Raytheon Company awarded $18M for engineering services, with limited competition and a cost-plus-fixed-fee structure

Contract Overview

Contract Amount: $17,997,278 ($18.0M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2022-09-28

End Date: 2025-12-31

Contract Duration: 1,190 days

Daily Burn Rate: $15.1K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: ENGINEERING SERVICES TI-100

Place of Performance

Location: MCKINNEY, COLLIN County, TEXAS, 75071

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $18.0 million to RAYTHEON COMPANY for work described as: ENGINEERING SERVICES TI-100 Key points: 1. Contract awarded via a sole-source justification, raising questions about price discovery and potential overpayment. 2. The cost-plus-fixed-fee (CPFF) pricing structure may incentivize cost overruns, requiring robust oversight. 3. Limited competition suggests potential risks of reduced innovation and higher prices compared to a more open market. 4. The contract duration of nearly three years indicates a significant, long-term need for these engineering services. 5. Performance is located in Texas, potentially impacting the local economy and workforce. 6. The specific NAICS code points to a specialized area within the defense industrial base.

Value Assessment

Rating: questionable

The contract's value of approximately $18 million for engineering services requires careful benchmarking. Without comparable sole-source contracts or detailed cost breakdowns, assessing value for money is challenging. The CPFF structure, while sometimes necessary for R&D or uncertain scope, can lead to higher costs than fixed-price contracts if not managed tightly. The absence of competitive bidding means there's no market validation of the pricing, making it difficult to determine if the government is receiving a fair price.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one contractor, Raytheon Company, was solicited. The justification for this approach is not detailed in the provided data, but sole-source awards typically occur when only one responsible source can fulfill the requirement. This lack of competition limits the government's ability to leverage market forces to achieve the best possible price and terms. It also means that potential efficiencies or innovations from other qualified firms were not explored.

Taxpayer Impact: Sole-source awards mean taxpayers do not benefit from the price reductions and improved terms that competitive bidding can generate. This can lead to higher overall spending for the same or similar services.

Public Impact

The Department of the Navy benefits from specialized engineering services crucial for its operational systems. Raytheon Company, as the contractor, will deliver critical engineering expertise. The contract's performance location in Texas may create or sustain high-skilled jobs in the region. The services provided are essential for maintaining and potentially advancing the capabilities of search, detection, navigation, guidance, and related systems.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition and potentially increases costs for taxpayers.
Cost-plus-fixed-fee contract type may incentivize higher spending if not rigorously managed.
Lack of transparency in the sole-source justification makes it difficult to assess necessity.
Potential for contractor lock-in due to specialized nature of services and limited competition.

Positive Signals

Award to a known entity (Raytheon Company) suggests a potentially reliable provider of specialized services.
Long contract duration indicates a sustained need and potential for stable service delivery.
Engineering services are critical for national defense, implying a high-value mission.

Sector Analysis

This contract falls within the broader aerospace and defense sector, specifically focusing on the manufacturing and support of advanced navigation and guidance systems. The market for such specialized engineering services is often dominated by a few large, established defense contractors due to high barriers to entry, including intellectual property, security clearances, and specialized R&D capabilities. Spending in this sub-sector is driven by defense modernization priorities and the need to maintain technological superiority.

Small Business Impact

The provided data indicates that this contract was not set aside for small businesses (ss: false, sb: false). As a sole-source award to a large prime contractor, Raytheon Company, there is a potential for subcontracting opportunities for small businesses. However, the extent to which small businesses will participate is not specified. Without a small business subcontracting plan requirement explicitly stated, the direct impact on the small business ecosystem is uncertain and may be limited.

Oversight & Accountability

Oversight for this contract will primarily fall under the Department of the Navy, a component of the Department of Defense. Given the sole-source nature and CPFF structure, rigorous oversight is crucial to manage costs, ensure performance, and prevent waste. The Department of Defense has established Inspector General offices that can investigate fraud, waste, and abuse. Transparency regarding the sole-source justification and ongoing performance metrics would enhance accountability.

Related Government Programs

Defense Research and Development
Naval Systems Engineering
Aerospace Manufacturing Support
Navigation and Guidance Systems Procurement
Department of Defense IT and Engineering Services

Risk Flags

Sole-source award without clear justification.
Cost-plus-fixed-fee contract type carries inherent cost escalation risks.
Lack of competitive bidding limits price discovery and potential savings.
Potential for contractor lock-in due to specialized services.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $18.0 million to RAYTHEON COMPANY. ENGINEERING SERVICES TI-100

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 $18.0 million.

What is the period of performance?

Start: 2022-09-28. End: 2025-12-31.

What is the specific justification for awarding this contract on a sole-source basis to Raytheon Company?

The provided data does not include the specific justification for the sole-source award. Typically, sole-source contracts are awarded when only one responsible source is available to meet the government's needs. This could be due to unique capabilities, proprietary technology, urgent and compelling circumstances, or a lack of adequate competition. Without the official justification document, it is impossible to definitively state why Raytheon was the only option considered. This lack of transparency is a concern, as it prevents a thorough assessment of whether competitive options were truly unavailable or if the sole-source path was chosen for other reasons.

How does the Cost Plus Fixed Fee (CPFF) pricing structure compare to other contract types in terms of risk and potential cost efficiency for the government?

The Cost Plus Fixed Fee (CPFF) contract type is often used when the scope of work is not well-defined or involves significant research and development, making it difficult to estimate costs accurately upfront. Under CPFF, the contractor is reimbursed for allowable costs plus a fixed fee representing profit. While this structure allows flexibility, it shifts much of the cost risk to the government. If costs escalate, the government pays more. The 'fixed fee' component aims to provide the contractor with an incentive to control costs, as their profit is predetermined. However, compared to fixed-price contracts, CPFF generally offers less cost certainty for the government and can potentially lead to higher overall expenditures if not managed with stringent oversight and cost controls.

What are the potential risks associated with limited competition for specialized engineering services like these?

Limited competition, especially in sole-source awards for specialized engineering services, carries several risks. Firstly, it can lead to higher prices as the contractor faces less pressure to be cost-competitive. Secondly, it may stifle innovation, as there is less incentive for the contractor to develop novel or more efficient solutions when they are the only provider. Thirdly, it can create contractor dependency or 'lock-in,' making it difficult and costly for the government to switch providers in the future. Finally, it reduces the government's leverage in negotiations regarding terms, conditions, and performance standards, potentially impacting overall program effectiveness and value.

What is the historical spending pattern for similar engineering services by the Department of the Navy or Department of Defense?

Historical spending data for similar engineering services by the Department of the Navy or the broader Department of Defense is not provided in the current data extract. To conduct a thorough analysis, one would need to examine past contracts awarded under the same or similar NAICS codes (e.g., 334511) and PSC codes, noting the contract types, competition levels, and total values. Benchmarking this $18 million award against previous expenditures would help determine if current pricing is consistent with historical trends or if there are significant deviations that warrant further investigation, particularly given the sole-source nature of this award.

What are the implications of the contract's performance location in Texas for workforce and economic impact?

The contract's performance location in Texas (st: TX) suggests a direct economic impact on the state. This includes the potential creation or sustainment of high-skilled jobs in engineering and related technical fields. Companies like Raytheon often employ a significant workforce, and a contract of this magnitude can contribute to local economies through salaries, local procurement, and associated service demands. The specific impact would depend on whether Raytheon utilizes existing facilities and personnel in Texas or hires new staff, and the extent to which they engage local subcontractors.

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: N0016422RJQ65

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: RTX Corp

Address: 2501 W UNIVERSITY DR, MCKINNEY, TX, 75071

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: $18,472,118

Exercised Options: $18,472,118

Current Obligation: $17,997,278

Actual Outlays: $25,351

Subaward Activity

Number of Subawards: 3

Total Subaward Amount: $218,902

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: N0016422GJQ65

IDV Type: BOA

Timeline