Boeing awarded $5.4M for Air Force's FY24 Material Improvement Project, focusing on non-recurring engineering

Contract Overview

Contract Amount: $5,396,517 ($5.4M)

Contractor: THE Boeing Company

Awarding Agency: Department of Defense

Start Date: 2024-09-30

End Date: 2028-03-31

Contract Duration: 1,278 days

Daily Burn Rate: $4.2K/day

Competition Type: NOT COMPETED

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: FY24 MATERIAL IMPROVEMENT PROJECT (MIP) - NON-RECURRING ENGINEERING (NRE) TASK ORDER

Place of Performance

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

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $5.4 million to THE BOEING COMPANY for work described as: FY24 MATERIAL IMPROVEMENT PROJECT (MIP) - NON-RECURRING ENGINEERING (NRE) TASK ORDER Key points: 1. Contract awarded to a single, established aerospace manufacturer, raising questions about competitive pricing. 2. The task order is for non-recurring engineering, suggesting upfront design and development costs. 3. A Cost Plus Fixed Fee contract type can incentivize cost overruns if not closely monitored. 4. The duration of nearly 4 years indicates a significant, long-term project. 5. Limited competition may lead to higher costs for taxpayers compared to a fully competed contract. 6. The contract is for aircraft manufacturing support, aligning with the Air Force's core mission needs.

Value Assessment

Rating: questionable

Benchmarking the value of this specific task order is challenging without detailed scope of work and comparable NRE projects. However, the 'Cost Plus Fixed Fee' structure, combined with a sole-source award, presents a risk of less favorable pricing. The Air Force should ensure rigorous oversight to manage costs effectively and verify that the fixed fee is appropriate for the level of effort and risk involved. Comparing the proposed fixed fee against industry standards for similar NRE services would be prudent.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning the Department of the Air Force did not solicit bids from multiple vendors. This approach is typically used when a specific contractor possesses unique capabilities or when urgency precludes a competitive process. The lack of competition means there was no direct price comparison with other potential providers, potentially impacting the final cost.

Taxpayer Impact: Sole-source awards limit the government's ability to leverage market competition to secure the best possible price, potentially resulting in higher expenditures for taxpayers.

Public Impact

The primary beneficiary is the Department of the Air Force, which will receive critical engineering support for its aircraft. Services delivered include non-recurring engineering, essential for developing or improving aircraft systems. The geographic impact is primarily within California, where the contractor is located, and potentially at Air Force bases where the aircraft are operated. Workforce implications include employment for engineers and technical staff at The Boeing Company.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition.
Cost Plus Fixed Fee contract type can lead to cost escalation if not managed.
Lack of transparency in the justification for sole-sourcing.
Long contract duration may not adapt well to evolving technological needs.

Positive Signals

Award to a major defense contractor with established expertise in aircraft manufacturing.
Focus on NRE is critical for foundational improvements to aircraft.
Contract aligns with core Air Force modernization and readiness objectives.

Sector Analysis

The aerospace and defense sector is characterized by high barriers to entry, significant R&D investment, and long product development cycles. Contracts like this, for non-recurring engineering, are fundamental to innovation and sustainment within the industry. The Department of Defense is a major customer, with spending often concentrated among a few large, established prime contractors. Benchmarking this specific NRE task order against broader defense R&D or aircraft manufacturing spending requires detailed analysis of the scope and complexity.

Small Business Impact

This contract was awarded directly to The Boeing Company and does not appear to have a small business set-aside component. There is no explicit information regarding subcontracting plans for small businesses within this specific task order. Without a set-aside or clear subcontracting goals, the direct impact on the small business ecosystem for this particular award is likely minimal, though Boeing's overall subcontracting practices would be relevant.

Oversight & Accountability

Oversight for this contract will fall under the Department of the Air Force's contracting and program management offices. Given the Cost Plus Fixed Fee structure and sole-source nature, rigorous financial oversight and performance monitoring will be crucial to ensure value for money and prevent cost overruns. Transparency regarding the justification for the sole-source award and the breakdown of costs would enhance accountability.

Related Government Programs

Aircraft Manufacturing
Defense Research and Development
Air Force Sustainment Programs
Aerospace Engineering Services

Risk Flags

Sole-source award
Cost Plus Fixed Fee contract type
Long contract duration
Lack of competitive bidding

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $5.4 million to THE BOEING COMPANY. FY24 MATERIAL IMPROVEMENT PROJECT (MIP) - NON-RECURRING ENGINEERING (NRE) TASK ORDER

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 $5.4 million.

What is the period of performance?

Start: 2024-09-30. End: 2028-03-31.

What is the specific justification provided by the Department of the Air Force for awarding this contract on a sole-source basis to The Boeing Company?

The provided data does not include the specific justification for the sole-source award. Typically, sole-source procurements are justified under specific circumstances outlined in federal acquisition regulations, such as the existence of only one responsible source capable of providing the required supplies or services, or when urgency precludes competition. For this contract, the Air Force would need to document why other qualified aircraft manufacturers could not fulfill the requirements for the FY24 Material Improvement Project's non-recurring engineering tasks. Without this documentation, it is difficult to assess the necessity of bypassing the competitive bidding process.

How does the Cost Plus Fixed Fee (CPFF) contract type compare to other pricing arrangements for similar non-recurring engineering (NRE) projects in the defense sector?

Cost Plus Fixed Fee (CPFF) contracts are common in R&D and complex projects where the scope is not fully defined at the outset, allowing for flexibility. However, they carry a risk of cost overruns as the contractor is reimbursed for allowable costs plus a fixed fee. Compared to Firm-Fixed-Price (FFP) contracts, CPFF offers less cost certainty for the government but can be more suitable for innovative or uncertain NRE work. Other arrangements like Cost Plus Incentive Fee (CPIF) or Cost Plus Award Fee (CPAF) introduce performance incentives. For NRE, FFP might be preferred if the scope is very well-defined, shifting risk entirely to the contractor. The choice of CPFF here suggests the Air Force acknowledged significant unknowns in the NRE effort.

What are the potential risks associated with a long-duration contract (nearly 4 years) for non-recurring engineering, especially when awarded sole-source?

A long duration for NRE, particularly under a sole-source award, presents several risks. Firstly, technological advancements could render the initial design or engineering approach obsolete before the project's completion, leading to wasted investment. Secondly, the contractor may lack the same cost-consciousness over an extended period without competitive pressure. Thirdly, the fixed fee, while set, might become disproportionate to the effort required if project complexities change significantly. Finally, the government's ability to pivot or incorporate new requirements is diminished compared to shorter, more agile contract structures. Continuous oversight and clear modification clauses are essential to mitigate these risks.

Can the $5.4 million award be considered a benchmark for similar NRE tasks within the Department of the Air Force or the broader defense industry?

This $5.4 million award is difficult to use as a direct benchmark without a detailed understanding of the specific non-recurring engineering tasks involved, the complexity of the aircraft systems, and the required deliverables. NRE costs can vary dramatically based on the scope, novelty of the technology, and the specific engineering challenges. While it represents a significant investment, its comparability to other NRE projects depends heavily on the specifics of the 'FY24 MATERIAL IMPROVEMENT PROJECT (MIP)'. A comprehensive benchmark would require analyzing the labor hours, specialized equipment, and technical expertise required, as well as comparing it to similar projects awarded competitively.

What is The Boeing Company's track record with Cost Plus Fixed Fee (CPFF) contracts and sole-source awards from the Department of Defense?

The Boeing Company, as one of the largest defense contractors, has extensive experience with various contract types, including CPFF and sole-source awards, from the Department of Defense. Historically, major defense programs often involve complex, long-term efforts where CPFF or other cost-reimbursement structures are utilized due to inherent uncertainties. Sole-source awards are also not uncommon for specialized systems or upgrades where Boeing holds unique capabilities or intellectual property. Analyzing Boeing's historical performance on such contracts would involve reviewing past contract data for cost performance, delivery timeliness, and any disputes or overruns. Generally, large contractors are expected to manage these contracts efficiently, but oversight remains critical.

Industry Classification

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

Product/Service Code: SPECIAL STUDIES/ANALYSIS, NOT R&D › SPECIAL STUDIES - NOT R and D

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: FA852624R0011

Pricing Type: COST PLUS FIXED FEE (U)

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: $5,396,517

Exercised Options: $5,396,517

Current Obligation: $5,396,517

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