Boeing's $404M C-17 Sustainment Labor Contract Awarded Sole Source by DoD
Contract Overview
Contract Amount: $404,052,513 ($404.1M)
Contractor: THE Boeing Company
Awarding Agency: Department of Defense
Start Date: 2017-10-01
End Date: 2018-09-30
Contract Duration: 364 days
Daily Burn Rate: $1.1M/day
Competition Type: NOT COMPETED
Pricing Type: FIXED PRICE INCENTIVE
Sector: Defense
Official Description: IGF::CT:IGF C-17 SUSTAINMENT LABOR
Place of Performance
Location: HUNTINGTON BEACH, ORANGE County, CALIFORNIA, 92647
Plain-Language Summary
Department of Defense obligated $404.1 million to THE BOEING COMPANY for work described as: IGF::CT:IGF C-17 SUSTAINMENT LABOR Key points: 1. Contract awarded on a sole-source basis, raising questions about price discovery and potential for overpayment. 2. Limited competition suggests potential risks related to contractor performance and innovation. 3. Fixed Price Incentive contract type aims to balance cost control with contractor performance incentives. 4. Contract duration of 364 days indicates a focus on immediate sustainment needs. 5. Awarded by the Defense Contract Management Agency, highlighting the critical nature of aircraft sustainment for national security. 6. The contract falls under Aircraft Manufacturing NAICS code 336411, indicating a specialized industrial sector.
Value Assessment
Rating: questionable
Benchmarking the value of this contract is challenging due to its sole-source nature and specific sustainment focus. Without competitive bids, it's difficult to ascertain if the $404 million price represents fair market value. The Fixed Price Incentive (FPI) structure suggests an attempt to control costs, but the absence of competition inherently limits the government's leverage in price negotiations. Further analysis would require comparing the labor rates and scope of work to similar sustainment contracts for other large military aircraft, which are often also sole-sourced.
Cost Per Unit: N/A
Competition Analysis
Competition Level: sole-source
This contract was awarded on a sole-source basis, meaning the Department of Defense did not solicit bids from multiple contractors. This typically occurs when only one contractor possesses the necessary capabilities, proprietary knowledge, or when urgency dictates a direct award. The lack of competition means that price discovery through market forces was bypassed, potentially leading to higher costs for the government compared to a fully competed contract.
Taxpayer Impact: Taxpayers may face higher costs due to the absence of competitive pressure to drive down prices. The government's ability to negotiate favorable terms is diminished in a sole-source scenario.
Public Impact
The primary beneficiaries are the U.S. Air Force, ensuring the continued operational readiness of the C-17 Globemaster III fleet. Services delivered include essential labor for the sustainment and maintenance of C-17 aircraft, crucial for global airlift capabilities. The geographic impact is national, supporting military operations worldwide, though the direct labor may be concentrated near Boeing facilities. Workforce implications include the employment of skilled labor in aircraft maintenance and manufacturing sectors, supporting the aerospace industry.
Waste & Efficiency Indicators
Waste Risk Score: 50 / 10
Warning Flags
- Sole-source award limits competitive pressure, potentially impacting cost-effectiveness.
- Lack of transparency in the bidding process makes independent value assessment difficult.
- Reliance on a single contractor for critical sustainment raises long-term dependency concerns.
Positive Signals
- Fixed Price Incentive contract type includes performance targets, encouraging efficiency.
- Boeing's established expertise in C-17 sustainment suggests a high likelihood of successful performance.
- The contract addresses a critical need for maintaining the operational readiness of a key military asset.
Sector Analysis
The aerospace and defense sector is characterized by high barriers to entry, significant R&D investment, and long product life cycles. Sustainment contracts, like this one for the C-17, are a substantial part of the industry's revenue stream, focusing on maintaining the operational readiness of complex military platforms. The market for military aircraft sustainment is often dominated by the original equipment manufacturers due to specialized knowledge and proprietary data. Comparable spending benchmarks for aircraft sustainment can vary widely based on aircraft type, age, and operational tempo.
Small Business Impact
This contract does not appear to have a small business set-aside component, as indicated by 'ss': false. Furthermore, the prime contractor, The Boeing Company, is a large aerospace firm. While large prime contractors are often required to subcontract a portion of their work to small businesses, the specific subcontracting plan for this contract is not detailed here. The absence of a direct set-aside means that small businesses would likely participate as subcontractors rather than direct awardees.
Oversight & Accountability
Oversight for this contract would typically fall under the Defense Contract Management Agency (DCMA), which is responsible for ensuring contractor performance and compliance with contract terms. Accountability measures are embedded within the Fixed Price Incentive (FPI) contract structure, which links contractor profit to achieving specific performance targets. Transparency is limited due to the sole-source nature of the award; however, contract modifications and performance reports are generally subject to internal government review and potentially Inspector General oversight.
Related Government Programs
- C-17 Globemaster III Sustainment
- Air Mobility Command Operations
- DoD Aircraft Maintenance Contracts
- Fixed Price Incentive Contracts
- Sole Source Defense Procurements
Risk Flags
- Sole-source award
- Lack of competitive bidding
- Potential for cost overruns
- Contractor dependency risk
Tags
defense, department-of-defense, aircraft-manufacturing, sustainment, sole-source, fixed-price-incentive, delivery-order, boeing, c-17, california, large-business
Frequently Asked Questions
What is this federal contract paying for?
Department of Defense awarded $404.1 million to THE BOEING COMPANY. IGF::CT:IGF C-17 SUSTAINMENT LABOR
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 $404.1 million.
What is the period of performance?
Start: 2017-10-01. End: 2018-09-30.
What is the historical spending trend for C-17 sustainment labor by The Boeing Company?
Analyzing historical spending requires access to prior contract awards for C-17 sustainment labor. Without specific data on previous contract values, durations, and the number of awards, it's challenging to establish a precise trend. However, it is common for sustainment contracts for major military platforms like the C-17 to be long-term and involve significant annual expenditures. The $404 million awarded for a 364-day period suggests a substantial annual cost. Trends in such spending are often influenced by operational tempo, fleet size, aircraft age, and evolving maintenance requirements. Fluctuations may occur due to major overhauls, upgrades, or changes in sustainment strategies. A comprehensive trend analysis would involve aggregating data over several fiscal years to identify patterns of increase, decrease, or stability in spending.
How does the Fixed Price Incentive (FPI) contract type typically function in practice for aircraft sustainment?
A Fixed Price Incentive (FPI) contract is designed to share the risks and rewards between the government and the contractor. The contract establishes a target cost, a target profit, and a price ceiling. If the final cost is below the target cost, both the government and contractor share in the savings according to a predetermined formula. Conversely, if the final cost exceeds the target cost but remains below the price ceiling, the contractor's profit is reduced, and the government pays the final cost. If the final cost exceeds the price ceiling, the contractor is responsible for the overrun. For aircraft sustainment, FPI contracts incentivize the contractor to control costs while meeting performance specifications related to aircraft availability, maintenance quality, and turnaround times. The incentive fee is typically tied to achieving specific performance metrics, ensuring that cost savings do not come at the expense of operational readiness or safety.
What are the potential risks associated with a sole-source award for critical defense sustainment services?
Sole-source awards for critical defense sustainment services present several potential risks. Firstly, the absence of competition can lead to higher prices than might be achieved in a competitive bidding process, as the government lacks market leverage. Secondly, it can reduce the incentive for the incumbent contractor to innovate or improve efficiency, as there is no direct threat of losing the contract to a competitor. Thirdly, it can create a dependency on a single supplier, making the government vulnerable to disruptions if the contractor faces financial difficulties, operational issues, or decides to exit the market. Lastly, transparency is often reduced, making it harder for oversight bodies and the public to verify the fairness and reasonableness of the contract's terms and pricing. For critical sustainment, these risks can impact operational readiness and national security.
What is the significance of the NAICS code 336411 (Aircraft Manufacturing) in the context of this contract?
The North American Industry Classification System (NAICS) code 336411, 'Aircraft Manufacturing,' signifies that this contract falls within the industrial sector primarily engaged in the manufacturing of civilian and military aircraft, spacecraft, and related parts. In the context of this C-17 sustainment labor contract, it indicates that the services provided are directly related to the ongoing support, maintenance, and potentially repair or modification of aircraft manufactured within this sector. While the contract is for 'sustainment labor' rather than new manufacturing, the NAICS code suggests that the expertise required is deeply rooted in the original manufacturing processes and design knowledge of the C-17 aircraft. This often means that the original equipment manufacturer (OEM), like Boeing, is the most qualified entity to provide such specialized sustainment services due to their intimate knowledge of the aircraft's systems, materials, and maintenance protocols.
How does the contract duration of 364 days impact the overall strategy for C-17 sustainment?
A contract duration of 364 days, essentially one year, suggests a focus on short-to-medium-term sustainment needs rather than long-term strategic planning or major platform upgrades. This duration is common for operational support contracts where requirements can fluctuate based on immediate operational demands, budget cycles, and evolving maintenance schedules. It allows the Department of Defense flexibility to reassess needs and potentially re-compete or modify the contract annually. For the contractor, it necessitates efficient resource allocation to meet the defined scope within the year. While it ensures continuity of essential services, it may not provide the stability needed for significant investments in process improvements or long-term workforce development by the contractor. Longer-term contracts or indefinite-delivery/indefinite-quantity (IDIQ) vehicles are often used for more comprehensive sustainment strategies.
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
Pricing Type: FIXED PRICE INCENTIVE (L)
Evaluated Preference: NONE
Contractor Details
Address: 14441 ASTRONAUTICS LN, HUNTINGTON BEACH, CA, 92647
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: $512,702,914
Exercised Options: $512,702,914
Current Obligation: $404,052,513
Contract Characteristics
Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED
Cost or Pricing Data: YES
Parent Contract
Parent Award PIID: FA852612D0001
IDV Type: IDC
Timeline
Start Date: 2017-10-01
Current End Date: 2018-09-30
Potential End Date: 2018-09-30 00:00:00
Last Modified: 2023-09-19
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