Boeing awarded $615M for engineering services, a sole-source contract with a long duration

Contract Overview

Contract Amount: $614,842,407 ($614.8M)

Contractor: Boeing Aerospace Operations, Inc.

Awarding Agency: Department of Defense

Start Date: 2007-04-01

End Date: 2023-07-31

Contract Duration: 5,965 days

Daily Burn Rate: $103.1K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: ENGINEERING SERVICES FOR CLS

Place of Performance

Location: OKLAHOMA CITY, OKLAHOMA County, OKLAHOMA, 73135

State: Oklahoma Government Spending

Plain-Language Summary

Department of Defense obligated $614.8 million to BOEING AEROSPACE OPERATIONS, INC. for work described as: ENGINEERING SERVICES FOR CLS Key points: 1. Contract awarded on a sole-source basis, raising questions about price discovery and potential value. 2. The contract spans over 16 years, indicating a long-term need for these engineering services. 3. A firm-fixed-price contract type suggests that cost overruns are primarily borne by the contractor. 4. The significant value of this contract warrants scrutiny of performance and cost-effectiveness. 5. The absence of competition may limit opportunities for other capable firms and potentially higher innovation. 6. The contract is managed by the Defense Contract Management Agency, suggesting a focus on defense-related engineering.

Value Assessment

Rating: questionable

Benchmarking the value of this $615 million contract is challenging due to its sole-source nature and long duration. Without competitive bids, it's difficult to ascertain if the pricing reflects fair market value or if taxpayers received the best possible deal. The extended period of performance suggests a sustained need, but the lack of competition means there's no direct comparison to similar contracts awarded through open bidding. Further analysis would require access to detailed cost breakdowns and performance metrics to assess true value for money.

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 vendors. This approach is typically used when only one vendor can provide the required goods or services, or in cases of urgent need. The lack of competition means there were no other bidders to compare against, potentially leading to higher prices than if the contract had been open to a bidding process. This limits the government's ability to leverage market forces to achieve the best possible pricing.

Taxpayer Impact: For taxpayers, a sole-source award means there's a reduced likelihood of benefiting from competitive pricing. The government may have paid more than it would have in a competitive scenario, as the contractor faced no direct pressure from rivals to offer lower costs.

Public Impact

The primary beneficiary is the Department of Defense, which receives essential engineering services. These services likely support critical aerospace and defense systems, ensuring operational readiness. The contract's duration suggests a long-term impact on defense capabilities and strategic planning. Boeing Aerospace Operations, Inc. benefits through sustained revenue and a significant contract award.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition and potential taxpayer savings.
Extended contract duration of over 16 years raises concerns about long-term cost management and adaptability.
Lack of transparency in the procurement process due to sole-source nature.
Potential for vendor lock-in given the long-term relationship and specialized services.

Positive Signals

Firm-fixed-price contract type shifts cost risk to the contractor.
Long duration indicates a stable, ongoing need for critical engineering services.
Managed by DCMA, suggesting established oversight for defense contracts.
Boeing is a major aerospace and defense contractor with a long track record.

Sector Analysis

This contract falls within the Engineering Services sector, a critical component of the broader aerospace and defense industry. The market for specialized engineering services in defense is substantial, driven by the need for advanced technological solutions and ongoing support for complex systems. Comparable spending benchmarks are difficult to establish for sole-source, long-duration contracts, but the sheer scale of this award highlights its significance within the defense procurement landscape. This contract likely supports Boeing's role as a prime contractor for major defense platforms.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb: false'. Given the sole-source nature and the prime contractor being Boeing, a large aerospace company, the likelihood of significant subcontracting opportunities for small businesses is uncertain without further details. The absence of a set-aside suggests that the primary focus was on securing services from a specific, large provider rather than promoting small business participation.

Oversight & Accountability

Oversight for this contract is likely managed by the Defense Contract Management Agency (DCMA), which is responsible for ensuring contractor performance and compliance on behalf of the Department of Defense. The firm-fixed-price contract type provides some level of cost control, as the contractor assumes the risk of cost overruns. However, the sole-source nature of the award necessitates robust oversight to ensure that the pricing remains fair and that the services delivered meet the required standards throughout the contract's extensive duration. Transparency may be limited due to the non-competitive award.

Related Government Programs

Aerospace Engineering Services
Defense Contractor Support
Long-Term Service Contracts
Sole-Source Procurement
Department of Defense Engineering

Risk Flags

Sole-source award
Long contract duration
High contract value
Lack of competitive benchmarking

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $614.8 million to BOEING AEROSPACE OPERATIONS, INC.. ENGINEERING SERVICES FOR CLS

Who is the contractor on this award?

The obligated recipient is BOEING AEROSPACE OPERATIONS, INC..

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $614.8 million.

What is the period of performance?

Start: 2007-04-01. End: 2023-07-31.

What is Boeing's track record with similar sole-source engineering contracts for the Department of Defense?

Boeing, as a major defense contractor, has a long history of working with the Department of Defense (DoD) on various engineering services. While specific data on their sole-source contracts of this magnitude is not readily available in this dataset, their extensive experience suggests a capacity to manage complex, long-term projects. However, sole-source awards, by definition, lack direct competitive benchmarking. Therefore, assessing Boeing's track record in this specific context would require examining past performance reviews, any documented cost efficiencies or overruns on similar non-competed contracts, and their overall relationship with the DoD in fulfilling critical engineering needs. The duration and value of this particular contract imply a high level of trust and a perceived unique capability from the DoD's perspective.

How does the $615 million value compare to other engineering service contracts awarded by the DoD?

The $615 million value for engineering services is substantial, placing it among significant contract awards. However, without knowing the specific scope and duration of comparable contracts, a direct comparison is difficult. The DoD awards numerous large contracts across various engineering disciplines, including R&D, systems integration, and maintenance support. Given that this contract is sole-source and spans over 16 years, its value is spread over a long period. To provide a meaningful comparison, one would need to analyze the average annual cost of engineering services contracts of similar complexity and criticality within the DoD, ideally those awarded through competitive processes to establish a benchmark for value for money.

What are the primary risks associated with a sole-source contract of this duration and value?

The primary risks associated with a sole-source contract of this duration and value include potential overpricing due to the lack of competition, reduced incentive for the contractor to innovate or improve efficiency over time, and the risk of vendor lock-in. Taxpayers may not be receiving the best possible price. Furthermore, a long duration increases the risk of the contracted services becoming outdated or misaligned with evolving technological needs, requiring costly modifications or renegotiations. There's also a risk that the government's leverage diminishes over time as the contractor becomes more entrenched. Robust oversight and clear performance metrics are crucial to mitigate these risks.

How effective is a firm-fixed-price contract type in managing costs for long-term engineering services?

A firm-fixed-price (FFP) contract type is generally effective in managing costs for long-term engineering services because it shifts the primary cost risk to the contractor. The contractor is obligated to complete the work for the agreed-upon price, regardless of their actual costs. This incentivizes the contractor to control expenses and manage resources efficiently. However, for very long-term contracts, there's a risk that the initial fixed price may not adequately account for unforeseen inflation, material cost fluctuations, or significant scope changes. In such cases, contract modifications or adjustments might become necessary, potentially eroding some of the initial cost certainty. Clear scope definition and change management processes are vital.

What is the historical spending pattern for engineering services by the Department of Defense?

The Department of Defense (DoD) consistently represents one of the largest federal spenders on engineering services, reflecting its complex technological requirements and extensive acquisition programs. Historical spending patterns show a significant and often increasing allocation towards R&D, systems engineering, and lifecycle support for military platforms. This includes a mix of competitive and sole-source awards, with large prime contractors like Boeing frequently receiving substantial portions of the budget for integrated system development and sustainment. Analyzing historical data would reveal trends in specific engineering disciplines, the average contract values, and the proportion allocated to different types of procurement, such as competitive versus non-competitive.

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

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: THE Boeing Company

Address: 8120 MID AMERICA BLVD STE 300, OKLAHOMA CITY, OK, 73135

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $867,549,607

Exercised Options: $867,549,607

Current Obligation: $614,842,407

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline