Raytheon Company awarded $1.23B for Defense Contract Management Agency systems, with a significant portion for R&D

Contract Overview

Contract Amount: $1,231,411,947 ($1.2B)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2004-04-21

End Date: 2015-07-19

Contract Duration: 4,106 days

Daily Burn Rate: $299.9K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS AWARD FEE

Sector: Defense

Place of Performance

Location: SUDBURY, MIDDLESEX County, MASSACHUSETTS, 01776

State: Massachusetts Government Spending

Plain-Language Summary

Department of Defense obligated $1.23 billion to RAYTHEON COMPANY for work described as: Key points: 1. Contract value exceeds $1 billion, indicating a substantial investment in critical defense systems. 2. The contract was not competed, raising questions about potential price efficiencies and market engagement. 3. A significant portion of the contract value is likely allocated to research and development, suggesting innovation and future capability building. 4. The duration of the contract (over 11 years) implies a long-term need for these systems and potential for sustained contractor performance. 5. The cost-plus award fee structure incentivizes performance but requires careful oversight to manage costs effectively. 6. The contract falls under the 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' NAICS code, highlighting its specialized nature.

Value Assessment

Rating: fair

The total award amount of $1.23 billion over more than 11 years represents a significant investment. Without comparable contract data or detailed cost breakdowns, a precise value-for-money assessment is challenging. The cost-plus award fee structure, while allowing for flexibility and incentivizing performance, can lead to higher costs compared to fixed-price contracts if not managed rigorously. Benchmarking against similar large-scale defense system development contracts would be necessary for a more definitive evaluation of pricing and value.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning it was not subject to a competitive bidding process. This approach is typically used when a specific contractor possesses unique capabilities, proprietary technology, or when urgency dictates a rapid award. The lack of competition means that taxpayers may not have benefited from the price reductions and innovative solutions that often arise from a competitive environment. The rationale for the sole-source award should be thoroughly documented to ensure it was justified.

Taxpayer Impact: The absence of competition limits the government's ability to secure the best possible price and may result in higher overall spending for taxpayers.

Public Impact

The primary beneficiaries are the Department of Defense and its various branches, which will receive advanced search, detection, navigation, and guidance systems. The services delivered include the development, integration, and potential sustainment of complex aeronautical and nautical systems. The geographic impact is likely national, supporting military operations and readiness across various theaters. Workforce implications may include specialized engineering, manufacturing, and technical support roles within Raytheon and its subcontractors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition and potential cost savings for taxpayers.
Cost-plus award fee contracts require robust oversight to prevent cost overruns and ensure fair pricing.
Long contract duration (over 11 years) increases the risk of scope creep and potential for performance issues to compound over time.
Lack of transparency in the sole-source justification could mask inefficiencies or missed opportunities for better value.

Positive Signals

Award to a major defense contractor like Raytheon suggests access to advanced technology and expertise.
The contract's focus on critical systems like navigation and guidance indicates a high priority for national security.
The cost-plus award fee structure, if managed well, can incentivize contractor performance and innovation.
The substantial investment signals a commitment to modernizing defense capabilities.

Sector Analysis

This contract falls within the broader defense electronics and systems manufacturing sector, a critical component of the U.S. industrial base. The NAICS code 334511 specifically targets companies involved in the manufacturing of instruments for searching, detecting, navigating, and guiding. This sector is characterized by high R&D investment, long product development cycles, and significant government procurement. Comparable spending benchmarks would involve analyzing other large-scale defense system development contracts awarded to prime contractors in this domain, often running into hundreds of millions or billions of dollars.

Small Business Impact

The contract details indicate that small business participation was not a primary set-aside consideration (ss: false, sb: false). While the prime contractor, Raytheon, is a large entity, there may be opportunities for small businesses to participate as subcontractors. The extent of small business subcontracting would need to be assessed through contract clauses and reporting. Without specific set-aside goals, the direct impact on the small business ecosystem for this particular contract is likely limited, though large prime contractors often engage small businesses for specialized components or services.

Oversight & Accountability

Oversight for this contract would primarily fall under the Defense Contract Management Agency (DCMA), which is responsible for ensuring contractor performance, quality, and compliance. The cost-plus award fee structure necessitates rigorous financial oversight to validate costs and assess performance against award criteria. Transparency is facilitated through contract reporting requirements, but the sole-source nature limits public insight into the negotiation process. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse.

Related Government Programs

Defense Advanced Research Projects Agency (DARPA) research initiatives
Naval Air Systems Command (NAVAIR) procurement programs
Air Force Life Cycle Management Center (AFLCMC) contracts
Intelligence, Surveillance, and Reconnaissance (ISR) systems development
Tactical Data Link systems

Risk Flags

Sole-source award
Cost-plus award fee structure
Long contract duration
Potential for cost overruns
Lack of competitive benchmarking

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $1.23 billion to RAYTHEON COMPANY. See the official description on USAspending.

Who is the contractor on this award?

The obligated recipient is RAYTHEON COMPANY.

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Contract Management Agency).

What is the total obligated amount?

The obligated amount is $1.23 billion.

What is the period of performance?

Start: 2004-04-21. End: 2015-07-19.

What is the historical spending pattern for similar navigation and guidance systems by the Department of Defense?

Analyzing historical spending for similar navigation and guidance systems by the Department of Defense reveals a consistent and substantial investment in these critical technologies. Over the past decade, the DoD has allocated billions of dollars annually towards the research, development, procurement, and sustainment of advanced systems that enhance situational awareness, precision targeting, and operational effectiveness. Contracts in this domain often involve complex integration, long development cycles, and significant R&D components, leading to high award values. For instance, major platform upgrades (e.g., aircraft, ships) frequently include substantial line items for integrated navigation and guidance suites. Furthermore, the trend has been towards more networked and data-driven systems, increasing the complexity and cost of development and integration. Without access to specific program data, it's difficult to pinpoint exact figures for comparable contracts, but the overall trend indicates a sustained high level of expenditure driven by evolving threats and technological advancements.

How does the cost-plus award fee structure typically impact final contract costs compared to fixed-price contracts?

The cost-plus award fee (CPAF) structure generally leads to higher final contract costs compared to fixed-price contracts, primarily due to the risk allocation. In a CPAF contract, the contractor is reimbursed for all allowable costs incurred, plus a fee that is composed of a base amount and an award amount. The award amount is contingent upon the contractor meeting or exceeding specific performance objectives, which are often subjective and determined by the government. While CPAF can incentivize performance and flexibility, especially in R&D-intensive or uncertain environments, it shifts a significant portion of the cost risk to the government. Contractors have less incentive to aggressively control costs since their allowable costs are reimbursed. In contrast, fixed-price contracts place the cost risk on the contractor, incentivizing them to manage expenses tightly to maximize profit. Therefore, while CPAF can be effective for achieving specific performance goals, it typically results in higher overall expenditures for the government than a well-defined fixed-price contract.

What are the potential risks associated with a sole-source award for a large defense contract?

Sole-source awards for large defense contracts carry several significant risks. Foremost among these is the lack of price competition, which can lead to inflated costs for taxpayers as the government does not benefit from the competitive pressure that drives down prices. This can result in a suboptimal value for money. Secondly, it limits the government's access to potentially innovative solutions or technologies that might be offered by other qualified contractors. The absence of a competitive process can also reduce the incentive for the sole-source provider to maintain high levels of efficiency and performance, as there is no immediate threat of losing future business to competitors. Furthermore, sole-source justifications can sometimes be based on incomplete information or may not fully explore alternative acquisition strategies, potentially leading to less strategic sourcing decisions. Finally, it can create a perception of favoritism or a lack of transparency, potentially undermining public trust in the procurement process.

What is Raytheon's track record with similar large-scale defense system development contracts?

Raytheon Company, now part of RTX, has an extensive and long-standing track record in developing and delivering large-scale defense systems, including those related to search, detection, navigation, and guidance. The company has been a prime contractor on numerous complex programs for the Department of Defense and allied nations, often involving advanced technologies and significant R&D investment. Historically, Raytheon has demonstrated capabilities in integrating sophisticated electronic warfare systems, radar, sensors, and command and control solutions. Their performance on such contracts has varied, as is common with large, multi-year endeavors. While they have successfully delivered critical capabilities on many occasions, they have also faced scrutiny regarding cost overruns, schedule delays, and performance issues on certain high-profile programs, as is often the case with major defense contractors navigating complex technological challenges and evolving requirements. A detailed review of specific past contracts would be needed to fully assess their performance trends.

How does the duration of this contract (over 11 years) impact its risk profile?

The extended duration of this contract, exceeding 11 years, significantly impacts its risk profile. Long-term contracts increase the likelihood of encountering unforeseen challenges, such as technological obsolescence, evolving threat landscapes, and shifts in government priorities or funding. There is a higher risk of scope creep, where requirements may expand beyond the original intent, leading to cost increases and schedule delays. Contractor performance can also degrade over extended periods if not actively managed and incentivized. Furthermore, the longer the contract, the greater the potential for economic fluctuations (inflation, material cost changes) to impact the overall cost, especially in cost-reimbursable contracts. Conversely, a long duration can provide stability and allow for deep specialization and continuous improvement by the contractor, potentially leading to more mature and reliable systems if managed effectively. Robust contract management, regular performance reviews, and mechanisms for adapting to change are crucial to mitigate the risks associated with such a lengthy commitment.

Industry Classification

NAICS: Manufacturing › Navigational, Measuring, Electromedical, and Control Instruments Manufacturing › Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing

Product/Service Code: COMM/DETECT/COHERENT RADIATION

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: COST PLUS AWARD FEE (R)

Evaluated Preference: NONE

Contractor Details

Parent Company: RTX Corp (UEI: 001344142)

Address: 528 BOSTON POST ROAD, SUDBURY, MA, 01776

Business Categories: Category Business, Not Designated a Small Business

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline