Boeing awarded $25.7M for depot maintenance services, a sole-source contract with a cost-plus incentive fee structure
Contract Overview
Contract Amount: $25,736,351 ($25.7M)
Contractor: THE Boeing Company
Awarding Agency: Department of Defense
Start Date: 2016-11-29
End Date: 2018-01-21
Contract Duration: 418 days
Daily Burn Rate: $61.6K/day
Competition Type: NOT COMPETED
Pricing Type: COST PLUS INCENTIVE FEE
Sector: Defense
Official Description: IGF::CT::IGF PROGRAM DEPOT MAINTENANCE SERVICES
Place of Performance
Location: OKLAHOMA CITY, OKLAHOMA County, OKLAHOMA, 73135
State: Oklahoma Government Spending
Plain-Language Summary
Department of Defense obligated $25.7 million to THE BOEING COMPANY for work described as: IGF::CT::IGF PROGRAM DEPOT MAINTENANCE SERVICES Key points: 1. The contract's cost-plus incentive fee structure aims to align contractor performance with government objectives, potentially yielding savings if targets are met. 2. As a sole-source award, the absence of competition may limit price discovery and potentially lead to higher costs compared to a fully competed scenario. 3. The contract duration of 418 days suggests a focused scope of work, but the lack of competition raises questions about long-term value. 4. Performance is being managed by the Defense Contract Management Agency, indicating a focus on defense-related logistics and sustainment. 5. The contract falls within the 'Other Aircraft Parts and Auxiliary Equipment Manufacturing' NAICS code, positioning it within the broader aerospace and defense sector. 6. The contractor, The Boeing Company, is a major player in the aerospace industry, suggesting established capabilities but also potential for market dominance.
Value Assessment
Rating: fair
Benchmarking the value of this sole-source contract is challenging due to the lack of competitive bids. The cost-plus incentive fee (CPIF) structure is designed to incentivize efficiency, but its effectiveness depends heavily on the realism of the target costs and the rigor of oversight. Without comparable contract data from a competitive process, it's difficult to definitively assess if the $25.7 million represents a fair price for the depot maintenance services provided. The contract's duration and scope will also influence the overall value assessment.
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 source is capable of meeting the requirement, or in specific circumstances where competition is not feasible or advantageous. The lack of competition means that the government did not benefit from the price reductions and innovation that can arise from a bidding process. This raises concerns about whether the government secured the best possible price and terms.
Taxpayer Impact: Taxpayers may face higher costs due to the absence of competitive pressure. Without competing bids, there is a reduced incentive for the contractor to offer the lowest possible price, potentially leading to less efficient use of public funds.
Public Impact
The primary beneficiaries are the Department of Defense, ensuring the operational readiness of aircraft through essential depot maintenance. Services delivered include maintenance, repair, and overhaul of aircraft and related components, crucial for sustaining military aviation capabilities. The geographic impact is primarily centered around the facilities where Boeing performs these maintenance services, likely within the United States. Workforce implications include the employment of skilled technicians, engineers, and support staff at Boeing's maintenance depots.
Waste & Efficiency Indicators
Waste Risk Score: 50 / 10
Warning Flags
- Sole-source award limits price competition, potentially increasing costs for taxpayers.
- Cost-plus incentive fee contracts require robust government oversight to ensure cost control and prevent contractor overruns.
- Lack of transparency in the sole-source justification could obscure potential alternatives or better pricing.
- The specific nature of depot maintenance can be complex, making it difficult to benchmark costs without detailed performance data.
Positive Signals
- The contract utilizes a cost-plus incentive fee structure, which can align contractor and government interests towards cost efficiency.
- The contractor, The Boeing Company, is a well-established aerospace firm with extensive experience in aircraft maintenance.
- The contract is managed by the Defense Contract Management Agency, suggesting established oversight processes are in place.
- The award supports critical defense readiness by ensuring aircraft are maintained to operational standards.
Sector Analysis
This contract operates within the aerospace and defense sector, specifically focusing on aircraft sustainment and maintenance. The market for depot maintenance services is characterized by specialized capabilities and often involves long-term relationships with defense agencies. Major aerospace manufacturers like Boeing are key players, often holding significant portions of the market due to their expertise and existing infrastructure. Comparable spending benchmarks would typically involve analyzing other large-scale maintenance contracts awarded by the DoD for similar aircraft types or service scopes.
Small Business Impact
This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. Furthermore, the prime contractor is The Boeing Company, a large aerospace corporation. While Boeing may engage small businesses as subcontractors, the primary award itself does not directly benefit small businesses through a set-aside. The subcontracting plan, if any, would be crucial to understanding the downstream impact on the small business ecosystem.
Oversight & Accountability
Oversight for this contract is managed by the Defense Contract Management Agency (DCMA), which is responsible for ensuring contractor performance and compliance with contract terms. The cost-plus incentive fee structure necessitates close monitoring of costs and performance against established targets. Transparency regarding the specific metrics and oversight activities would be beneficial. Inspector General jurisdiction would likely fall under the Department of Defense's IG, should any investigations into fraud, waste, or abuse arise.
Related Government Programs
- Aircraft Depot Maintenance
- Aerospace Manufacturing Support
- Defense Logistics Services
- Aircraft Parts and Components Manufacturing
Risk Flags
- Sole-source award raises concerns about price competition.
- Cost-plus contracts require diligent oversight to manage costs effectively.
- Lack of transparency in sole-source justification could obscure potential issues.
Tags
defense, department-of-defense, the-boeing-company, sole-source, cost-plus-incentive-fee, depot-maintenance, aircraft-parts, aerospace, delivery-order, oklahoma
Frequently Asked Questions
What is this federal contract paying for?
Department of Defense awarded $25.7 million to THE BOEING COMPANY. IGF::CT::IGF PROGRAM DEPOT MAINTENANCE SERVICES
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 $25.7 million.
What is the period of performance?
Start: 2016-11-29. End: 2018-01-21.
What is the historical spending pattern for depot maintenance services provided by The Boeing Company to the Department of Defense?
Analyzing historical spending patterns for The Boeing Company's depot maintenance services requires access to detailed contract databases and financial reports. Generally, large defense contractors like Boeing receive substantial funding for sustainment and maintenance programs over extended periods. This specific contract, valued at approximately $25.7 million and spanning from late 2016 to early 2018, represents a segment of Boeing's broader engagement with the DoD. Historical data would likely show a consistent need for such services due to the aging of military aircraft fleets and the complexity of their maintenance requirements. Fluctuations in spending could be attributed to specific aircraft programs, modernization efforts, or changes in operational tempo. Without specific historical data for this exact service category, it's presumed that Boeing's involvement in defense depot maintenance is a long-standing and significant revenue stream.
How does the cost-plus incentive fee (CPIF) structure typically perform in defense contracts compared to other fee arrangements?
The Cost-Plus Incentive Fee (CPIF) structure is designed to incentivize contractors to control costs by sharing in any savings or overruns relative to a target cost. If the contractor's final cost is below the target, both the government and the contractor share in the savings according to a predetermined formula. Conversely, if the final cost exceeds the target, both parties share in the overrun. This structure aims to align the contractor's profit motive with the government's objective of achieving the required performance at the lowest possible cost. Compared to fixed-price contracts, CPIF offers more flexibility for complex or uncertain projects but carries a higher risk of cost growth if not managed diligently. It is generally considered more cost-conscious than Cost-Plus-Fixed-Fee (CPFF) contracts, where the contractor has less financial incentive to reduce costs once the fee is fixed. Effective implementation of CPIF relies heavily on realistic target cost setting and robust government oversight.
What are the primary risks associated with sole-source defense contracts, particularly in the aerospace sector?
Sole-source defense contracts, like the one awarded to Boeing for depot maintenance, present several primary risks. The most significant is the lack of price competition, which can lead to inflated costs for the government as the contractor faces no pressure to offer the lowest possible price. This can result in a suboptimal use of taxpayer funds. Another risk is reduced innovation; without competitive pressure, a sole-source provider may have less incentive to invest in new technologies or more efficient processes. Furthermore, sole-source awards can create vendor lock-in, making it difficult and costly to switch providers in the future. There's also a potential for complacency on the part of the contractor, assuming continued awards regardless of performance. Robust justification and stringent oversight are critical to mitigating these risks.
What is the typical performance benchmark for aircraft depot maintenance services within the Department of Defense?
Performance benchmarks for aircraft depot maintenance within the Department of Defense are typically measured by metrics such as aircraft availability rates, turnaround time for maintenance tasks, quality of repairs (e.g., defect rates), and adherence to schedule. Specific Key Performance Indicators (KPIs) are often established within individual contracts, tailored to the type of aircraft and the scope of maintenance. For example, metrics might include the percentage of aircraft returned to operational status within a specified timeframe, the number of repeat discrepancies found after maintenance, or the achievement of specific readiness levels. Benchmarking also involves comparing a contractor's performance against historical data for similar services, industry best practices, or even against other depots performing comparable work. The effectiveness of the Cost-Plus Incentive Fee (CPIF) structure in this contract would be evaluated against these performance benchmarks.
How does the 'Other Aircraft Parts and Auxiliary Equipment Manufacturing' NAICS code relate to the services provided under this contract?
The North American Industry Classification System (NAICS) code 336413, 'Other Aircraft Parts and Auxiliary Equipment Manufacturing,' is a classification used for statistical purposes to categorize businesses based on their primary economic activity. While this contract is for 'depot maintenance services,' it falls under this NAICS code because such maintenance often involves the repair, overhaul, and modification of aircraft parts and auxiliary equipment. This code encompasses establishments primarily engaged in manufacturing aircraft parts and auxiliary equipment, but it is also applied to entities that perform significant repair and overhaul work on these components, effectively manufacturing or restoring them to operational condition. Therefore, the code accurately reflects the nature of the work, which goes beyond simple servicing to include complex restoration and manufacturing-like processes for aircraft components.
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
Pricing Type: COST PLUS INCENTIVE FEE (V)
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: $26,089,316
Exercised Options: $26,089,316
Current Obligation: $25,736,351
Contract Characteristics
Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED
Cost or Pricing Data: YES
Parent Contract
Parent Award PIID: FA810616D0002
IDV Type: IDC
Timeline
Start Date: 2016-11-29
Current End Date: 2018-01-21
Potential End Date: 2018-01-21 00:00:00
Last Modified: 2024-05-29
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