Raytheon Company awarded $13.7M contract for engineering services, raising questions about competition and value

Contract Overview

Contract Amount: $13,730,757 ($13.7M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2005-12-19

End Date: 2008-01-31

Contract Duration: 773 days

Daily Burn Rate: $17.8K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: 200605!000040!5700!FA8726!ESC/NIK !FA820706D0001 !A!N! !Y!RS03 ! !20051219!20071031!018494109!018494109!001339159!N!RAYTHEON COMPANY !1768 BUSINESS CENTER DR !RESTON !VA!20190!66672!059!51!RESTON !FAIRFAX !VIRGINIA !+000006408304!N!N!000000000000!H958!OTHER QUALITY CNTL SVCS/COMMUNICATION EQUIPMENT !A7 !ELECTRONICS AND COMMUNICATION EQUIP !237 !GBS !541330!E! !5!B!S! ! ! !99990909!B! ! !N!Z!D!U!U!1!001!N!1B!Z!Y!Z! ! !N!C!N! ! ! !Z!Z!A!A!000!A!C!N! ! ! ! ! ! !0001! !

Place of Performance

Location: RESTON, FAIRFAX County, VIRGINIA, 20190

State: Virginia Government Spending

Plain-Language Summary

Department of Defense obligated $13.7 million to RAYTHEON COMPANY for work described as: 200605!000040!5700!FA8726!ESC/NIK !FA820706D0001 !A!N! !Y!RS03 ! !20051219!20071031!018494109!018494109!001339159!N!RAYTHEON COMPANY !1768 BUSINESS CENTER DR !RESTON !VA!20190!66672!059!51!RESTON !FAIR… Key points: 1. Contract awarded on a sole-source basis, limiting price discovery and potentially increasing costs. 2. The contract type (Cost Plus Fixed Fee) can incentivize cost overruns. 3. Limited competition may indicate a lack of market alternatives or a strategic sourcing decision. 4. The duration of the contract (773 days) suggests a significant, ongoing need for these services. 5. The specific services provided fall under engineering, a broad category with varying market rates. 6. The award to a large, established defense contractor like Raytheon is typical for this sector.

Value Assessment

Rating: questionable

The contract's Cost Plus Fixed Fee structure, while common for complex R&D or services where costs are hard to predict, can lead to higher overall spending if not tightly managed. Without a competitive bidding process, it's difficult to benchmark the pricing against market rates or other similar contracts. The total award amount of $13.7 million over approximately two years suggests a significant investment, and the lack of competition makes it challenging to assess if this represents good value for money. Further analysis of the fixed fee percentage and the cost drivers would be necessary for 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 it was not competed. This typically occurs when only one responsible source can provide the required services, or in cases of urgent need. The lack of competition means that potential alternative providers were not considered, and the government did not benefit from the price reductions that can arise from a competitive bidding process. This limits the government's ability to explore different solutions or negotiate more favorable terms.

Taxpayer Impact: For taxpayers, a sole-source award means there is a higher risk of paying a premium for the services. Without competitive pressure, the contractor may not have the same incentive to offer the lowest possible price, potentially leading to less efficient use of public funds.

Public Impact

The primary beneficiary is the Department of Defense, which receives essential engineering services. These services likely support critical defense systems or infrastructure, ensuring operational readiness. The contract's geographic impact is centered in Virginia, where the contractor is located. The contract supports jobs within Raytheon Company, contributing to the defense industry workforce.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition, potentially leading to higher costs for taxpayers.
Cost Plus Fixed Fee contract type can incentivize increased spending if not closely monitored.
Lack of transparency in the sole-source justification makes it difficult to assess necessity.
The broad nature of 'Engineering Services' can obscure specific cost drivers and value.

Positive Signals

Award to a large, experienced contractor like Raytheon suggests a focus on proven capabilities.
The contract duration indicates a sustained need, implying the services are important to agency missions.
The specific NAICS code (541330) points to a defined area of engineering expertise.

Sector Analysis

This contract falls within the Engineering Services sector, a broad category encompassing design, development, and technical consulting. The U.S. engineering services market is substantial, with significant government spending, particularly in defense and aerospace. This contract with the Department of Defense aligns with typical government procurement patterns for specialized technical support. Comparable spending benchmarks are difficult to establish without more specific details on the engineering disciplines involved, but defense-related engineering services often represent a significant portion of the federal IT and defense budgets.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by the 'N' for 'SB' (Small Business) in the data. Furthermore, the award to a large prime contractor like Raytheon suggests that subcontracting opportunities for small businesses may exist, but this is not guaranteed or specified in the provided data. The impact on the small business ecosystem would depend on whether Raytheon actively seeks small business partners for this specific contract.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contract management and inspection agencies, such as the Defense Contract Management Agency (DCMA). Accountability measures would be tied to the performance requirements outlined in the contract and the Cost Plus Fixed Fee structure, which requires detailed cost reporting. Transparency is limited due to the sole-source nature of the award; however, contract award data is publicly available through federal procurement databases. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Defense Engineering Services
Raytheon Company Contracts
Cost Plus Fixed Fee Contracts
Sole Source Procurements
Department of Defense IT and Support Services

Risk Flags

Sole-source award
Cost Plus Fixed Fee contract type
Lack of competitive bidding
Potential for cost overruns
Limited transparency on value for money

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $13.7 million to RAYTHEON COMPANY. 200605!000040!5700!FA8726!ESC/NIK !FA820706D0001 !A!N! !Y!RS03 ! !20051219!20071031!018494109!018494109!001339159!N!RAYTHEON COMPANY !1768 BUSINESS CENTER DR !RESTON !VA!20190!66672!059!51!RESTON !FAIRFAX !VIRGINIA !+000006408304!N!N!000000000000!H958!OTHER QUALITY CNTL SVCS/COMMUNICATION EQUIPMENT !A7 !ELECTRONICS AND COMMUNICATION EQUIP !237 !GBS !541330!E! !5!B!S! ! ! !999

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 $13.7 million.

What is the period of performance?

Start: 2005-12-19. End: 2008-01-31.

What is Raytheon Company's track record with the federal government, particularly in providing engineering services?

Raytheon Company, now part of RTX, has a long and extensive history of contracting with the U.S. federal government, primarily the Department of Defense. They are a major defense contractor involved in a wide array of programs, including aerospace, defense, and cybersecurity. Their track record includes numerous large-scale contracts for complex systems development, integration, and support services. For engineering services specifically, Raytheon has consistently been awarded contracts across various domains, leveraging their expertise in areas like systems engineering, software development, and advanced technologies. While their overall track record is extensive, the specifics of performance on any given contract can vary, and detailed performance reviews are often proprietary or aggregated within larger program evaluations.

How does the $13.7 million award compare to similar engineering services contracts awarded by the Department of Defense?

Comparing the $13.7 million award to similar contracts requires access to a broader dataset of federal procurements and specific details about the engineering services rendered. However, for a contract spanning approximately two years (773 days), $13.7 million is a substantial amount, averaging around $7 million per year. This suggests a significant scope of work or highly specialized engineering expertise is required. The Department of Defense frequently awards contracts in the tens to hundreds of millions of dollars for engineering and technical support, especially for major weapon systems or complex technological development. Without knowing the precise nature of the engineering services (e.g., R&D, sustainment, integration), it's difficult to provide a precise benchmark, but the award size is consistent with significant, long-term engineering support needs within the defense sector.

What are the primary risks associated with a sole-source, Cost Plus Fixed Fee (CPFF) contract of this nature?

The primary risks associated with a sole-source, Cost Plus Fixed Fee (CPFF) contract are twofold. Firstly, the sole-source nature eliminates competitive pressure, which can lead to higher prices than might be achieved in a competitive environment. The government may not be getting the best possible value for its money. Secondly, the CPFF contract type, while useful when costs are uncertain, carries the risk of cost escalation. The contractor is reimbursed for allowable costs plus a negotiated fixed fee. If costs increase, the total contract value increases, and the contractor's profit (the fixed fee) remains the same. This can incentivize less cost-consciousness from the contractor, as their profit is guaranteed regardless of cost efficiency, potentially leading to overspending if not rigorously overseen.

What does the NAICS code 541330 (Engineering Services) typically encompass in federal contracting, and how does this contract fit?

The North American Industry Classification System (NAICS) code 541330 broadly covers establishments primarily engaged in providing architectural, engineering, and related services. This includes services such as designing, planning, and managing construction projects; providing engineering consulting; and performing related services like testing and inspection. In federal contracting, this code often signifies contracts for specialized technical expertise required for the design, development, testing, integration, and sustainment of complex systems, particularly in sectors like defense, aerospace, and infrastructure. This specific contract, awarded to Raytheon Company by the Department of Defense, likely involves sophisticated engineering support crucial for defense systems, aligning well with the typical scope of services under this NAICS code.

Given the contract's duration and value, what are the potential historical spending patterns for similar engineering services within the Department of Defense?

The Department of Defense (DoD) is a major consumer of engineering services, with historical spending patterns showing consistent and significant investment in this area. Contracts for engineering support, especially for major defense programs, often span multiple years and can range from millions to billions of dollars. The DoD's reliance on contractors like Raytheon for specialized technical expertise is a long-standing pattern, driven by the complexity of modern military systems and the need for cutting-edge technology. Historical data indicates that engineering services are a critical component of the defense budget, supporting everything from research and development to system sustainment and modernization. Spending in this category tends to fluctuate with defense priorities, technological advancements, and geopolitical events, but a consistent demand for high-level engineering support remains.

Industry Classification

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

Product/Service Code: QUALITY CONTROL, TEST, INSPECTION › OTHER QUALITY, TEST, INSPECT SVCS

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Address: 1768 BUSINESS CENTER DR, RESTON, VA, 11

Business Categories: Category Business, Not Designated a Small Business

Contract Characteristics

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: FA820706D0001

IDV Type: IDC

Timeline