Raytheon awarded $12.3M for engineering services, but competition was limited, raising value concerns

Contract Overview

Contract Amount: $12,297,187 ($12.3M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2020-03-25

End Date: 2025-12-31

Contract Duration: 2,107 days

Daily Burn Rate: $5.8K/day

Competition Type: NOT COMPETED

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: THE PURPOSE OF THIS ACTION IS TO AWARD THE DELIVERY ORDER IN SUPPORT OF SENTINEL ENGINEERING SERVICES.

Place of Performance

Location: FULLERTON, ORANGE County, CALIFORNIA, 92833

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $12.3 million to RAYTHEON COMPANY for work described as: THE PURPOSE OF THIS ACTION IS TO AWARD THE DELIVERY ORDER IN SUPPORT OF SENTINEL ENGINEERING SERVICES. Key points: 1. Contract awarded via non-competitive process, limiting price discovery and potentially increasing costs. 2. Significant contract duration of over 2100 days suggests long-term reliance on this provider. 3. Engineering services are critical for defense infrastructure, but lack of competition warrants scrutiny. 4. Contract type is Cost Plus Fixed Fee, which can incentivize cost increases. 5. Awarded to a large, established contractor, potentially crowding out smaller, specialized firms. 6. Geographic focus on California may indicate specific project needs or regional capabilities.

Value Assessment

Rating: questionable

The contract's value is difficult to benchmark due to the lack of competitive bidding. The Cost Plus Fixed Fee structure, while common for complex engineering, can lead to higher costs if not managed tightly. Without comparable bids, it's challenging to ascertain if the $12.3 million represents a fair market price for the engineering services provided over its extended duration. Further analysis of the fixed fee component and the cost-plus elements would be necessary to fully assess value for money.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning there was no open competition. This approach is typically used when only one vendor can provide the required goods or services, or in urgent situations. The lack of competition means that the government did not benefit from the price reductions and innovation that typically arise from a competitive bidding process. This raises questions about whether the most cost-effective solution was secured.

Taxpayer Impact: Taxpayers may have paid a premium for these engineering services due to the absence of competitive pressure to lower prices. The government missed an opportunity to leverage market forces to achieve better value.

Public Impact

The Department of the Army benefits from specialized engineering services crucial for its operations. Services are delivered in California, supporting regional defense infrastructure projects. The contract supports the maintenance and enhancement of critical defense systems. Workforce implications include employment for engineers and technical staff within Raytheon Company. The long duration suggests ongoing support for complex, long-term defense initiatives.

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 can incentivize cost overruns.
Sole-source award limits transparency and potential for innovation from other vendors.

Positive Signals

Awarded to a known entity (Raytheon Company) with a track record in defense contracting.
Contract duration indicates a commitment to fulfilling long-term engineering needs.
Services are essential for national defense infrastructure.

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 expertise and often involves complex projects requiring deep technical knowledge. The market size for engineering services supporting the federal government is substantial, with significant spending allocated to defense and infrastructure. This specific award to Raytheon Company for the Sentinel Engineering Services aligns with typical government procurement patterns for specialized technical support within the defense industry.

Small Business Impact

This contract was not set aside for small businesses, nor does it appear to have specific subcontracting requirements for small businesses mentioned in the provided data. The award to a large prime contractor like Raytheon Company suggests that the primary focus was on the prime's capabilities rather than fostering small business participation through this specific vehicle. This could limit opportunities for small businesses to engage in this particular project, unless they are already part of Raytheon's supply chain.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of the Army's contracting and program management offices. Given the sole-source nature and Cost Plus Fixed Fee structure, rigorous oversight of costs, performance, and adherence to the contract's scope is crucial. Transparency is limited by the non-competitive award, but contract performance reviews and financial audits would be key accountability measures. The Inspector General's office for the Department of Defense would have jurisdiction for investigating any potential fraud, waste, or abuse.

Related Government Programs

Department of Defense Engineering Services
Army Command and Control Systems
Sentinel Program Support
Defense Infrastructure Modernization

Risk Flags

Sole-source award lacks competition, potentially increasing costs.
Cost Plus Fixed Fee contract type carries inherent cost escalation risks.
Extended contract duration requires sustained oversight.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $12.3 million to RAYTHEON COMPANY. THE PURPOSE OF THIS ACTION IS TO AWARD THE DELIVERY ORDER IN SUPPORT OF SENTINEL 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 $12.3 million.

What is the period of performance?

Start: 2020-03-25. End: 2025-12-31.

What is Raytheon Company's track record with similar sole-source engineering contracts within the Department of Defense?

Raytheon Company, now RTX, has a long and extensive history of contracting with the Department of Defense across various engineering and defense systems. While specific data on their sole-source engineering contracts for similar services isn't provided here, their overall profile suggests significant experience. Historically, large defense contractors like Raytheon are often awarded sole-source contracts due to their specialized capabilities, existing system knowledge, or sole-provider status for critical components. However, the frequency and value of such sole-source awards can vary. A deeper analysis would involve reviewing historical contract awards databases (like FPDS or USASpending) to identify patterns in sole-source awards to Raytheon for engineering services, their duration, value, and the justifications provided for the lack of competition. This would help contextualize the current award and assess if it aligns with past practices or represents an outlier.

How does the $12.3 million cost compare to similar engineering service contracts awarded competitively by the Army?

Direct comparison of the $12.3 million cost is challenging without knowing the specific scope of 'Sentinel Engineering Services' and the contract's duration (2107 days). However, the fact that this contract was awarded on a sole-source basis inherently limits direct value-for-money comparisons against competitively bid contracts. Competitively sourced engineering services typically yield lower prices due to market pressures. If this $12.3 million were spread over the contract's nearly 6-year term, it averages roughly $2 million per year. Benchmarking this annual cost against comparable, competitively awarded engineering support contracts for complex defense systems within the Army would be necessary. Factors like the level of technical expertise required, the criticality of the systems supported, and the geographic location (California) would need to be considered for a fair comparison. The absence of competition suggests this figure might be higher than what could have been achieved through a bidding process.

What are the primary risks associated with a sole-source, Cost Plus Fixed Fee contract for engineering services?

The primary risks associated with a sole-source, Cost Plus Fixed Fee (CPFF) contract are twofold. Firstly, the sole-source nature eliminates competitive pressure, potentially leading to inflated prices and reduced incentive for the contractor to be highly efficient, as the government bears most of the cost risk. Secondly, the CPFF structure, while providing flexibility for evolving requirements, can incentivize the contractor to increase costs to maximize their fee, which is a percentage of the total costs. This combination requires robust government oversight to scrutinize costs, ensure the fixed fee is appropriate, and manage the contract's scope effectively to prevent cost overruns. Without strong oversight, taxpayers are exposed to higher costs and potentially less value for the services rendered.

What is the 'Sentinel Engineering Services' and why might it require a sole-source award?

The provided data indicates 'Sentinel Engineering Services' as the purpose of the action. The 'Sentinel' designation likely refers to a specific defense system or program managed by the Department of the Army. Engineering services for such systems often involve highly specialized knowledge, proprietary technology, or integration with existing complex platforms. A sole-source award might be justified if Raytheon Company is the original equipment manufacturer (OEM), holds unique intellectual property rights, possesses indispensable technical expertise developed over years of working with the Sentinel system, or if there are urgent operational needs that preclude a lengthy competitive procurement process. The specific justification for the sole-source award would typically be documented by the contracting agency.

How has federal spending on Engineering Services (NAICS 541330) trended over the past five years, and how does this contract fit?

Federal spending on Engineering Services (NAICS 541330) has generally been substantial and has seen fluctuations over the past five years, largely driven by defense, infrastructure, and R&D investments. While precise figures require accessing detailed spending databases, this sector consistently represents billions of dollars annually. This $12.3 million contract, awarded by the Department of the Army, fits within the significant portion of federal engineering service spending allocated to defense. Its duration of over five years means it contributes to the sustained spending in this category. The sole-source nature of this particular award might be an exception to broader trends that often favor competitive bidding for large-scale engineering projects, though sole-source awards are not uncommon for specialized 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

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: RTX Corp

Address: 1801 HUGHES DR, FULLERTON, CA, 92834

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: $12,297,187

Exercised Options: $12,297,187

Current Obligation: $12,297,187

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: W31P4Q19D0030

IDV Type: IDC

Timeline