Boeing awarded $18.9M for KC-135 Engineering Support Services, a sole-source contract

Contract Overview

Contract Amount: $18,936,977 ($18.9M)

Contractor: THE Boeing Company

Awarding Agency: Department of Defense

Start Date: 2021-04-01

End Date: 2022-06-01

Contract Duration: 426 days

Daily Burn Rate: $44.5K/day

Competition Type: NOT COMPETED

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: ENGINEERING SUPPORT SERVICES (ESS) KC135

Place of Performance

Location: OKLAHOMA CITY, OKLAHOMA County, OKLAHOMA, 73135

State: Oklahoma Government Spending

Plain-Language Summary

Department of Defense obligated $18.9 million to THE BOEING COMPANY for work described as: ENGINEERING SUPPORT SERVICES (ESS) KC135 Key points: 1. Contract awarded on a sole-source basis, limiting price competition. 2. The contract type is Cost Plus Fixed Fee, which can lead to cost overruns if not managed carefully. 3. Performance period is 14 months, indicating a focused scope of work. 4. The contract is for engineering support services for the KC-135 aircraft. 5. The value of the contract is substantial for specialized engineering support. 6. No small business set-aside was included in this award.

Value Assessment

Rating: fair

The contract value of $18.9 million for 14 months of engineering support for the KC-135 program appears to be within a reasonable range for specialized aerospace engineering services. However, without a competitive bidding process, it is difficult to definitively benchmark the value for money. The Cost Plus Fixed Fee (CPFF) contract type introduces some risk, as costs can escalate beyond initial estimates, though the fixed fee component provides some control. Comparisons to similar sole-source contracts for legacy aircraft sustainment would be necessary for a more precise assessment.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning that only one bidder, The Boeing Company, was solicited. This approach is typically used when a specific contractor possesses unique capabilities or when urgency dictates a rapid award. The lack of competition means that taxpayers did not benefit from potential cost savings that could arise from a bidding war among multiple qualified vendors. Price discovery is therefore limited, and the government relies heavily on negotiation and oversight to ensure a fair price.

Taxpayer Impact: The absence of competition means taxpayers may not be receiving the lowest possible price for these engineering services. The government's ability to secure favorable terms is diminished without alternative offers.

Public Impact

The primary beneficiaries are the Department of Defense and specifically the Air Force, ensuring the continued operational readiness of the KC-135 Stratotanker fleet. Services delivered include critical engineering support, likely encompassing sustainment, modification, and technical expertise for the aircraft. The geographic impact is likely centered around military bases operating the KC-135 and potentially Boeing's engineering facilities. Workforce implications include the employment of specialized engineers and technical staff at Boeing.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure on pricing.
Cost Plus Fixed Fee contract type carries inherent risk of cost escalation.
Lack of transparency in the justification for sole-source award.
Potential for contractor lock-in due to specialized knowledge of legacy systems.

Positive Signals

Boeing is the original equipment manufacturer, possessing unique expertise for the KC-135.
Contract ensures continued support for a critical military asset.
Fixed fee component provides some cost predictability.
Contract duration is relatively short, allowing for future re-evaluation of needs.

Sector Analysis

The aerospace and defense sector is characterized by high barriers to entry, significant R&D investment, and long product lifecycles. Engineering support services for legacy aircraft like the KC-135 are crucial for maintaining fleet readiness and are often provided by the original equipment manufacturers (OEMs) due to their proprietary knowledge. The market for such specialized services is limited to a few key players. Comparable spending benchmarks would involve analyzing other sustainment contracts for similar large military aircraft, which often run into tens or hundreds of millions of dollars annually.

Small Business Impact

This contract does not appear to include any small business set-aside provisions, nor is there an indication of significant subcontracting opportunities for small businesses based on the provided data. The award to a large prime contractor like Boeing suggests that the primary focus is on leveraging the prime's direct capabilities. This could limit opportunities for small businesses that might otherwise contribute specialized engineering or support services.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contracting and program management structures, potentially involving the Defense Contract Management Agency (DCMA) for contract administration. Accountability measures would be tied to the performance metrics outlined in the contract and the CPFF structure. Transparency is limited due to the sole-source nature of the award, with justifications for this approach needing to be publicly accessible. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

KC-135 Stratotanker Sustainment Programs
Air Mobility Command Engineering Services
Department of Defense Aircraft Maintenance Contracts
Aerospace Engineering Services Contracts

Risk Flags

Sole-source award
Cost Plus Fixed Fee contract type
Lack of competitive bidding

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $18.9 million to THE BOEING COMPANY. ENGINEERING SUPPORT SERVICES (ESS) KC135

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 $18.9 million.

What is the period of performance?

Start: 2021-04-01. End: 2022-06-01.

What is the specific justification provided by the Department of Defense for awarding this contract on a sole-source basis to The Boeing Company?

The provided data indicates the contract was 'NOT COMPETED'. Typically, sole-source justifications for defense contracts are based on factors such as the unique capabilities of the contractor, the need to maintain compatibility with existing systems, urgency, or the unavailability of other sources. For the KC-135, Boeing, as the original equipment manufacturer (OEM), likely possesses proprietary data, specialized tooling, and unique engineering knowledge essential for its sustainment. The specific justification document, often a Justification and Approval (J&A) for Other Than Full and Open Competition, would detail these reasons, which are usually required to be publicly accessible under federal procurement regulations, though the provided snippet does not include it.

How does the Cost Plus Fixed Fee (CPFF) contract structure compare to other contract types in terms of risk and potential for cost savings for the government?

The Cost Plus Fixed Fee (CPFF) contract type is a hybrid that aims to balance risk between the government and the contractor. The government agrees to pay the contractor's actual costs incurred, plus a predetermined fixed fee representing profit. This structure is often used when the scope of work is not precisely defined or involves a high degree of uncertainty, such as in research and development or complex engineering services. For the government, the risk lies in potential cost overruns if the contractor's actual costs exceed estimates, although the fixed fee provides some predictability in profit. For the contractor, the risk is limited to the fixed fee, as they are reimbursed for all allowable costs. Compared to Firm-Fixed-Price (FFP) contracts, CPFF offers less cost certainty for the government but allows for greater flexibility. Compared to Cost-Plus-Incentive-Fee (CPIF) contracts, CPFF lacks the built-in incentives for the contractor to control costs, potentially making it less cost-effective if not managed diligently.

What are the potential implications of awarding a sole-source contract for engineering support on the long-term sustainment costs of the KC-135 fleet?

Awarding a sole-source contract for engineering support can have significant long-term implications for sustainment costs. Without competition, The Boeing Company faces less pressure to innovate or reduce costs, potentially leading to higher prices over the lifecycle of the KC-135. The government may become dependent on Boeing's proprietary knowledge and services, creating a 'vendor lock-in' situation. This dependence can reduce the government's leverage in future negotiations and limit its ability to explore alternative solutions or cost-saving measures. While Boeing's expertise as the OEM is valuable, the lack of competitive tension over time could result in higher overall sustainment expenditures compared to a scenario where multiple vendors could compete for support services.

Can the government effectively benchmark the 'fairness' of the fixed fee in this CPFF contract without competitive proposals?

Benchmarking the fairness of the fixed fee in a sole-source CPFF contract is challenging but not impossible. The government can utilize several methods. Firstly, they can analyze historical data from previous, similar contracts awarded to Boeing or other contractors for comparable services, looking at the fee percentages relative to total contract costs. Secondly, they can consult independent cost estimating or industry experts to assess industry norms for fixed fees in aerospace engineering support. Thirdly, they can review Boeing's proposed cost structure and the basis for their fee calculation. While direct comparison to competing bids is absent, these indirect methods help establish a reasonable range for the fee, ensuring it reflects the risk and effort involved without being excessive.

What is Boeing's track record with providing engineering support services for legacy military aircraft like the KC-135?

The Boeing Company has an extensive and long-standing track record of providing engineering, sustainment, and upgrade services for numerous military aircraft platforms, including the KC-135 Stratotanker. As the original equipment manufacturer (OEM) for many of these aircraft, Boeing possesses deep institutional knowledge, proprietary technical data, and specialized engineering capabilities. Their involvement with the KC-135 spans decades, encompassing initial production, modifications, and ongoing sustainment efforts. While specific performance metrics for individual contracts are often not public, Boeing is generally considered a primary provider for such services due to its historical role and expertise. Their ability to secure sole-source contracts for legacy platforms often stems from this established relationship and unique technical position.

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

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

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: $18,936,977

Exercised Options: $18,936,977

Current Obligation: $18,936,977

Subaward Activity

Number of Subawards: 1

Total Subaward Amount: $40,094

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: FA810516D0002

IDV Type: IDC

Timeline