DoD's $18.7M Rolls-Royce Engine Support Contract Awarded Sole-Source to Incumbent

Contract Overview

Contract Amount: $18,682,519 ($18.7M)

Contractor: Rolls-Royce Corporation

Awarding Agency: Department of Defense

Start Date: 2019-07-01

End Date: 2020-06-30

Contract Duration: 365 days

Daily Burn Rate: $51.2K/day

Competition Type: NOT COMPETED

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: ASPIRE AE 3007H (F137) ENGINE SUSTAINMENT SUPPORT MAINTENANCE, REPAIR, AND OVERHAUL (MRO) FOR THE AE 3007H (F137) ENGINE.

Place of Performance

Location: INDIANAPOLIS, MARION County, INDIANA, 46225

State: Indiana Government Spending

Plain-Language Summary

Department of Defense obligated $18.7 million to ROLLS-ROYCE CORPORATION for work described as: ASPIRE AE 3007H (F137) ENGINE SUSTAINMENT SUPPORT MAINTENANCE, REPAIR, AND OVERHAUL (MRO) FOR THE AE 3007H (F137) ENGINE. Key points: 1. The contract focuses on sustainment support, maintenance, repair, and overhaul for AE 3007H (F137) engines. 2. Awarded on a firm-fixed-price basis, indicating a defined cost for services. 3. The sole-source nature raises questions about potential price inflation and lack of competitive pressure. 4. Performance period is one year, suggesting a need for ongoing support. 5. The contractor, Rolls-Royce Corporation, is the original equipment manufacturer, often leading to sole-source awards for specialized support. 6. This contract falls under Aircraft Engine and Engine Parts Manufacturing NAICS code 336412.

Value Assessment

Rating: questionable

Benchmarking the value of this specific contract is challenging due to its sole-source nature and the specialized MRO services for a particular engine model. Without competitive bids, it's difficult to ascertain if the $18.7 million represents a fair market price. However, for sustainment of critical aerospace assets, such specialized support often commands premium pricing. The firm-fixed-price structure provides cost certainty but doesn't inherently guarantee value for money without a competitive baseline.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one vendor, Rolls-Royce Corporation, was solicited. This is common for original equipment manufacturers (OEMs) providing specialized maintenance, repair, and overhaul (MRO) services for their own complex products, like aircraft engines. While efficient for ensuring technical compatibility and expertise, it eliminates the price discovery benefits that come from a competitive bidding process.

Taxpayer Impact: Sole-source awards can lead to higher costs for taxpayers as there is no competitive pressure to drive down prices. The government relies on negotiation and oversight to ensure a reasonable price.

Public Impact

The primary beneficiaries are the Department of the Air Force, ensuring the operational readiness of aircraft powered by AE 3007H (F137) engines. Services delivered include essential maintenance, repair, and overhaul, critical for aircraft safety and performance. The geographic impact is likely tied to Air Force bases operating these specific aircraft, primarily within the United States. Workforce implications include the need for highly skilled technicians familiar with Rolls-Royce engines, potentially supporting jobs within Rolls-Royce and its supply chain.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may result in inflated pricing.
Sole-source awards can reduce transparency in pricing.
Dependence on a single supplier for critical MRO services poses a long-term risk.

Positive Signals

Awarded to the OEM, ensuring specialized expertise and technical knowledge.
Firm-fixed-price contract provides cost certainty for the government.
Focus on sustainment supports ongoing operational readiness of critical assets.

Sector Analysis

The aerospace and defense industry is characterized by high barriers to entry, complex supply chains, and significant R&D investment. Maintenance, Repair, and Overhaul (MRO) services for specialized aircraft engines represent a critical segment within this sector. Rolls-Royce Corporation is a major global player in this market. Comparable spending benchmarks for engine MRO are highly specific to engine type, age, and service level agreements, making broad comparisons difficult. However, the total contract value of $18.7 million for a one-year period for sustainment support is substantial, reflecting the complexity and criticality of the services.

Small Business Impact

This contract was not set aside for small businesses, nor does it appear to have specific subcontracting requirements mentioned. As a sole-source award to a large corporation (Rolls-Royce), the direct impact on the small business ecosystem is likely minimal. However, Rolls-Royce may utilize small businesses within its broader supply chain for components or services, but this is not explicitly detailed in the award information.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of the Air Force's contracting and program management offices. Accountability measures are embedded in the firm-fixed-price contract terms, requiring delivery of specified MRO services. Transparency is limited due to the sole-source nature, but contract award data is publicly available. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Aircraft Engine Maintenance
Aerospace Sustainment Programs
Defense Logistics Agency (DLA) Support Contracts
Original Equipment Manufacturer (OEM) Support Services

Risk Flags

Sole-source award
Lack of competition
Potential for cost overruns
Limited transparency

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $18.7 million to ROLLS-ROYCE CORPORATION. ASPIRE AE 3007H (F137) ENGINE SUSTAINMENT SUPPORT MAINTENANCE, REPAIR, AND OVERHAUL (MRO) FOR THE AE 3007H (F137) ENGINE.

Who is the contractor on this award?

The obligated recipient is ROLLS-ROYCE CORPORATION.

Which agency awarded this contract?

Awarding agency: Department of Defense (Department of the Air Force).

What is the total obligated amount?

The obligated amount is $18.7 million.

What is the period of performance?

Start: 2019-07-01. End: 2020-06-30.

What is the track record of Rolls-Royce Corporation in providing sustainment support for AE 3007H (F137) engines to the Department of Defense?

Rolls-Royce Corporation, as the original equipment manufacturer (OEM) for the AE 3007H (F137) engine, has a long-standing relationship with the Department of Defense (DoD) for the sustainment of these engines. Their track record typically involves providing comprehensive maintenance, repair, and overhaul (MRO) services, spare parts, and technical support. Given the specialized nature of these engines, which are often used in critical military platforms, the DoD relies heavily on the OEM's expertise to ensure operational readiness and safety. Historical data would likely show consistent performance in meeting contractual obligations, though specific performance metrics (e.g., turnaround times, engine availability rates) would be detailed in past performance reviews and contract close-outs. The sole-source nature of this award suggests a continued reliance on their established capabilities and potentially a lack of viable alternative providers for this specific engine sustainment.

How does the $18.7 million contract value compare to similar engine sustainment contracts for the Air Force?

Directly comparing the $18.7 million value of this specific contract to 'similar' engine sustainment contracts is challenging without more granular data. 'Similar' could refer to contracts for the same engine model, different engine models, or contracts with different service scopes (e.g., full overhaul vs. component repair). However, for a one-year period of sustainment, maintenance, repair, and overhaul (MRO) for a critical military aircraft engine, $18.7 million is a significant but not necessarily outlier figure. The AE 3007H is used in various platforms, and the scope of 'sustainment support' can vary widely. Factors influencing cost include the number of engines supported, the expected operational tempo, the age and condition of the engines, and the required turnaround times for repairs. Given that this is a sole-source award to the OEM, the price is likely negotiated rather than market-driven, making direct value-for-money comparisons difficult without access to internal DoD cost analyses or competitive bidding data from other similar procurements.

What are the primary risks associated with awarding this contract on a sole-source basis?

The primary risks associated with awarding this contract on a sole-source basis are centered around cost and competition. Firstly, the lack of competition means that Rolls-Royce Corporation is not incentivized by market forces to offer the lowest possible price. This can lead to potentially higher costs for the government compared to what might be achieved through a competitive bidding process. Secondly, sole-source awards can reduce transparency in pricing, making it harder for the government to verify that the price paid is fair and reasonable. Thirdly, there's a risk of vendor lock-in, where the government becomes overly dependent on a single supplier for critical support, potentially limiting future flexibility and negotiation leverage. Lastly, without competitive pressure, there might be less incentive for the contractor to innovate or improve efficiency beyond what is contractually required.

How effective is the firm-fixed-price (FFP) contract type in ensuring program effectiveness for engine sustainment?

The Firm-Fixed-Price (FFP) contract type is generally considered effective for ensuring program effectiveness in engine sustainment, particularly when the scope of work is well-defined. For maintenance, repair, and overhaul (MRO) services, an FFP contract establishes a set price for the services rendered, providing cost certainty to the government. This means the contractor assumes the risk of cost overruns. This structure incentivizes the contractor to perform the work efficiently to maintain profitability. For program effectiveness, it ensures that the agreed-upon services are delivered within the budgeted amount. However, the effectiveness is contingent on the clarity and completeness of the Statement of Work (SOW). If the SOW is ambiguous or incomplete, it can lead to disputes or unmet requirements. In the context of sole-source awards, while FFP provides cost certainty, it doesn't inherently guarantee the 'best' value without competitive benchmarking.

What are the historical spending patterns for AE 3007H (F137) engine sustainment support by the Department of Defense?

Historical spending patterns for AE 3007H (F137) engine sustainment support by the Department of Defense (DoD) would likely show consistent, significant investment over time, reflecting the ongoing need to maintain operational readiness for aircraft utilizing these engines. Rolls-Royce Corporation, as the OEM, has historically been the primary, if not sole, provider for these specialized services. Annual spending would fluctuate based on factors such as the number of aircraft in the fleet, their operational tempo, the age and condition of the engines requiring maintenance, and the specific support requirements outlined in contracts. Awards for sustainment are often multi-year, though individual delivery orders or contract periods might be for one year, as seen here. Without access to specific historical contract databases or DoD budget reports for this engine type, precise figures are unavailable, but it's reasonable to assume a sustained expenditure in the tens of millions of dollars annually or over multi-year periods to support these critical assets.

What is the potential impact of this contract on the overall readiness of the Air Force's AE 3007H (F137) powered fleet?

This contract is crucial for maintaining the overall readiness of the Air Force's fleet powered by AE 3007H (F137) engines. The services provided—maintenance, repair, and overhaul (MRO)—are fundamental to ensuring that these engines function reliably and safely. By securing this support, the Air Force aims to minimize aircraft downtime, prevent mission-critical failures, and extend the operational lifespan of the engines and the aircraft they power. The timely and effective execution of this contract directly translates to the availability of these aircraft for training, operational missions, and other defense-related activities. A lapse in sustainment support or subpar performance could lead to increased aircraft unserviceability, reduced operational capacity, and potentially higher long-term costs due to deferred maintenance or premature engine replacement.

Industry Classification

NAICS: Manufacturing › Aerospace Product and Parts Manufacturing › Aircraft Engine and Engine Parts 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: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Rolls-Royce Holdings PLC

Address: 450 S MERIDIAN ST, INDIANAPOLIS, IN, 46225

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Foreign Owned, Foreign-Owned and U.S.-Incorporated Business, Manufacturer of Goods, Not Designated a Small Business, Special Designations

Financial Breakdown

Contract Ceiling: $18,682,519

Exercised Options: $18,682,519

Current Obligation: $18,682,519

Actual Outlays: $325,522

Subaward Activity

Number of Subawards: 1

Total Subaward Amount: $14,525,565

Contract Characteristics

Multi-Year Contract: Yes

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: FA812418D0004

IDV Type: IDC

Timeline