Boeing awarded $1.16B for C-17 virtual fleet material, a sole-source contract for aircraft manufacturing

Contract Overview

Contract Amount: $1,159,306,467 ($1.2B)

Contractor: THE Boeing Company

Awarding Agency: Department of Defense

Start Date: 2023-10-01

End Date: 2025-03-31

Contract Duration: 547 days

Daily Burn Rate: $2.1M/day

Competition Type: NOT COMPETED

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Official Description: FY24 C-17 VIRTUAL FLEET MATERIAL REQUIREMENTS

Place of Performance

Location: LONG BEACH, LOS ANGELES County, CALIFORNIA, 90808

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $1.16 billion to THE BOEING COMPANY for work described as: FY24 C-17 VIRTUAL FLEET MATERIAL REQUIREMENTS Key points: 1. Contract awarded to a single supplier, raising questions about price competitiveness. 2. Long-term contract duration suggests a critical, ongoing need for C-17 sustainment. 3. Cost-plus contract type may incentivize higher spending without strict cost controls. 4. Focus on virtual fleet material indicates a shift towards modern sustainment strategies. 5. Significant award value highlights the substantial investment in maintaining strategic airlift capabilities.

Value Assessment

Rating: questionable

The contract's value of $1.16 billion over 547 days is substantial, but without competitive bidding, it's difficult to benchmark its value for money. The cost-plus incentive fee structure, while common for complex procurements, can lead to costs exceeding initial estimates if not managed rigorously. Comparing this to similar sole-source sustainment contracts for other major aircraft platforms would be necessary to assess if the pricing is reasonable, but such data is not readily available in this context.

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 there is a compelling justification for not seeking competition. The lack of competition means that price discovery through market forces was bypassed, potentially leading to higher costs for the government.

Taxpayer Impact: Taxpayers are exposed to the risk of paying a premium due to the absence of competitive pressure. Without competing bids, there is less incentive for the contractor to offer the lowest possible price.

Public Impact

The U.S. Air Force benefits from the continued operational readiness of its C-17 Globemaster III fleet. Services delivered include the provision of virtual fleet material, crucial for aircraft maintenance and sustainment. The geographic impact is national, supporting a critical component of U.S. strategic airlift capabilities. Workforce implications include continued employment for personnel involved in the manufacturing and supply chain for C-17 components.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure, potentially increasing costs for taxpayers.
Cost-plus contract type can lead to cost overruns if not closely monitored.
Lack of transparency in pricing due to non-competitive nature.
Long-term duration of the contract may lock in potentially suboptimal pricing.
Dependence on a single supplier for critical aircraft components.

Positive Signals

Ensures continued availability of essential materials for a critical military asset (C-17).
Boeing's established expertise in C-17 manufacturing suggests a high likelihood of successful delivery.
Focus on 'virtual fleet material' may indicate modernization of logistics and sustainment.
Contract duration provides stability for sustainment planning.
Potential for performance incentives within the cost-plus structure.

Sector Analysis

The aerospace and defense sector is characterized by high barriers to entry, significant R&D investment, and long product lifecycles. The C-17 Globemaster III is a strategic airlift aircraft, and its sustainment is critical for national defense. Boeing is a primary manufacturer for this platform, making a sole-source award for specialized materials unsurprising, though still subject to scrutiny. Comparable spending benchmarks for aircraft sustainment can vary widely based on platform age, complexity, and the scope of services required.

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 primary impact on small businesses would be through potential subcontracting opportunities. The extent to which Boeing engages small businesses in its supply chain for these materials will determine the indirect benefit to the small business ecosystem.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Air Force's contracting and program management offices. The cost-plus incentive fee structure necessitates robust oversight to ensure costs are controlled and performance targets are met. Transparency may be limited due to the sole-source nature, but contract performance reviews and audits by the Defense Contract Audit Agency (DCAA) would be standard oversight mechanisms. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

C-17 Globemaster III Sustainment Programs
Air Mobility Command Logistics Contracts
Aircraft Parts and Materials Procurement
Defense Logistics Agency (DLA) Aviation Contracts

Risk Flags

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

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $1.16 billion to THE BOEING COMPANY. FY24 C-17 VIRTUAL FLEET MATERIAL REQUIREMENTS

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 $1.16 billion.

What is the period of performance?

Start: 2023-10-01. End: 2025-03-31.

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

The Boeing Company has a long-standing relationship with the U.S. Air Force as the prime contractor for the C-17 Globemaster III, including its manufacturing and sustainment. Historically, Boeing has been responsible for delivering and supporting these aircraft. While specific performance metrics for past sustainment contracts are often not publicly detailed, the continued operation of a large C-17 fleet suggests a generally successful, albeit expensive, sustainment partnership. However, like many large defense contracts, there may have been instances of cost overruns or performance issues that were addressed through contract modifications or negotiations. The 'virtual fleet material' aspect of this current contract suggests an evolution in how sustainment is managed, potentially leveraging digital tools and advanced logistics.

How does the $1.16 billion value compare to previous C-17 material requirements?

Direct year-over-year comparisons of this specific $1.16 billion award for 'virtual fleet material' to previous C-17 material requirements are challenging without more granular historical data. The total cost of ownership for a fleet like the C-17 is spread across numerous contracts for parts, maintenance, upgrades, and support services over decades. This $1.16 billion figure represents a significant investment over its 547-day period (approximately 1.5 years), indicating a substantial need for materials. However, it's not directly comparable to annual sustainment budgets or specific component procurements from prior years, which may have varied significantly in scope and value. The 'virtual fleet' designation might also represent a new category of material or service, making historical comparisons less direct.

What are the primary risks associated with a sole-source, cost-plus contract for aircraft materials?

The primary risks associated with a sole-source, cost-plus incentive fee (CPIF) contract for aircraft materials are twofold. Firstly, the sole-source nature eliminates competitive pressure, meaning the government may not achieve the lowest possible price for the materials. The contractor has less incentive to reduce costs when there are no competing offers. Secondly, the CPIF structure, while designed to incentivize performance, allows the contractor to recover allowable costs plus a negotiated fee that can be adjusted based on performance against targets. This can lead to cost overruns if the targets are not well-defined or if costs escalate beyond projections, as the government ultimately bears the burden of the costs incurred, plus the fee. Effective oversight is crucial to mitigate these risks.

How effective is the 'virtual fleet material' approach in ensuring C-17 readiness?

The effectiveness of the 'virtual fleet material' approach hinges on its implementation and integration with existing sustainment strategies. This concept likely refers to advanced inventory management, predictive maintenance, and digital logistics, aiming to optimize the supply chain for C-17 components. By using data analytics and potentially digital twins, the Air Force and Boeing can better forecast material needs, reduce waste, and ensure critical parts are available when and where needed, thereby enhancing fleet readiness. If executed well, it can lead to more efficient logistics, reduced lead times, and potentially lower inventory holding costs compared to traditional 'just-in-case' warehousing. However, its ultimate effectiveness depends on the accuracy of the data, the sophistication of the analytical tools, and the seamless integration with the physical supply chain.

What is the historical spending trend for C-17 sustainment by the Department of Defense?

Historical spending on C-17 sustainment by the Department of Defense has been substantial and ongoing since the aircraft entered service in the late 1990s. While specific annual figures fluctuate based on operational tempo, modernization efforts, and the age of the fleet, total spending over the life of the program runs into the tens of billions of dollars. This includes costs for spare parts, depot maintenance, modifications, contractor logistics support, and personnel. The trend generally shows sustained, high-level investment required to maintain a large fleet of strategic airlift aircraft. Awards like the one for virtual fleet material are components of this larger, continuous sustainment effort, reflecting the long-term commitment to the C-17 platform.

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: COST PLUS INCENTIVE FEE (V)

Evaluated Preference: NONE

Contractor Details

Address: 4060 N LAKEWOOD BLVD, LONG BEACH, CA, 90808

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: $1,159,306,467

Exercised Options: $1,159,306,467

Current Obligation: $1,159,306,467

Actual Outlays: $35,573

Subaward Activity

Number of Subawards: 1711

Total Subaward Amount: $279,344,426

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: FA852621D0001

IDV Type: IDC

Timeline