Boeing awarded $50.1M for KC-46 fuel tank spares, raising questions about competition and value

Contract Overview

Contract Amount: $50,108,127 ($50.1M)

Contractor: THE Boeing Company

Awarding Agency: Department of Defense

Start Date: 2022-09-01

End Date: 2022-12-31

Contract Duration: 121 days

Daily Burn Rate: $414.1K/day

Competition Type: NOT COMPETED

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: KC-46 BODY FUEL TANK SPARES

Place of Performance

Location: TUKWILA, KING County, WASHINGTON, 98108

State: Washington Government Spending

Plain-Language Summary

Department of Defense obligated $50.1 million to THE BOEING COMPANY for work described as: KC-46 BODY FUEL TANK SPARES Key points: 1. Sole-source award for critical aircraft components suggests limited market options or strategic sourcing. 2. High unit cost for spares may indicate premium pricing due to specialized nature or sole-source status. 3. Short contract duration (121 days) points to immediate supply needs rather than long-term strategic procurement. 4. Lack of competition limits price discovery and potentially increases overall program costs. 5. This award falls within the broader context of ongoing KC-46 tanker program sustainment and modernization efforts. 6. The 'Aircraft Manufacturing' NAICS code indicates a highly specialized industrial base for these components.

Value Assessment

Rating: questionable

The unit cost of $414,117 per fuel tank spare appears high when benchmarked against general aircraft component pricing. Without specific details on the complexity and manufacturing process of the KC-46 body fuel tank spares, a direct comparison is difficult. However, the sole-source nature of this award, coupled with the lack of competitive bidding, likely contributes to a less favorable price point for the government. This suggests that the value for money may be compromised due to the absence of market pressure to reduce costs.

Cost Per Unit: $414,117 per unit

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 other reasons. The lack of competition means that the government did not benefit from multiple bids, which could have driven down the price through competitive pressure. This limits the government's ability to ensure it is receiving the best possible price.

Taxpayer Impact: Taxpayers may be paying a premium for these critical spares due to the absence of competitive bidding, as the government could not leverage market forces to secure a lower price.

Public Impact

The primary beneficiaries are the U.S. Air Force units operating the KC-46 Pegasus tanker aircraft, ensuring operational readiness. The services delivered include the provision of essential spare parts for the KC-46's body fuel tank system. The geographic impact is national, supporting Air Mobility Command operations across various bases. Workforce implications are primarily within The Boeing Company's specialized manufacturing and supply chain operations.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition, potentially leading to higher costs for taxpayers.
Lack of transparency in the sole-source justification process could mask inefficiencies.
Dependence on a single supplier for critical spares poses a supply chain risk.
High per-unit cost warrants further investigation into manufacturing expenses and profit margins.

Positive Signals

Award ensures critical operational readiness for the KC-46 fleet.
Boeing's established expertise in KC-46 manufacturing likely ensures quality and timely delivery.
Firms fixed price contract provides cost certainty for this specific award.

Sector Analysis

This contract falls within the aerospace and defense manufacturing sector, specifically focusing on aircraft components. The market for specialized spares for complex military aircraft like the KC-46 is often concentrated among a few original equipment manufacturers or their authorized suppliers. Spending benchmarks for such niche components are difficult to establish publicly due to proprietary information and the unique nature of military hardware. However, overall defense spending on aircraft sustainment and spare parts represents a significant portion of the Department of Defense's budget.

Small Business Impact

This contract was not set aside for small businesses, nor does it appear to involve significant subcontracting opportunities for small businesses based on the provided data. The award to The Boeing Company, a large prime contractor, suggests that the manufacturing of these specialized fuel tank spares is likely handled internally or through established large-scale supply chains. This limits direct opportunities for small businesses to participate in this specific procurement, although they may be involved in the broader KC-46 supply ecosystem.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Air Force's contracting and program management offices. The Defense Contract Management Agency (DCMA) may also provide oversight on contract performance and compliance. Transparency is limited due to the sole-source nature of the award. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

KC-46 Pegasus Tanker Aircraft Program
Air Mobility Command Aircraft Sustainment
Military Aircraft Spare Parts Procurement
Defense Logistics Agency (DLA) Supply Chain Management

Risk Flags

Sole-source award
High per-unit cost
Potential supply chain risk
Lack of competitive pricing

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $50.1 million to THE BOEING COMPANY. KC-46 BODY FUEL TANK SPARES

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 $50.1 million.

What is the period of performance?

Start: 2022-09-01. End: 2022-12-31.

What is Boeing's track record with the KC-46 program, particularly regarding cost overruns and delivery schedules?

The KC-46 program has faced significant challenges, including cost overruns and schedule delays, primarily stemming from development issues and production complexities. Boeing has incurred substantial costs to address deficiencies identified by the Air Force, such as problems with the refueling boom system and leaks in the fuel system. While this specific award is for spares and has a short duration, it is part of the larger sustainment effort for a program that has historically been plagued by cost and schedule issues. The Air Force has implemented stricter oversight and cost-sharing agreements to mitigate future overruns, but the program's history suggests a need for continued vigilance regarding contractor performance and financial management.

How does the $414,117 per-unit cost for these fuel tank spares compare to similar components on other military aircraft?

Benchmarking the per-unit cost of $414,117 for KC-46 body fuel tank spares against similar components on other military aircraft is challenging without detailed specifications and market data. Specialized components for advanced military platforms, especially those with unique design requirements or manufactured in low volumes, often command higher prices. However, this figure is substantial. For context, major structural components or complex systems for older aircraft might cost less, while cutting-edge technology for next-generation platforms could be even more expensive. The sole-source nature of this award to Boeing, the original equipment manufacturer, likely inflates the price compared to what might be achievable through competitive bidding among multiple suppliers.

What are the specific risks associated with a sole-source award for critical aircraft spares like these?

The primary risk associated with a sole-source award for critical aircraft spares is the lack of price competition, which can lead to inflated costs for the government and taxpayers. It removes the incentive for the sole provider to offer the most competitive pricing. Furthermore, sole-source awards can create a dependency on a single supplier, potentially leading to supply chain vulnerabilities if that supplier experiences production issues, financial instability, or decides to discontinue the product line. This dependency can also reduce the government's leverage in negotiating future contracts or addressing quality concerns. Finally, without competitive proposals, there's a reduced opportunity to identify innovative solutions or more cost-effective manufacturing methods that might be offered by other potential vendors.

What is the expected impact of these spares on the operational effectiveness and readiness of the KC-46 fleet?

These body fuel tank spares are critical for maintaining the airworthiness and operational readiness of the KC-46 Pegasus tanker fleet. The KC-46 is a vital asset for aerial refueling, enabling power projection and global reach for U.S. and allied air forces. Failures or deficiencies in the fuel tank system could ground aircraft, reduce sortie availability, and impact mission accomplishment. By ensuring the availability of these essential spares, the Air Force can perform necessary maintenance, repairs, and replacements, thereby maximizing the number of KC-46 aircraft available for operational missions and sustaining the fleet's overall effectiveness.

How has spending on KC-46 sustainment and spare parts evolved over the program's lifecycle?

Spending on KC-46 sustainment and spare parts has been a significant and evolving aspect of the program's total lifecycle cost. Initially, the focus was heavily on development and procurement. As the fleet has entered operational service, the emphasis has shifted towards sustainment, including maintenance, repair, and the procurement of spare parts. This shift typically leads to increased annual spending on sustainment activities. The program has experienced cost growth, partly due to addressing design deficiencies and ensuring the availability of critical components. Future spending will likely continue to be substantial as the fleet matures and requires ongoing support, with the Air Force aiming to manage these costs effectively through performance-based logistics and strategic sourcing initiatives where possible.

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: FIRM FIXED PRICE (J)

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: $50,108,127

Exercised Options: $50,108,127

Current Obligation: $50,108,127

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