Boeing awarded $215M for B-52 CONECT upgrade, a sole-source contract for aircraft manufacturing

Contract Overview

Contract Amount: $215,428,669 ($215.4M)

Contractor: THE Boeing Company

Awarding Agency: Department of Defense

Start Date: 2015-08-28

End Date: 2022-12-30

Contract Duration: 2,681 days

Daily Burn Rate: $80.4K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST NO FEE

Sector: Defense

Official Description: ACAT II - B-52 CONECT FULLL FLEET UPGRADE CONTRACT

Place of Performance

Location: OKLAHOMA CITY, OKLAHOMA County, OKLAHOMA, 73135

State: Oklahoma Government Spending

Plain-Language Summary

Department of Defense obligated $215.4 million to THE BOEING COMPANY for work described as: ACAT II - B-52 CONECT FULLL FLEET UPGRADE CONTRACT Key points: 1. The contract's value of over $215 million represents a significant investment in modernizing a critical strategic asset. 2. As a sole-source award, the absence of competition may limit price negotiation leverage. 3. The contract duration of 2681 days suggests a long-term commitment to the upgrade program. 4. The 'Aircraft Manufacturing' NAICS code indicates a focus on production and integration of complex systems. 5. The contract type 'COST NO FEE' implies that the government bears the cost of performance, with no fee for the contractor. 6. The award was managed by the Defense Contract Management Agency, suggesting robust oversight for this defense-related project.

Value Assessment

Rating: fair

Benchmarking the value of this specific B-52 CONECT upgrade is challenging due to its unique nature and sole-source award. However, the total contract value of over $215 million for a full fleet upgrade indicates a substantial investment. Without competitive bids, it's difficult to definitively assess if the pricing represents optimal value for money. The 'COST NO FEE' contract type means the government covers all costs, which can sometimes lead to higher overall expenditures compared to fixed-price contracts if cost controls are not stringent.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning there was no open competition. This typically occurs when a specific contractor possesses unique capabilities or intellectual property essential for the requirement, or in cases of urgent need where competition is not feasible. The lack of multiple bidders means that price discovery through market forces was not utilized, potentially leading to higher costs than if a competitive process had been employed.

Taxpayer Impact: Taxpayers may have paid a premium due to the absence of competitive bidding. The government did not benefit from the price reductions that often result from multiple companies vying for a contract.

Public Impact

The primary beneficiaries are the United States Air Force, which receives modernized B-52 bombers capable of enhanced communication and data transfer. The services delivered include the integration of the Communications, Navigation, and Targeting (CONECT) system into the B-52 fleet. The geographic impact is national, as the B-52 fleet is a strategic asset for global operations. Workforce implications include specialized roles in aircraft manufacturing, systems integration, and avionics for The Boeing Company and its subcontractors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition, potentially increasing costs for taxpayers.
Cost-plus contract type can incentivize higher spending if not closely managed.
Long contract duration increases exposure to potential cost overruns and schedule delays.
Lack of transparency in pricing due to non-competitive nature.

Positive Signals

Addresses critical modernization needs for a strategic bomber fleet.
Awarded to a known prime contractor with extensive experience in aircraft manufacturing.
Contract managed by Defense Contract Management Agency, implying oversight.
Ensures continued operational capability of a key national defense asset.

Sector Analysis

The defense aerospace sector is characterized by high barriers to entry, significant R&D investment, and long product lifecycles. Contracts for major aircraft upgrades, like the B-52 CONECT, are often awarded to established prime contractors such as Boeing due to their specialized expertise, existing infrastructure, and security clearances. The market for strategic bomber modernization is limited to a few key players globally. This contract fits within the broader category of defense sustainment and modernization, ensuring the longevity and effectiveness of aging but vital platforms.

Small Business Impact

This contract does not appear to have a specific small business set-aside component, as indicated by 'sb: false'. While Boeing, as the prime contractor, may engage small businesses as subcontractors, the primary award was not directed towards small business participation. The absence of a set-aside means that opportunities for small businesses to directly compete for this large-scale defense contract are limited. Subcontracting plans would be crucial for ensuring small business involvement in the execution of this program.

Oversight & Accountability

The contract is managed by the Defense Contract Management Agency (DCMA), which provides contract administration services to the Department of Defense. Oversight mechanisms would include monitoring contractor performance, costs, and adherence to contract terms. Transparency is generally limited in sole-source, cost-plus contracts, but DCMA's role is to ensure accountability. Inspector General jurisdiction would apply to any potential fraud, waste, or abuse related to the contract.

Related Government Programs

B-52 Bomber Modernization Programs
Air Force Avionics and Communication Systems
Strategic Aircraft Upgrades
Defense Contractor Logistics Support

Risk Flags

Sole-source award
Cost-plus contract type
Long contract duration
Potential for cost overruns

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $215.4 million to THE BOEING COMPANY. ACAT II - B-52 CONECT FULLL FLEET UPGRADE CONTRACT

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 $215.4 million.

What is the period of performance?

Start: 2015-08-28. End: 2022-12-30.

What is the track record of The Boeing Company with large-scale defense aircraft modernization contracts?

The Boeing Company has a long and extensive track record in large-scale defense aircraft modernization. They are a primary contractor for numerous military aircraft programs, including upgrades for bombers, fighters, and transport planes. Historically, Boeing has been involved in complex projects requiring significant systems integration, avionics upgrades, and structural modifications. While their experience is vast, like many large defense contractors, they have faced scrutiny over cost overruns and schedule delays on certain high-profile programs. However, their deep expertise in aerospace engineering and manufacturing makes them a go-to provider for critical defense modernization efforts, including the B-52 CONECT program.

How does the 'COST NO FEE' contract type typically impact project costs compared to other contract types?

The 'COST NO FEE' (Cost) contract type is a type of cost-reimbursement contract where the contractor is reimbursed for all allowable costs incurred in performing the contract, but receives no fee or profit. This type of contract is generally used when the level of risk for the contractor is very low, or when the scope of work is not well-defined and requires flexibility. For the government, it means bearing the full financial risk of cost overruns. While it can facilitate rapid start-up and flexibility, it often leads to higher overall costs for the government compared to fixed-price contracts because the contractor has less incentive to control costs. Robust government oversight is crucial to manage expenditures effectively under this contract type.

What are the primary risks associated with a sole-source award for a major defense system upgrade?

The primary risks associated with a sole-source award for a major defense system upgrade include a lack of competitive pricing, which can lead to higher costs for the government and taxpayers. Without competing bids, there is less incentive for the sole contractor to optimize efficiency or reduce profit margins. There's also a potential risk of complacency or reduced innovation from the contractor, as they face no direct competition for follow-on work or future contracts. Furthermore, the government may have less leverage in negotiating contract terms and modifications. This necessitates strong contract management and oversight to mitigate these inherent risks.

What is the historical spending pattern for B-52 modernization efforts prior to this contract?

Historical spending on B-52 modernization efforts has been significant, reflecting the aircraft's long service life and strategic importance. Prior to the CONECT program, the Air Force has invested in various upgrades to maintain the B-52's relevance. These have included improvements to engines, avionics, and weapons systems to extend its operational capability. For instance, the B-52 Re-engining Program (REP) was considered to replace the aging TF33 engines, though it was ultimately canceled. Other upgrades have focused on enhancing situational awareness, communication capabilities, and the ability to carry modern munitions. The cumulative spending across these various sustainment and upgrade initiatives represents a substantial, ongoing investment in the B-52 fleet over decades.

How does the ACAT II designation influence the oversight and approval process for this contract?

The ACAT II (Acquisition Category II) designation signifies that this program falls under a specific level of review and oversight within the Department of Defense acquisition framework. ACAT II programs are typically major defense acquisition programs that exceed certain cost thresholds but are below the highest tier (ACAT I). This designation mandates specific milestone reviews, requires detailed program documentation, and involves higher levels of management approval, including potentially the Under Secretary of Defense for Acquisition and Sustainment. The ACAT II classification ensures that the program undergoes rigorous testing, evaluation, and validation processes to confirm its necessity, cost-effectiveness, and technical feasibility before and during its execution.

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: COST NO FEE (S)

Evaluated Preference: NONE

Contractor Details

Address: 6001 S AIR DEPOT BLVD, OKLAHOMA CITY, OK, 73135

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: $218,691,605

Exercised Options: $218,691,605

Current Obligation: $215,428,669

Actual Outlays: $418,127

Subaward Activity

Number of Subawards: 14

Total Subaward Amount: $8,425,375

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline