Raytheon Company awarded $150M contract for engineering services, raising questions about competition and value

Contract Overview

Contract Amount: $149,536,097 ($149.5M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2022-01-03

End Date: 2027-01-02

Contract Duration: 1,825 days

Daily Burn Rate: $81.9K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Other

Official Description: GENERAL ENGINEERING SERVICES

Place of Performance

Location: TUCSON, PIMA County, ARIZONA, 85756

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $149.5 million to RAYTHEON COMPANY for work described as: GENERAL ENGINEERING SERVICES Key points: 1. Contract awarded on a sole-source basis, limiting price discovery and potentially increasing costs. 2. Significant contract value suggests a substantial need for engineering services within the Department of the Navy. 3. The 'cost plus fixed fee' pricing structure may incentivize cost overruns. 4. Long contract duration of five years could indicate a stable, long-term requirement. 5. Geographic location in Arizona may point to specific operational needs or existing infrastructure. 6. Lack of competition raises concerns about whether the government is receiving the best possible value.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to the sole-source award and lack of detailed performance metrics. The 'cost plus fixed fee' (CPFF) contract type, while common for complex projects, can lead to higher costs if not managed rigorously. Without competitive bids, it's difficult to ascertain if the fixed fee and estimated costs represent a fair market price for the engineering services provided. Further analysis of cost breakdowns and comparison to similar CPFF contracts for engineering services would be necessary to provide a more definitive value assessment.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning the Department of the Navy did not conduct a competitive bidding process. This typically occurs when a specific contractor is deemed uniquely qualified or when circumstances prevent full and open competition. The absence of multiple bidders means there was no direct price comparison, potentially leading to a less favorable price for the government than if the contract had been competed.

Taxpayer Impact: Sole-source awards limit the government's ability to leverage competition to drive down prices, potentially resulting in higher expenditures for taxpayers.

Public Impact

The Department of the Navy is the primary beneficiary, receiving essential engineering services. Services likely support naval operations, research, development, or maintenance activities. The contract's performance is tied to Arizona, suggesting a focus on specific regional projects or facilities. The contract may indirectly support a specialized engineering workforce in Arizona.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure on pricing.
Cost-plus-fixed-fee structure can incentivize higher costs if not closely monitored.
Long contract duration may reduce flexibility to adapt to changing needs or technologies.
Lack of transparency in the sole-source justification could hide potential inefficiencies.
Limited public information on specific deliverables makes performance assessment difficult.

Positive Signals

Raytheon Company is a major defense contractor with extensive experience.
The contract addresses a specific, potentially critical, engineering need for the Navy.
The fixed fee component provides some cost certainty compared to cost-plus-award-fee.
The contract duration suggests a stable, long-term requirement, allowing for focused expertise development.

Sector Analysis

This contract falls within the Engineering Services sector, a critical component of the broader professional, scientific, and technical services industry. This sector is characterized by high technical expertise and often involves complex projects for government and private clients. The market size for engineering services is substantial, with significant government spending driven by defense, infrastructure, and research needs. This specific contract with the Department of the Navy represents a portion of that defense-related engineering expenditure, likely supporting specialized naval requirements.

Small Business Impact

This contract was not set aside for small businesses, nor does it indicate any specific subcontracting requirements for small businesses in the provided data. As a sole-source award to a large prime contractor, the direct impact on the small business ecosystem is likely minimal unless Raytheon Company actively engages small businesses as subcontractors. Further investigation into subcontracting plans would be needed to assess the broader impact on small businesses.

Oversight & Accountability

Oversight for this contract would primarily reside with the Department of the Navy's contracting officers and program managers. Accountability measures are typically embedded within the contract's terms and conditions, including performance standards and reporting requirements. Transparency is limited due to the sole-source nature of the award. Inspector General jurisdiction would apply if any fraud, waste, or abuse is suspected.

Related Government Programs

Naval Sea Systems Command (NAVSEA) Contracts
Department of Defense Engineering Services
Cost-Plus-Fixed-Fee Contracts
Sole-Source Defense Contracts
Arizona Defense Spending

Risk Flags

Sole-source award
Cost-plus-fixed-fee pricing
Lack of transparency in justification
Long contract duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $149.5 million to RAYTHEON COMPANY. GENERAL 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 (Department of the Navy).

What is the total obligated amount?

The obligated amount is $149.5 million.

What is the period of performance?

Start: 2022-01-03. End: 2027-01-02.

What specific engineering services are being procured under this contract?

The provided data indicates the contract is for 'GENERAL ENGINEERING SERVICES' (NAICS code 541330). However, the specific nature of these services is not detailed. Given the awardee (Raytheon Company) and the awarding agency (Department of the Navy), these services could range widely from naval architecture and marine engineering to systems engineering, research and development support, technical consulting, or specialized design services for naval platforms, weapons systems, or infrastructure. Without further documentation, such as the contract's Statement of Work (SOW), the precise scope remains undefined.

Why was this contract awarded on a sole-source basis?

The data explicitly states the contract was 'NOT COMPETED,' indicating a sole-source award. Common justifications for sole-source contracts include that only one responsible source can satisfy the agency's needs, or that an urgent and compelling requirement prevents full and open competition. For a large contractor like Raytheon, it might be argued they possess unique technical expertise, proprietary data, or existing infrastructure directly relevant to the Navy's specific needs in Arizona. However, the absence of a competitive process means these justifications are not publicly vetted against alternative solutions or pricing.

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

The CPFF structure is common for complex engineering projects where the scope may evolve or is not fully defined at the outset. The contractor is reimbursed for allowable costs plus a fixed fee representing profit. Compared to 'Cost Plus Incentive Fee' (CPIF), CPFF offers less incentive for the contractor to control costs, as the fee is fixed regardless of final cost. However, it provides more cost certainty to the government than a pure 'Cost Plus' contract. It is generally considered less advantageous for the government than 'Fixed Price' contracts when scope is well-defined, as it shifts cost risk to the government.

What is the historical spending pattern for general engineering services by the Department of the Navy?

Historical spending data for general engineering services by the Department of the Navy is extensive. The Navy consistently procures a significant volume of engineering support across various platforms and programs. While this specific $150 million contract is substantial, the Navy's total annual spending on engineering services likely runs into billions of dollars, distributed across numerous contracts, both competed and sole-source, and encompassing various contract types. Analyzing trends would require examining spending over multiple fiscal years, identifying major programs, and assessing the mix of competitive versus non-competitive awards.

What are the potential risks associated with a five-year sole-source contract for engineering services?

A five-year sole-source contract presents several risks. Firstly, the lack of competition throughout the period means the government may not benefit from potential cost reductions or technological advancements offered by other firms. Secondly, the 'Cost Plus Fixed Fee' structure, while providing a fixed profit margin, can incentivize the contractor to incur costs without strong pressure to minimize them, especially over a long duration. Thirdly, the long timeframe might lead to vendor lock-in, making it difficult and costly to switch providers if needs change or performance issues arise. Finally, without regular competitive re-evaluation, there's a risk of complacency or reduced innovation from the incumbent contractor.

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: N0002420R5405

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: RTX Corp

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: $149,536,097

Exercised Options: $149,536,097

Current Obligation: $149,536,097

Actual Outlays: $977,104

Subaward Activity

Number of Subawards: 48

Total Subaward Amount: $10,939,899

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline