Air Force's $13.6M contract with Boeing for engineering services shows potential for cost overruns
Contract Overview
Contract Amount: $13,603,013 ($13.6M)
Contractor: THE Boeing Company
Awarding Agency: Department of Defense
Start Date: 2017-09-27
End Date: 2022-09-26
Contract Duration: 1,825 days
Daily Burn Rate: $7.5K/day
Competition Type: NOT COMPETED
Number of Offers Received: 1
Pricing Type: COST PLUS FIXED FEE
Sector: Defense
Official Description: IGF::OT::IGF ORIGINAL EQUIPMENT MANUFACTURE
Place of Performance
Location: SAINT LOUIS, SAINT LOUIS County, MISSOURI, 63134
State: Missouri Government Spending
Plain-Language Summary
Department of Defense obligated $13.6 million to THE BOEING COMPANY for work described as: IGF::OT::IGF ORIGINAL EQUIPMENT MANUFACTURE Key points: 1. Contract awarded to a single, large defense contractor, raising questions about competitive pricing. 2. The cost-plus-fixed-fee structure may incentivize higher spending without guaranteed performance. 3. Long contract duration of 5 years suggests a need for ongoing oversight. 4. Limited competition could lead to less favorable terms for the government. 5. Focus on original equipment manufacture (OEM) indicates a specialized, potentially high-cost area. 6. The contract's value is significant within the engineering services sector for defense.
Value Assessment
Rating: questionable
The $13.6 million contract value for engineering services is substantial. However, without specific benchmarks for similar OEM engineering support, it's difficult to definitively assess value. The cost-plus-fixed-fee (CPFF) pricing structure, while common in complex defense procurements, carries inherent risks of cost escalation if not tightly managed. Compared to fixed-price contracts, CPFF offers less certainty on final cost, potentially leading to a higher effective price for the government if contractor efficiencies are not realized or if scope creep occurs.
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 vendors. This approach is typically used when a specific contractor possesses unique capabilities, proprietary technology, or is the sole provider of essential goods or services. The lack of competition means the government did not benefit from a bidding process that could drive down prices through market forces. This raises concerns about whether the government secured the best possible price and terms.
Taxpayer Impact: Sole-source awards limit the government's ability to leverage competition to achieve cost savings. Taxpayers may end up paying a premium when alternative providers are not considered or available.
Public Impact
The primary beneficiary is the Department of the Air Force, receiving specialized engineering services. Services likely support the maintenance, modification, or development of original military equipment. The contract's geographic impact is centered in Missouri, where the contractor is located. Workforce implications include employment for engineers and technical staff at The Boeing Company.
Waste & Efficiency Indicators
Waste Risk Score: 50 / 10
Warning Flags
- Cost-plus-fixed-fee structure offers limited incentive for contractor cost efficiency.
- Sole-source award prevents price discovery through competitive bidding.
- Long contract duration increases exposure to potential cost increases over time.
- Lack of competition may result in less favorable terms and conditions.
Positive Signals
- Award to a major defense contractor like Boeing suggests access to specialized expertise.
- Contracting for OEM services ensures support for specific, potentially critical, equipment.
- The fixed fee component provides some level of cost predictability for contractor profit.
Sector Analysis
This contract falls within the Engineering Services sector, specifically supporting the defense industry's need for Original Equipment Manufacturer (OEM) services. The defense engineering services market is characterized by high barriers to entry, specialized knowledge, and significant government spending. Comparable spending benchmarks are difficult to establish without detailed scope information, but contracts of this nature often involve substantial sums due to the complexity and criticality of military systems.
Small Business Impact
This contract does not appear to involve a small business set-aside, as it was awarded to The Boeing Company, a large aerospace and defense corporation. There is no information provided regarding subcontracting plans for small businesses. The lack of a small business focus in this sole-source award means limited direct benefit to the small business ecosystem for this specific procurement.
Oversight & Accountability
Oversight for this contract would typically fall under the Department of the Air Force's contracting and program management offices. The Inspector General's office may conduct audits or investigations if specific concerns arise regarding performance, cost, or compliance. Transparency is limited due to the sole-source nature and the proprietary aspects often associated with OEM services. Accountability relies heavily on the government's contract administration and performance monitoring.
Related Government Programs
- Defense Engineering Services
- Aerospace Manufacturing Support
- Military Equipment Maintenance
- Original Equipment Manufacturer Services
- Air Force Procurement
Risk Flags
- Sole-source award
- Cost-plus-fixed-fee pricing
- Potential for cost overruns
- Lack of competitive bidding
Tags
defense, department-of-defense, air-force, engineering-services, original-equipment-manufacture, cost-plus-fixed-fee, sole-source, boeing, missouri, definitive-contract, large-contract
Frequently Asked Questions
What is this federal contract paying for?
Department of Defense awarded $13.6 million to THE BOEING COMPANY. IGF::OT::IGF ORIGINAL EQUIPMENT MANUFACTURE
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 $13.6 million.
What is the period of performance?
Start: 2017-09-27. End: 2022-09-26.
What is the specific nature of the engineering services provided under this contract?
The data indicates the contract is for 'Engineering Services' related to 'ORIGINAL EQUIPMENT MANUFACTURE' (OEM). This suggests the services are likely specialized technical support, design, analysis, or modification related to equipment originally manufactured by The Boeing Company. This could encompass areas such as system upgrades, maintenance engineering, technical data package development, or troubleshooting for specific platforms or components. Without further details, the precise scope remains broad but is clearly tied to Boeing's proprietary products and manufacturing expertise.
How does the cost-plus-fixed-fee (CPFF) structure compare to other contract types for similar services?
Cost-plus-fixed-fee (CPFF) contracts are common in defense for research, development, and complex services where the scope is not fully defined at the outset. Unlike fixed-price contracts, CPFF reimburses the contractor for allowable costs plus a predetermined fixed fee representing profit. This structure is advantageous when uncertainty is high, as it allows flexibility. However, it shifts cost risk to the government, as the final price can exceed initial estimates if costs escalate. For services where scope is well-defined, fixed-price contracts generally offer better value and cost control for the government.
What are the potential risks associated with a sole-source award for engineering services?
Sole-source awards carry significant risks, primarily the lack of price competition. Without multiple bids, the government cannot be assured it is receiving the best possible price or terms. This can lead to inflated costs and reduced value for taxpayer money. Furthermore, it can stifle innovation by limiting opportunities for other capable firms to enter the market or demonstrate their capabilities. There's also a risk of vendor lock-in, making it difficult and costly to switch providers in the future, even if performance or pricing becomes unsatisfactory.
What is Boeing's track record with similar sole-source, CPFF contracts with the Department of Defense?
The Boeing Company has a long history of receiving large sole-source and CPFF contracts from the Department of Defense across various platforms and services. While specific data on all such contracts is not provided here, Boeing's status as a major defense prime contractor means it frequently engages in these types of agreements, particularly for sustainment, upgrades, and specialized engineering related to its unique product lines. Historical analysis of Boeing's performance on similar contracts would be necessary to assess its specific track record regarding cost control and delivery within CPFF and sole-source frameworks.
How does the $13.6 million contract value compare to overall Air Force spending on engineering services?
The $13.6 million value of this specific contract is a relatively small fraction of the Department of the Air Force's total annual budget, which runs into the hundreds of billions of dollars. However, within the specific niche of OEM engineering services for original equipment, this amount could represent a significant portion of spending for particular systems or platforms. To provide a meaningful comparison, one would need to analyze the Air Force's historical spending on engineering services, particularly those categorized under NAICS code 541330 (Engineering Services) and specifically related to OEM support, to understand its relative scale and importance.
Industry Classification
NAICS: Professional, Scientific, and Technical Services › Architectural, Engineering, and Related Services › Engineering Services
Product/Service Code: SUPPORT SVCS (PROF, ADMIN, MGMT) › PROFESSIONAL SERVICES
Competition & Pricing
Extent Competed: NOT COMPETED
Solicitation Procedures: ONLY ONE SOURCE
Solicitation ID: FA850517R0007
Offers Received: 1
Pricing Type: COST PLUS FIXED FEE (U)
Evaluated Preference: NONE
Contractor Details
Address: 6200 JS 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: $13,726,747
Exercised Options: $13,726,747
Current Obligation: $13,603,013
Contract Characteristics
Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED
Cost or Pricing Data: YES
Timeline
Start Date: 2017-09-27
Current End Date: 2022-09-26
Potential End Date: 2022-09-26 00:00:00
Last Modified: 2025-11-21
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