Boeing awarded $114M contract for Minuteman III guidance subsystem repair, a sole-source acquisition

Contract Overview

Contract Amount: $114,198,848 ($114.2M)

Contractor: THE Boeing Company

Awarding Agency: Department of Defense

Start Date: 2023-07-25

End Date: 2039-09-27

Contract Duration: 5,908 days

Daily Burn Rate: $19.3K/day

Competition Type: NOT COMPETED

Pricing Type: COST PLUS AWARD FEE

Sector: Defense

Official Description: REPAIR THE GUIDANCE SUBSYSTEM OF THE MINUTEMAN III MISSILE

Place of Performance

Location: HEATH, LICKING County, OHIO, 43056

State: Ohio Government Spending

Plain-Language Summary

Department of Defense obligated $114.2 million to THE BOEING COMPANY for work described as: REPAIR THE GUIDANCE SUBSYSTEM OF THE MINUTEMAN III MISSILE Key points: 1. The contract focuses on essential repair and maintenance for a critical missile system. 2. Sole-source award suggests limited market options or specific contractor expertise required. 3. Long contract duration (over 16 years) indicates a sustained need for these services. 4. Cost-plus award fee structure incentivizes contractor performance while managing costs. 5. The absence of small business set-asides is noted. 6. This contract supports the sustainment of strategic defense assets.

Value Assessment

Rating: fair

Benchmarking the value of this specific repair contract is challenging due to its specialized nature and sole-source award. The cost-plus award fee (CPAF) structure allows for cost reimbursement plus a fee, which can lead to higher overall costs compared to fixed-price contracts if not managed carefully. Without competitive bids, it's difficult to definitively assess if the pricing represents optimal value for money. However, the long duration suggests a consistent need, and the Air Force will need to actively monitor performance and costs to ensure efficiency.

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 typically occurs when a specific contractor possesses unique capabilities, proprietary technology, or is the only source capable of meeting the government's requirements. The lack of competition limits the government's ability to leverage market forces to drive down prices and potentially explore innovative solutions from a wider range of vendors.

Taxpayer Impact: Taxpayers may face higher costs due to the absence of competitive pressure. The government relies on robust negotiation and oversight to ensure a fair price is paid.

Public Impact

The primary beneficiaries are the U.S. Air Force and the Department of Defense, ensuring the operational readiness of the Minuteman III intercontinental ballistic missile system. Services delivered include the repair and maintenance of the guidance subsystem, crucial for missile accuracy and reliability. The geographic impact is primarily within the United States, supporting strategic missile bases. Workforce implications include specialized technical roles for engineers and technicians involved in missile system maintenance.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing and potential innovation.
Long-term contract duration increases exposure to cost overruns if not closely managed.
Cost-plus award fee structure can incentivize spending if not adequately controlled.

Positive Signals

Focus on critical national security asset sustainment.
Contractor (Boeing) has extensive experience with defense systems.
Long duration provides stability for essential maintenance services.

Sector Analysis

The aerospace and defense sector is characterized by high barriers to entry, significant R&D investment, and long product lifecycles. Contracts for maintaining strategic assets like the Minuteman III are often specialized and may involve proprietary technology, leading to sole-source or limited competition awards. Spending in this sub-sector focuses on sustainment, upgrades, and readiness of aging but critical platforms. Comparable spending benchmarks are difficult to establish due to the unique nature of strategic missile components.

Small Business Impact

This contract does not appear to include a small business set-aside. Given the specialized nature of the Minuteman III guidance subsystem and the sole-source award to a large prime contractor, the direct impact on small businesses through prime contracting is unlikely. However, the prime contractor may engage small businesses as subcontractors for specific components or services, though this is not explicitly detailed in the provided data.

Oversight & Accountability

Oversight for this contract will likely be managed by the Department of the Air Force, with specific program offices responsible for monitoring performance, costs, and adherence to contract terms. The Cost Plus Award Fee (CPAF) structure necessitates rigorous oversight to ensure the contractor is meeting performance objectives and managing costs effectively. Transparency will depend on the reporting requirements stipulated in the contract and the Air Force's commitment to public disclosure of contract performance data.

Related Government Programs

Minuteman III Sustainment Program
ICBM Modernization Programs
Strategic Deterrence Systems Maintenance
Aerospace and Defense Repair Services

Risk Flags

Sole-source award
Long contract duration
Cost-plus award fee structure

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $114.2 million to THE BOEING COMPANY. REPAIR THE GUIDANCE SUBSYSTEM OF THE MINUTEMAN III MISSILE

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 $114.2 million.

What is the period of performance?

Start: 2023-07-25. End: 2039-09-27.

What is Boeing's track record with the Minuteman III program and similar defense sustainment contracts?

The Boeing Company has a long-standing relationship with the U.S. military, including extensive experience with the Minuteman III missile system. They have been involved in various aspects of its sustainment, maintenance, and upgrade programs over the years. Their track record in defense sustainment contracts is generally characterized by deep technical expertise and established relationships with the Department of Defense. However, like many large defense contractors, they have faced scrutiny regarding cost management and contract performance on specific programs. For the Minuteman III, their continued role suggests a level of trust and capability deemed essential by the Air Force for maintaining this critical strategic asset.

How does the Cost Plus Award Fee (CPAF) structure compare to other contract types for this type of service?

The Cost Plus Award Fee (CPAF) structure is often used for complex, long-term projects where the scope of work may evolve or is difficult to define precisely upfront, such as the repair and sustainment of sophisticated defense systems. Unlike fixed-price contracts, CPAF reimburses the contractor for allowable costs and includes a base fee plus an award amount based on performance against predetermined criteria. This structure aims to incentivize contractor performance and efficiency while providing flexibility. However, it can lead to higher overall costs compared to fixed-price contracts if performance targets are not challenging or if oversight is insufficient, as the government bears more cost risk. Other options like Cost Plus Incentive Fee (CPIF) or Firm-Fixed-Price (FFP) could offer different risk/reward profiles but might be less suitable for the inherent uncertainties in long-term missile system repair.

What are the primary risks associated with a sole-source award for critical defense infrastructure?

The primary risks associated with a sole-source award for critical defense infrastructure like the Minuteman III guidance subsystem repair include a lack of competitive pricing, which can lead to higher costs for the government and taxpayers. Without competition, there is reduced incentive for the contractor to innovate or seek cost efficiencies. Furthermore, sole-source awards can create vendor lock-in, making it difficult and potentially more expensive to switch providers in the future. There's also a risk that the government may not be aware of alternative, potentially more effective or affordable solutions that could have emerged from a competitive bidding process. Robust contract management and oversight are crucial to mitigate these risks.

What is the historical spending trend for the Minuteman III guidance subsystem repair and maintenance?

Historical spending data for the specific repair and maintenance of the Minuteman III guidance subsystem is not readily available in a consolidated public format. However, the Minuteman III program itself has undergone significant sustainment and modernization efforts over its decades-long service life, indicating consistent and substantial investment. The U.S. Air Force has allocated billions of dollars over the years to ensure the readiness and reliability of the entire Minuteman III fleet. This particular contract, valued at approximately $114 million over its potential 16-year duration, represents a portion of that ongoing sustainment expenditure. Trends would likely show a continuous need for maintenance, with potential spikes related to specific upgrade initiatives or component obsolescence issues.

How does the contract's long duration (over 16 years) impact its overall risk profile?

The contract's long duration, spanning from July 2023 to September 2039 (over 16 years), significantly impacts its risk profile. On one hand, it provides stability and ensures continuous support for a critical defense asset, potentially leading to efficiencies through long-term planning and workforce stability for the contractor. On the other hand, extended durations increase the risk of cost escalation due to inflation, unforeseen technological obsolescence, changes in program requirements, or contractor performance issues that may not be immediately apparent. Managing such a long-term contract requires robust oversight, regular performance reviews, and mechanisms for contract modification or termination if necessary to protect the government's interests and ensure continued value.

Industry Classification

NAICS: Other Services (except Public Administration) › Electronic and Precision Equipment Repair and Maintenance › Other Electronic and Precision Equipment Repair and Maintenance

Product/Service Code: TECHNICAL REPRESENTATIVE SVCS. › TECHNICAL REPRESENTATIVE SERVICES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Pricing Type: COST PLUS AWARD FEE (R)

Evaluated Preference: NONE

Contractor Details

Address: 801 IRVING WICK DR W, HEATH, OH, 43056

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: $221,865,839

Exercised Options: $221,865,839

Current Obligation: $114,198,848

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: FA821421D0003

IDV Type: IDC

Timeline