Department of the Army awarded $84M in engineering services to a joint venture, with limited competition

Contract Overview

Contract Amount: $84,248,870 ($84.2M)

Contractor: Raytheon/Lockheed Martin Javelin JV

Awarding Agency: Department of Defense

Start Date: 2013-06-14

End Date: 2019-09-30

Contract Duration: 2,299 days

Daily Burn Rate: $36.6K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Other

Official Description: ENGINEERING SERVICES FY13-FY15

Place of Performance

Location: TUCSON, PIMA County, ARIZONA, 85756

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $84.2 million to RAYTHEON/LOCKHEED MARTIN JAVELIN JV for work described as: ENGINEERING SERVICES FY13-FY15 Key points: 1. The contract utilized a Cost Plus Fixed Fee (CPFF) pricing structure, which can lead to cost overruns if not carefully managed. 2. Awarded to a joint venture of Raytheon and Lockheed Martin, indicating a concentration of expertise but potentially limited market entry for smaller firms. 3. The contract duration of 2299 days (over 6 years) suggests a long-term need for these engineering services. 4. The contract was not competed, raising questions about potential cost savings and the exploration of alternative solutions. 5. The primary performance location is Arizona, suggesting a localized impact for this significant federal expenditure. 6. The North American Industry Classification System (NAICS) code 541330 points to a focus on specialized engineering services.

Value Assessment

Rating: fair

Benchmarking the value of this contract is challenging due to the lack of competitive bidding and the specific nature of engineering services. The CPFF structure, while allowing for flexibility, carries inherent risks of cost escalation compared to fixed-price contracts. Without a competitive process, it's difficult to ascertain if the government secured the best possible price or if alternative approaches could have yielded greater value for taxpayer dollars. The total award value of approximately $84 million over six years averages to about $14 million annually, which needs to be assessed against the scope and complexity of the engineering tasks performed.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning it was not openly competed. This approach is typically reserved for situations where only one source can fulfill the requirement, or in cases of urgent need. The lack of competition limits the government's ability to solicit bids from multiple vendors, potentially hindering price discovery and innovation. It also raises questions about whether a more competitive process could have been implemented to achieve better pricing or a wider range of technical solutions.

Taxpayer Impact: Sole-source awards can result in higher costs for taxpayers as the government does not benefit from the price pressures inherent in a competitive bidding environment. This can lead to less efficient use of public funds.

Public Impact

The Department of the Army benefits from specialized engineering services crucial for its operations. The contract supports advanced engineering solutions likely related to defense systems or infrastructure. The geographic impact is concentrated in Arizona, where the primary performance is located. The contract likely supports a specialized engineering workforce, potentially requiring high-skilled professionals.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to higher costs for taxpayers.
Cost Plus Fixed Fee contract type carries inherent risk of cost overruns.
Sole-source award limits opportunities for small businesses to participate.

Positive Signals

Award to a joint venture of established defense contractors suggests access to significant expertise.
Long contract duration indicates a sustained need and potential for stable service delivery.
Specific NAICS code suggests a focus on critical engineering services.

Sector Analysis

This contract falls within the Engineering Services sector, a critical component of the broader professional, scientific, and technical services industry. This sector is characterized by specialized knowledge and expertise, often supporting complex government and private sector projects. The market size for engineering services is substantial, with significant government spending directed towards defense, infrastructure, and research and development. This specific award to a joint venture of major defense contractors suggests a focus on high-value, specialized engineering solutions within the defense industrial base.

Small Business Impact

The contract was not competed and did not include small business set-asides. This indicates that opportunities for small businesses to directly participate in this specific contract were likely limited. Without a competitive bidding process that includes subcontracting goals for small businesses, the direct economic impact on the small business ecosystem for this particular award may be minimal. Future contracts of this nature should explore avenues for small business inclusion through subcontracting or by encouraging joint ventures.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of the Army's contracting and program management offices. As a sole-source award, the justification and approval process would be subject to review. Transparency regarding the specific engineering services rendered and the justification for the sole-source award would be key to assessing accountability. Inspector General involvement would be contingent on any reported issues of fraud, waste, or abuse.

Related Government Programs

Department of Defense Engineering Services
Army Research and Development Contracts
Sole-Source Defense Procurements
Cost-Plus-Fixed-Fee Contracts

Risk Flags

Sole-source award lacks competitive justification.
CPFF contract type poses cost overrun risks.
Limited transparency on specific services rendered.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $84.2 million to RAYTHEON/LOCKHEED MARTIN JAVELIN JV. ENGINEERING SERVICES FY13-FY15

Who is the contractor on this award?

The obligated recipient is RAYTHEON/LOCKHEED MARTIN JAVELIN JV.

Which agency awarded this contract?

Awarding agency: Department of Defense (Department of the Army).

What is the total obligated amount?

The obligated amount is $84.2 million.

What is the period of performance?

Start: 2013-06-14. End: 2019-09-30.

What specific engineering services were provided under this contract?

The provided data indicates the contract was for 'ENGINEERING SERVICES' under NAICS code 541330. While the specific nature of these services is not detailed, this code typically encompasses establishments primarily engaged in providing architectural, engineering, and related design services. For a defense contract of this magnitude, it likely involves complex design, analysis, testing, and integration services for military systems, platforms, or infrastructure. Examples could include the development of new weapon systems, upgrades to existing platforms, or the design of specialized military facilities. Further details would require access to the contract's statement of work.

How does the Cost Plus Fixed Fee (CPFF) pricing structure compare to other contract types for similar services?

The CPFF structure is common for research and development or complex services where the scope is not fully defined at the outset. It allows the contractor to recover all allowable costs plus a predetermined fixed fee representing profit. Compared to Firm-Fixed-Price (FFP) contracts, CPFF offers more flexibility for the government if requirements change but carries a higher risk of cost overruns, as the contractor is incentivized to incur costs to increase the base for their fee. Fixed-Price Incentive (FPI) contracts offer a middle ground with shared cost savings and overruns. For well-defined engineering services, FFP contracts are often preferred for better cost certainty, but CPFF can be appropriate for exploratory or highly uncertain projects.

What are the potential risks associated with a sole-source award for engineering services?

Sole-source awards for engineering services present several risks. Primarily, the lack of competition can lead to inflated prices, as there is no market pressure to offer the most cost-effective solution. It also limits the government's exposure to innovative approaches or alternative technologies that other firms might offer. Furthermore, it can create a dependency on a single contractor, potentially reducing leverage in future negotiations. Without a competitive process, it's also harder to objectively assess if the chosen contractor possesses unique capabilities that truly justify the sole-source designation, or if the requirement could have been met by multiple qualified vendors.

What is the historical spending trend for engineering services by the Department of the Army?

Historical spending data for engineering services by the Department of the Army is substantial, reflecting the ongoing need for specialized technical expertise in areas such as research, development, acquisition, and infrastructure support. While the specific figure of $84 million over FY13-FY15 for this particular contract is significant, the Army's overall annual expenditure on engineering and related professional services often runs into billions of dollars across various contracts and programs. Trends are influenced by defense budgets, modernization priorities, and geopolitical factors. Analyzing broader spending patterns would reveal shifts in investment towards areas like cybersecurity, advanced materials, and digital engineering.

What is the significance of the joint venture between Raytheon and Lockheed Martin for this contract?

The formation of a joint venture (JV) between Raytheon and Lockheed Martin for this engineering services contract signifies a strategic collaboration between two major defense industry players. This approach allows them to pool their distinct expertise, resources, and technological capabilities to address a complex requirement that might be challenging for either company to undertake alone. For the government, it potentially provides access to a high level of specialized knowledge and a proven track record. However, it also concentrates significant market power within a single entity, potentially limiting future competition from these prime contractors or their subsidiaries.

Industry Classification

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

Product/Service Code: RESEARCH AND DEVELOPMENT › C – National Defense R&D Services

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: W31P4Q12R0072

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 BLDG 80, TUCSON, AZ, 85706

Business Categories: Category Business, Manufacturer of Goods, Not Designated a Small Business, Partnership or Limited Liability Partnership, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $227,707,507

Exercised Options: $144,334,747

Current Obligation: $84,248,870

Subaward Activity

Number of Subawards: 2

Total Subaward Amount: $933,040

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline