Raytheon Company's $24.8M engineering services contract awarded by the Army, with no competition

Contract Overview

Contract Amount: $24,780,548 ($24.8M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2023-03-28

End Date: 2027-03-31

Contract Duration: 1,464 days

Daily Burn Rate: $16.9K/day

Competition Type: NOT COMPETED

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: SENTINEL ENGINEERING SERVICES

Place of Performance

Location: FULLERTON, ORANGE County, CALIFORNIA, 92833

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $24.8 million to RAYTHEON COMPANY for work described as: SENTINEL ENGINEERING SERVICES Key points: 1. Value for money is difficult to assess due to the lack of competition and the cost-plus-fixed-fee contract type. 2. Competition dynamics are limited, with the contract being sole-sourced, potentially leading to higher costs. 3. Risk indicators include the sole-source award and the cost-plus-fixed-fee structure, which can incentivize spending. 4. Performance context is provided by the contract duration of nearly four years. 5. Sector positioning is within engineering services, a critical support function for defense agencies. 6. The contract's value is significant within the engineering services category for the Department of the Army.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to its sole-source nature and the cost-plus-fixed-fee (CPFF) pricing structure. CPFF contracts can sometimes lead to higher overall costs as the contractor is reimbursed for all allowable costs plus a fixed fee, potentially reducing the incentive for cost control. Without competitive bids, it's difficult to ascertain if the pricing reflects fair market value for the engineering services provided. Further analysis would require comparing the fixed fee and the estimated cost to similar sole-source CPFF contracts for comparable engineering services within the Department of Defense.

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 potential offerors. This approach is typically used when only one contractor possesses the unique capabilities or resources required for the service, or in situations where urgency or specific circumstances preclude full and open competition. The lack of competition limits the government's ability to leverage market forces to drive down prices and ensure the most cost-effective solution.

Taxpayer Impact: Taxpayers may face higher costs due to the absence of competitive pressure. The government did not have the opportunity to solicit and evaluate multiple proposals to identify the best value at the lowest price.

Public Impact

The primary beneficiary is the Department of the Army, which receives essential engineering support services. Services delivered include specialized engineering expertise crucial for military operations and infrastructure. The geographic impact is centered in California, where the contractor is located and services are likely performed. Workforce implications include the employment of engineers and technical staff by Raytheon Company to fulfill this contract.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price discovery and potentially increases costs for taxpayers.
Cost-plus-fixed-fee contract type may disincentivize cost control by the contractor.
Lack of competition raises questions about whether the government secured the best possible value.
The extended duration of the contract (nearly 4 years) means potential cost overruns could be substantial.

Positive Signals

Awarding to Raytheon Company, a known defense contractor, suggests a level of established capability.
The fixed fee component of the contract provides some predictability in contractor profit.
The contract is for engineering services, which are vital for defense readiness and modernization.

Sector Analysis

The engineering services sector is a critical component of the broader defense industrial base, providing specialized expertise for design, development, testing, and sustainment of complex military systems and infrastructure. This contract falls within the professional, scientific, and technical services industry. Spending in this area is often driven by the need for advanced technological solutions and ongoing support for existing platforms. Comparable spending benchmarks would involve analyzing the total annual expenditure by the Department of Defense on engineering services, particularly those procured through sole-source or limited competition vehicles.

Small Business Impact

This contract was not competed and there is no indication of small business set-aside provisions or subcontracting requirements. Therefore, it is unlikely to directly benefit small businesses through this specific award. The absence of a small business set-aside means that opportunities for small business participation were not actively pursued or mandated within the scope of this sole-source procurement.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Army's contracting and program management offices. Accountability measures are typically embedded within the contract terms, including performance standards and reporting requirements. Transparency is limited due to the sole-source nature of the award. Inspector General jurisdiction would apply if any allegations of fraud, waste, or abuse arise during the contract's performance.

Related Government Programs

Department of Defense Engineering Services
Army Professional Services Contracts
Sole-Source Defense Procurements
Cost-Plus-Fixed-Fee Contracts

Risk Flags

Sole-source award
Cost-plus-fixed-fee pricing
Lack of competition

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $24.8 million to RAYTHEON COMPANY. 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 $24.8 million.

What is the period of performance?

Start: 2023-03-28. End: 2027-03-31.

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

Raytheon Company, now RTX, is a major defense contractor with a long history of providing a wide array of services and products to the Department of Defense, including the Army. Their track record typically involves complex systems integration, research and development, and sustainment services. For engineering services specifically, the Army has awarded numerous contracts to Raytheon over the years, covering areas from missile systems engineering to logistical support. While specific performance metrics for this particular contract are not detailed here, Raytheon's general performance with the DoD is often characterized by large-scale, high-value engagements. However, like any large contractor, they have also faced scrutiny on specific contracts regarding cost, schedule, and performance. A deeper dive would involve reviewing past performance evaluations and contract close-out data for Raytheon's engineering services contracts with the Army.

How does the $24.8 million value compare to similar engineering services contracts awarded by the Army?

The $24.8 million value for this engineering services contract is a significant, but not extraordinary, amount for the Department of the Army. The Army procures a vast range of engineering services, from small, specialized technical support tasks to massive, multi-year system development programs. Contracts in the tens of millions are common for specialized engineering support, particularly when they involve complex systems or extended durations, as this one does (nearly four years). To provide a precise comparison, one would need to analyze the Army's spending on engineering services within the same North American Industry Classification System (NAICS) code (541330 - Engineering Services) over a similar period, filtering for contracts of comparable scope, duration, and complexity. However, given the sole-source nature and CPFF structure, this contract's value warrants scrutiny against benchmarks for similar sole-source awards.

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 for engineering services are twofold. Firstly, the sole-source nature eliminates competitive pressure, meaning the government may not be obtaining the most cost-effective solution available in the market. This lack of competition can lead to inflated pricing. Secondly, the CPFF structure reimburses the contractor for all allowable costs incurred, plus a predetermined fixed fee representing profit. While the fixed fee provides some cost certainty for the contractor's profit margin, the reimbursement of costs can reduce the contractor's incentive to control expenses rigorously. This can lead to cost overruns if not managed and overseen effectively by the government. For engineering services, where scope can sometimes be difficult to define precisely upfront, these risks are amplified.

What is the expected effectiveness of these engineering services given the contract details?

The expected effectiveness of these engineering services hinges on several factors, primarily the contractor's capability and the government's oversight. Raytheon Company is a large, established defense contractor with significant engineering expertise, suggesting a high potential for delivering effective services. The contract's duration of nearly four years indicates a need for sustained support, likely for complex or long-term projects. However, the effectiveness can be impacted by the contract type. The CPFF structure, while allowing flexibility for evolving engineering requirements, necessitates robust government oversight to ensure costs remain reasonable and that the services delivered meet the defined objectives. Without clear performance metrics and diligent program management from the Army, the effectiveness could be compromised by cost inefficiencies or a lack of focused delivery.

How has historical spending on engineering services by the Department of the Army trended, and does this contract align?

Historical spending on engineering services by the Department of the Army has generally trended upwards over the past decade, driven by modernization efforts, sustainment of aging platforms, and the increasing complexity of defense technologies. The Army consistently allocates billions of dollars annually to various engineering, research, development, and technical services. This $24.8 million contract, while a single award, aligns with the broader trend of significant investment in specialized engineering expertise. The prevalence of sole-source and limited competition awards within this category is also a historical pattern, often justified by the specialized nature of defense requirements. Analyzing the Army's total obligations for NAICS code 541330 over several fiscal years would provide a clearer picture of the scale and trends, showing how this specific contract fits within the larger budgetary landscape.

Industry Classification

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

Product/Service Code: COMM/DETECT/COHERENT RADIATION

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: $24,780,548

Exercised Options: $24,780,548

Current Obligation: $24,780,548

Actual Outlays: $1,612,776

Subaward Activity

Number of Subawards: 1

Total Subaward Amount: $35,939

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