Raytheon Company awarded $26.5M for engineering services, with limited competition and a cost-plus-fixed-fee structure

Contract Overview

Contract Amount: $26,461,281 ($26.5M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2011-09-29

End Date: 2020-09-30

Contract Duration: 3,289 days

Daily Burn Rate: $8.0K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: HAWK FSSP ENGINEERING SERVICES

Place of Performance

Location: ANDOVER, ESSEX County, MASSACHUSETTS, 01810

State: Massachusetts Government Spending

Plain-Language Summary

Department of Defense obligated $26.5 million to RAYTHEON COMPANY for work described as: HAWK FSSP ENGINEERING SERVICES Key points: 1. The contract utilized a cost-plus-fixed-fee pricing structure, which can incentivize cost overruns. 2. Awarded to a single vendor, raising questions about the extent of price discovery. 3. The contract duration of over 9 years suggests a long-term need for these engineering services. 4. Services were procured under a definitive contract, indicating a specific and established need. 5. The lack of small business set-aside raises questions about opportunities for smaller firms in this procurement.

Value Assessment

Rating: fair

The total award amount of $26.5 million over approximately 9 years for engineering services requires careful benchmarking against similar contracts. Without specific details on the scope of work and deliverables, it's challenging to definitively assess value for money. The cost-plus-fixed-fee (CPFF) contract type, while allowing for flexibility, can sometimes lead to higher costs compared to fixed-price contracts if not managed rigorously. Further analysis would involve comparing the per-unit costs or labor rates to industry standards and other government contracts for comparable engineering services.

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 in situations where urgency or specific requirements preclude a competitive process. The lack of competition means that the government did not benefit from the price reductions and innovation that can arise from a bidding process. This can potentially lead to higher prices and less favorable terms for the government.

Taxpayer Impact: Sole-source awards limit the government's ability to secure the best possible pricing through competitive bidding, potentially resulting in higher costs for taxpayers. It also reduces opportunities for other qualified companies to secure government contracts.

Public Impact

The Department of the Army benefits from specialized engineering services crucial for its operations. These services likely support the development, maintenance, or enhancement of defense systems or infrastructure. The contract's duration suggests a sustained impact on the defense sector's technological capabilities. Workforce implications may include specialized engineering roles within the contractor's organization.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing and potential taxpayer savings.
Cost-plus-fixed-fee structure may incentivize cost escalation if not closely monitored.
Long contract duration (over 9 years) could tie the government to potentially suboptimal terms if market conditions change.
Lack of small business participation noted, potentially limiting opportunities for smaller, innovative firms.

Positive Signals

Award to a large, established defense contractor like Raytheon suggests access to specialized expertise.
Definitive contract indicates a clear and defined need for the engineering services.
Services are likely critical to the Department of the Army's mission requirements.

Sector Analysis

This contract falls within the Engineering Services sector, a critical component of the broader aerospace and defense industry. This sector is characterized by high technical expertise, significant R&D investment, and often long-term, complex projects. The market size for engineering services supporting the Department of Defense is substantial, with numerous large and small firms competing for various contracts. This specific award to Raytheon Company for HAWK FSSP Engineering Services fits within the defense industrial base, supporting specialized military systems.

Small Business Impact

The contract data indicates that this was not a small business set-aside, and the prime contractor is not a small business. This suggests that opportunities for small businesses would primarily be through subcontracting, if Raytheon chooses to engage them. The absence of a specific small business subcontracting plan requirement in the provided data means the extent of small business involvement is uncertain. This could limit the infusion of innovation from smaller enterprises into this specific defense engineering effort.

Oversight & Accountability

Oversight for this contract would typically be managed by the contracting officer and the relevant program executive office within the Department of the Army. The cost-plus-fixed-fee structure necessitates rigorous financial oversight to ensure costs are reasonable and allocable. Transparency would be enhanced through regular reporting requirements from the contractor and potential audits by the Defense Contract Audit Agency (DCAA). Inspector General involvement would be possible if specific allegations of fraud, waste, or abuse arise.

Related Government Programs

Defense Engineering Services
Aerospace and Defense Contracts
Raytheon Company Contracts
Department of the Army Procurements
Cost-Plus Contracts

Risk Flags

Sole-source award
Cost-plus contract type
Long contract duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $26.5 million to RAYTHEON COMPANY. HAWK FSSP 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 Army).

What is the total obligated amount?

The obligated amount is $26.5 million.

What is the period of performance?

Start: 2011-09-29. End: 2020-09-30.

What specific HAWK FSSP engineering services were provided under this contract, and how did their scope evolve over the 9-year period?

The HAWK FSSP (Forward Support Support Program) engineering services likely encompassed a range of technical support activities related to the HAWK missile system. This could include system design, integration, testing, maintenance planning, technical data package development, and lifecycle support. Over its 9-year duration, the scope may have evolved to address obsolescence, upgrades, performance enhancements, or changes in operational requirements. Without access to the contract's detailed statements of work and any modifications, the precise evolution of services remains speculative. However, such long-term contracts often adapt to technological advancements and changing defense needs, requiring continuous engineering input.

How does the cost-plus-fixed-fee (CPFF) structure for this $26.5M contract compare to industry benchmarks for similar defense engineering services?

The Cost-Plus-Fixed-Fee (CPFF) structure is common in defense contracts, particularly for research, development, and complex engineering services where the final cost is difficult to predict upfront. For a $26.5 million contract over 9 years, the fixed fee component is intended to provide the contractor with a reasonable profit margin. Benchmarking this CPFF structure requires comparing the fee percentage and the overall cost-to-fee ratio against similar contracts for HAWK system support or comparable missile defense engineering services. Generally, CPFF contracts are considered less cost-effective for the government than fixed-price contracts due to the risk transfer. However, in cases of high technical uncertainty or evolving requirements, they can be justified. The government's oversight and audit capabilities are crucial to managing costs effectively under this type of contract.

What were the primary justifications for awarding this contract on a sole-source basis instead of through full and open competition?

Sole-source awards are typically justified under specific circumstances outlined in federal acquisition regulations, such as when only one responsible source can provide the required supplies or services, or when a public exigency requires immediate contract award. For a specialized engineering services contract like the HAWK FSSP, the justification might stem from Raytheon's unique historical knowledge, proprietary data, or established expertise with the HAWK system, making them the only viable option. Alternatively, if the requirement was urgent and a competitive process would have caused unacceptable delays, a sole-source award might have been deemed necessary. The specific justification would be documented in the contract file, often involving a Justification and Approval (J&A) document.

What is Raytheon Company's track record with the Department of Defense, particularly concerning engineering services and cost-plus contracts?

Raytheon Company, now part of RTX, has a long and extensive history of contracting with the Department of Defense (DoD) across a wide array of defense systems and services. They are a major defense contractor known for its expertise in areas such as missiles, radar, and command and control systems. Their track record with the DoD includes numerous large-scale contracts, many of which involve complex engineering, development, and sustainment services. Like many large defense contractors, Raytheon has experience with various contract types, including cost-plus structures. While specific performance metrics and cost control histories for individual contracts are often sensitive or not publicly detailed, Raytheon's continued success in securing significant DoD contracts suggests a generally satisfactory performance record in meeting program requirements, albeit subject to the inherent complexities and oversight associated with defense procurement.

How does the $26.5M total value of this contract compare to overall US government spending on engineering services in the defense sector?

The $26.5 million awarded to Raytheon for HAWK FSSP engineering services represents a relatively small fraction of the total US government spending on engineering services, particularly within the defense sector. The Department of Defense alone awards hundreds of billions of dollars annually across all contract types and service categories. Engineering services, encompassing R&D, system design, technical support, and more, constitute a significant portion of this spending. While $26.5 million is a substantial sum for a single contract, it is dwarfed by the overall defense budget and the aggregate spending on engineering and technical support services. This contract is likely one of many supporting specific weapon systems or programs within the larger defense ecosystem.

Industry Classification

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

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: W31P4Q11R0174

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: RTX Corp (UEI: 001344142)

Address: 350 LOWELL ST, ANDOVER, MA, 01810

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: $52,506,583

Exercised Options: $26,461,281

Current Obligation: $26,461,281

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline