Raytheon Company awarded $225.7M for engineering support, with limited competition and cost-plus-fixed-fee structure

Contract Overview

Contract Amount: $225,706,999 ($225.7M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2011-12-27

End Date: 2017-01-13

Contract Duration: 1,844 days

Daily Burn Rate: $122.4K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: PROVIDE ENGINEERING AND TECHNICAL SUPPORT SERVICES

Place of Performance

Location: TUCSON, PIMA County, ARIZONA, 85756

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $225.7 million to RAYTHEON COMPANY for work described as: PROVIDE ENGINEERING AND TECHNICAL SUPPORT SERVICES Key points: 1. Contract awarded to a single, large defense contractor, indicating potential for limited competition. 2. Cost-plus-fixed-fee pricing structure may incentivize cost overruns. 3. Long contract duration (over 4 years) suggests a significant, ongoing need for services. 4. Services provided are critical engineering and technical support, vital for defense operations. 5. Contract awarded by the Department of Defense, a major federal spender. 6. The contract's value is substantial, reflecting the complexity and importance of the services.

Value Assessment

Rating: fair

The contract's value of $225.7 million over approximately 4 years for engineering and technical support is substantial. Without specific benchmarks for comparable services, it's difficult to definitively assess value for money. The cost-plus-fixed-fee (CPFF) pricing structure, while common for complex R&D or services where costs are uncertain, carries inherent risks of cost escalation compared to fixed-price contracts. This structure requires robust oversight to ensure efficiency and prevent unnecessary spending.

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 used when only one vendor possesses the necessary capabilities, security clearances, or proprietary knowledge required for the service. The lack of competition means that the government did not benefit from potential price reductions or innovative solutions that might arise from a competitive bidding process.

Taxpayer Impact: Sole-source awards can lead to higher costs for taxpayers as there is no competitive pressure to drive down prices. It also limits opportunities for other qualified businesses to secure federal contracts.

Public Impact

The Department of Defense benefits from essential engineering and technical support services, crucial for maintaining operational readiness and technological advancement. The contract supports advanced engineering capabilities, likely contributing to the development and sustainment of complex defense systems. The geographic impact is primarily within Arizona (ST/SN), where the contractor's operations are located. The contract likely supports a workforce of engineers, technicians, and support staff employed by Raytheon Company.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing and potential innovation.
Cost-plus-fixed-fee structure may lead to higher than anticipated costs if not closely managed.
Long contract duration could indicate a lack of market alternatives or a need for sustained, specialized support.

Positive Signals

Award to a major defense contractor like Raytheon suggests access to specialized expertise and proven capabilities.
Engineering and technical support are critical functions for national defense, ensuring system effectiveness.
The contract provides a stable, long-term engagement for essential services.

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 dominated by a few large, established contractors with the specialized knowledge, security clearances, and infrastructure required. Spending in this sector is directly tied to defense budgets and the need for advanced technological development and sustainment of military platforms. Comparable spending benchmarks would typically involve analyzing other large-scale engineering support contracts awarded by the DoD to similar prime contractors.

Small Business Impact

This contract was not set aside for small businesses, nor does it appear to have specific subcontracting requirements mentioned in the provided data. As a sole-source award to a large prime contractor, the direct impact on small businesses is likely minimal unless Raytheon Company actively engages them as subcontractors for specific components or services. The absence of set-asides means opportunities for small businesses to directly compete for this significant contract were not available.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contract management and administration functions, potentially involving the Defense Contract Management Agency (DCMA). The cost-plus-fixed-fee structure necessitates rigorous financial oversight to monitor expenditures, ensure compliance with contract terms, and verify the allowability and allocability of costs. Transparency is generally limited for sole-source contracts, but reporting requirements on cost and performance would be mandated by the contract terms.

Related Government Programs

Department of Defense Research and Development
Defense Engineering Services
Technical Support Services
Aerospace and Defense Manufacturing

Risk Flags

Sole-source award
Cost-plus-fixed-fee pricing
Lack of competitive bidding

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $225.7 million to RAYTHEON COMPANY. PROVIDE ENGINEERING AND TECHNICAL SUPPORT 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 $225.7 million.

What is the period of performance?

Start: 2011-12-27. End: 2017-01-13.

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

Raytheon Company, now part of RTX, has a long and extensive history of providing engineering and technical support services to the Department of Defense across various platforms and programs. Their track record includes significant contributions to missile defense, aerospace, and command and control systems. Historically, they have been a prime contractor on numerous large-value, complex contracts, often involving advanced research, development, and sustainment. While specific performance metrics for this particular contract are not detailed here, Raytheon's overall standing as a major defense industrial base participant suggests a capacity to meet demanding technical requirements. However, like many large contractors, they have also faced scrutiny regarding contract costs and performance on specific projects, underscoring the importance of ongoing oversight.

How does the $225.7 million contract value compare to other engineering support contracts awarded by the DoD?

The $225.7 million contract value for engineering and technical support services is substantial, placing it among significant federal procurements. The Department of Defense regularly awards contracts in the hundreds of millions, and even billions, for complex engineering, research, development, and sustainment services. For instance, contracts for major weapon system development, aircraft sustainment, or large-scale IT infrastructure often exceed this amount. However, when compared to the total annual defense budget, which runs into hundreds of billions, this specific contract represents a focused investment in specialized engineering capabilities. Benchmarking requires comparing it to contracts with similar scope, duration, and complexity, often awarded to other large defense primes like Lockheed Martin, Boeing, or Northrop Grumman.

What are the primary risks associated with a sole-source, cost-plus-fixed-fee contract for engineering services?

The primary risks associated with a sole-source, cost-plus-fixed-fee (CPFF) contract for engineering services are twofold. Firstly, the sole-source nature eliminates competitive pressure, potentially leading to higher prices than might be achieved in a competitive environment. The government lacks the benefit of multiple bids to establish a fair market price. Secondly, the CPFF structure, while providing flexibility for uncertain costs, carries a significant risk of cost escalation. The contractor is reimbursed for allowable costs plus a fixed fee, which can incentivize less cost-conscious behavior if not rigorously monitored. This structure requires robust government oversight to ensure costs remain reasonable and that the contractor is not incentivized to inflate expenses. Without strong controls, taxpayers could face significantly higher costs than initially projected.

How effective is the cost-plus-fixed-fee (CPFF) structure in ensuring value for money in defense engineering contracts?

The effectiveness of the CPFF structure in ensuring value for money for defense engineering contracts is often debated and highly dependent on contract administration and oversight. CPFF is typically employed when the scope of work is not well-defined, or when there is significant uncertainty about the costs involved, such as in advanced research and development. While it allows for flexibility and ensures that contractors are willing to undertake high-risk projects, it can also lead to cost overruns if not managed diligently. The 'fixed fee' provides some incentive for the contractor to control costs to protect their profit margin, but the primary risk lies in the 'cost-plus' aspect. Effective value for money is achieved when the government has strong mechanisms to audit costs, negotiate rates, and ensure that the services delivered meet the required technical specifications and performance standards, even if the final cost is higher than initially estimated.

What are the historical spending patterns for engineering and technical support services within the Department of Defense?

Historical spending patterns for engineering and technical support services within the Department of Defense have consistently represented a significant portion of the overall defense budget. These services are fundamental to the lifecycle of defense systems, encompassing research, design, development, testing, evaluation, sustainment, and modernization. Over the years, the DoD has allocated tens to hundreds of billions of dollars annually to various categories of engineering and technical support. Spending often fluctuates based on geopolitical events, technological advancements, and specific program requirements. Major defense contractors are perennial recipients of these funds, reflecting the specialized nature and scale of the required expertise. Analysis of historical data would likely show a trend of increasing complexity and cost associated with advanced technologies, driving sustained or growing investment in these critical support services.

Industry Classification

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

Product/Service Code: WEAPONS

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0002411R5451

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: RTX Corp (UEI: 001344142)

Address: 1151 E HERMANS RD, TUCSON, AZ, 85756

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: $246,331,401

Exercised Options: $246,331,401

Current Obligation: $225,706,999

Subaward Activity

Number of Subawards: 254

Total Subaward Amount: $172,267,934

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline