Rolls-Royce awarded $82.4M contract for aircraft engine parts, raising value-for-money questions

Contract Overview

Contract Amount: $82,412,605 ($82.4M)

Contractor: Rolls-Royce Corporation

Awarding Agency: Department of Defense

Start Date: 2006-02-01

End Date: 2009-03-31

Contract Duration: 1,154 days

Daily Burn Rate: $71.4K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: 200606!000050!5700!FA8504!WR-ALC/LBK !FA850406C0004 !A!N! !Y! ! !20060201!20070131!804754141!210908687!734340057!N!ROLLS-ROYCE CORPORATION !2001 S TIBBS AVE !INDIANAPOLIS !IN!46241!36000!097!18!INDIANAPOLIS !MARION !INDIANA !+000018914744!N!N!000000000000!R799!OTHER MANAGEMENT SUPPORT SERVICES !A1A!AIRFRAMES AND SPARES !220 !C130-J !336412!E! !1! ! ! ! ! !99990909!B!E!N!A! !D!U!J!1!001!N!1A!Z!N!Z! ! !Y!C!N! ! ! !A!A!A!A!000!A!D!Y! ! ! ! ! ! !0001! !

Place of Performance

Location: INDIANAPOLIS, MARION County, INDIANA, 46241

State: Indiana Government Spending

Plain-Language Summary

Department of Defense obligated $82.4 million to ROLLS-ROYCE CORPORATION for work described as: 200606!000050!5700!FA8504!WR-ALC/LBK !FA850406C0004 !A!N! !Y! ! !20060201!20070131!804754141!210908687!734340057!N!ROLLS-ROYCE CORPORATION !2001 S TIBBS AVE !INDIANAPOLIS !IN!46241!36000!097!18!INDIANAPOLIS !MARI… Key points: 1. Contract awarded on a sole-source basis, limiting price competition and potentially increasing costs. 2. Duration of over three years suggests a long-term need for these critical aircraft components. 3. The contract's value is substantial, indicating significant reliance on the contractor for essential parts. 4. Fixed-price contract type shifts risk to the contractor, but the lack of competition is a concern. 5. The specific parts procured are for C-130J aircraft, highlighting a focus on tactical airlift capabilities. 6. Contractor's location in Indiana suggests potential regional economic impact and workforce implications.

Value Assessment

Rating: questionable

The contract's value of over $82 million for aircraft engine parts warrants scrutiny, especially given the sole-source award. Without competitive bidding, it is difficult to benchmark the pricing against market rates or similar contracts. The fixed-price nature provides some cost certainty, but the absence of competition raises concerns about whether the government achieved the best possible value. Further analysis would be needed to compare unit costs to industry benchmarks for similar engine components.

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, Rolls-Royce Corporation, was solicited. This approach is typically used when only one source is capable of meeting the government's needs, often due to proprietary technology or unique capabilities. The lack of competition means that price discovery through market forces was bypassed, potentially leading to higher costs for the government compared to a competed contract.

Taxpayer Impact: Taxpayers may have paid a premium for these aircraft engine parts due to the absence of competitive bidding. The government did not benefit from the potential cost savings that typically arise from multiple vendors vying for a contract.

Public Impact

The primary beneficiaries are the U.S. Air Force units operating C-130J Super Hercules aircraft, ensuring the continued airworthiness of these tactical airlift platforms. The contract delivers essential aircraft engine parts, crucial for maintaining the operational readiness and availability of the C-130J fleet. The geographic impact is primarily centered around the contractor's facility in Indianapolis, Indiana, supporting local employment and the regional aerospace supply chain. Workforce implications include the potential for sustained employment at Rolls-Royce's Indianapolis facility and its associated suppliers.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure, potentially leading to higher prices.
Lack of transparency in pricing due to no competitive bidding process.
Potential for cost overruns if market prices for components fluctuate significantly.
Reliance on a single supplier for critical aircraft engine parts could pose supply chain risks.

Positive Signals

Fixed-price contract shifts cost risk to the contractor.
Contractor is a well-established entity with a known track record in aerospace.
Ensures availability of critical parts for a key military aircraft platform.
Contract duration provides stability for planning and sustainment.

Sector Analysis

This contract falls within the broader aerospace and defense sector, specifically focusing on aircraft engine manufacturing and parts supply. The market for such specialized components is often characterized by high barriers to entry due to technological expertise, stringent quality control, and regulatory requirements. Rolls-Royce is a major global player in this industry. Spending benchmarks for similar engine component contracts can vary widely based on the specific part, aircraft type, and volume, but contracts in the tens of millions are common for sustainment of major platforms like the C-130J.

Small Business Impact

This contract does not appear to involve a small business set-aside. As a sole-source award to a large corporation, there are no direct subcontracting opportunities mandated for small businesses within this specific contract. The impact on the small business ecosystem is therefore indirect, relying on Rolls-Royce's own supply chain practices.

Oversight & Accountability

Oversight for this contract would typically be managed by the contracting agency (Department of Defense, likely through the Air Force) and potentially the Defense Contract Management Agency (DCMA). Accountability measures are embedded in the contract terms, including delivery schedules and quality specifications. Transparency is limited due to the sole-source nature, but contract award data is publicly available. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

C-130J Super Hercules Sustainment Programs
Tactical Airlift Aircraft Maintenance Contracts
Aerospace Component Procurement
Defense Logistics Agency (DLA) Parts Contracts

Risk Flags

Sole-source award
Lack of competition
Potential for inflated pricing
Supply chain dependency on a single vendor

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $82.4 million to ROLLS-ROYCE CORPORATION. 200606!000050!5700!FA8504!WR-ALC/LBK !FA850406C0004 !A!N! !Y! ! !20060201!20070131!804754141!210908687!734340057!N!ROLLS-ROYCE CORPORATION !2001 S TIBBS AVE !INDIANAPOLIS !IN!46241!36000!097!18!INDIANAPOLIS !MARION !INDIANA !+000018914744!N!N!000000000000!R799!OTHER MANAGEMENT SUPPORT SERVICES !A1A!AIRFRAMES AND SPARES !220 !C130-J !336412!E! !1! ! ! ! ! !999

Who is the contractor on this award?

The obligated recipient is ROLLS-ROYCE CORPORATION.

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Contract Management Agency).

What is the total obligated amount?

The obligated amount is $82.4 million.

What is the period of performance?

Start: 2006-02-01. End: 2009-03-31.

What is Rolls-Royce Corporation's track record with the Department of Defense, particularly concerning sole-source contracts for aircraft engine parts?

Rolls-Royce Corporation has a long-standing relationship with the Department of Defense, supplying engines and parts for various military aircraft. Their track record includes numerous contracts, both competed and sole-source, for platforms like the C-130J, V-22 Osprey, and others. While they are a reputable supplier, sole-source awards, like this one, often draw scrutiny regarding pricing and justification. Historical data indicates that sole-source awards can sometimes result in higher costs compared to competitive procurements, but they are often deemed necessary for specialized components or when only one qualified supplier exists. The specific justification for this sole-source award would likely relate to proprietary engine technology or unique manufacturing capabilities essential for the C-130J's AE 2100D3 engines.

How does the $82.4 million contract value compare to historical spending on C-130J engine parts from this contractor?

Comparing the $82.4 million contract value requires examining historical spending patterns for C-130J engine parts procured from Rolls-Royce Corporation. This specific contract, awarded in 2006 with an estimated value of $82,412,604.74 and a duration of approximately 3 years (Feb 2006 - Jan 2007 for initial period, with potential extensions), represents a significant but not necessarily anomalous expenditure. Rolls-Royce has been the sole provider of AE 2100D3 turboprop engines for the C-130J since its inception. Therefore, sustainment contracts for parts are expected. To provide a precise comparison, one would need to aggregate spending across multiple contracts over the C-130J's operational life, factoring in inflation and changes in operational tempo. However, this $82M figure suggests a substantial annual spend for engine sustainment during the contract period.

What are the primary risks associated with this sole-source contract for aircraft engine parts?

The primary risks associated with this sole-source contract revolve around cost and supply chain dependency. Firstly, the lack of competition means the government cannot be assured it is receiving the best possible price; Rolls-Royce could potentially charge a premium. Secondly, the reliance on a single supplier for critical engine components creates a vulnerability. Any disruption in Rolls-Royce's production, supply chain issues, or unforeseen price increases could directly impact the operational readiness of the C-130J fleet. Furthermore, without competitive pressure, there might be less incentive for the contractor to innovate or offer cost-saving efficiencies. The fixed-price nature mitigates some cost risk for the government if costs escalate, but the initial price could still be inflated.

How effective is the C-130J aircraft program, and how critical are these engine parts to its overall mission success?

The C-130J Super Hercules is a highly effective and critical platform for tactical airlift missions, including troop transport, cargo delivery, humanitarian aid, and special operations. Its versatility, reliability, and ability to operate from austere airfields make it indispensable to the U.S. Air Force and allied nations. The AE 2100D3 turboprop engines, manufactured by Rolls-Royce, are the heart of the C-130J's performance. Therefore, the availability of high-quality, reliable engine parts procured under this contract is absolutely critical to the aircraft's overall mission success. Any degradation in engine performance or availability due to subpar parts or supply shortages would directly compromise the C-130J's ability to execute its diverse and vital missions, impacting readiness and operational capability.

What is the typical procurement process for aircraft engine parts for major military platforms like the C-130J, and why might a sole-source approach be chosen?

The typical procurement process for aircraft engine parts can range from full and open competition to sole-source awards. For common or standardized parts, competitive bidding is often preferred to ensure best value. However, for highly specialized components, proprietary parts, or items where only one manufacturer possesses the necessary technical data, manufacturing capability, or intellectual property rights, a sole-source justification is often required. In the case of the C-130J's AE 2100D3 engines, Rolls-Royce holds the design and manufacturing rights. A sole-source award might be chosen because only Rolls-Royce can produce these specific, critical engine components to the required specifications and quality standards, ensuring airworthiness and performance. This avoids the need for extensive and costly government efforts to re-engineer or find alternative suppliers, which may not even exist.

Industry Classification

NAICS: Manufacturing › Aerospace Product and Parts Manufacturing › Aircraft Engine and Engine Parts Manufacturing

Product/Service Code: SUPPORT SVCS (PROF, ADMIN, MGMT) › MANAGEMENT SUPPORT SERVICES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Rolls-Royce Holdings PLC (UEI: 217127290)

Address: 2001 S TIBBS AVE, INDIANAPOLIS, IN, 07

Business Categories: Category Business, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Contract Characteristics

Cost or Pricing Data: NO

Timeline