERVICES

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 $38.0 million.

What is the period of performance?

Start: 2011-10-06. End: 2018-09-30.

What specific engineering services are being provided under this contract?

The provided data indicates the contract is for 'ENGINEERING SERVICES' with a North American Industry Classification System (NAICS) code of 336311, which pertains to 'Turbine and Turbine Generator Set Units Manufacturing.' This suggests the engineering services are likely related to the design, development, testing, modification, or manufacturing support of turbine engines and associated generator sets. Without more granular data, it's difficult to pinpoint the exact nature of the services, such as whether they are focused on research and development, production support, sustainment engineering, or system integration. The contract type, Cost Plus Fixed Fee (CPFF), often implies a level of uncertainty or innovation in the scope of work, where the final costs are less predictable than in fixed-price contracts.

How does the $38 million contract value compare to similar engineering service contracts for turbine components?

Comparing the $38 million contract value requires context regarding the specific type of engineering services, the duration, and the complexity of the turbine components involved. Contracts for turbine manufacturing and related engineering can range significantly, from tens of millions for component development to billions for entire engine programs or large-scale power generation projects. Given this contract's duration of approximately seven years (2551 days), the annual value is roughly $5.4 million. This figure appears moderate for specialized engineering services within the defense or energy sectors, especially for a large contractor like Raytheon. However, without knowing if this is for a specific component, a system upgrade, or a new development, a precise benchmark is difficult. The fact that it was awarded under full and open competition suggests the government sought competitive bids, implying the price was considered reasonable within the market at the time of award.

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

The primary risk with a Cost Plus Fixed Fee (CPFF) contract, especially one valued at $38 million over seven years, is the potential for cost overruns. In a CPFF structure, the contractor is reimbursed for allowable costs plus a fixed fee representing profit. This can create an incentive for the contractor to incur higher costs, as the fixed fee remains constant regardless of the total cost. Effective management and oversight are crucial to mitigate this risk. The government must diligently monitor the contractor's expenditures to ensure they are reasonable, allocable, and allowable. Furthermore, the long duration increases the risk of scope creep, changes in market conditions affecting material or labor costs, and potential technical challenges that could drive up expenses beyond initial projections. Robust change control processes and regular performance reviews are essential to manage these risks.

What is the significance of the NAICS code 336311 (Turbine and Turbine Generator Set Units Manufacturing) in understanding this contract?

The NAICS code 336311 is highly significant as it precisely defines the industry and product focus of this contract: the manufacturing of turbine and turbine generator set units. This code narrows the scope of the 'engineering services' to those directly related to the production, design, modification, or support of these specific types of equipment. Turbine units are critical components in various applications, including power generation (both civilian and military), aircraft propulsion, and industrial machinery. Understanding this code helps contextualize the contract's importance, suggesting it supports essential infrastructure or defense capabilities. It also implies that the engineering expertise required would be specialized in areas like thermodynamics, materials science, mechanical engineering, and potentially electrical engineering for the generator sets.

How does the 'full and open competition' award status impact the value proposition for taxpayers?

The 'full and open competition' award status is a positive indicator for taxpayers. It signifies that the government solicited proposals from all responsible sources, allowing for a broad range of potential bidders. This competitive environment typically drives down prices as contractors vie for the award by offering their best terms and pricing. It also increases the likelihood that the government secures the most technically suitable solution at the most advantageous price. For taxpayers, this means their money is more likely to be spent efficiently, avoiding the potential for inflated prices that can occur with sole-source or limited competition contracts. The process inherently promotes transparency and fairness in government procurement.

What does the contract award type 'DEFINITIVE CONTRACT' imply about the agreement?

A 'DEFINITIVE CONTRACT' is a standard, legally binding agreement that clearly outlines the rights and responsibilities of both the government and the contractor. Unlike other contract types like letter contracts or basic ordering agreements, a definitive contract typically has all its essential elements (like scope of work, price, delivery schedule, and terms and conditions) finalized at the time of award. This implies that the requirements for this $38 million engineering services contract were well-defined and understood by both parties. It provides a stable framework for the seven-year performance period, reducing ambiguity and setting clear expectations for deliverables and payment, which is generally beneficial for cost control and performance management.

Industry Classification

NAICS: Manufacturing › Engine, Turbine, and Power Transmission Equipment Manufacturing › Turbine and Turbine Generator Set Units Manufacturing

Product/Service Code: RESEARCH AND DEVELOPMENT › OTHER RESEARCH/DEVELOPMENT

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Offers Received: 2

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Rockwell Collins Australia PTY Limited

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

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Manufacturer of Goods, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $43,619,832

Exercised Options: $43,619,832

Current Obligation: $38,007,572

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline