Boeing awarded $32M for Link-16 systems, with contract performance extending over 5 years

Contract Overview

Contract Amount: $32,010,577 ($32.0M)

Contractor: THE Boeing Company

Awarding Agency: Department of Defense

Start Date: 2017-09-08

End Date: 2023-06-30

Contract Duration: 2,121 days

Daily Burn Rate: $15.1K/day

Competition Type: NOT COMPETED

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: ACAT II, LINK-16

Place of Performance

Location: OKLAHOMA CITY, OKLAHOMA County, OKLAHOMA, 73135

State: Oklahoma Government Spending

Plain-Language Summary

Department of Defense obligated $32.0 million to THE BOEING COMPANY for work described as: ACAT II, LINK-16 Key points: 1. Value for money is difficult to assess due to the lack of competition and limited public data on unit costs. 2. The sole-source nature of this award limits price discovery and potentially increases costs for the government. 3. Performance risk appears manageable given the contractor's established role in this technology area. 4. The contract spans a significant period, indicating a long-term need for these systems. 5. This contract falls within the Defense sector, specifically supporting aircraft communication systems. 6. The absence of small business participation is noted, with no set-aside provisions. 7. The contract type (Cost Plus Fixed Fee) can incentivize cost overruns if not closely monitored.

Value Assessment

Rating: fair

Benchmarking this contract's value is challenging due to its sole-source nature and the absence of publicly available comparable contract data. The Cost Plus Fixed Fee (CPFF) structure, while common for complex defense systems, carries inherent risks of cost escalation if not rigorously managed. Without competitive bids, it's difficult to ascertain if the pricing reflects optimal value for the government.

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 among multiple vendors. This approach is typically justified when only one vendor possesses the necessary capabilities, technology, or security clearances. The lack of competition means the government did not benefit from a bidding process that could drive down prices through market forces.

Taxpayer Impact: Taxpayers may face higher costs due to the absence of competitive pressure, as the contractor faces less incentive to offer the lowest possible price.

Public Impact

The primary beneficiaries are the Department of Defense, specifically the Air Force, which receives critical communication systems. The services delivered involve the sustainment and potential modification of LINK-16 systems, vital for battlefield awareness and coordination. The geographic impact is primarily within the operational theaters where Air Force assets are deployed. Workforce implications are likely concentrated within The Boeing Company and its direct suppliers.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing.
Cost Plus Fixed Fee contract type can lead to cost overruns.
Lack of transparency in pricing due to sole-source nature.
No small business participation noted.

Positive Signals

Contract supports critical defense communication capabilities.
Long contract duration suggests sustained need and potential for stable support.
Contractor (Boeing) has extensive experience in defense systems.

Sector Analysis

The defense electronics market is characterized by high barriers to entry, specialized technology, and long procurement cycles. LINK-16 systems are a mature but essential component of military communication networks, enabling secure data exchange among various platforms. Spending in this sub-sector is driven by modernization efforts and the need for interoperability. Comparable spending benchmarks are difficult to establish due to the proprietary nature of many defense contracts and the unique specifications of each system.

Small Business Impact

This contract does not appear to include any small business set-aside provisions, nor is there information suggesting significant subcontracting opportunities for small businesses. The sole-source nature of the award further limits the potential for small business involvement, as the primary contract is directly with a large prime contractor. This could mean missed opportunities to leverage the innovation and agility of the small business defense industrial base.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Defense's contracting and program management offices. Accountability measures are inherent in the CPFF contract type, requiring the contractor to justify costs and meet performance milestones. Transparency is limited due to the sole-source award and the classified nature of some defense systems. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Tactical Data Links
Airborne Communication Systems
Defense Information Systems
Joint All-Domain Command and Control (JADC2)

Risk Flags

Sole-source award
Cost Plus Fixed Fee contract type
Lack of competitive bidding
Potential for cost overruns

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $32.0 million to THE BOEING COMPANY. ACAT II, LINK-16

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 $32.0 million.

What is the period of performance?

Start: 2017-09-08. End: 2023-06-30.

What is the historical spending trend for LINK-16 systems by the Department of Defense?

Historical spending on LINK-16 systems by the Department of Defense has been substantial over the years, reflecting the system's critical role in military operations. While specific figures for LINK-16 alone are often embedded within broader communication or platform sustainment budgets, the total investment runs into billions of dollars cumulatively. This spending covers initial procurement, upgrades, sustainment, and training across various branches of the military. The trend generally shows consistent investment, with peaks during periods of major conflict or significant technological upgrades. The $32 million awarded in this specific contract represents a portion of the ongoing sustainment and potential modernization efforts for these vital systems.

How does the Cost Plus Fixed Fee (CPFF) contract type compare to other contract types in terms of cost control for defense procurements?

The Cost Plus Fixed Fee (CPFF) contract type is often used for research and development or complex system acquisitions where cost estimation is difficult. It allows the contractor to recover all allowable costs plus a predetermined fixed fee representing profit. While it facilitates the initiation of work when costs are uncertain, it offers less incentive for cost efficiency compared to fixed-price contracts. Cost control relies heavily on robust government oversight, detailed cost accounting, and stringent auditing. Compared to Firm-Fixed-Price (FFP) contracts, CPFF shifts more cost risk to the government. However, it can be more appropriate than Cost-Plus-Incentive-Fee (CPIF) if performance incentives are hard to define or when the primary goal is to ensure system availability and functionality over aggressive cost reduction.

What are the primary risks associated with sole-source defense contracts like this one?

Sole-source defense contracts carry several significant risks. The most prominent is the lack of price competition, which can lead to inflated costs for the government as the contractor faces no market pressure to offer the lowest price. This can result in a suboptimal return on investment for taxpayers. Another risk is reduced innovation; without competitive pressure, contractors may have less incentive to develop more cost-effective or technologically superior solutions. Furthermore, sole-source awards can create vendor lock-in, making it difficult and expensive to switch providers in the future. Dependence on a single supplier can also introduce supply chain risks if that supplier encounters financial difficulties or production issues.

What is the typical performance track record of The Boeing Company on similar defense contracts?

The Boeing Company has a long and extensive track record of performing complex defense contracts for the U.S. Department of Defense and international allies. They are a major prime contractor across numerous platforms, including aircraft, rotorcraft, and sophisticated electronic systems. Historically, Boeing has demonstrated capability in delivering advanced technological solutions, often involving large-scale, multi-year programs. While specific performance metrics for individual contracts are not always public, Boeing's continued selection for major defense programs suggests a generally satisfactory performance history. However, like any large defense contractor, they have faced scrutiny and challenges on specific programs related to cost overruns, schedule delays, and technical issues, underscoring the importance of robust government oversight.

How does the ACAT II designation impact the oversight and management of this contract?

The ACAT II (Acquisition Category II) designation indicates that this program falls under a specific level of review and oversight within the Department of Defense acquisition framework. ACAT II programs are typically significant in terms of cost and complexity, requiring milestone reviews by senior officials and adherence to specific acquisition policies. This designation mandates a structured approach to program management, including detailed planning, rigorous testing, and regular reporting. It implies that the program office must demonstrate program maturity and cost-effectiveness at key decision points. While not as stringent as ACAT I programs (which involve the highest levels of cost and strategic importance), ACAT II ensures a substantial degree of oversight to manage risks and ensure the program meets its objectives within defined parameters.

Industry Classification

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

Product/Service Code: INSTRUMENTS AND LABORATORY EQPT

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Pricing Type: COST PLUS FIXED FEE (U)

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: $32,010,577

Exercised Options: $32,010,577

Current Obligation: $32,010,577

Actual Outlays: $348,690

Subaward Activity

Number of Subawards: 12

Total Subaward Amount: $2,892,552

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: FA862810D1000

IDV Type: IDC

Timeline