Boeing awarded $46.7M for aircraft parts, with limited competition and a high per-unit cost

Contract Overview

Contract Amount: $46,716,750 ($46.7M)

Contractor: THE Boeing Company

Awarding Agency: Department of Defense

Start Date: 2007-10-16

End Date: 2010-12-31

Contract Duration: 1,172 days

Daily Burn Rate: $39.9K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST NO FEE

Sector: Defense

Official Description: OBLIGATE FUNDS.

Place of Performance

Location: WICHITA, SEDGWICK County, KANSAS, 67210

State: Kansas Government Spending

Plain-Language Summary

Department of Defense obligated $46.7 million to THE BOEING COMPANY for work described as: OBLIGATE FUNDS. Key points: 1. The contract's value of $46.7 million was awarded through a sole-source procurement, raising questions about price competitiveness. 2. Analysis of the contract's duration (1172 days) and total value suggests a significant investment in aircraft parts. 3. The 'Other Aircraft Parts and Auxiliary Equipment Manufacturing' sector is critical for defense readiness and maintenance. 4. The contract was awarded to The Boeing Company, a major defense contractor with extensive experience in this sector. 5. The absence of competition may indicate unique specifications or a lack of alternative suppliers for these specific parts. 6. The contract's cost-plus-no-fee (CPNF) structure can incentivize cost overruns if not closely monitored.

Value Assessment

Rating: questionable

The total contract value of $46.7 million for aircraft parts over approximately three years appears substantial. Without specific details on the parts procured, a direct value-for-money assessment is challenging. However, the sole-source nature of the award, coupled with a cost-plus-no-fee pricing structure, suggests potential risks for cost control and may not represent the best possible price for the government. Benchmarking against similar sole-source contracts for specialized aircraft components would be necessary for a more definitive value assessment.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one vendor, The Boeing Company, was solicited. This approach is typically used when only one responsible source is available or when there is a compelling justification for excluding competition. The lack of multiple bidders means that the government did not benefit from the price discovery mechanisms inherent in a competitive bidding process, potentially leading to higher costs than if multiple offers had been considered.

Taxpayer Impact: The sole-source award means taxpayers may have paid a premium, as there was no competitive pressure to drive down prices. This also limits the government's ability to explore innovative solutions or cost-saving alternatives from other potential suppliers.

Public Impact

The primary beneficiaries are likely the Department of Defense, ensuring the availability of critical aircraft parts for its fleet. The services delivered involve the manufacturing and supply of specialized aircraft parts and auxiliary equipment. The geographic impact is primarily linked to the operations of The Boeing Company, with its manufacturing facilities likely in Kansas (st='KS'). Workforce implications include employment at Boeing's facilities involved in the production of these aircraft components.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source procurement limits price competition and may result in higher costs for taxpayers.
Cost-plus-no-fee (CPNF) contracts can incentivize higher spending if not rigorously managed.
Lack of competition raises concerns about potential vendor lock-in and reduced innovation.
The contract's duration and value require sustained oversight to ensure performance and cost control.

Positive Signals

Awarded to a major, experienced defense contractor (The Boeing Company) with a proven track record.
The contract addresses a specific need for aircraft parts, crucial for maintaining defense capabilities.
The contract was awarded by the Department of Defense, a primary customer for such specialized equipment.

Sector Analysis

The 'Other Aircraft Parts and Auxiliary Equipment Manufacturing' sector is a vital component of the aerospace and defense industry. This sector supplies essential components for aircraft assembly, maintenance, and repair. The market is characterized by high technical requirements, stringent quality control, and often involves long-term relationships between manufacturers and end-users, particularly in the defense sector. Spending in this area is directly tied to defense readiness and modernization programs. Comparable spending benchmarks would typically involve analyzing other sole-source or competitively awarded contracts for similar specialized aircraft components within the DoD.

Small Business Impact

There is no indication that this contract included a small business set-aside. As a sole-source award to a large prime contractor, The Boeing Company, the opportunities for small businesses would likely be limited to subcontracting roles. The prime contractor's subcontracting plan, if any, would determine the extent of small business participation. Without specific subcontracting data, it's difficult to assess the impact on the small business ecosystem, but typically large sole-source awards offer fewer direct opportunities for small businesses compared to competitively bid contracts with set-aside provisions.

Oversight & Accountability

Oversight for this contract would primarily fall under the purview of the Defense Contract Management Agency (DCMA), which is responsible for contract administration. The cost-plus-no-fee (CPNF) structure necessitates close monitoring of costs incurred by the contractor to ensure reasonableness and allowability. Transparency regarding the specific parts procured and the justification for the sole-source award would be key to assessing accountability. While no specific Inspector General (IG) jurisdiction is mentioned, the DoD IG generally has oversight over defense spending.

Related Government Programs

Aircraft Component Manufacturing
Defense Procurement
Aerospace Industry Contracts
Sole-Source Defense Contracts
Department of Defense Supply Chain

Risk Flags

Sole-source procurement
Cost-plus-no-fee contract type
Lack of competition
Potential for cost overruns without strong oversight

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $46.7 million to THE BOEING COMPANY. OBLIGATE FUNDS.

Who is the contractor on this award?

The obligated recipient is THE BOEING 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 $46.7 million.

What is the period of performance?

Start: 2007-10-16. End: 2010-12-31.

What specific aircraft parts were procured under this contract, and what was the justification for the sole-source award?

The provided data does not specify the exact aircraft parts procured under this contract. The justification for the sole-source award is also not detailed in the extract. Typically, sole-source awards are made when only one responsible source is capable of providing the required goods or services, or when there is a compelling urgency. For aircraft parts, this could be due to proprietary designs, unique manufacturing capabilities, or the need to maintain compatibility with existing platforms. Without further documentation, the precise rationale remains unclear, but it is a critical point for assessing the value and necessity of the procurement.

How does the cost-plus-no-fee (CPNF) pricing structure impact the government's ability to control costs compared to other contract types?

The Cost-Plus-No-Fee (CPNF) contract type reimburses the contractor for allowable costs incurred plus a fixed fee, which in this case is zero. While the zero fee removes the incentive for the contractor to maximize profit by increasing costs, it does not inherently provide a strong incentive for cost efficiency. The government bears the risk of cost overruns, and effective oversight is crucial to ensure that costs are reasonable and allocable. Compared to fixed-price contracts, CPNF offers less cost certainty for the government. However, it can be appropriate for research and development or when cost estimation is difficult. Robust government oversight and auditing are paramount to mitigate cost risks associated with CPNF contracts.

What is the historical spending pattern for The Boeing Company with the Department of Defense in the 'Other Aircraft Parts and Auxiliary Equipment Manufacturing' category?

The provided data represents a single contract award of $46.7 million to The Boeing Company. To understand historical spending patterns, a broader analysis of past contracts awarded to Boeing within this specific product service code (PSC) or North American Industry Classification System (NAICS) code ('336413') by the Department of Defense would be necessary. Boeing is a major defense contractor, and it is highly probable that they have received numerous contracts for aircraft parts and related equipment over the years. Analyzing these historical trends would reveal the volume, value, and types of contracts awarded, as well as the prevalence of competitive versus sole-source procurements, providing context for this specific award.

What are the potential risks associated with a sole-source award of this magnitude in the defense sector?

Sole-source awards of this magnitude, such as the $46.7 million contract to Boeing, carry several potential risks. Firstly, the absence of competition means the government may not achieve the lowest possible price, leading to potentially higher costs for taxpayers. Secondly, it can foster vendor lock-in, making it difficult and costly to switch suppliers in the future. Thirdly, it can reduce the incentive for the contractor to innovate or improve efficiency, as there is no competitive pressure. Finally, it raises concerns about the thoroughness of the justification for sole-sourcing; if competition was feasible but bypassed, it represents a failure in procurement processes and potentially a missed opportunity for better value.

How does the contract's duration (1172 days) influence the assessment of its performance and value?

A contract duration of 1172 days (approximately 3.2 years) indicates a long-term commitment for the supply of aircraft parts. This extended period allows for a more stable supply chain and potentially better planning for both the government and the contractor. However, it also means that any inefficiencies or cost issues within the contract will persist over a longer timeframe. For a sole-source award, a longer duration amplifies the risks associated with price and potential lack of innovation. Effective performance management and continuous oversight are critical throughout the contract's life to ensure that the government continues to receive good value and that the parts meet evolving requirements.

Industry Classification

NAICS: Manufacturing › Aerospace Product and Parts Manufacturing › Other Aircraft Parts and Auxiliary Equipment Manufacturing

Product/Service Code: MAINT, REPAIR, REBUILD EQUIPMENT › MAINT, REPAIR, REBUILD OF EQUIPMENT

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: COST NO FEE (S)

Evaluated Preference: NONE

Contractor Details

Address: 6001 S AIR DEPOT BLVD, OKLAHOMA CITY, OK, 73135

Business Categories: Category Business, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $46,774,993

Exercised Options: $46,716,750

Current Obligation: $46,716,750

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: FA810606D0001

IDV Type: IDC

Timeline