Boeing awarded $255M for C-17 sustainment, raising questions about competition and value

Contract Overview

Contract Amount: $255,185,131 ($255.2M)

Contractor: THE Boeing Company

Awarding Agency: Department of Defense

Start Date: 2018-10-04

End Date: 2020-02-19

Contract Duration: 503 days

Daily Burn Rate: $507.3K/day

Competition Type: NOT COMPETED

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Official Description: C-17 SUSTAINMENT

Place of Performance

Location: HUNTINGTON BEACH, ORANGE County, CALIFORNIA, 92647

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $255.2 million to THE BOEING COMPANY for work described as: C-17 SUSTAINMENT Key points: 1. Contract awarded on a sole-source basis, limiting price discovery and potentially increasing costs. 2. Cost-plus incentive fee structure may incentivize higher spending if not carefully managed. 3. Limited competition raises concerns about whether the government secured the best possible value. 4. The contract duration of 503 days is relatively short for a major sustainment effort. 5. Boeing's established role as the sole manufacturer of the C-17 likely contributed to the sole-source award. 6. Performance metrics and oversight will be critical to ensuring effective use of funds.

Value Assessment

Rating: fair

Benchmarking the value of this sole-source contract is challenging due to the lack of competitive bids. The cost-plus incentive fee (CPIF) pricing structure means that actual costs could exceed initial estimates, and the government's ability to negotiate favorable terms is limited. While CPIF can incentivize efficiency, it also carries inherent risks of cost overruns if not rigorously monitored. The contract's value is difficult to assess without comparable sustainment contracts for similar large aircraft.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning that only one bidder, The Boeing Company, was solicited. This approach is typically used when a unique product or service is required, or when only one responsible source is available. The lack of competition means that the government did not benefit from the price reductions and innovation that typically arise from a competitive bidding process. This can lead to higher prices and reduced value for taxpayer dollars.

Taxpayer Impact: Sole-source awards limit the government's leverage in price negotiations, potentially resulting in higher expenditures for taxpayers. Without competitive pressure, there is less incentive for the contractor to offer the most cost-effective solution.

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 maintenance, repair, and logistics support essential for the C-17's global airlift capabilities. The geographic impact is nationwide, supporting Air Mobility Command operations across various bases. Workforce implications include sustaining highly skilled aerospace technicians and engineers at Boeing facilities.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure, potentially leading to higher costs.
Cost-plus incentive fee structure requires robust oversight to prevent cost overruns.
Lack of transparency in pricing due to sole-source nature.
Dependence on a single contractor for critical sustainment services.
Potential for scope creep if requirements are not clearly defined and managed.

Positive Signals

Ensures continued operational capability of a critical strategic asset (C-17).
Boeing possesses unique expertise and historical knowledge for C-17 sustainment.
Incentive fee structure aims to align contractor performance with government objectives.
Contract provides necessary resources for maintaining fleet readiness.

Sector Analysis

The aerospace and defense sector is characterized by high barriers to entry, significant R&D investment, and long product lifecycles. Sustainment contracts like this are crucial for maintaining the operational readiness of complex military platforms. The C-17 Globemaster III is a strategic airlift aircraft, and its continued support is vital for national security. Spending on aircraft sustainment typically represents a significant portion of defense budgets, with major aerospace manufacturers dominating the market.

Small Business Impact

This contract does not appear to include specific small business set-asides. As a sole-source award to a large prime contractor, the opportunities for small businesses would likely be through subcontracting. The extent to which Boeing engages small businesses as subcontractors for C-17 sustainment is not detailed in the provided data, but it is a critical factor in assessing the broader economic impact and compliance with federal small business utilization goals.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contract management agencies, such as the Defense Contract Management Agency (DCMA). The cost-plus incentive fee structure necessitates close monitoring of costs, performance, and adherence to contract terms. Transparency is limited due to the sole-source nature, but reporting requirements within the contract should provide some level of accountability. Inspector General investigations could be initiated if performance or cost issues arise.

Related Government Programs

C-17 Globemaster III Operations and Support
Air Mobility Command Sustainment Programs
Defense Logistics Agency Aviation Support
Aircraft Component Manufacturing and Repair

Risk Flags

Sole-source award
Cost-plus contract type
Lack of competitive bidding
Potential for cost overruns

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $255.2 million to THE BOEING COMPANY. C-17 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 $255.2 million.

What is the period of performance?

Start: 2018-10-04. End: 2020-02-19.

What is Boeing's track record with C-17 sustainment contracts?

Boeing has been the sole manufacturer and primary sustainment provider for the C-17 Globemaster III since its inception. Their track record involves extensive experience with the aircraft's systems, maintenance requirements, and operational demands. Historically, Boeing has been responsible for ensuring the fleet's readiness, managing complex supply chains, and implementing engineering changes. While specific performance metrics for past contracts are not detailed here, their long-standing relationship suggests a deep understanding of the platform. However, the sole-source nature of awards means that direct comparisons of their performance against competitors in a competitive bidding environment are not available.

How does the cost-plus incentive fee (CPIF) structure compare to other contract types for sustainment?

Cost-plus incentive fee (CPIF) contracts are used when the government wants to encourage contractor efficiency and cost control while accepting some risk. In a CPIF contract, the final profit is adjusted based on whether the final costs are below or above a target cost, with a pre-defined sharing formula. This differs from fixed-price contracts, where the contractor bears more risk for cost overruns but also retains more profit if costs are lower. For sustainment, CPIF can be beneficial if the government has clear performance metrics and cost targets, as it incentivizes the contractor to meet or exceed these. However, it requires robust government oversight to ensure costs are reasonable and that the incentive structure is effective, unlike firm-fixed-price contracts which offer greater cost certainty.

What are the risks associated with a sole-source award for aircraft sustainment?

The primary risk of a sole-source award for aircraft sustainment is the potential for inflated costs due to the absence of competitive bidding. Without competing offers, the government may not achieve the best possible pricing or value. This can also reduce the incentive for the sole contractor to innovate or improve efficiency beyond what is contractually required. Furthermore, it creates a dependency on a single provider, which can be problematic if that provider faces financial difficulties, operational issues, or decides to exit the market. Ensuring fair pricing and adequate performance requires exceptionally strong negotiation and oversight from the government.

What is the typical duration for C-17 sustainment contracts?

The duration for sustainment contracts, particularly for major platforms like the C-17, can vary significantly. Contracts can range from shorter-term, focused efforts (like this 503-day delivery order) to longer-term, comprehensive support agreements that may span several years, often with options for extension. Longer-term contracts often provide greater stability for both the government and the contractor, allowing for more integrated planning and potentially better economies of scale. However, shorter durations can offer more frequent opportunities for re-evaluation or re-competition, though this is less likely with sole-source awards. The 503-day duration here suggests a specific, time-bound need rather than a comprehensive, long-term sustainment strategy.

How does the PSC code '336411' relate to this contract?

The Product and Service Code (PSC) '336411' corresponds to 'Aircraft Manufacturing'. This code indicates that the primary nature of the contract involves the manufacturing of aircraft. While this contract is for 'C-17 SUSTAINMENT', the underlying manufacturing code suggests that the services provided may include aspects related to the production line, spare parts manufacturing, or modifications that fall under the broader manufacturing category. It's important to note that sustainment often involves a blend of services, and the PSC code reflects the dominant or initial classification of the work involved.

Industry Classification

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

Product/Service Code: MAINT, REPAIR, REBUILD EQUIPMENT › MAINT, REPAIR, REBUILD OF EQUIPMENT

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Pricing Type: COST PLUS INCENTIVE FEE (V)

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: $278,340,991

Exercised Options: $278,340,991

Current Obligation: $255,185,131

Actual Outlays: $1,723,888

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