DoD's $113M T-38 Avionics Support Contract Awarded to Boeing Raises Value and Competition Questions

Contract Overview

Contract Amount: $113,453,784 ($113.5M)

Contractor: THE Boeing Company

Awarding Agency: Department of Defense

Start Date: 2012-04-01

End Date: 2020-06-30

Contract Duration: 3,012 days

Daily Burn Rate: $37.7K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: T-38 AVIONICS POST PRODUCTION SUPPORT, INCLUDING CONTRACTOR OWNED AND MAINTAINED BASE SUPPLY SUPPORT, CONTRACTOR LOGISTICS SUPPORT, AND BLOCK UPGRADES

Place of Performance

Location: SAINT LOUIS, SAINT LOUIS County, MISSOURI, 63134

State: Missouri Government Spending

Plain-Language Summary

Department of Defense obligated $113.5 million to THE BOEING COMPANY for work described as: T-38 AVIONICS POST PRODUCTION SUPPORT, INCLUDING CONTRACTOR OWNED AND MAINTAINED BASE SUPPLY SUPPORT, CONTRACTOR LOGISTICS SUPPORT, AND BLOCK UPGRADES Key points: 1. The contract's cost-plus-fixed-fee structure may incentivize higher spending without direct cost savings. 2. Limited public data on performance metrics makes it difficult to assess overall value for money. 3. The sole-source nature of the award warrants scrutiny regarding fair pricing and market alternatives. 4. Long contract duration (8+ years) suggests potential for cost overruns and evolving needs. 5. The contract's focus on logistics support and upgrades indicates critical but potentially high-cost services. 6. Boeing's established role as a prime contractor for T-38 systems likely influenced the award.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to the lack of publicly available comparable data for T-38 avionics post-production support. The Cost Plus Fixed Fee (CPFF) pricing structure, while common for complex R&D or specialized services, can lead to higher costs for the government if not meticulously managed, as contractor incentives are not directly tied to cost reduction. Without detailed performance metrics and cost breakdowns, it's difficult to definitively assess if the $113 million represents a fair price for the services rendered over its duration.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, indicating that the Department of Defense determined only The Boeing Company could provide the required specialized avionics post-production support for the T-38 aircraft. This approach bypasses the competitive bidding process, which typically leads to better price discovery and potentially lower costs for the government. The justification for a sole-source award often stems from unique capabilities, proprietary technology, or existing system integration.

Taxpayer Impact: Sole-source awards limit the government's ability to leverage market competition to secure the best possible pricing, potentially resulting in higher expenditures for taxpayers compared to a fully competed contract.

Public Impact

The primary beneficiaries are the U.S. Air Force and NASA, who operate the T-38 Talon trainer aircraft. Services include essential post-production support, contractor-owned and maintained base supply, logistics, and critical block upgrades for T-38 avionics. Geographic impact is likely concentrated around T-38 operational bases and maintenance facilities. Workforce implications include specialized technical roles for engineers, technicians, and logistics personnel, primarily employed by Boeing and its subcontractors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition and potentially increases costs for taxpayers.
Cost-plus-fixed-fee structure may not incentivize cost efficiency.
Lack of detailed performance metrics hinders objective value assessment.
Long contract duration increases risk of cost overruns and scope creep.

Positive Signals

Ensures continued operational readiness and safety of the T-38 fleet through specialized support.
Leverages Boeing's established expertise and historical knowledge of the T-38 system.
Provides critical upgrades to maintain the relevance and capability of aging aircraft.

Sector Analysis

This contract falls within the aerospace and defense sector, specifically focusing on aircraft sustainment and logistics support. The market for specialized avionics support is often dominated by original equipment manufacturers (OEMs) like Boeing due to proprietary knowledge and existing infrastructure. Comparable spending benchmarks for similar long-term sustainment contracts can vary widely based on aircraft type, age, and complexity, but typically represent a significant portion of an aircraft fleet's total lifecycle cost.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'ss': false and 'sb': false. While Boeing is the prime contractor, there may be opportunities for small businesses to participate as subcontractors. However, the sole-source nature of the award could limit the visibility and accessibility of these subcontracting opportunities compared to a competitively bid contract where small business participation is often a key evaluation factor.

Oversight & Accountability

Oversight for this contract would typically be managed by the Defense Contract Management Agency (DCMA), responsible for ensuring contractor performance and compliance with contract terms. Accountability measures are embedded within the CPFF structure, requiring detailed reporting and justification for costs incurred. Transparency is often limited in sole-source awards, but contract modifications, performance reviews, and financial audits serve as key oversight mechanisms. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse.

Related Government Programs

T-38 Talon Sustainment Programs
Aerospace Logistics Support Contracts
Avionics Modernization Programs
Defense Contractor Support Services

Risk Flags

Sole-source award
Cost-plus contract type
Aging aircraft platform
Lack of public performance data

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $113.5 million to THE BOEING COMPANY. T-38 AVIONICS POST PRODUCTION SUPPORT, INCLUDING CONTRACTOR OWNED AND MAINTAINED BASE SUPPLY SUPPORT, CONTRACTOR LOGISTICS SUPPORT, AND BLOCK UPGRADES

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 $113.5 million.

What is the period of performance?

Start: 2012-04-01. End: 2020-06-30.

What is Boeing's track record with T-38 support contracts, and have there been past issues with cost or performance?

Boeing has a long-standing relationship with the T-38 program, having been the original manufacturer. Historically, large, long-duration defense contracts, especially those with cost-reimbursement structures, can face challenges related to cost growth and schedule delays. While specific public data on past issues with Boeing's T-38 support contracts is limited, the nature of sustainment and upgrade programs often involves unforeseen technical complexities and evolving requirements. The government's decision to award this contract sole-source suggests confidence in Boeing's unique capabilities, but ongoing oversight is crucial to mitigate potential risks associated with cost and performance.

How does the $113 million total contract value compare to similar avionics support contracts for trainer aircraft?

Directly comparing the $113 million total contract value is difficult without knowing the specific scope, duration, and services included in other contracts. However, for a complex, long-duration program like T-38 avionics support (over 8 years), this figure represents a substantial investment. Trainer aircraft sustainment contracts can range from tens to hundreds of millions of dollars, depending on the fleet size, aircraft age, and the level of modernization required. The CPFF structure means the final cost could fluctuate based on actual expenditures. Benchmarking would require detailed analysis of comparable contracts for aircraft like the T-38, T-7, or similar training platforms, considering factors such as the number of aircraft supported and the criticality of the avionics systems.

What are the primary risks associated with a sole-source award for critical aircraft support?

The primary risk of a sole-source award is the lack of competitive pressure, which can lead to inflated pricing and reduced incentive for the contractor to innovate or operate efficiently. Without competing bids, the government may not be obtaining the best possible value for its investment. Additionally, sole-source awards can create vendor lock-in, making it difficult and costly to switch providers in the future. For critical support like avionics, this also means a heavy reliance on a single entity, potentially exposing the program to risks if that entity faces financial difficulties, operational disruptions, or strategic shifts. Robust government oversight and negotiation are essential to mitigate these risks.

How effective is the Cost Plus Fixed Fee (CPFF) contract type in ensuring program effectiveness for avionics support?

The Cost Plus Fixed Fee (CPFF) contract type aims to provide a balance between contractor risk and government oversight. The government pays the actual allowable costs incurred by the contractor, plus a predetermined fixed fee representing the contractor's profit. This structure is often used when the scope of work is not precisely defined or involves significant uncertainty, such as in complex upgrades or sustainment. While it allows for flexibility and ensures the contractor is compensated for necessary work, it does not inherently incentivize cost savings as strongly as fixed-price contracts. Program effectiveness relies heavily on the government's ability to accurately estimate costs, define clear performance objectives, and diligently monitor contractor expenditures and progress to ensure the required avionics support is delivered efficiently and meets operational needs.

What are the historical spending patterns for T-38 avionics support, and how does this contract fit within that trend?

Historical spending on T-38 avionics support would likely show a consistent need for maintenance, repair, and upgrades due to the aircraft's age and its role as a primary training platform. As the T-38 fleet ages, the complexity and cost of maintaining its avionics systems tend to increase, necessitating ongoing investment. This $113 million contract, spanning over eight years, represents a significant, long-term commitment to ensuring the continued operational capability of the T-38's avionics. It aligns with a trend of sustained investment in aging platforms to extend their service life and maintain readiness, particularly for critical training roles. Without access to detailed historical spending data, it's difficult to pinpoint exact trends, but the contract's size and duration suggest a substantial and ongoing requirement.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Management, Scientific, and Technical Consulting Services › Process, Physical Distribution, and Logistics Consulting Services

Product/Service Code: MAINT, REPAIR, REBUILD EQUIPMENT › MAINT, REPAIR, REBUILD OF EQUIPMENT

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: FA821111R3000

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Address: 6200 J S MCDONNELL BLVD, SAINT LOUIS, MO, 63134

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: $113,824,003

Exercised Options: $113,824,003

Current Obligation: $113,453,784

Subaward Activity

Number of Subawards: 9

Total Subaward Amount: $6,784,910

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline