DoD awards $15B+ to Boeing for aircraft systems, with limited competition and long duration

Contract Overview

Contract Amount: $15,047,344 ($15.0M)

Contractor: THE Boeing Company

Awarding Agency: Department of Defense

Start Date: 2005-01-14

End Date: 2010-08-08

Contract Duration: 2,032 days

Daily Burn Rate: $7.4K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Place of Performance

Location: SAINT LOUIS, SAINT LOUIS County, MISSOURI, 63134

State: Missouri Government Spending

Plain-Language Summary

Department of Defense obligated $15.0 million to THE BOEING COMPANY for work described as: Key points: 1. Contract awarded through a sole-source mechanism, raising questions about price discovery and potential cost efficiencies. 2. The contract's extended duration of over 2000 days suggests a long-term need for these critical aircraft systems. 3. Performance is managed by the Defense Contract Management Agency, indicating significant oversight for this high-value award. 4. The specific product service code is not provided, making direct comparisons to similar procurements challenging. 5. Boeing's established role as a major defense contractor positions them to fulfill this complex requirement.

Value Assessment

Rating: questionable

The total award amount of over $15 billion over a period of more than five years presents a significant financial commitment. Without a competitive bidding process, it is difficult to benchmark the value for money. The cost-plus-fixed-fee structure allows for cost reimbursement plus a fixed fee, which can incentivize contractors to incur costs. However, it also carries the risk of cost overruns if not managed tightly. Further analysis would require detailed cost breakdowns and comparison to similar sole-source awards for comparable systems.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one bidder, The Boeing Company, was solicited. This approach is typically used when only one responsible source is available or when a compelling justification exists for excluding competition. The lack of competition means that the government did not benefit from the price reductions and innovations that typically arise from a competitive bidding process.

Taxpayer Impact: Sole-source awards can lead to higher prices for taxpayers as there is no competitive pressure to drive down costs. This necessitates robust government oversight to ensure fair pricing and prevent potential overspending.

Public Impact

The primary beneficiaries are the Department of Defense, which receives critical aircraft systems for its operations. The contract supports the manufacturing and sustainment of specialized aircraft systems essential for national security. The geographic impact is primarily centered around Boeing's facilities in Missouri, where the contract is managed. This contract likely supports a significant number of jobs within The Boeing Company and its supply chain.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure, potentially leading to higher costs for taxpayers.
Cost-plus-fixed-fee contract type can incentivize cost incurrence without guaranteed efficiency.
Long contract duration increases exposure to potential cost escalations and technological obsolescence.
Lack of detailed product service code hinders direct benchmarking against similar systems.

Positive Signals

Award to a prime defense contractor with extensive experience in aircraft systems.
Contract managed by the Defense Contract Management Agency, suggesting established oversight protocols.
Definitive contract type provides a framework for a long-term relationship.

Sector Analysis

This contract falls within the aerospace and defense manufacturing sector, specifically focusing on the production and sustainment of aircraft systems. This sector is characterized by high barriers to entry, significant R&D investment, and long product lifecycles. The market is dominated by a few large prime contractors, including Boeing. Comparable spending benchmarks are difficult to establish without more specific details on the system being procured, but multi-billion dollar awards for complex defense platforms are not uncommon within this sector.

Small Business Impact

There is no indication that this contract includes small business set-asides. As a sole-source award to a large prime contractor, the primary impact on small businesses would be through potential subcontracting opportunities. The extent of these opportunities would depend on Boeing's subcontracting plan and the specific components and services required for the aircraft systems.

Oversight & Accountability

The contract is managed by the Defense Contract Management Agency (DCMA), which is responsible for overseeing contract performance, ensuring compliance, and verifying costs. The cost-plus-fixed-fee structure necessitates rigorous financial oversight to monitor expenditures and the reasonableness of the fixed fee. Transparency is enhanced through DCMA's reporting and audit functions, though specific details of the cost structure may be proprietary.

Related Government Programs

Aircraft Manufacturing
Defense Procurement
Aeronautical Systems
Navigation Systems
Guidance Systems

Risk Flags

Sole-source award
Cost-plus-fixed-fee contract type
Long contract duration
Lack of specific system details

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $15.0 million 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 $15.0 million.

What is the period of performance?

Start: 2005-01-14. End: 2010-08-08.

What is the specific type of aircraft system being procured under this contract?

The provided data indicates the contract is for 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' (NAICS 334511). However, it does not specify the exact type of aircraft system. This could range from components for existing platforms to entirely new systems. Without this specific detail, it is challenging to assess the technological advancement, operational necessity, and potential risks associated with the system's development or production. Further clarification on the system's function and application would allow for a more precise analysis of its strategic importance and value.

How does the cost-plus-fixed-fee (CPFF) structure compare to other contract types for similar sole-source procurements?

The Cost-Plus-Fixed-Fee (CPFF) contract type is often used for research and development or complex systems where costs are difficult to estimate accurately upfront. For sole-source procurements, CPFF can provide flexibility but also carries risks of cost overruns, as the contractor is reimbursed for all allowable costs plus a predetermined profit (the fixed fee). In sole-source situations, agencies often attempt to negotiate a fair and reasonable fixed fee based on industry benchmarks and the contractor's performance history. However, without competition, the government lacks the leverage to drive down costs as effectively as in a fully competed scenario. Other contract types like cost-plus-incentive-fee (CPIF) might offer better incentives for cost control, while fixed-price contracts (if feasible) would shift more risk to the contractor.

What is Boeing's historical performance record with similar sole-source Department of Defense contracts?

The provided data does not include specific performance metrics or historical contract details for The Boeing Company. However, as a major defense contractor, Boeing has a long and extensive history of performing large-scale, complex contracts with the Department of Defense. Their track record generally includes the delivery of major aircraft platforms and systems. Assessing their performance on similar sole-source contracts would require a review of past contract awards, on-time delivery rates, cost performance relative to initial estimates, and any documented issues or disputes. A comprehensive analysis would involve examining data from sources like the Federal Procurement Data System (FPDS) and potentially Inspector General reports.

What are the potential risks associated with the long duration (2032 days) of this contract?

A contract duration of 2032 days (approximately 5.5 years) introduces several potential risks. Firstly, technological obsolescence is a significant concern; systems developed or manufactured over such a long period may become outdated before their intended service life is complete, especially in rapidly evolving fields like navigation and guidance. Secondly, economic risks, such as inflation and fluctuations in material costs, can impact the total cost of the contract, even with a fixed fee, if not adequately managed through contract clauses. Thirdly, there's a risk of scope creep or evolving requirements that may not be fully captured in the initial contract, leading to change orders and potential cost increases. Finally, maintaining contractor focus and performance over an extended period requires continuous oversight and effective program management.

How does the $15 billion award compare to overall Department of Defense spending on aircraft systems?

The $15 billion award represents a substantial investment within the Department of Defense's overall budget. While specific figures for 'aircraft systems' can vary depending on categorization, DoD spending typically runs into hundreds of billions of dollars annually. This single contract, awarded to Boeing, likely constitutes a significant portion of the budget allocated to a particular category of aircraft systems or components. To provide a precise comparison, one would need to analyze the DoD's historical spending reports and budget justifications for the specific fiscal years covered by this contract, and then isolate expenditures related to similar types of aircraft systems. This would help determine if this award is an outlier or a typical investment for such capabilities.

Industry Classification

NAICS: Manufacturing › Navigational, Measuring, Electromedical, and Control Instruments Manufacturing › Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing

Product/Service Code: AMMUNITION AND EXPLOSIVES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Address: J S MCDONNELL BLVD, SAINT LOUIS, MO, 63166

Business Categories: Category Business, Not Designated a Small Business

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline