Raytheon Company awarded $207.7M for engineering services, a sole-source contract with a long duration

Contract Overview

Contract Amount: $207,673,205 ($207.7M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2005-11-08

End Date: 2013-12-14

Contract Duration: 2,958 days

Daily Burn Rate: $70.2K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: TOW ENGINEERING SERVICES

Place of Performance

Location: TUCSON, PIMA County, ARIZONA, 85756

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $207.7 million to RAYTHEON COMPANY for work described as: TOW ENGINEERING SERVICES Key points: 1. Contract awarded on a sole-source basis, raising questions about price discovery and potential for overpayment. 2. The contract spans nearly 8 years, indicating a long-term need for these engineering services. 3. A significant portion of the contract value was awarded without competitive bidding, suggesting limited market engagement. 4. The 'Cost Plus Fixed Fee' pricing structure can incentivize cost overruns if not closely monitored. 5. The contract's duration and sole-source nature warrant scrutiny for potential inefficiencies. 6. Performance context is limited due to the lack of competitive benchmarks.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to its sole-source nature and long duration. Without competitive bids, it's difficult to ascertain if the pricing reflects fair market value. The 'Cost Plus Fixed Fee' (CPFF) structure, while common for complex or uncertain scope work, carries inherent risks of cost escalation. The total value of over $207 million over nearly 8 years suggests a substantial investment, and the lack of competition means taxpayers may not have benefited from the cost savings typically achieved through a competitive bidding process. Further analysis would require detailed cost breakdowns and comparison to similar sole-source engineering service contracts.

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 typically occurs when only one vendor possesses the necessary capabilities, or in situations deemed urgent or critical. The lack of competition means that Raytheon Company was the only bidder, and the government did not have the opportunity to solicit and evaluate offers from other qualified companies. This can limit price negotiation leverage and potentially lead to higher costs compared to a competitively awarded contract.

Taxpayer Impact: Sole-source awards mean taxpayers do not benefit from the price reductions and efficiencies that typically arise from a competitive bidding environment. This can result in higher overall spending for the government.

Public Impact

The Department of Defense benefits from specialized engineering services provided by Raytheon Company. These services likely support critical defense systems and infrastructure, ensuring operational readiness. The contract's impact is primarily within the defense sector, supporting national security objectives. Workforce implications may include specialized engineering roles within Raytheon and potentially its subcontractors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price discovery and potential savings for taxpayers.
Long contract duration (nearly 8 years) increases the risk of cost overruns and potential for scope creep without competitive re-evaluation.
CPFF contract type can incentivize higher costs if not rigorously managed.
Lack of competition makes it difficult to assess if the contractor's performance is truly best-in-class or simply the only option available.

Positive Signals

Award to a large, established defense contractor like Raytheon suggests access to significant technical expertise and resources.
The contract's long duration indicates a sustained and potentially critical need for these engineering services by the DoD.
The definitive contract award type provides a clear framework for the services to be rendered over the contract period.

Sector Analysis

This contract falls within the Engineering Services sector (NAICS 541330), a critical component of the broader defense industrial base. The market for specialized engineering services supporting defense applications is often characterized by high barriers to entry due to security clearances, proprietary technology, and extensive experience requirements. Large, established defense contractors like Raytheon Company dominate this space. Comparable spending benchmarks are difficult to establish precisely due to the unique nature of defense engineering requirements and the prevalence of sole-source or limited competition awards in this specialized niche.

Small Business Impact

This contract does not appear to have a small business set-aside component (ss: false, sb: false). Given the sole-source nature and the specialized engineering services required, it is unlikely that significant subcontracting opportunities for small businesses were mandated or actively sought through a competitive process. The focus was likely on securing the specialized capabilities of the prime contractor, Raytheon Company. This means the direct economic benefit to the small business ecosystem from this specific contract may be limited unless Raytheon proactively engages small businesses as subcontractors.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contract management agencies, such as the Defense Contract Management Agency (DCMA). Given the 'Cost Plus Fixed Fee' structure, rigorous oversight of incurred costs, progress, and adherence to the fixed fee is crucial. Transparency is often limited in sole-source defense contracts, but reporting requirements within the contract itself would dictate the level of insight available to the government. Inspector General (IG) jurisdiction would apply if any fraud, waste, or abuse is suspected.

Related Government Programs

Defense Engineering Services
Raytheon Company Contracts
Department of Defense Procurement
Sole Source Defense Contracts
Cost Plus Fixed Fee Contracts

Risk Flags

Sole Source Award
Long Contract Duration
Cost Plus Fixed Fee Pricing
Lack of Competition

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $207.7 million to RAYTHEON COMPANY. TOW 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 (Defense Contract Management Agency).

What is the total obligated amount?

The obligated amount is $207.7 million.

What is the period of performance?

Start: 2005-11-08. End: 2013-12-14.

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

Raytheon Company, now part of RTX, has a long and extensive history of providing a wide array of engineering, technical, and defense-related services to the Department of Defense (DoD). Their track record includes work on complex systems such as radar, missiles, command and control systems, and cybersecurity solutions. Historically, Raytheon has been a major prime contractor on numerous large-scale DoD programs, often securing contracts through both competitive and sole-source means. While specific performance metrics for individual contracts are often not publicly detailed, their continued success in winning significant DoD contracts suggests a generally positive performance perception by the agency. However, like any large defense contractor, they have also faced scrutiny and audits on specific contracts regarding cost, schedule, and performance.

How does the $207.7 million value compare to other sole-source engineering service contracts awarded by the DoD?

The $207.7 million value for this nearly 8-year engineering services contract is substantial, but within the range of large sole-source awards common in the defense sector. Sole-source contracts are often awarded for highly specialized, critical, or unique requirements where only one contractor possesses the necessary technology, expertise, or security clearances. These types of contracts can easily reach hundreds of millions, or even billions, of dollars, especially when they involve long-term sustainment, research and development, or integration of complex weapon systems. While this specific amount is significant, it is not an outlier for a sole-source award to a major defense contractor like Raytheon for extensive engineering support over an extended period. The key concern is not the absolute dollar amount, but the justification for the sole-source award and the rigor of cost oversight.

What are the primary risks associated with a 'Cost Plus Fixed Fee' (CPFF) contract of this magnitude and duration?

The primary risks associated with a CPFF contract of this magnitude ($207.7M over nearly 8 years) revolve around cost control and contractor incentives. In a CPFF contract, the contractor is reimbursed for allowable costs plus a fixed fee representing profit. The risk for the government is that the contractor may have less incentive to control costs rigorously, as cost overruns are generally reimbursed. If the fixed fee is not adequately negotiated or if oversight is lax, the total contract cost can significantly exceed initial estimates. For long-duration contracts, the risk of scope creep or unforeseen technical challenges can also lead to cost increases. Effective risk mitigation requires robust government oversight, detailed cost tracking, clear performance metrics, and strong negotiation of the fixed fee and contract terms.

What does the lack of competition (sole-source) imply about the market for these specific engineering services?

The sole-source nature of this contract implies that, at the time of award, the Department of Defense determined that only Raytheon Company possessed the specific capabilities, technology, or security clearances required for these engineering services. This suggests a highly specialized niche market with potentially limited competition. It could indicate that the technology is proprietary, the required expertise is rare, or the program is a continuation of previous work where Raytheon is the incumbent and sole developer. While this ensures the government secures the needed services, it also means taxpayers may not benefit from the price reductions and innovation that typically arise from a competitive environment. It raises questions about whether the market could be developed or if alternative solutions exist that were not considered.

How has federal spending on 'Engineering Services' (NAICS 541330) evolved over the past decade, and where does this contract fit?

Federal spending on 'Engineering Services' (NAICS 541330) has generally remained substantial, driven significantly by defense, infrastructure, and R&D needs. The defense sector is consistently the largest consumer of these services, utilizing them for weapon system design, development, testing, and sustainment. Over the past decade, spending has fluctuated based on defense budgets, geopolitical events, and infrastructure initiatives. This specific $207.7 million contract, awarded to Raytheon, fits within the defense segment of engineering services. While it represents a significant single award, it is one of many contracts within the broader federal engineering services spend. Its sole-source nature and long duration make it a notable example within this category, highlighting specific procurement strategies used for critical defense needs.

Industry Classification

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

Product/Service Code: SUPPORT SVCS (PROF, ADMIN, MGMT) › PROFESSIONAL SERVICES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: W31P4Q05R0263

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: RTX Corp (UEI: 001344142)

Address: 1151 E HERMANS RD, TUCSON, AZ, 85706

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Manufacturer of Goods, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $314,748,230

Exercised Options: $207,673,205

Current Obligation: $207,673,205

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline