Raytheon Company awarded $83M cost-plus contract by DoD for unspecified defense services

Contract Overview

Contract Amount: $82,974,614 ($83.0M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 1999-11-01

End Date: 2005-06-30

Contract Duration: 2,068 days

Daily Burn Rate: $40.1K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS AWARD FEE

Sector: Defense

Place of Performance

Location: TUCSON, PIMA County, ARIZONA, 85756

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $83.0 million to RAYTHEON COMPANY for work described as: Key points: 1. Contract awarded on a cost-plus basis, which can lead to higher final costs than fixed-price contracts. 2. The contract was not competed, raising questions about potential price efficiencies and best value. 3. A long performance period of 2068 days suggests a significant, ongoing requirement. 4. The contract's broad award type (DCA) and lack of specific product/service code make detailed performance assessment difficult. 5. Awarded by the Defense Contract Management Agency, indicating a focus on contract oversight and administration. 6. The contract was awarded to a single, large defense contractor, potentially limiting opportunities for smaller businesses.

Value Assessment

Rating: questionable

The contract's cost-plus award fee structure inherently carries higher risk for cost overruns compared to fixed-price contracts. Without specific details on the services rendered or performance metrics, it is difficult to benchmark value against similar contracts. The lack of competition further complicates a value assessment, as there was no market pressure to drive down costs. The long duration and cost-plus nature suggest a potentially significant expenditure over time, warranting close scrutiny of incurred costs and contractor performance.

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, or for urgent requirements. The absence of competition means there was no opportunity for price discovery through a bidding process, potentially leading to higher costs for the government than if multiple offers had been considered.

Taxpayer Impact: Sole-source awards mean taxpayers may not be receiving the most cost-effective solution, as competitive pressures that typically drive down prices were absent.

Public Impact

The primary beneficiary is the Department of Defense, receiving unspecified defense services. The contract supports national security objectives by providing essential defense capabilities. Services are likely delivered within the United States, given the contractor's primary location in Arizona. The contract may support a workforce within Raytheon Company, contributing to employment in the defense sector.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost-plus award fee structure increases risk of cost overruns.
Sole-source award limits price competition and potential for best value.
Lack of specific service details hinders performance and value assessment.
Long contract duration (2068 days) could lead to significant cumulative costs.
No indication of small business participation or subcontracting goals.

Positive Signals

Awarded to a major defense contractor with established capabilities.
Contract managed by the Defense Contract Management Agency, suggesting oversight.
Contract supports critical defense needs for the Department of Defense.

Sector Analysis

The defense sector is characterized by large, complex contracts often awarded to a few major prime contractors. This contract falls within the broad category of defense services, which can encompass a wide range of activities from logistics and maintenance to specialized technical support. Spending in this sector is substantial, driven by national security requirements. Benchmarking is challenging without specific service details, but large, non-competed contracts for ongoing services are common within the Department of Defense.

Small Business Impact

This contract does not appear to have been set aside for small businesses, nor is there information indicating specific subcontracting plans for small businesses. The award to a large prime contractor like Raytheon suggests that opportunities for small businesses may be limited unless they are part of Raytheon's supply chain. Further investigation into subcontracting reports would be needed to assess the actual impact on the small business ecosystem.

Oversight & Accountability

The contract is managed by the Defense Contract Management Agency (DCMA), which is responsible for overseeing contract performance and ensuring compliance. As a cost-plus award fee contract, there should be specific mechanisms for reviewing incurred costs and determining award fees based on performance. Transparency regarding the specific services rendered and the justification for the sole-source award would enhance oversight.

Related Government Programs

Department of Defense Services Contracts
Cost-Plus Award Fee Contracts
Sole-Source Defense Procurements
Defense Contract Management Agency Oversight

Risk Flags

Sole-source award lacks competitive pricing.
Cost-plus structure increases risk of cost overruns.
Lack of specific service details hinders performance assessment.
Long contract duration may lead to significant cumulative costs.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $83.0 million to RAYTHEON COMPANY. See the official description on USAspending.

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 $83.0 million.

What is the period of performance?

Start: 1999-11-01. End: 2005-06-30.

What specific defense services were procured under this contract?

The provided data does not specify the exact nature of the defense services procured under this contract. The contract type is listed as 'COST PLUS AWARD FEE' (CPAF) and the award type is 'DCA' (which often refers to a broad category like 'Defense Contract Audit Agency' or similar administrative function, but without a specific PSC code, the service remains undefined). CPAF contracts are used when a precise cost and performance specification is not feasible at the outset, and they allow for contractor reimbursement of allowable costs plus an award fee based on performance. The lack of specificity makes it difficult to assess the necessity, efficiency, or effectiveness of the services provided.

What is the rationale behind the sole-source award for this $83 million contract?

The data indicates this contract was awarded on a 'NOT COMPETED' basis, signifying a sole-source procurement. The rationale for sole-sourcing is not provided in the data. Typically, sole-source awards are justified under specific circumstances, such as the existence of only one responsible source, urgent and compelling needs, or when a specific capability is uniquely held by a single contractor. Without the official justification, it is impossible to determine if this award represents a fair and reasonable procurement or if it potentially bypassed opportunities for competitive pricing and broader vendor participation.

How does the cost-plus award fee structure impact the final cost and contractor incentive?

A Cost-Plus Award Fee (CPAF) contract reimburses the contractor for all allowable costs incurred, plus a fee that is composed of a fixed base amount and an award amount. The award amount is determined by the government based on the contractor's performance against pre-defined criteria. While CPAF provides flexibility for services where cost and performance are difficult to define upfront, it carries a higher risk of cost escalation for the government compared to fixed-price contracts. The contractor is incentivized to perform well to earn the award fee, but the cost control incentive is less direct than in fixed-price arrangements, as costs are reimbursed.

What is the significance of the long contract duration of 2068 days?

A contract duration of 2068 days, approximately 5.6 years, indicates a long-term requirement for the services being procured. This extended period suggests that the services are critical and ongoing for the Department of Defense. For a sole-source, cost-plus contract, such a long duration amplifies the potential financial exposure for the government. It necessitates robust oversight to ensure that costs remain reasonable and performance stays aligned with objectives throughout the contract's life cycle. It also suggests a stable, albeit potentially expensive, provision of capability.

What is the historical spending pattern for similar services or with this contractor by the DoD?

The provided data snippet focuses on a single contract and does not offer historical spending patterns for similar services or with Raytheon Company by the DoD. To assess historical spending, one would need to query databases for prior contracts with the same Product/Service Code (PSC) or for similar service descriptions, and analyze spending trends with Raytheon over multiple fiscal years. Without this broader context, it's difficult to determine if the $83 million award represents an increase, decrease, or consistent level of spending for these types of services or with this specific contractor.

What oversight mechanisms are in place for this specific contract, given its sole-source and cost-plus nature?

The contract is managed by the Defense Contract Management Agency (DCMA), which is responsible for contract administration and oversight. For a Cost-Plus Award Fee (CPAF) contract, DCMA would typically monitor incurred costs, review contractor performance against established criteria, and recommend the award fee. The sole-source nature means the initial justification and negotiation of terms are critical. Robust oversight would involve detailed audits of costs, regular performance reviews, and clear communication channels to ensure the government receives value for its expenditure and that the contractor meets its obligations effectively.

Competition & Pricing

Extent Competed: NOT COMPETED

Offers Received: 1

Pricing Type: COST PLUS AWARD FEE (R)

Contractor Details

Address: 1151 E HERMANS RD, TUCSON, AZ, 90

Business Categories: Category Business, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Contract Characteristics

Cost or Pricing Data: YES

Timeline