Boeing's $322M engine sustainment contract awarded to sole source, raising value-for-money questions
Contract Overview
Contract Amount: $322,220,568 ($322.2M)
Contractor: THE Boeing Company
Awarding Agency: Department of Defense
Start Date: 2017-03-30
End Date: 2018-09-30
Contract Duration: 549 days
Daily Burn Rate: $586.9K/day
Competition Type: NOT COMPETED
Number of Offers Received: 1
Pricing Type: FIRM FIXED PRICE
Sector: Defense
Official Description: IGF::OT::IGF F117 ENGINE SUSTAINMENT
Place of Performance
Location: HUNTINGTON BEACH, ORANGE County, CALIFORNIA, 92647
Plain-Language Summary
Department of Defense obligated $322.2 million to THE BOEING COMPANY for work described as: IGF::OT::IGF F117 ENGINE SUSTAINMENT Key points: 1. The contract's sole-source nature limits competitive pressure, potentially impacting cost-effectiveness. 2. A high dollar value for sustainment services warrants close scrutiny of pricing and performance. 3. The fixed-price contract type shifts some risk to the contractor, but oversight is crucial. 4. Limited competition may indicate unique contractor capabilities or market concentration. 5. Performance duration of over 500 days requires monitoring to ensure timely delivery and quality. 6. The absence of small business set-asides warrants examination of subcontracting opportunities.
Value Assessment
Rating: questionable
The $322 million contract value for engine sustainment is substantial. Without competitive bidding, it is difficult to benchmark the pricing against market rates or similar contracts. The fixed-price nature provides some cost control, but the lack of competition raises concerns about whether the government is receiving optimal value. Further analysis of the specific services rendered and their necessity would be required to fully assess value for money.
Cost Per Unit: N/A
Competition Analysis
Competition Level: sole-source
This contract was awarded on a sole-source basis, meaning only one vendor, The Boeing Company, was solicited. This approach is typically used when only one responsible source is available or when a compelling justification exists for not seeking competition. The lack of multiple bidders means there was no price discovery through a competitive process, potentially leading to higher costs for the government.
Taxpayer Impact: Sole-source awards limit the government's ability to leverage competition to drive down prices, meaning taxpayers may be paying a premium for these sustainment services.
Public Impact
The primary beneficiary is the Department of Defense, ensuring the operational readiness of its aircraft fleet. Services include sustainment for F117 engines, critical for maintaining airpower capabilities. The contract's geographic impact is likely tied to military bases where these aircraft are deployed. Workforce implications include specialized technical roles for engine maintenance and support.
Waste & Efficiency Indicators
Waste Risk Score: 50 / 10
Warning Flags
- Sole-source award limits price competition and potential cost savings.
- Lack of small business participation may reduce opportunities for smaller firms in the supply chain.
- High contract value necessitates robust oversight to ensure performance and prevent cost overruns.
Positive Signals
- Fixed-price contract shifts some financial risk to the contractor.
- Boeing's established role suggests potential for specialized expertise in engine sustainment.
- Contract duration indicates a long-term need for these critical services.
Sector Analysis
The aerospace and defense sector is characterized by high barriers to entry, complex supply chains, and significant government investment. Engine sustainment is a critical component of maintaining fleet readiness, often involving specialized technical knowledge and proprietary data. This contract fits within the broader category of aerospace manufacturing support services, where long-term relationships and specialized capabilities are common. Comparable spending benchmarks are difficult to establish without detailed service breakdowns and competitive data.
Small Business Impact
This contract was not competed with small business set-asides, nor does it indicate any specific subcontracting goals for small businesses. The sole-source nature further limits the ability to integrate small businesses into the primary contract. This suggests that opportunities for small businesses in this specific procurement are likely indirect, through potential subcontracts awarded by Boeing, rather than direct participation in the primary contract.
Oversight & Accountability
Oversight for this contract would typically fall under the purview of the Defense Contract Management Agency (DCMA), which is responsible for ensuring contractor performance and compliance. The fixed-price nature of the contract provides a degree of accountability, as the contractor is incentivized to complete the work within the agreed-upon price. Transparency regarding the specific services and performance metrics would be crucial for effective oversight, though details may be limited due to the sole-source nature.
Related Government Programs
- Aircraft Engine Maintenance
- Defense Logistics Support
- Aerospace Sustainment Services
- Military Aircraft Parts and Components
Risk Flags
- Sole-source award
- Lack of competition
- High contract value
- Potential for cost overruns
- Limited small business participation
Tags
defense, department-of-defense, aircraft-manufacturing, not-competed, delivery-order, firm-fixed-price, california, large-business, engine-sustainment, aerospace
Frequently Asked Questions
What is this federal contract paying for?
Department of Defense awarded $322.2 million to THE BOEING COMPANY. IGF::OT::IGF F117 ENGINE SUSTAINMENT
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 $322.2 million.
What is the period of performance?
Start: 2017-03-30. End: 2018-09-30.
What is Boeing's track record with similar sole-source sustainment contracts for military engines?
Assessing Boeing's track record with similar sole-source sustainment contracts requires a review of historical contract awards and performance evaluations. Generally, large defense contractors like Boeing have extensive experience in sustainment services. However, sole-source awards, by definition, lack direct competitive performance data. Therefore, an analysis would focus on their historical performance on other fixed-price contracts, on-time delivery rates, quality metrics, and any past issues related to cost overruns or performance deficiencies on comparable sustainment programs. It's also important to consider if there have been any protests or disputes related to their sole-source awards in the past. Without specific data on this contract's performance, a general assessment relies on their broader company performance metrics within the defense sustainment sector.
How does the pricing of this contract compare to industry benchmarks for engine sustainment, given its sole-source nature?
Directly comparing the pricing of this sole-source contract to industry benchmarks is challenging due to the absence of competitive bidding. Sole-source awards often do not reflect the most competitive market rates. To assess value, one would typically look at historical pricing for similar services provided by Boeing or other contractors on competitively awarded contracts, or analyze the cost breakdown provided by Boeing to ensure reasonableness. Factors such as the specific engine model, age, utilization rates, and the scope of sustainment services (e.g., scheduled maintenance, unscheduled repairs, parts replacement) significantly influence costs. Without access to detailed cost data and a competitive baseline, a definitive price comparison is difficult, but the sole-source designation inherently suggests a potential for higher costs than if competition were present.
What are the primary risks associated with a sole-source award of this magnitude for engine sustainment?
The primary risks associated with a sole-source award of this magnitude ($322 million) for engine sustainment include potential for inflated pricing due to lack of competition, reduced incentive for contractor efficiency, and a higher likelihood of scope creep if not managed tightly. There's also a risk that the government may not be leveraging the most innovative or cost-effective solutions available in the market. Furthermore, if Boeing's performance falters, the government has limited immediate alternatives for sourcing these critical sustainment services, potentially leading to operational disruptions. Robust contract management, clear performance metrics, and strong oversight are essential to mitigate these risks.
How effective are fixed-price contracts in ensuring performance and value for sustainment services like this?
Fixed-price contracts, like the one awarded here, are generally effective in controlling costs and ensuring performance when the scope of work is well-defined and risks are understood. The contractor assumes the primary financial risk, incentivizing them to manage costs efficiently and deliver the specified services within the agreed budget. For sustainment services, this can be effective for routine maintenance and predictable repairs. However, the effectiveness can be diminished if unforeseen issues arise (e.g., unexpected component failures, complex repairs) that were not adequately accounted for in the initial pricing, potentially leading to change orders or disputes. Clear performance standards and quality assurance clauses are crucial to ensure that cost savings do not come at the expense of service quality or operational readiness.
What is the historical spending trend for F117 engine sustainment or similar services within the Department of Defense?
Analyzing historical spending trends for F117 engine sustainment or similar services within the Department of Defense requires access to comprehensive budget and contract data over multiple fiscal years. Typically, sustainment costs for complex military assets like aircraft engines represent a significant portion of their total lifecycle cost. Spending in this area can fluctuate based on factors such as fleet size, operational tempo, aging of the equipment, and the introduction of new technologies or maintenance strategies. Without specific historical data for F117 sustainment, one can infer that spending in this category is likely substantial and consistent, reflecting the ongoing need to maintain readiness for critical air assets. Trends might show increases due to aging fleets requiring more intensive maintenance or decreases due to efficiency improvements or fleet modernization.
Industry Classification
NAICS: Manufacturing › Aerospace Product and Parts Manufacturing › Aircraft Manufacturing
Product/Service Code: SUPPORT SVCS (PROF, ADMIN, MGMT) › PROFESSIONAL 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
Address: 5301 BOLSA AVE, HUNTINGTON BEACH, CA, 92647
Business Categories: Category Business, Corporate Entity Not Tax Exempt, Not Designated a Small Business, Special Designations, U.S.-Owned Business
Financial Breakdown
Contract Ceiling: $322,220,568
Exercised Options: $322,220,568
Current Obligation: $322,220,568
Contract Characteristics
Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED
Cost or Pricing Data: YES
Parent Contract
Parent Award PIID: FA852612D0001
IDV Type: IDC
Timeline
Start Date: 2017-03-30
Current End Date: 2018-09-30
Potential End Date: 2018-09-30 00:00:00
Last Modified: 2023-06-01
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