DoD awards $281.6M contract to Boeing for aeronautical systems, raising questions about competition

Contract Overview

Contract Amount: $281,558,644 ($281.6M)

Contractor: THE Boeing Company

Awarding Agency: Department of Defense

Start Date: 2006-03-03

End Date: 2008-10-16

Contract Duration: 958 days

Daily Burn Rate: $293.9K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Place of Performance

Location: SAINT LOUIS, ST. LOUIS (CITY) County, MISSOURI, 63166

State: Missouri Government Spending

Plain-Language Summary

Department of Defense obligated $281.6 million to THE BOEING COMPANY for work described as: Key points: 1. Contract awarded to a single, large defense contractor, limiting potential for competitive pricing. 2. Long-term contract duration suggests a need for ongoing support and potential for cost escalation. 3. Fixed-price contract type shifts some risk to the contractor, but scope creep remains a concern. 4. Awarded by the Department of the Air Force, indicating a focus on aviation and defense capabilities. 5. The specific product service code (334511) points to a specialized manufacturing area within the defense sector.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging without detailed cost breakdowns and comparisons to similar sole-source awards. The total value of $281.6 million over its period of performance suggests a significant investment. However, the lack of competition inherently limits the government's ability to secure the best possible price. Without competitive bids, it's difficult to ascertain if the pricing reflects true market value or if there's an opportunity for cost savings through a more open procurement process.

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 a specific capability is only available from a single source, or for follow-on work where competition is not feasible. The lack of multiple bidders means there was no direct price comparison or negotiation driven by competitive pressure, potentially leading to higher costs for the government.

Taxpayer Impact: Sole-source awards mean taxpayers do not benefit from the cost reductions typically achieved through competitive bidding processes. This can result in a higher overall expenditure for the government compared to what might be achieved in an open market scenario.

Public Impact

The primary beneficiaries are the Department of Defense and the U.S. Air Force, receiving critical aeronautical systems. The contract supports the manufacturing and delivery of specialized search, detection, navigation, guidance, and related instruments. The geographic impact is primarily centered around The Boeing Company's facilities in Missouri, contributing to the local economy. This contract likely supports a specialized workforce within the aerospace and defense manufacturing sector.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure on pricing.
Long contract duration increases risk of cost overruns if not managed tightly.
Lack of transparency in sole-source justification requires careful scrutiny.

Positive Signals

Fixed-price contract type provides some cost certainty.
Award to a major defense contractor suggests established capabilities.
Contract supports critical defense systems.

Sector Analysis

This contract falls within the aerospace and defense manufacturing sector, specifically focusing on navigation and guidance systems. This is a highly specialized and capital-intensive industry dominated by a few large players. The market size for such systems is substantial, driven by ongoing defense modernization and technological advancements. Comparable spending benchmarks would involve looking at other sole-source or limited-competition awards for similar complex defense systems.

Small Business Impact

This contract does not appear to involve a small business set-aside. 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 small business participation would depend on Boeing's subcontracting plan and the availability of qualified small businesses for specific components or services required for the contract.

Oversight & Accountability

Oversight for this contract would primarily reside with the Department of Defense and the Department of the Air Force contracting and program management offices. Accountability measures would be embedded in the contract terms, including performance metrics and delivery schedules. Transparency in sole-source procurements can be limited, but the government is expected to maintain records justifying the sole-source decision and monitor contract performance closely. Inspector General jurisdiction would apply if any fraud, waste, or abuse is suspected.

Related Government Programs

Defense Procurement
Aeronautical Systems Manufacturing
Navigation and Guidance Systems
Sole-Source Contracts
Air Force Contracts

Risk Flags

Sole-source award
Lack of competitive bidding
Potential for cost overruns
Limited transparency

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $281.6 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 (Department of the Air Force).

What is the total obligated amount?

The obligated amount is $281.6 million.

What is the period of performance?

Start: 2006-03-03. End: 2008-10-16.

What specific justification was provided for awarding this contract on a sole-source basis to The Boeing Company?

Sole-source awards are typically justified when only one responsible source is capable of providing the required supplies or services. For this contract, the justification would likely stem from Boeing's unique technological capabilities, proprietary designs, or existing infrastructure related to the specific aeronautical systems. The Department of Defense would have conducted a thorough review to ensure no other contractor could meet the requirements, or that competition would not be in the government's best interest due to factors like excessive cost or unacceptable delays. Detailed documentation supporting this justification should be available through federal procurement databases or agency records, outlining the specific reasons why competitive bidding was not pursued.

How does the pricing of this contract compare to similar sole-source awards for comparable systems?

Direct comparison of pricing for sole-source contracts is inherently difficult due to the absence of competitive benchmarks. However, analysts can attempt to compare the per-unit cost or total value against historical sole-source awards for systems with similar complexity, technological sophistication, and intended use within the defense sector. Factors such as the number of units procured, contract duration, and specific performance requirements would need to be normalized. Without access to detailed cost breakdowns and proprietary pricing information, such comparisons remain estimates. The government's contracting officers are responsible for negotiating fair and reasonable prices, often relying on cost-plus-incentive-fee or other mechanisms to manage risk and ensure value, even in sole-source situations.

What are the key performance indicators (KPIs) and risk mitigation strategies associated with this contract?

Key performance indicators for this contract would likely focus on timely delivery of systems, adherence to technical specifications, quality control, and system reliability. Risk mitigation strategies would be embedded within the contract terms and managed by the contracting officer. For a fixed-price contract, the primary risk to the government is potential scope creep or contractor underperformance. Mitigation might include detailed statement of work, phased deliveries with acceptance criteria, robust quality assurance surveillance plans, and clear procedures for change order management. The contractor bears the risk of cost overruns unless specific contract clauses allow for adjustments. Regular program reviews and communication channels are crucial for identifying and addressing risks proactively.

What is the historical spending pattern for similar aeronautical systems by the Department of Defense?

Historical spending on aeronautical systems by the Department of Defense is substantial and spans decades, reflecting the continuous need for advanced aircraft, navigation, and detection technologies. Spending patterns vary significantly based on technological advancements, geopolitical factors, and specific military branch requirements. For navigation and guidance systems specifically, spending has likely increased with the integration of more sophisticated digital technologies, GPS, and autonomous capabilities. Analyzing historical data for similar systems, particularly those procured through sole-source or limited competition, would reveal trends in contract values, durations, and the prevalence of specific contract types. This context helps in evaluating whether the current $281.6 million award is consistent with past investments or represents a significant shift.

What is the potential impact of this contract on future technological development in the aerospace sector?

Contracts of this magnitude awarded to major players like Boeing can significantly influence future technological development. By funding the production of specific systems, the contract validates existing technologies and may spur further innovation in related areas. The government's investment can de-risk the development of cutting-edge technologies, encouraging the contractor to invest in research and development for next-generation systems. Furthermore, the specifications and performance requirements outlined in the contract can set de facto industry standards, guiding the direction of R&D efforts across the sector. However, sole-source awards can also limit broader innovation by concentrating development within a single entity, potentially stifling competition and diverse approaches.

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: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: J S MCDONNELL BLVD, SAINT LOUIS, MO, 90

Business Categories: Category Business, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Contract Characteristics

Cost or Pricing Data: NO

Timeline