DoD's $11B aircraft manufacturing contract with Boeing saw no competition, raising value concerns

Contract Overview

Contract Amount: $11,086,769,500 ($11.1B)

Contractor: THE Boeing Company

Awarding Agency: Department of Defense

Start Date: 2003-10-02

End Date: 2017-10-31

Contract Duration: 5,143 days

Daily Burn Rate: $2.2M/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Place of Performance

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

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $11.09 billion to THE BOEING COMPANY for work described as: Key points: 1. The contract's value proposition is questionable due to the lack of competitive bidding. 2. Sole-source awards can limit price discovery and potentially lead to inflated costs. 3. The long duration of the contract (over 14 years) warrants scrutiny of ongoing value. 4. Performance context is limited without comparative data from a competitive environment. 5. This contract falls within the Defense sector, specifically aircraft manufacturing. 6. The absence of small business set-asides or subcontracting plans is noted.

Value Assessment

Rating: questionable

Assessing the value for money on this $11 billion contract is challenging given its sole-source nature. Without competitive bids, it's difficult to benchmark pricing against market rates or compare it to similar contracts awarded through open competition. The lack of competition suggests potential for higher costs than might be achieved in a more robust bidding process. Further analysis would require access to internal cost data or comparable sole-source awards to make a more definitive judgment on value.

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 indicates that only one bidder, The Boeing Company, was considered for this award. The lack of competition limits the government's ability to leverage market forces to secure the best possible price and terms. It suggests that either Boeing was the only capable source, or the circumstances of the award did not necessitate a competitive process.

Taxpayer Impact: Taxpayers may have paid a premium due to the absence of competitive pressure. Without competing offers, the government had less leverage to negotiate favorable pricing, potentially leading to higher overall expenditure.

Public Impact

The primary beneficiary is the Department of Defense, which receives aircraft manufacturing services. The contract supports the production of aircraft, crucial for national defense operations. The geographic impact is centered in California, where Boeing's operations are located. This contract likely has significant workforce implications, supporting jobs in the aerospace manufacturing sector.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to higher costs for taxpayers.
Sole-source awards can reduce transparency in pricing.
Long contract duration without competition raises concerns about sustained value.
Absence of small business participation noted.

Positive Signals

Contract awarded to a major, established defense contractor.
Firm fixed-price contract type can provide cost certainty.
Contract supports critical defense capabilities.

Sector Analysis

The aerospace and defense industry is characterized by high barriers to entry, significant R&D investment, and long product development cycles. This contract falls within the aircraft manufacturing sub-sector, a critical component of the defense industrial base. Spending in this area is often substantial due to the complexity and cost of military aircraft. Comparable spending benchmarks would typically involve other large-scale aircraft procurement contracts, which are often sole-sourced or limited competition due to specialized requirements and the limited number of qualified manufacturers.

Small Business Impact

This contract does not appear to have included specific small business set-aside provisions. The sole-source nature of the award further limits opportunities for small businesses to participate directly as prime contractors. While Boeing may engage small businesses as subcontractors, the absence of explicit set-asides or subcontracting goals means there is no mandated mechanism to ensure broad small business inclusion within this specific contract's framework.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Defense's contract management and oversight bodies, such as the Defense Contract Management Agency (DCMA). Accountability measures are inherent in the firm fixed-price structure, which aims to hold the contractor responsible for cost overruns. Transparency is limited by the sole-source nature, but contract awards and basic details are generally publicly available. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Aircraft Procurement, Defense
Aerospace Manufacturing Contracts
Department of Defense Major Weapon Systems

Risk Flags

Sole-source award
Lack of competition
High contract value
Long contract duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $11.09 billion to THE BOEING COMPANY. See the official description on USAspending.

Who is the contractor on this award?

The obligated recipient is THE BOEING COMPANY.

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Contract Management Agency).

What is the total obligated amount?

The obligated amount is $11.09 billion.

What is the period of performance?

Start: 2003-10-02. End: 2017-10-31.

What is the track record of The Boeing Company with the Department of Defense on similar aircraft manufacturing contracts?

The Boeing Company has a long and extensive history of contracting with the Department of Defense for a wide array of aircraft and defense systems. They are a primary manufacturer of military aircraft, including fighters, bombers, tankers, and rotorcraft. Historically, Boeing has been a major recipient of DoD contracts, often securing large-value awards. While many of these contracts are highly specialized and may involve limited competition due to the nature of the technology and the limited number of qualified suppliers, the sheer volume and value of their work with the DoD indicate a significant and established relationship. Performance reviews and past issues on specific programs would require a deeper dive into individual contract histories, but their overall position as a key defense industrial base partner is undeniable.

How does the pricing of this contract compare to industry benchmarks for similar aircraft manufacturing services?

Directly comparing the pricing of this $11 billion sole-source contract to industry benchmarks is challenging without access to detailed cost breakdowns and specific aircraft specifications. Sole-source awards inherently lack the price discovery mechanism of competitive bidding, making external benchmarking difficult. Industry benchmarks are typically derived from aggregated data of competitively awarded contracts or publicly available pricing for commercial equivalents, neither of which directly applies here. To assess value, one would need to compare the unit costs or total contract value against historical DoD awards for similar platforms, adjusted for inflation and technological advancements, or against internal cost estimates if available. The absence of competition suggests a higher likelihood of the price being at the higher end of what the market might bear.

What are the primary risks associated with a sole-source award of this magnitude?

The primary risks associated with a sole-source award of this magnitude ($11 billion) include potential cost overruns due to a lack of competitive pressure, reduced innovation as the contractor faces less incentive to improve efficiency or offer new solutions, and a potential for complacency. Taxpayers may bear a higher cost than necessary. Furthermore, a sole-source award can create a dependency on a single supplier, which can be a strategic risk if that supplier faces production issues, financial instability, or geopolitical challenges. The government also loses the opportunity to explore alternative solutions or technologies that might have emerged from a competitive process. Ensuring robust oversight and negotiation becomes even more critical in sole-source situations.

What is the expected program effectiveness and performance outcome for this contract?

The expected program effectiveness and performance outcome for this contract are tied to the Department of Defense's requirements for the specific aircraft being manufactured. As a sole-source award to a major contractor like Boeing, the expectation is that the program will deliver the contracted aircraft according to specifications and schedule, contributing to national defense capabilities. However, without a competitive baseline, assessing 'effectiveness' in terms of exceeding expectations or achieving superior value is difficult. Performance outcomes will be measured against the terms of the firm fixed-price contract, focusing on delivery, quality, and adherence to technical requirements. The long duration suggests a need for sustained performance and potential for program evolution over time.

What have been historical spending patterns for aircraft manufacturing by the Department of Defense?

Historical spending patterns for aircraft manufacturing by the Department of Defense have consistently represented a significant portion of the overall defense budget. The DoD procures a wide range of aircraft, from tactical fighters and bombers to transport planes, helicopters, and surveillance aircraft. Major programs often span decades and involve billions of dollars in investment. Spending is influenced by geopolitical conditions, technological advancements, and strategic priorities. Historically, a substantial portion of this spending has been directed towards a few prime contractors, including Boeing and Lockheed Martin, often through large, multi-year contracts. Sole-source or limited competition awards are not uncommon in this sector due to the specialized nature of the products and the limited number of capable manufacturers.

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

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 2401 E WARDLOW RD, LONG BEACH, CA, 90807

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $10,962,873,620

Exercised Options: $10,963,595,420

Current Obligation: $11,086,769,500

Actual Outlays: $0

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline