Raytheon Company awarded $27M for engineering services on missile systems, with limited competition

Contract Overview

Contract Amount: $26,981,365 ($27.0M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2020-07-31

End Date: 2026-02-28

Contract Duration: 2,038 days

Daily Burn Rate: $13.2K/day

Competition Type: NOT COMPETED

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: ENGINEERING SERVICES FOR THE TUBE-LAUNCHED OPTICALLY-TRACKED WIRELESS-GUIDED MISSILES.

Place of Performance

Location: TUCSON, PIMA County, ARIZONA, 85756

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $27.0 million to RAYTHEON COMPANY for work described as: ENGINEERING SERVICES FOR THE TUBE-LAUNCHED OPTICALLY-TRACKED WIRELESS-GUIDED MISSILES. Key points: 1. Contract awarded to a single, established defense contractor, indicating potential for limited price negotiation. 2. The contract spans over six years, suggesting a long-term need for these specialized engineering services. 3. Services are for advanced missile guidance systems, highlighting critical defense technology development. 4. The contract type (Cost Plus Fixed Fee) can lead to cost overruns if not closely monitored. 5. Geographic focus on Arizona for contract performance. 6. No small business set-aside, suggesting the prime contractor will likely manage subcontracting.

Value Assessment

Rating: fair

The contract value of $26.98 million for engineering services on missile systems appears reasonable given the specialized nature of the work and the long duration of the contract (over six years). However, without detailed breakdowns of labor categories, hours, and overhead rates, a precise value-for-money assessment is challenging. Benchmarking against similar sole-source or limited-competition contracts for advanced defense engineering services would be necessary for a more definitive comparison. The Cost Plus Fixed Fee (CPFF) structure introduces risk, as costs can escalate beyond initial estimates if not managed effectively.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning Raytheon Company was the only vendor considered. This approach is typically used when a specific contractor possesses unique capabilities, proprietary technology, or when urgency dictates a rapid award without a full competition. The lack of competition means that taxpayers do not benefit from the price discovery mechanisms inherent in a competitive bidding process, potentially leading to higher costs than might be achieved in an open market.

Taxpayer Impact: Sole-source awards limit opportunities for other businesses to compete and can result in taxpayers paying a premium for goods and services due to the absence of competitive pressure on pricing.

Public Impact

The primary beneficiaries are the Department of the Army, receiving critical engineering support for advanced missile systems. Services delivered include engineering expertise for the development and sustainment of Tube-Launched Optically-Tracked Wire-Guided Missiles. Geographic impact is concentrated in Arizona, where the contractor will perform the work. Workforce implications include employment for specialized engineers and technical staff within Raytheon Company.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost Plus Fixed Fee contract type carries inherent risk of cost escalation.
Sole-source award limits competitive pressure, potentially impacting price efficiency.
Long contract duration requires sustained oversight to ensure continued value.
Lack of small business set-aside may limit opportunities for smaller firms in the supply chain.

Positive Signals

Award to a prime contractor with demonstrated expertise in defense systems.
Contract addresses a critical national defense need for advanced missile technology.
Long-term nature of the contract provides stability for specialized engineering resources.
Clear performance period with defined end date.

Sector Analysis

This contract falls within the Defense Industrial Base sector, specifically focusing on advanced weapons systems engineering. The market for such specialized missile technology is highly concentrated among a few large defense contractors. Raytheon Company is a major player in this space. Spending on defense engineering services is a significant portion of the overall defense budget, supporting research, development, and sustainment of military platforms. Comparable spending benchmarks would typically involve analyzing other sole-source or limited-competition contracts for similar engineering support on complex weapon systems.

Small Business Impact

This contract does not include a small business set-aside. As a sole-source award to a large prime contractor, Raytheon Company, the primary impact on small businesses would be through potential subcontracting opportunities. The extent to which Raytheon engages small businesses in its supply chain for this contract will determine the broader impact on the small business ecosystem. Without specific subcontracting plans mandated or reported, it is difficult to quantify this impact.

Oversight & Accountability

Oversight for this contract would primarily reside with the Department of the Army contracting and program management offices. Accountability measures are typically embedded within the contract terms, including performance metrics, reporting requirements, and payment schedules tied to milestones. Transparency may be limited due to the sole-source nature and the classified or sensitive aspects of missile technology. Inspector General jurisdiction would apply to investigations of fraud, waste, or abuse.

Related Government Programs

Missile Defense Systems
Advanced Weapons Development
Defense Engineering Services
Department of the Army Procurement

Risk Flags

Sole-source award
Cost Plus Fixed Fee contract type
Long contract duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $27.0 million to RAYTHEON COMPANY. ENGINEERING SERVICES FOR THE TUBE-LAUNCHED OPTICALLY-TRACKED WIRELESS-GUIDED MISSILES.

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 $27.0 million.

What is the period of performance?

Start: 2020-07-31. End: 2026-02-28.

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 engineering services and complex weapon systems to the Department of Defense. They are a primary contractor for numerous missile programs, including air-to-air, surface-to-air, and tactical missiles. Their track record includes successful development, production, and sustainment of advanced defense technologies. While specific performance metrics for individual contracts are often not publicly disclosed, their continued selection for critical programs suggests a generally positive performance history and deep expertise in the required fields. However, like any large defense contractor, they have faced scrutiny and audits on specific contracts regarding cost, schedule, and performance.

How does the Cost Plus Fixed Fee (CPFF) contract type compare to other pricing arrangements for this type of service?

The Cost Plus Fixed Fee (CPFF) contract type is common for research and development or complex services where the scope of work is not fully defined at the outset, or where innovation is a key objective. Under CPFF, the contractor is reimbursed for all allowable costs incurred, plus a predetermined fixed fee representing profit. This structure incentivizes the contractor to control costs to maximize their fee relative to the fixed profit amount. However, it shifts much of the cost risk to the government, as the final price can exceed initial estimates if costs escalate. Other arrangements like Firm-Fixed-Price (FFP) offer greater cost certainty to the government but are less suitable for undefined scopes. Cost-Plus-Incentive-Fee (CPIF) offers a middle ground with shared cost savings and overruns.

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

Sole-source awards, while sometimes necessary for unique capabilities or urgent needs, carry significant risks. The primary risk is the lack of competitive pressure, which can lead to inflated pricing and reduced incentive for the contractor to innovate or optimize efficiency. Without competing bids, it's harder to benchmark the fairness of the price and ensure the government is receiving the best value. There's also a risk that the government becomes overly reliant on a single supplier, potentially limiting future options or leverage. Furthermore, the absence of multiple bidders might mean less scrutiny on the contractor's proposed technical approach or management plan, potentially increasing the risk of performance issues or delays.

What is the typical duration for engineering services contracts in the defense sector, and how does this one compare?

Engineering services contracts in the defense sector can vary widely in duration, from short-term projects to multi-year sustainment and development efforts. Contracts supporting major weapon system development or sustainment often span several years, reflecting the complexity and lifecycle of military assets. A duration of approximately six years, as seen in this contract (July 2020 to February 2026), is not uncommon for specialized engineering support related to advanced missile systems. This extended period allows for continuity in technical expertise, integration of design changes, and ongoing support throughout different phases of the system's lifecycle. Shorter contracts might be used for specific studies or analyses.

How does the geographic location of contract performance (Arizona) typically influence oversight and cost?

The geographic location of contract performance can influence oversight and cost in several ways. For oversight, having performance located domestically, such as in Arizona, generally simplifies monitoring for the contracting agency compared to overseas locations. It allows for easier site visits, direct communication, and potentially more straightforward application of U.S. labor laws and regulations. Cost-wise, domestic labor rates, including those in Arizona, are typically higher than in many overseas locations. However, this is often offset by reduced travel costs, logistical complexities, and potential security requirements associated with foreign performance. The specific cost impact depends heavily on the prevailing wage rates and overhead structures in the performance region.

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: Rockwell Collins Australia PTY Limited

Address: 1151 E HERMANS RD, TUCSON, AZ, 85756

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: $26,981,365

Exercised Options: $26,981,365

Current Obligation: $26,981,365

Subaward Activity

Number of Subawards: 1

Total Subaward Amount: $129,688

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: W31P4Q19D0032

IDV Type: IDC

Timeline