Boeing awarded $287M for C-17 sustainment, a sole-source contract for aircraft manufacturing

Contract Overview

Contract Amount: $287,383,849 ($287.4M)

Contractor: THE Boeing Company

Awarding Agency: Department of Defense

Start Date: 2020-10-01

End Date: 2023-09-30

Contract Duration: 1,094 days

Daily Burn Rate: $262.7K/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 $287.4 million to THE BOEING COMPANY for work described as: C-17 SUSTAINMENT Key points: 1. Contract awarded to a single supplier, raising questions about price competitiveness. 2. Long-term sustainment contract indicates critical need for C-17 fleet support. 3. Cost-plus contract type may incentivize higher spending without strict cost controls. 4. Performance period spans nearly three years, suggesting ongoing operational requirements. 5. Focus on aircraft manufacturing highlights the complexity of maintaining specialized military assets. 6. Lack of competition limits opportunities for other qualified aerospace firms.

Value Assessment

Rating: fair

The contract's value of $287 million for C-17 sustainment over three years requires careful benchmarking. As a sole-source award, direct comparisons to similar competitively bid contracts are difficult. The cost-plus incentive fee structure means actual costs could exceed initial estimates, and the government's ability to secure the best value is contingent on effective negotiation and oversight of contractor performance and costs. Without competitive pressure, there's a risk of inflated pricing.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one bidder, The Boeing Company, was solicited. This approach is typically used when only one responsible source is available or when there is a compelling justification for excluding competition. The lack of multiple bidders means that price discovery through market forces was not utilized, potentially leading to higher costs than if the contract had been competed.

Taxpayer Impact: Taxpayers may be paying a premium due to the absence of competitive bidding. The government's negotiating position is weakened without alternative offers to consider.

Public Impact

The U.S. Air Force benefits from the continued operational readiness of its C-17 Globemaster III fleet. Services include maintenance, repair, and logistics support essential for aircraft airworthiness. The contract supports jobs within the aerospace manufacturing and maintenance sectors. Geographic impact is primarily centered around Boeing's facilities and Air Force bases utilizing C-17s.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing and potentially increases costs for taxpayers.
Cost-plus contract type can lead to cost overruns if not managed rigorously.
Lack of transparency in pricing due to non-competitive nature.
Long-term sustainment contracts can become entrenched, making future competition difficult.
Reliance on a single contractor for critical sustainment raises supply chain and single-point-of-failure risks.

Positive Signals

Ensures continued operational capability of a vital strategic airlift asset.
Boeing possesses unique expertise and historical knowledge for C-17 sustainment.
Contract provides stability for critical maintenance and support functions.
Potential for performance incentives to drive efficiency within the sole-source framework.

Sector Analysis

The aerospace and defense sector is characterized by high barriers to entry, complex supply chains, and significant government investment. Sustainment contracts like this are crucial for maintaining the operational readiness of aging military fleets. The C-17 program represents a substantial segment of military airlift capability, and its ongoing support is a significant expenditure within the defense budget. Benchmarking this contract's value is challenging without competitive data, but it aligns with the high costs associated with specialized, long-term aircraft support.

Small Business Impact

This contract does not appear to include specific small business set-aside provisions. As a sole-source award to a large prime contractor, the primary impact on small businesses would be through potential subcontracting opportunities. The extent to which Boeing engages small businesses for parts, services, or specialized support in fulfilling this contract will determine the downstream effect on the small business ecosystem.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Defense's contract management agencies, such as the Defense Contract Management Agency (DCMA). Accountability measures are embedded within the cost-plus incentive fee structure, which links contractor profit to performance metrics and cost control. Transparency is limited due to the sole-source nature, but contract modifications, performance reports, and financial audits would be subject to internal government review and potentially Inspector General oversight.

Related Government Programs

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

Risk Flags

Sole-source award limits price competition.
Cost-plus contract type carries risk of cost overruns.
Potential for supply chain disruptions impacting sustainment.
Long-term reliance on a single contractor.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $287.4 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 $287.4 million.

What is the period of performance?

Start: 2020-10-01. End: 2023-09-30.

What is Boeing's historical performance record with similar sole-source sustainment contracts for major defense platforms?

Boeing has a long history of providing sustainment services for major defense platforms, often leveraging its original equipment manufacturer status. For sole-source contracts, performance is typically evaluated based on meeting delivery schedules, technical specifications, and cost targets, where applicable. Historical data suggests that while Boeing generally performs well in delivering required services, cost control in cost-plus contracts can be a recurring area of scrutiny. Specific performance metrics and any past issues related to C-17 sustainment or comparable sole-source agreements would require detailed review of contract performance reports and any associated corrective actions or disputes.

How does the pricing structure (Cost Plus Incentive Fee) compare to other C-17 sustainment approaches, and what are the inherent risks?

The Cost Plus Incentive Fee (CPIF) structure aims to incentivize the contractor to control costs by sharing savings or cost overruns with the government based on pre-defined targets. Compared to fixed-price contracts, CPIF offers more flexibility for complex, uncertain work like sustainment, but it carries inherent risks. The primary risk is that the 'cost' component can escalate significantly if not managed effectively, potentially exceeding initial estimates. The 'incentive' portion requires careful negotiation of targets and sharing formulas to ensure they genuinely motivate cost reduction without compromising quality or safety. Without robust government oversight and clear performance metrics, CPIF can lead to higher overall expenditures than a well-defined fixed-price contract.

What are the key performance indicators (KPIs) used to measure the success of this C-17 sustainment contract, and how are they monitored?

Key performance indicators for C-17 sustainment contracts typically revolve around aircraft availability rates, mission capable rates, turnaround times for repairs, and adherence to maintenance schedules. Other KPIs might include logistics support responsiveness, spare parts availability, and compliance with technical orders. These KPIs are usually monitored through regular reporting by the contractor, joint reviews with government representatives (e.g., DCMA), and data analysis from operational units. The CPIF structure would tie financial incentives or penalties to the achievement of specific, measurable KPIs, ensuring that performance directly impacts the contractor's profitability.

What is the projected total cost of ownership for the C-17 fleet over its remaining service life, and how does this contract fit into that projection?

The total cost of ownership (TCO) for the C-17 fleet over its remaining service life is a complex projection influenced by numerous factors, including operational tempo, planned upgrades, fuel costs, and sustainment spending. This $287 million contract represents a significant portion of the sustainment budget for a defined period (FY2020-2023). However, it is just one component of the overall TCO. Future sustainment needs, potential fleet size adjustments, and evolving maintenance technologies will shape the long-term financial picture. Accurate TCO projections require continuous analysis of current spending, anticipated future requirements, and potential cost-saving initiatives.

Are there any known risks associated with Boeing's supply chain for C-17 sustainment parts and services that could impact contract performance?

As with any complex aerospace platform, risks associated with Boeing's supply chain for C-17 sustainment are a potential concern. These can include the availability of specialized components, lead times for manufactured parts, the financial health of lower-tier suppliers, and geopolitical factors affecting raw material sourcing. Boeing's role as the OEM provides some advantage in managing this, but disruptions can still occur. Contract performance clauses and robust inventory management strategies are crucial for mitigating these risks. The government's oversight would include monitoring Boeing's supply chain risk management practices and ensuring contingency plans are in place.

What is the historical spending trend for C-17 sustainment, and how does this $287M award compare to previous years or similar contracts?

Historical spending on C-17 sustainment has been substantial, reflecting the aircraft's critical role and operational demands. Annual spending can fluctuate based on specific maintenance needs, fleet size, and contract structures. While this $287 million award covers a three-year period (FY2020-2023), it's essential to compare it against average annual sustainment costs for the C-17 fleet in prior years. Without access to detailed historical obligated amounts and contract types, a precise comparison is difficult. However, given the platform's age and ongoing operational tempo, sustainment costs are expected to remain significant, and this award appears consistent with the scale of such long-term support requirements.

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: $296,498,345

Exercised Options: $296,498,345

Current Obligation: $287,383,849

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