Air Force awards $173M+ to Boeing for aircraft manufacturing, with a Cost Plus Fixed Fee contract type

Contract Overview

Contract Amount: $173,438,472 ($173.4M)

Contractor: THE Boeing Company

Awarding Agency: Department of Defense

Start Date: 2022-06-28

End Date: 2027-02-15

Contract Duration: 1,693 days

Daily Burn Rate: $102.4K/day

Competition Type: NOT COMPETED

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: KOSS - UNDEFINITIZED DELIVERY ORDER

Place of Performance

Location: TUKWILA, KING County, WASHINGTON, 98108

State: Washington Government Spending

Plain-Language Summary

Department of Defense obligated $173.4 million to THE BOEING COMPANY for work described as: KOSS - UNDEFINITIZED DELIVERY ORDER Key points: 1. The contract's Cost Plus Fixed Fee structure may incentivize cost overruns, requiring close monitoring. 2. Lack of competition suggests potential for higher pricing than a fully competed contract. 3. The long performance period (2022-2027) indicates a significant, ongoing need for these aircraft manufacturing services. 4. This contract falls within the Aircraft Manufacturing sector, a critical area for defense readiness. 5. The significant dollar value positions this as a major award within its sector. 6. The undefinitized delivery order status indicates initial terms were established before final negotiation, posing a potential risk.

Value Assessment

Rating: questionable

Benchmarking the value of this Cost Plus Fixed Fee contract is challenging without detailed cost breakdowns and comparisons to similar undefinitized delivery orders. The lack of competition inherently limits price discovery, potentially leading to less favorable terms for the government. The undefinitized nature of the order at its inception adds a layer of uncertainty regarding the final cost and value realization. However, the long-term nature and the critical defense application may justify the investment if performance is met.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning it was not competed. This approach is typically used when only one responsible source can provide the required goods or services. The lack of competition means that the government did not benefit from the price reductions and innovation that can arise from a competitive bidding process. This can lead to higher costs for taxpayers.

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

Public Impact

The U.S. Air Force is the primary beneficiary, receiving critical aircraft manufacturing services. This contract supports the production and sustainment of essential military aircraft. The geographic impact is primarily centered around the contractor's facilities in Washington. The contract likely supports a skilled workforce in the aerospace manufacturing sector.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

The undefinitized delivery order status at the outset presents a risk of cost escalation before final terms are agreed upon.
Sole-source procurement limits competitive pressure, potentially leading to higher prices and reduced innovation.
Cost Plus Fixed Fee contracts can incentivize contractors to incur higher costs, necessitating robust oversight.
The long performance period requires sustained monitoring to ensure continued value and performance.
Lack of detailed cost data makes independent value assessment difficult.

Positive Signals

The contract is with a major, established aerospace manufacturer (The Boeing Company), suggesting a high likelihood of technical capability.
The significant award value indicates a critical need and strategic importance for the U.S. Air Force.
The contract duration suggests a stable, long-term relationship and commitment to the program.
The fixed fee component in the CPFF structure provides some level of cost certainty for the contractor's profit.
The contract is for aircraft manufacturing, a core defense capability.

Sector Analysis

This contract falls within the broader aerospace and defense sector, specifically aircraft manufacturing. This industry is characterized by high barriers to entry, significant R&D investment, and long production cycles. Major players like Boeing dominate the landscape. Government contracts are a substantial portion of revenue for many companies in this sector. Comparable spending benchmarks would involve other large-scale aircraft production or sustainment contracts awarded by the Department of Defense.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. Furthermore, the prime contractor is a large corporation, suggesting that subcontracting opportunities for small businesses may exist but are not explicitly mandated or tracked within this specific data point. The impact on the small business ecosystem would depend on Boeing's subcontracting strategy and the availability of specialized small businesses capable of supporting aircraft manufacturing.

Oversight & Accountability

Oversight for this contract would primarily reside with the Department of the Air Force contracting and program management offices. Given the Cost Plus Fixed Fee structure and the undefinitized delivery order status, rigorous financial oversight and auditing would be crucial to ensure costs are reasonable and allocable. Transparency may be limited due to the sole-source nature and defense classification, but contract modifications and performance reports would be key accountability measures. Inspector General jurisdiction would apply for investigations into fraud, waste, or abuse.

Related Government Programs

F-15 Aircraft Production
F/A-18 Super Hornet Program
C-17 Globemaster III Sustainment
Defense Production Act Investments
Air Force Materiel Command Contracts

Risk Flags

Undefinitized Contract Action
Sole-Source Procurement
Cost-Plus Contract Type
Long Performance Period

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $173.4 million to THE BOEING COMPANY. KOSS - UNDEFINITIZED DELIVERY 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 $173.4 million.

What is the period of performance?

Start: 2022-06-28. End: 2027-02-15.

What is the historical spending pattern for aircraft manufacturing contracts awarded to The Boeing Company by the Department of Defense?

The Department of Defense has a long and substantial history of awarding contracts to The Boeing Company for various aircraft manufacturing and sustainment programs. Historically, Boeing has been a primary contractor for numerous fighter jets (e.g., F-15, F/A-18), bombers, and transport aircraft. Annual spending can fluctuate significantly based on program lifecycles, new development initiatives, and sustainment requirements. For instance, during peak production phases of major platforms, annual awards could reach billions of dollars. In recent years, spending has also focused on upgrades, modifications, and readiness support for existing fleets. Analyzing specific program data over the last decade would reveal trends in production rates, modernization efforts, and the overall value of Boeing's contribution to Air Force and Navy aviation capabilities. This particular $173M+ award represents a segment of this ongoing, large-scale relationship.

How does the Cost Plus Fixed Fee (CPFF) contract type typically impact final costs compared to fixed-price contracts for similar aircraft manufacturing services?

Cost Plus Fixed Fee (CPFF) contracts are generally considered less cost-effective for the government compared to fixed-price contracts, especially when the scope of work is well-defined. In a CPFF arrangement, the contractor is reimbursed for all allowable costs incurred, plus a predetermined fixed fee representing their profit. While this structure is useful for research and development or when cost uncertainties are high, it shifts much of the cost risk to the government. Contractors have less incentive to control costs because their profit (the fixed fee) remains constant regardless of the final project cost. This can lead to higher overall expenditures than anticipated. Fixed-price contracts, conversely, place the cost risk on the contractor, incentivizing them to manage expenses efficiently to maximize their profit margin. Therefore, for established aircraft manufacturing processes, a fixed-price contract would typically yield better value for the taxpayer.

What are the primary risks associated with an undefinitized delivery order (UDO) in a sole-source contract?

An undefinitized delivery order (UDO) presents several risks, particularly within a sole-source context. A UDO means that the essential terms and conditions, including price, are not finalized at the time the order is issued. The contractor begins work based on preliminary agreement, with the expectation that a definitive contract will follow. The primary risk is that the government may end up paying more than intended because the final negotiation occurs after work has commenced, reducing the government's leverage. There's also a risk of scope creep or disagreements over allowable costs during the definitization period. In a sole-source situation, the government lacks the option to switch to another vendor if negotiations falter, amplifying these risks. Robust oversight and a clear path to definitization are critical to mitigate these potential downsides and ensure fair pricing.

What is The Boeing Company's track record with Cost Plus Fixed Fee contracts within the Department of Defense?

The Boeing Company has a long and extensive history of performing contracts with the Department of Defense (DoD) across various contract types, including Cost Plus Fixed Fee (CPFF). As a major defense contractor, Boeing has utilized CPFF structures for complex, long-term programs where cost estimation is challenging, such as initial development phases or sustainment efforts with evolving requirements. While CPFF contracts can provide flexibility and allow work to commence promptly, they also carry inherent risks of cost growth for the government. Boeing's track record with CPFF contracts would involve numerous instances where costs may have exceeded initial estimates, necessitating careful government oversight and negotiation to manage expenditures. Analyzing specific program performance data, cost variances, and audit findings related to Boeing's CPFF awards would provide a comprehensive view of their performance and the government's effectiveness in managing these types of agreements.

How does the 'Aircraft Manufacturing' NAICS code (336411) typically perform in terms of contract competition levels within the DoD?

The 'Aircraft Manufacturing' NAICS code (336411) within the Department of Defense (DoD) context often sees a mix of competition levels, but large, complex platforms frequently lean towards limited or sole-source procurements. This is due to the high barriers to entry, including immense capital investment, specialized technology, extensive R&D, and long development cycles. For established platforms requiring sustainment, upgrades, or continued production runs, incumbent contractors like Boeing often hold significant advantages, leading to sole-source or limited competition awards. However, for certain components, subsystems, or less complex aircraft, competitive bidding can occur. The DoD actively seeks competition where feasible, but the nature of advanced military aircraft manufacturing inherently restricts the number of capable and willing bidders, making sole-source awards more common for critical, high-value programs.

Industry Classification

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

Product/Service Code: MAINT, REPAIR, REBUILD EQUIPMENT › MAINT, REPAIR, REBUILD OF EQUIPMENT

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: $227,525,413

Exercised Options: $185,165,638

Current Obligation: $173,438,472

Subaward Activity

Number of Subawards: 29

Total Subaward Amount: $2,066,437

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