Boeing awarded $59.7M for aircraft depot maintenance, a sole-source contract with a cost-plus incentive fee structure

Contract Overview

Contract Amount: $59,687,854 ($59.7M)

Contractor: THE Boeing Company

Awarding Agency: Department of Defense

Start Date: 2020-02-06

End Date: 2023-06-30

Contract Duration: 1,240 days

Daily Burn Rate: $48.1K/day

Competition Type: NOT COMPETED

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Official Description: PROGRAMMED DEPOT MAINTENANCE ON AIRCRAFT 676

Place of Performance

Location: OKLAHOMA CITY, OKLAHOMA County, OKLAHOMA, 73135

State: Oklahoma Government Spending

Plain-Language Summary

Department of Defense obligated $59.7 million to THE BOEING COMPANY for work described as: PROGRAMMED DEPOT MAINTENANCE ON AIRCRAFT 676 Key points: 1. The contract utilizes a cost-plus incentive fee (CPIF) structure, which aims to align contractor and government interests by rewarding cost savings. 2. The sole-source nature of this award warrants scrutiny regarding the justification for not pursuing a competitive bidding process. 3. Performance has been rated as 'OK' by the agency, suggesting no significant issues but also no exceptional performance. 4. The contract duration of 1240 days indicates a long-term need for these specialized maintenance services. 5. The contract is managed by the Defense Contract Management Agency, a key oversight body for defense procurements. 6. The specific Product Service Code (PSC) is not provided, making direct comparisons to similar maintenance contracts challenging.

Value Assessment

Rating: fair

The contract's CPIF structure is designed to incentivize cost efficiency, but without a competitive baseline, assessing true value for money is difficult. The awarded amount of $59.7 million over approximately 3.5 years suggests a significant investment in aircraft sustainment. Benchmarking this against similar sole-source depot maintenance contracts for comparable aircraft would be necessary for a more definitive value assessment. The 'OK' performance rating indicates that the contractor is meeting basic requirements, but doesn't suggest exceptional value.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning that only one contractor, The Boeing Company, was solicited. The justification for this approach is not detailed in the provided data. Sole-source awards can sometimes lead to higher prices due to the lack of competitive pressure. Without information on the number of bidders or the specific circumstances leading to a sole-source decision, it's challenging to fully assess the impact on price discovery.

Taxpayer Impact: For taxpayers, a sole-source award means there was no opportunity to leverage competition to drive down costs, potentially resulting in a higher overall expenditure for these essential aircraft maintenance services.

Public Impact

The primary beneficiaries are the U.S. Department of Defense, ensuring the operational readiness of its aircraft fleet. The services delivered include programmed depot maintenance, a critical process for extending the lifespan and ensuring the airworthiness of aircraft. The contract is managed by the Defense Contract Management Agency, indicating a focus on national defense infrastructure. Workforce implications include the employment of skilled technicians and support staff at Boeing facilities involved in aircraft maintenance.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition raises concerns about potential overpricing and reduced incentive for efficiency.
The 'OK' performance rating suggests a lack of proactive problem-solving or exceeding expectations.
The sole-source nature limits transparency into the procurement process and justification for vendor selection.
Absence of specific performance metrics makes it difficult to gauge the true effectiveness of the maintenance provided.

Positive Signals

The CPIF contract type is designed to incentivize cost savings, potentially benefiting the government if managed effectively.
The long contract duration suggests a stable, long-term relationship for critical sustainment services.
The contract is managed by a specialized defense agency, implying established oversight processes.
The contractor, Boeing, is a major aerospace manufacturer with extensive experience in aircraft maintenance.

Sector Analysis

This contract falls within the aerospace and defense manufacturing sector, specifically focusing on aircraft maintenance and sustainment. The market for programmed depot maintenance is often characterized by specialized capabilities and long-standing relationships between manufacturers and the military. While specific market size data for this niche is not readily available, the overall defense sustainment market is substantial, with significant government spending allocated annually to ensure fleet readiness. This contract represents a portion of that larger ecosystem.

Small Business Impact

The provided data indicates that small business participation (sb) is false, and there is no indication of a small business set-aside (ss). This suggests that the contract was not specifically targeted towards small businesses. Consequently, there are no direct subcontracting implications for small businesses stemming from this particular award based on the available information. The focus appears to be on a large, established prime contractor.

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 CPIF structure includes incentive clauses that require careful monitoring to ensure the government realizes potential cost savings. Transparency is limited by the sole-source nature of the award, but DCMA's role implies a degree of accountability. Specific Inspector General (IG) involvement would depend on any identified issues or audits initiated by the DoD IG.

Related Government Programs

Aircraft Depot Maintenance
Aerospace Manufacturing
Defense Sustainment Programs
Cost-Plus Incentive Fee Contracts
Sole-Source Defense Procurements

Risk Flags

Sole-source award justification
Potential for uncompetitive pricing
Adequacy of 'OK' performance rating
Lack of detailed performance metrics

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $59.7 million to THE BOEING COMPANY. PROGRAMMED DEPOT MAINTENANCE ON AIRCRAFT 676

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 $59.7 million.

What is the period of performance?

Start: 2020-02-06. End: 2023-06-30.

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

The provided data does not include the specific justification for this sole-source award. Typically, sole-source contracts are awarded when only one responsible source can provide the required supplies or services, often due to unique capabilities, proprietary technology, or urgent and compelling needs. Without further documentation, such as a Justification and Approval (J&A) document, it is impossible to determine the precise rationale. This lack of transparency is a common concern with sole-source procurements, as it bypasses the competitive process that usually ensures fair pricing and wider market participation.

How does the Cost Plus Incentive Fee (CPIF) structure typically function in contracts of this nature, and what are the potential benefits and risks?

A Cost Plus Incentive Fee (CPIF) contract is a type of cost-reimbursement contract where the contractor is reimbursed for allowable costs and receives a target fee, but the final fee is adjusted based on performance against pre-determined targets (e.g., cost, schedule, or performance). The goal is to incentivize the contractor to control costs and achieve specific objectives. Benefits include aligning contractor and government interests and potentially achieving lower costs than fixed-price contracts if targets are met. Risks include the complexity of establishing appropriate targets and sharing formulas, potential for disputes over target achievement, and the government still bearing the cost risk if the contractor exceeds the target cost significantly, even with fee adjustments.

What does the 'OK' performance rating signify in the context of this aircraft depot maintenance contract?

An 'OK' performance rating, often represented by codes like 'S' for Satisfactory, indicates that the contractor is meeting the minimum requirements of the contract but is not necessarily exceeding expectations or demonstrating exceptional performance. In the context of aircraft depot maintenance, this suggests that the aircraft are being serviced adequately to maintain operational readiness, but it does not imply superior quality, efficiency beyond the contractually obligated level, or proactive identification and resolution of potential issues. It signifies compliance rather than excellence, which can be a neutral indicator but may warrant closer monitoring if higher performance is desired or expected.

Can we compare the per-unit cost or overall value of this contract to similar aircraft depot maintenance contracts for other aircraft types or agencies?

Direct comparison of the per-unit cost or overall value of this contract to similar aircraft depot maintenance contracts is challenging without more specific data. Key factors influencing cost include the specific aircraft model being maintained (complexity, age, size), the scope of work required for depot maintenance (e.g., inspections, repairs, overhauls, modifications), the labor rates, and the overhead structure of the contractor. Furthermore, the sole-source nature of this award and the CPIF structure complicate direct benchmarking against competitively awarded fixed-price contracts. A thorough comparison would require detailed analysis of the work breakdown structure, labor hours, material costs, and performance metrics for comparable contracts.

What are the historical spending patterns for programmed depot maintenance on aircraft within the Department of Defense, and how does this contract fit within that trend?

Historical spending on programmed depot maintenance (PDM) for aircraft within the Department of Defense is substantial and represents a significant portion of the overall defense sustainment budget. PDM is a cyclical and essential process required to maintain the airworthiness and extend the service life of military aircraft. Spending fluctuates based on the size and age of the fleet, modernization programs, and operational tempo. This $59.7 million contract for Boeing's aircraft maintenance fits within the broader trend of consistent, high-level investment in aircraft sustainment. While this specific award's value is significant, it is one of many such contracts supporting the vast DoD aviation inventory, reflecting the ongoing need for specialized maintenance services.

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: $61,058,745

Exercised Options: $61,058,745

Current Obligation: $59,687,854

Actual Outlays: $7,885,637

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