Boeing awarded $127M contract for ICBM cryptography upgrade, facing limited competition
Contract Overview
Contract Amount: $127,276,950 ($127.3M)
Contractor: THE Boeing Company
Awarding Agency: Department of Defense
Start Date: 2018-10-29
End Date: 2023-08-31
Contract Duration: 1,767 days
Daily Burn Rate: $72.0K/day
Competition Type: NOT COMPETED
Number of Offers Received: 1
Pricing Type: FIXED PRICE INCENTIVE
Sector: Defense
Official Description: IGF::OT::IGF ICBM CRYPTOGRAPHY UPGRADE PROGRAM, INCREMENT II (ICU II)UNDEFINITIZED CONTRACT ACTION TO INITIATE PRODUCTION OF 75 A4 DRAWERS, 8 DIGITAL COMPONENTS, AND PROGRAM MANAGEMENT SUPPORT.
Place of Performance
Location: LAYTON, DAVIS County, UTAH, 84041
State: Utah Government Spending
Plain-Language Summary
Department of Defense obligated $127.3 million to THE BOEING COMPANY for work described as: IGF::OT::IGF ICBM CRYPTOGRAPHY UPGRADE PROGRAM, INCREMENT II (ICU II)UNDEFINITIZED CONTRACT ACTION TO INITIATE PRODUCTION OF 75 A4 DRAWERS, 8 DIGITAL COMPONENTS, AND PROGRAM MANAGEMENT SUPPORT. Key points: 1. Contract awarded for critical missile defense system components. 2. Sole-source award raises questions about price discovery and value. 3. Long performance period suggests potential for cost overruns. 4. Focus on production and program management indicates a mature program. 5. Geographic concentration in Utah may have local economic impacts. 6. Lack of small business set-aside noted.
Value Assessment
Rating: questionable
The contract's value is substantial, but without competitive bidding, it's difficult to benchmark against market rates or similar contracts. The fixed-price incentive structure aims to control costs, but the lack of competition limits the government's leverage in negotiating favorable terms. Further analysis of the specific components and program management support costs would be needed to provide a more precise value assessment.
Cost Per Unit: N/A
Competition Analysis
Competition Level: sole-source
This contract was awarded on a sole-source basis, meaning only one bidder, The Boeing Company, was considered. This approach is typically used when a unique capability is required or when only one source can fulfill the requirement. However, it bypasses the standard competitive process, potentially leading to higher prices than if multiple companies had bid.
Taxpayer Impact: Sole-source awards limit taxpayer value by removing the downward price pressure that competition provides. Without competing bids, the government may pay more than necessary for goods and services.
Public Impact
The Department of Defense benefits from the upgrade of a critical national security asset. Services include production of specific hardware components and program management. The contract has a geographic impact in Utah, where the work is performed. The contract supports specialized manufacturing and program management roles within the defense industrial base.
Waste & Efficiency Indicators
Waste Risk Score: 50 / 10
Warning Flags
- Sole-source award limits competitive pressure on pricing.
- Long contract duration (1767 days) increases risk of cost escalation.
- Lack of transparency in sole-source justification requires scrutiny.
Positive Signals
- Award to a prime contractor with extensive experience in aerospace and defense.
- Fixed-price incentive contract type aims to align contractor and government interests on cost.
- Focus on production indicates a move towards delivering tangible assets for national security.
Sector Analysis
This contract falls within the Guided Missile and Space Vehicle Manufacturing sector, a highly specialized area of the aerospace and defense industry. The market is characterized by high barriers to entry, significant R&D investment, and a limited number of prime contractors capable of undertaking such complex programs. Spending in this sector is driven by national security requirements and technological advancements.
Small Business Impact
This contract does not appear to include a small business set-aside. Given the sole-source nature and the specialized requirements of ICBM components, it is unlikely that significant subcontracting opportunities for small businesses would be mandated or easily integrated without specific provisions. The impact on the small business ecosystem is likely minimal unless Boeing actively seeks small business partners for specific components.
Oversight & Accountability
Oversight for this contract would primarily fall under the Department of Defense's contracting and program management offices. The Inspector General's office may conduct audits or investigations into contract performance and costs, particularly given the sole-source nature and significant value. Transparency is limited due to the non-competitive award, but performance metrics and delivery schedules would be monitored.
Related Government Programs
- ICBM Modernization Programs
- Strategic Weapons Systems
- Aerospace Manufacturing Contracts
- Department of Defense Procurement
Risk Flags
- Sole-source award
- Long contract duration
- Lack of competition
Tags
defense, department-of-defense, department-of-the-air-force, guided-missile-and-space-vehicle-manufacturing, definitive-contract, large-contract, sole-source, fixed-price-incentive, utah, icbm
Frequently Asked Questions
What is this federal contract paying for?
Department of Defense awarded $127.3 million to THE BOEING COMPANY. IGF::OT::IGF ICBM CRYPTOGRAPHY UPGRADE PROGRAM, INCREMENT II (ICU II)UNDEFINITIZED CONTRACT ACTION TO INITIATE PRODUCTION OF 75 A4 DRAWERS, 8 DIGITAL COMPONENTS, AND PROGRAM MANAGEMENT SUPPORT.
Who is the contractor on this award?
The obligated recipient is THE BOEING COMPANY.
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 $127.3 million.
What is the period of performance?
Start: 2018-10-29. End: 2023-08-31.
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 the sole-source award. Typically, sole-source contracts are justified when only one responsible source can provide the required supplies or services, such as when there is a critical need for compatibility with existing systems, a unique capability possessed by only one contractor, or in cases of urgent and compelling need where competition is not feasible. For a program like the ICBM Cryptography Upgrade Program, it's plausible that Boeing possesses unique intellectual property, manufacturing capabilities, or has been the incumbent provider, making them the only viable option. A full justification would typically be documented and approved by the procuring agency.
How does the fixed-price incentive (FPI) contract type aim to manage costs for this program?
A Fixed-Price Incentive (FPI) contract establishes a target cost, a target profit, and a price ceiling. The final price is determined by formulas that adjust profit based on the relationship between the final negotiated cost and the target cost. If the final cost is below the target cost, both the government and the contractor share in the savings (a "share line"). If the final cost exceeds the target cost, the contractor bears a larger portion of the overrun up to the price ceiling. This structure incentivizes the contractor to control costs to achieve a higher profit, while the price ceiling protects the government from unlimited cost increases. However, the effectiveness of FPI depends heavily on the accuracy of the initial cost targets and the contractor's ability to manage production.
What are the potential risks associated with the long performance period of 1767 days?
A performance period of 1767 days (approximately 4.8 years) for a complex defense contract introduces several risks. Firstly, the longer the period, the greater the chance of unforeseen technological obsolescence or changes in threat assessments that could render the procured items less effective or require modifications. Secondly, extended timelines increase the risk of inflation impacting material and labor costs, even with fixed-price elements, potentially eroding the value of the contract. Thirdly, managing a long-duration contract requires sustained oversight to ensure performance remains on track and that the contractor maintains focus and quality throughout the period. Finally, there's a higher probability of personnel turnover within both the government oversight team and the contractor's project staff, which can lead to knowledge gaps and project delays.
Are there any comparable contracts or spending benchmarks for ICBM cryptography upgrades?
Directly comparable public spending benchmarks for ICBM cryptography upgrades are difficult to ascertain due to the classified nature of many strategic defense programs and the unique, often sole-source, contracting environment. However, general spending trends in strategic missile defense and aerospace manufacturing can provide context. Contracts for similar complex, high-security electronic systems or upgrades to critical infrastructure within the Department of Defense often run into tens or hundreds of millions of dollars. The value of this $127 million contract appears consistent with the scale and criticality of upgrading components for a major strategic asset like an ICBM, especially when considering the specialized engineering, rigorous testing, and security protocols involved.
What is the historical spending trend for the IGF ICBM Cryptography Upgrade Program?
The provided data pertains to a specific contract action (Increment II) initiated in October 2018. It does not offer historical spending data for the overall IGF ICBM Cryptography Upgrade Program. To understand historical spending patterns, one would need to analyze previous contract awards, modifications, and task orders associated with this program across different increments or phases. This would involve searching federal procurement databases for all contracts related to the 'ICBM Cryptography Upgrade Program' or similar identifiers issued by the Department of the Air Force or Department of Defense over several fiscal years.
Industry Classification
NAICS: Manufacturing › Aerospace Product and Parts Manufacturing › Guided Missile and Space Vehicle Manufacturing
Product/Service Code: GUIDED MISSLES
Competition & Pricing
Extent Competed: NOT COMPETED
Solicitation Procedures: ONLY ONE SOURCE
Solicitation ID: FA820418R7000
Offers Received: 1
Pricing Type: FIXED PRICE INCENTIVE (L)
Evaluated Preference: NONE
Contractor Details
Address: 465 N MARSHALL WAY, LAYTON, UT, 84041
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: $129,088,476
Exercised Options: $127,276,950
Current Obligation: $127,276,950
Actual Outlays: $1,841,949
Subaward Activity
Number of Subawards: 36
Total Subaward Amount: $13,083,165
Contract Characteristics
Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED
Cost or Pricing Data: NO
Timeline
Start Date: 2018-10-29
Current End Date: 2023-08-31
Potential End Date: 2023-08-31 00:00:00
Last Modified: 2023-06-30
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