Boeing awarded $50.3M for KC-46 long-term test aircraft maintenance, raising questions about competition and value

Contract Overview

Contract Amount: $50,304,855 ($50.3M)

Contractor: THE Boeing Company

Awarding Agency: Department of Defense

Start Date: 2020-09-16

End Date: 2026-03-15

Contract Duration: 2,006 days

Daily Burn Rate: $25.1K/day

Competition Type: NOT COMPETED

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: ACQUISITION CATEGORY 1 KC-46 LONG-TERM TEST AIRCRAFT MAINTENANCE SUPPORT (LTTAMS) UCA

Place of Performance

Location: TUKWILA, KING County, WASHINGTON, 98108

State: Washington Government Spending

Plain-Language Summary

Department of Defense obligated $50.3 million to THE BOEING COMPANY for work described as: ACQUISITION CATEGORY 1 KC-46 LONG-TERM TEST AIRCRAFT MAINTENANCE SUPPORT (LTTAMS) UCA Key points: 1. Contract awarded to a single source raises concerns about price discovery and potential overpayment. 2. The cost-plus-fixed-fee structure may incentivize higher costs without strict oversight. 3. Long-term support contracts can become entrenched, limiting future competition and innovation. 4. Performance context is limited as this is a test aircraft support contract. 5. The contract falls within the broader Defense sector, specifically aircraft manufacturing and support. 6. Lack of competition is a significant risk indicator for value for money.

Value Assessment

Rating: questionable

The contract's value is difficult to benchmark due to its sole-source nature and specific application to KC-46 test aircraft. Without competitive bids, it's challenging to assess if the pricing reflects fair market value. The cost-plus-fixed-fee (CPFF) pricing structure, while common for complex R&D or support, can lead to higher overall costs if not managed rigorously, as the contractor is reimbursed for allowable costs plus a fixed fee. This contrasts with fixed-price contracts where risk is shifted more to the contractor.

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 typically occurs when a specific capability is only available from a single source, or in this case, likely due to the unique nature of supporting a specific test aircraft program where the original manufacturer is the only viable option. The lack of competition means there was no opportunity for price negotiation based on multiple offers, potentially leading to a higher price than if it had been competed.

Taxpayer Impact: Taxpayers may be paying a premium for this support due to the absence of competitive pressure. Without competing the requirement, the government loses the opportunity to leverage market forces to drive down costs and ensure the best possible value.

Public Impact

The primary beneficiaries are the Department of the Air Force, ensuring the operational readiness of KC-46 test aircraft. Services delivered include long-term maintenance and support for these critical test assets. The geographic impact is primarily within the United States, where the test aircraft are based and maintained. Workforce implications include specialized technical and maintenance jobs at The Boeing Company and potentially its subcontractors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition and potentially increases costs for taxpayers.
Cost-plus-fixed-fee contract structure may incentivize higher spending without robust oversight.
Long-term nature of the contract could lead to vendor lock-in and reduced future flexibility.
Lack of transparency in the sole-source justification could hide potential inefficiencies.
Dependence on a single contractor for critical test aircraft support poses a risk if performance falters.

Positive Signals

Contract ensures continued support for vital KC-46 test aircraft, crucial for program development.
The Boeing Company is the original equipment manufacturer, possessing unique expertise for this specific aircraft.
The fixed fee component provides some cost certainty for the government compared to pure cost-reimbursement.
The contract duration aligns with the expected testing and evaluation phases of the KC-46 program.

Sector Analysis

This contract falls within the aerospace and defense sector, specifically focusing on aircraft maintenance and support services. The market for specialized support of complex military platforms like the KC-46 tanker is often dominated by the original equipment manufacturers due to proprietary knowledge and technical expertise. Comparable spending benchmarks are difficult to establish without more specific details on the scope of work, but long-term sustainment contracts for major weapon systems can represent significant portions of their lifecycle costs.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'ss': false and 'sb': false. The award to The Boeing Company, a large prime contractor, suggests that small businesses are unlikely to be direct recipients of this prime contract. However, Boeing may engage small businesses as subcontractors for specific parts or services, though the extent of this subcontracting is not detailed in the provided data. The absence of a set-aside means opportunities for small businesses to compete directly for this specific requirement are limited.

Oversight & Accountability

Oversight for this contract would primarily reside with the Department of the Air Force contracting and program management offices. Given the sole-source nature and CPFF structure, rigorous oversight of incurred costs, performance metrics, and adherence to contract terms is crucial. Transparency may be limited due to the non-competitive award, but contract modifications, performance reviews, and financial audits would serve as key accountability measures. The Inspector General's office within the Department of Defense would have jurisdiction for audits and investigations if fraud, waste, or abuse were suspected.

Related Government Programs

KC-46 Pegasus Tanker Program
Air Mobility Command Aircraft Support
Defense Contract Management Agency (DCMA) Oversight
Aerospace Maintenance and Sustainment Contracts

Risk Flags

Sole-source award
Cost-plus-fixed-fee pricing
Lack of competition
Potential for cost overruns
Long-term commitment

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $50.3 million to THE BOEING COMPANY. ACQUISITION CATEGORY 1 KC-46 LONG-TERM TEST AIRCRAFT MAINTENANCE SUPPORT (LTTAMS) UCA

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 $50.3 million.

What is the period of performance?

Start: 2020-09-16. End: 2026-03-15.

What is the specific justification for awarding this contract on a sole-source basis to The Boeing Company?

The provided data indicates the contract was 'NOT COMPETED' and awarded to 'THE BOEING COMPANY'. While the specific justification is not detailed, sole-source awards for complex military aircraft like the KC-46 are often based on the original equipment manufacturer (OEM) possessing unique technical data, intellectual property, or specialized tooling essential for maintenance and support. For test aircraft, the OEM may be the only entity with the necessary expertise and access to perform the required long-term testing support. A formal Justification for Other Than Full and Open Competition (JOFOC) would typically be required and publicly available, outlining the rationale in detail, such as the unavailability of comparable commercial items or the need to maintain compatibility with existing systems.

How does the Cost Plus Fixed Fee (CPFF) contract type potentially impact the overall cost compared to other contract types?

The Cost Plus Fixed Fee (CPFF) structure means the contractor, Boeing, is reimbursed for all allowable costs incurred during performance, plus a predetermined fixed fee representing profit. This structure shifts significant financial risk to the government, as the total cost is not fixed upfront. While it can be effective for research, development, or complex services where cost estimation is difficult, it lacks the cost-control incentives of fixed-price contracts. The government must implement robust oversight to scrutinize allowable costs and ensure efficiency. If costs escalate beyond initial projections, the government bears the burden, potentially leading to a higher final price than anticipated or achievable under a competitive fixed-price arrangement.

What are the potential risks associated with a long-term support contract for test aircraft?

Long-term support contracts, especially sole-source ones, carry several risks. Firstly, there's the risk of 'vendor lock-in,' where the government becomes heavily reliant on a single provider, making it difficult and costly to switch vendors in the future, even if better alternatives emerge. Secondly, without ongoing competition, there's less pressure on the contractor to innovate or improve efficiency, potentially leading to stagnant service quality or higher-than-necessary costs over time. Thirdly, the extended duration increases the government's exposure to potential contractor performance issues or financial instability. Finally, the specific nature of supporting 'test aircraft' implies evolving requirements and potential for unforeseen technical challenges, which, under a CPFF structure, could lead to significant cost growth.

Can we compare the per-unit cost or value for money of this contract to other KC-46 sustainment efforts?

Direct comparison of per-unit cost or value for money for this specific contract is challenging with the provided data. This contract covers 'LONG-TERM TEST AIRCRAFT MAINTENANCE SUPPORT (LTTAMS)' for the KC-46, which is distinct from operational fleet sustainment or production support. The 'ACQUISITION CATEGORY 1' designation and its focus on test assets suggest unique, potentially higher, per-unit costs due to specialized requirements, limited production runs, and the nature of testing. Furthermore, the sole-source, CPFF award structure complicates direct benchmarking against competitively procured, fixed-price contracts for operational support. A detailed analysis would require access to the contract's detailed line items, performance metrics, and comparisons with similar test support contracts across the DoD.

What is The Boeing Company's track record with large defense sustainment contracts, particularly for aircraft?

The Boeing Company has an extensive and long-standing track record in providing sustainment and support services for numerous large-scale defense aircraft programs globally. This includes major platforms such as the C-17 Globemaster III, F-15, F/A-18, and Apache helicopters, among others. Their experience encompasses logistics, maintenance, repair, overhaul (MRO), engineering support, and upgrades. While generally considered a capable provider, Boeing, like other major defense contractors, has faced scrutiny and challenges related to cost overruns, schedule delays, and performance issues on various large programs. Their ability to manage complex sustainment contracts effectively is well-established, but oversight remains critical to ensure value and performance.

Industry Classification

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

Product/Service Code: QUALITY CONTROL, TEST, INSPECTION › EQUIPMENT AND MATERIALS TESTING

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Address: 7755 E MARGINAL WAY S, SEATTLE, WA, 98108

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: $52,256,712

Exercised Options: $52,256,712

Current Obligation: $50,304,855

Subaward Activity

Number of Subawards: 12

Total Subaward Amount: $1,137,975

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: FA860919D0007

IDV Type: IDC

Timeline