Raytheon Company awarded $187M contract for Navy design agent support, raising questions about competition and value

Contract Overview

Contract Amount: $187,266,594 ($187.3M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2023-07-12

End Date: 2028-12-29

Contract Duration: 1,997 days

Daily Burn Rate: $93.8K/day

Competition Type: NOT AVAILABLE FOR COMPETITION

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: FY23 DESIGN AGENT SUPPORT

Place of Performance

Location: TUCSON, PIMA County, ARIZONA, 85756

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $187.3 million to RAYTHEON COMPANY for work described as: FY23 DESIGN AGENT SUPPORT Key points: 1. Contract awarded on a sole-source basis, limiting price discovery and potentially increasing costs. 2. Significant duration of the contract (nearly 2000 days) suggests a long-term need for these services. 3. The 'Cost Plus Fixed Fee' pricing structure can incentivize cost overruns. 4. Lack of competition raises concerns about whether the government is receiving the best possible value. 5. The contract's value is substantial, indicating a critical role for the design agent. 6. Performance context is limited due to the 'NOT AVAILABLE FOR COMPETITION' status.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to its sole-source nature and the specific 'design agent support' service. Without competitive bids, it's difficult to ascertain if the $187 million over its nearly 5-year term represents a fair market price. The 'Cost Plus Fixed Fee' (CPFF) structure, while common for complex services, carries inherent risks of cost escalation if not meticulously managed. Compared to similar sole-source engineering services contracts, the pricing could be higher than if multiple bidders were involved, potentially impacting overall value for money.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded under a 'NOT AVAILABLE FOR COMPETITION' justification, indicating that a full and open competition was not pursued. This typically occurs when only one source is capable of meeting the requirement, or in situations where urgency or national security dictates a specific contractor. The absence of multiple bidders means there was no direct price comparison or negotiation leverage derived from a competitive bidding process, which can lead to less favorable pricing for the government.

Taxpayer Impact: The lack of competition means taxpayers may be paying a premium for these design agent services, as the contractor faced no pressure to offer the lowest possible price.

Public Impact

The Department of the Navy benefits from specialized design agent support, crucial for its engineering and acquisition programs. This contract likely supports advanced naval systems and infrastructure development. The geographic impact is primarily within Arizona (st) where Raytheon Company is located, but the services support naval operations nationwide. Workforce implications include employment for engineers and technical specialists at Raytheon, contributing to the defense industrial base.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure, potentially leading to higher costs.
Cost Plus Fixed Fee (CPFF) contract type can incentivize increased spending if not tightly managed.
Lack of transparency in the justification for 'NOT AVAILABLE FOR COMPETITION' hinders full assessment.
Long contract duration (nearly 2000 days) increases exposure to potential cost overruns and performance issues.

Positive Signals

Award to a large, established defense contractor (Raytheon) suggests a high level of technical capability and experience.
The contract addresses a critical need for design agent support within the Department of the Navy.
The fixed fee component of the CPFF contract provides some level of cost certainty for the government.

Sector Analysis

This contract falls within the Engineering Services sector, specifically supporting defense-related design and development. The market for specialized defense engineering services is dominated by large, established contractors like Raytheon. The total addressable market for such services within the US federal government is substantial, with significant annual spending allocated to R&D, engineering, and technical support across various agencies, particularly the Department of Defense. This contract represents a portion of that broader spending landscape.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb: false'. Given the sole-source nature and the likely complexity of the services required, it is improbable that significant subcontracting opportunities would be directed towards small businesses unless explicitly mandated. The primary focus is on the prime contractor's capabilities, potentially limiting the direct economic benefit to the small business ecosystem in this specific award.

Oversight & Accountability

Oversight for this contract would primarily reside with the contracting officers and program managers within the Department of the Navy. The 'Cost Plus Fixed Fee' structure necessitates rigorous financial oversight to monitor incurred costs against the fixed fee and ensure compliance with contract terms. Transparency is limited due to the sole-source award; however, standard reporting requirements for contract performance and expenditures would apply. Inspector General jurisdiction would cover potential fraud, waste, or abuse.

Related Government Programs

Naval Sea Systems Command (NAVSEA) Contracts
Department of Defense Engineering Services
Defense Advanced Research Projects Agency (DARPA) Support Contracts
Military Construction and Engineering Support
Aerospace and Defense Contractor Spending

Risk Flags

Sole-source award
Cost Plus Fixed Fee contract type
Lack of competitive bidding
Long contract duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $187.3 million to RAYTHEON COMPANY. FY23 DESIGN AGENT SUPPORT

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 $187.3 million.

What is the period of performance?

Start: 2023-07-12. End: 2028-12-29.

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

Raytheon Company, a major defense contractor, has a long-standing relationship with the Department of the Navy, undertaking numerous contracts for a wide array of services including engineering, systems integration, and platform support. Historical data indicates Raytheon has consistently secured significant contract awards from the Navy, reflecting its established presence and perceived capabilities. While specific performance metrics for past 'design agent support' contracts are not detailed here, the Navy's continued reliance on Raytheon suggests a generally satisfactory performance history. However, a deeper dive into past performance reviews, contract modifications, and any disputes or terminations would be necessary for a comprehensive assessment of their track record on similar engagements.

How does the $187 million value compare to similar sole-source design agent support contracts awarded by the Navy?

Direct comparison of this $187 million sole-source contract to similar sole-source awards is challenging without access to a comprehensive database of all Navy contracts, particularly those justified under 'NOT AVAILABLE FOR COMPETITION'. However, the value suggests a significant scope of work over the contract's nearly five-year duration (July 2023 - December 2028). Sole-source contracts, by their nature, often command higher prices than competitively awarded ones due to the lack of market pressure. If comparable services were competed, the price could potentially be lower. The 'Cost Plus Fixed Fee' structure also means the final cost could fluctuate based on actual expenses incurred, making precise value benchmarking difficult.

What are the primary risks associated with a sole-source 'Cost Plus Fixed Fee' contract of this magnitude?

The primary risks associated with this sole-source 'Cost Plus Fixed Fee' (CPFF) contract are twofold. Firstly, the sole-source nature eliminates competitive pressure, potentially leading to inflated pricing and reduced incentive for the contractor to optimize costs. The government relies heavily on the contractor's good faith in reporting expenses. Secondly, the CPFF structure, while providing a fixed profit margin, allows the contractor to recover allowable costs. This can create an incentive to incur higher costs, as the fee is fixed regardless of the total cost. Effective oversight, stringent cost accounting standards, and clear performance metrics are crucial to mitigate these risks and ensure value for money.

What is the expected program effectiveness and impact of this contract on Navy's engineering capabilities?

This contract is expected to enhance the Navy's engineering capabilities by providing specialized 'design agent support,' which typically involves technical expertise in system design, integration, and lifecycle management. The effectiveness hinges on Raytheon's ability to deliver high-quality technical solutions and advice that align with the Navy's strategic objectives and operational requirements. The long duration suggests a critical, ongoing need for these specialized skills, implying that outsourcing this function is deemed more efficient or necessary than developing equivalent in-house capabilities. Successful execution should lead to improved system designs, reduced development risks, and potentially faster program execution for the Navy's platforms and systems.

How has federal spending on engineering services, particularly for the Department of the Navy, trended in recent fiscal years?

Federal spending on engineering services, particularly within the Department of the Navy, has generally seen a consistent or increasing trend in recent fiscal years, driven by modernization efforts, platform upgrades, and new defense initiatives. Agencies like the Navy allocate substantial budgets to research, development, testing, and evaluation (RDT&E), as well as procurement, which often include significant engineering support components. While specific figures fluctuate annually based on budgetary priorities and geopolitical factors, the overall demand for specialized engineering expertise in the defense sector remains robust. This $187 million contract aligns with this broader trend of sustained investment in defense-related engineering services.

Industry Classification

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

Product/Service Code: GUIDED MISSLES

Competition & Pricing

Extent Competed: NOT AVAILABLE FOR COMPETITION

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0002423R5401

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: $282,551,290

Exercised Options: $189,850,954

Current Obligation: $187,266,594

Subaward Activity

Number of Subawards: 28

Total Subaward Amount: $7,157,583

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline