Raytheon Company awarded $26.7M for engineering services, with limited competition and a long performance period

Contract Overview

Contract Amount: $26,719,508 ($26.7M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2021-09-30

End Date: 2026-11-30

Contract Duration: 1,887 days

Daily Burn Rate: $14.2K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: ENGINEERING SERVICES

Place of Performance

Location: EL SEGUNDO, LOS ANGELES County, CALIFORNIA, 90245

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $26.7 million to RAYTHEON COMPANY for work described as: ENGINEERING SERVICES Key points: 1. Contract awarded to a single, large defense contractor, indicating potential for limited market engagement. 2. The contract spans over 5 years, suggesting a long-term need for these engineering services. 3. The 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' sector is highly specialized. 4. Cost-plus-fixed-fee contract type may incentivize cost increases, requiring robust oversight. 5. The absence of small business set-aside suggests a focus on large prime contractors. 6. The contract is a delivery order, implying it's part of a larger indefinite-delivery/indefinite-quantity (IDIQ) contract.

Value Assessment

Rating: fair

The contract's value of $26.7 million over nearly 5 years averages to approximately $5.3 million annually. Without specific benchmarks for 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' engineering services, a direct value-for-money assessment is challenging. The cost-plus-fixed-fee structure warrants scrutiny to ensure costs remain controlled and the fixed fee is reasonable for the services rendered. Comparison to similar, competitively bid contracts for specialized engineering support would be necessary for a more definitive value assessment.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded as a sole-source action, meaning it was not competed among multiple potential offerors. This approach is typically used when only one contractor possesses the necessary unique capabilities, proprietary data, or when urgency dictates. The lack of competition means there was no opportunity for price discovery through a bidding process, potentially leading to higher costs than if multiple firms had competed.

Taxpayer Impact: Taxpayers may not have received the benefit of competitive pricing, as the government did not have multiple offers to choose from to secure the best value.

Public Impact

The Department of the Navy benefits from specialized engineering services crucial for its advanced systems. Services likely support the development, maintenance, or enhancement of search, detection, navigation, and guidance systems. The contract's duration suggests ongoing support for critical defense technologies. Geographic impact is concentrated within the contractor's operational areas, likely supporting naval bases or research facilities. Workforce implications include employment for highly skilled engineers and technical specialists within the defense industry.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure on pricing.
Cost-plus-fixed-fee contract type can lead to cost overruns if not managed tightly.
Long performance period (nearly 5 years) increases exposure to potential scope creep or evolving requirements.
Lack of specific performance metrics in the provided data makes it difficult to assess service quality.
Absence of small business participation raises concerns about broader economic impact and utilization of diverse suppliers.

Positive Signals

Award to Raytheon Company, a known entity in defense contracting, suggests established capabilities.
The contract addresses critical defense needs in navigation and detection systems.
Delivery order structure implies it aligns with a pre-existing strategic procurement vehicle.
The fixed fee component of the contract provides some level of cost predictability for the government.

Sector Analysis

The defense engineering services sector is characterized by high barriers to entry due to specialized knowledge, security clearances, and long-standing relationships with government agencies. Companies like Raytheon are major players, often holding significant portions of the market for complex systems. Spending in this area is driven by national security priorities and technological advancements. Benchmarks for similar specialized engineering services are often proprietary or difficult to obtain due to the unique nature of defense contracts.

Small Business Impact

This contract does not appear to include a small business set-aside, as indicated by 'sb': false. The award to a large prime contractor like Raytheon suggests that small businesses are unlikely to be direct recipients of this prime contract funding. However, Raytheon may engage small businesses as subcontractors, though this is not explicitly detailed in the provided data. The absence of a set-aside means opportunities for small businesses to directly compete for this specific work were not prioritized.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy's contracting and program management offices. As a cost-plus-fixed-fee contract, rigorous financial oversight is crucial to monitor expenditures against the estimated costs and ensure the fixed fee remains justified. Transparency is typically managed through contract reporting systems and periodic reviews. The Inspector General for the Department of Defense would have jurisdiction for audits and investigations related to potential fraud, waste, or abuse.

Related Government Programs

Naval Sea Systems Command (NAVSEA) Contracts
Defense Engineering Services
Aerospace and Defense Manufacturing
Navigation Systems Procurement
Search and Detection Technology Development

Risk Flags

Sole-source award
Cost-plus-fixed-fee contract type
Long contract duration
Lack of explicit small business participation

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $26.7 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 (Department of the Navy).

What is the total obligated amount?

The obligated amount is $26.7 million.

What is the period of performance?

Start: 2021-09-30. End: 2026-11-30.

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

Raytheon Company, now RTX, has a long and extensive history of contracting with the Department of Defense across various sectors, including aerospace, defense, and intelligence. They are a major prime contractor known for developing and producing complex systems such as radar, missiles, and command and control systems. Their track record includes numerous large-scale contracts for engineering, research, development, and production. While specific performance metrics for past contracts are often not publicly detailed, their continued success in securing significant defense awards suggests a generally positive performance history and established capability in delivering sophisticated technological solutions required by the military.

How does the $26.7 million value compare to typical engineering service contracts in the defense sector?

The $26.7 million value for engineering services over nearly five years places this contract in the mid-to-large range for specialized defense support. Contracts for highly technical engineering, research, and development in areas like navigation and detection systems can vary widely, from a few million to hundreds of millions or even billions of dollars, depending on the scope, complexity, and duration. Given that this is a delivery order, it's likely part of a larger IDIQ vehicle, meaning the total value of the underlying contract could be significantly higher. Without knowing the specific deliverables and the competitive landscape for these niche services, it's difficult to definitively benchmark this value, but it represents a substantial investment in specialized engineering capabilities.

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

The primary risks associated with a sole-source, cost-plus-fixed-fee (CPFF) contract are twofold. Firstly, the sole-source nature eliminates competitive pressure, potentially leading to higher prices than if the contract were competed. The government lacks the benefit of multiple bids to ensure optimal value. Secondly, the CPFF structure, while providing flexibility, carries the risk of cost escalation. The contractor is reimbursed for allowable costs plus a fixed fee representing profit. If costs increase, the contractor's profit margin (as a percentage of total cost) decreases, which can create an incentive to incur costs. Robust government oversight, detailed cost monitoring, and clear definition of allowable costs are critical to mitigate these risks and ensure the government pays a fair price for the services rendered.

How effective are sole-source awards in ensuring the government receives necessary specialized capabilities?

Sole-source awards can be effective in ensuring the government receives necessary specialized capabilities when only one contractor possesses the unique technical expertise, proprietary information, or critical infrastructure required for a specific project. This is often the case in highly advanced or niche technological fields, such as certain defense systems or specialized research. By awarding directly to the sole source, the government can secure access to these indispensable capabilities without delay. However, the effectiveness is contingent on rigorous justification for the sole-source determination and strong contract management to ensure fair pricing and adequate performance, as the absence of competition removes a key mechanism for driving efficiency and value.

What is the historical spending trend for 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' by the Department of the Navy?

Historical spending trends for the 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' (NAICS 334511) sector by the Department of the Navy are substantial, reflecting the critical role these systems play in naval operations. While specific annual figures fluctuate based on modernization programs, research initiatives, and procurement cycles, the Navy consistently invests billions of dollars in areas related to advanced sensors, radar, sonar, communication systems, and navigation equipment. This spending supports both the development of new technologies and the sustainment of existing platforms. The provided contract is a component of this larger, ongoing investment in maintaining and advancing the Navy's technological superiority in these crucial domains.

Industry Classification

NAICS: Manufacturing › Navigational, Measuring, Electromedical, and Control Instruments Manufacturing › Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing

Product/Service Code: MAINT, REPAIR, REBUILD EQUIPMENT › MAINT, REPAIR, REBUILD OF EQUIPMENT

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0016421RWS31

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: RTX Corp

Address: 2000 E EL SEGUNDO BLVD, EL SEGUNDO, CA, 90245

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: $30,308,601

Exercised Options: $30,308,601

Current Obligation: $26,719,508

Subaward Activity

Number of Subawards: 1

Total Subaward Amount: $81,612

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: N0016421GWS31

IDV Type: BOA

Timeline