Boeing awarded $63.3M for KC-46 refueling capability, a sole-source contract for aircraft manufacturing

Contract Overview

Contract Amount: $63,318,731 ($63.3M)

Contractor: THE Boeing Company

Awarding Agency: Department of Defense

Start Date: 2021-07-28

End Date: 2027-06-15

Contract Duration: 2,148 days

Daily Burn Rate: $29.5K/day

Competition Type: NOT COMPETED

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: KC-46 AIRWORTHINESS LIMITATION REFUELING ONLOAD/OFFLOAD CAPABILITY INCREASE

Place of Performance

Location: TUKWILA, KING County, WASHINGTON, 98108

State: Washington Government Spending

Plain-Language Summary

Department of Defense obligated $63.3 million to THE BOEING COMPANY for work described as: KC-46 AIRWORTHINESS LIMITATION REFUELING ONLOAD/OFFLOAD CAPABILITY INCREASE Key points: 1. Contract awarded to a single supplier suggests potential for higher costs due to lack of competition. 2. The Cost Plus Fixed Fee (CPFF) structure may incentivize cost overruns, requiring close oversight. 3. Long contract duration (2021-2027) indicates a significant, ongoing need for this specific capability. 4. Focus on refueling onload/offload capability highlights a critical operational enhancement for the KC-46 fleet. 5. The absence of small business participation raises questions about broader economic impact. 6. This contract falls within the aircraft manufacturing sector, a key area for defense spending.

Value Assessment

Rating: questionable

Benchmarking the value of this $63.3 million contract is challenging without specific performance metrics or comparable sole-source awards. The CPFF pricing structure, while common for complex development, carries inherent risk of cost escalation. Without competitive bidding, it's difficult to ascertain if the pricing reflects optimal value for the government. Further analysis of the fixed fee and estimated costs would be necessary to provide a more definitive value assessment.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was not competed, indicating a sole-source award to The Boeing Company. The rationale for sole-sourcing is not provided but typically stems from unique capabilities, existing platform integration, or urgent requirements where only one source can fulfill the need. The lack of competition means the government did not benefit from price discovery through multiple bids, potentially leading to a higher final cost.

Taxpayer Impact: Taxpayers may be paying a premium for this capability due to the absence of competitive pressure to drive down costs. The government's negotiating position is weakened without alternative suppliers.

Public Impact

The primary beneficiaries are the U.S. Air Force and its KC-46 tanker fleet, enhancing operational capabilities. Services delivered include increased airworthiness limitation and improved refueling onload/offload functionality for the aircraft. The geographic impact is national, supporting Air Force operations across various bases and deployment locations. Workforce implications include specialized engineering, manufacturing, and technical support roles within The Boeing Company.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure, potentially increasing costs for taxpayers.
Cost Plus Fixed Fee (CPFF) contract type can incentivize cost overruns if not closely managed.
Lack of small business participation means missed opportunities for economic inclusion and innovation.
Long contract duration requires sustained oversight to ensure performance and cost control.

Positive Signals

Addresses a critical operational enhancement for a key military asset (KC-46 tanker).
Contract awarded to a major defense contractor with established expertise in aircraft manufacturing.
Clear delivery end date (June 2027) provides a defined project timeline.

Sector Analysis

This contract falls within the aerospace and defense sector, specifically aircraft manufacturing and modification. The market for large military aircraft development and sustainment is highly concentrated, with a few major players like Boeing dominating. Spending in this area is driven by national security requirements and the need to maintain a technologically advanced fleet. Comparable spending benchmarks would involve other sole-source or competed contracts for major aircraft system upgrades or modifications.

Small Business Impact

This contract does not appear to have a small business set-aside, nor is there an indication of significant subcontracting opportunities for small businesses based on the provided data. The award to a large prime contractor like Boeing often means that small business participation is limited unless specifically mandated or pursued through subcontracting plans. This represents a missed opportunity to leverage the innovation and capacity of the small business industrial base within the defense sector.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Air Force's contracting and program management offices. Given the CPFF structure, rigorous monitoring of costs, progress, and adherence to the fixed fee is crucial. 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 involvement is possible if performance issues or allegations of fraud arise.

Related Government Programs

KC-46 Pegasus Tanker Program
Air Force Aircraft Procurement
Defense Logistics and Sustainment Contracts
Aerospace Manufacturing Services

Risk Flags

Sole-source award
Cost Plus Fixed Fee contract type
Potential for cost overruns
Lack of small business participation

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $63.3 million to THE BOEING COMPANY. KC-46 AIRWORTHINESS LIMITATION REFUELING ONLOAD/OFFLOAD CAPABILITY INCREASE

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 $63.3 million.

What is the period of performance?

Start: 2021-07-28. End: 2027-06-15.

What is the specific technical capability being enhanced by this contract, and why is it critical for the KC-46?

This contract focuses on increasing the airworthiness limitation related to the KC-46's refueling onload/offload capability. This enhancement is critical because it directly impacts the tanker's ability to efficiently and safely transfer fuel to other aircraft. Improved onload/offload functionality can lead to faster refueling operations, increased fuel transfer volume per mission, and potentially expanded operational envelopes for both the tanker and the receiving aircraft. For the KC-46, which is a relatively new platform, addressing such limitations is key to maximizing its operational effectiveness and fulfilling its strategic role in global power projection and sustainment.

How does the Cost Plus Fixed Fee (CPFF) contract structure compare to other contract types for similar aircraft modifications?

Cost Plus Fixed Fee (CPFF) contracts are often used for research and development or complex modifications where the scope of work is not fully defined at the outset, or where innovation is a key driver. In such cases, the contractor is reimbursed for allowable costs plus a fixed fee representing profit. Compared to Firm-Fixed-Price (FFP) contracts, CPFF offers more flexibility for the government if requirements change but shifts more cost risk to the government. For aircraft modifications where the technical challenges are significant and unpredictable, CPFF can be appropriate. However, it requires robust government oversight to control costs, as the contractor has less incentive to minimize expenses compared to an FFP contract. Other types like Cost Plus Incentive Fee (CPIF) might offer better cost control by linking profit to performance targets.

What are the potential risks associated with a sole-source award for critical defense systems like the KC-46?

Sole-source awards for critical defense systems like the KC-46 carry several risks. Primarily, the lack of competition can lead to higher prices than might be achieved through a competitive bidding process, as the contractor faces no direct market pressure to reduce costs. This can result in inefficient use of taxpayer funds. Secondly, it can stifle innovation, as there is less incentive for the sole provider to explore novel or more cost-effective solutions when they are guaranteed the contract. Furthermore, it can create a dependency on a single supplier, making the government vulnerable to supply chain disruptions, price hikes, or the contractor's strategic decisions. Finally, it reduces transparency and makes it harder to benchmark pricing against industry standards.

What is Boeing's track record with the KC-46 program, and how might that influence this contract?

Boeing's track record with the KC-46 program has been complex, marked by significant development challenges and delays, particularly concerning the Remote Vision System (RVS) and boom issues, which have impacted its operational readiness and led to contractual disputes and financial penalties. Despite these challenges, Boeing is the original manufacturer and holds the primary expertise for the KC-46 platform. This contract, focusing on specific capability enhancements, likely leverages Boeing's existing knowledge base and infrastructure related to the aircraft. While past performance issues might warrant increased scrutiny and oversight on this specific contract, the inherent reliance on Boeing as the sole source for modifications to their own aircraft design means that past performance may have less direct impact on the award itself than on the management and oversight applied during its execution.

How does this contract's value compare to overall spending on the KC-46 program?

This contract represents a $63.3 million award for specific capability enhancements to the KC-46 program. The overall spending on the KC-46 program, encompassing development, production, and sustainment, is significantly higher, running into tens of billions of dollars. For instance, the total program acquisition cost has been estimated to be well over $40 billion. Therefore, this $63.3 million contract, while substantial in absolute terms, constitutes a relatively small fraction of the total program expenditure. It addresses a specific, albeit important, upgrade rather than the foundational acquisition or long-term sustainment of the entire fleet.

Industry Classification

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

Product/Service Code: AEROSPACE CRAFT AND STRUCTURAL COMPONENTS

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: $125,250,858

Exercised Options: $125,250,858

Current Obligation: $63,318,731

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