DoD's $38.8M sole-source contract for Rolls-Royce engines raises value and competition concerns

Contract Overview

Contract Amount: $38,756,334 ($38.8M)

Contractor: Rolls-Royce Deutschland Ltd & CO KG

Awarding Agency: Department of Defense

Start Date: 2021-03-12

End Date: 2022-03-12

Contract Duration: 365 days

Daily Burn Rate: $106.2K/day

Competition Type: NOT COMPETED

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: BACN E-11A SPARE ENGINES - ROLLS ROYCE BR710 A2-20

Plain-Language Summary

Department of Defense obligated $38.8 million to ROLLS-ROYCE DEUTSCHLAND LTD & CO KG for work described as: BACN E-11A SPARE ENGINES - ROLLS ROYCE BR710 A2-20 Key points: 1. The contract was awarded on a sole-source basis, limiting competitive pressure and potentially impacting price. 2. A single awardee, Rolls-Royce Deutschland, suggests a lack of market competition for these specific spare engines. 3. The firm fixed-price contract type shifts risk to the contractor, but the absence of competition is a key concern. 4. Performance duration is one year, indicating a need for ongoing supply rather than a long-term strategic acquisition. 5. The contract falls under Aircraft Engine and Engine Parts Manufacturing, a specialized sector. 6. No small business set-aside was utilized, which is typical for high-value, specialized defense procurements.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging without more data on specific engine models and market rates. However, the sole-source nature of the award inherently limits the government's ability to secure the best possible price through competitive bidding. While firm fixed-price contracts are generally favorable for cost control, the lack of competition means the government may not be realizing optimal value for money. Further analysis would require comparing this price to historical sole-source awards for similar components or to prices obtained through competitive processes for comparable engine parts.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded using a sole-source justification, meaning it was not competed. This typically occurs when only one responsible source can provide the required goods or services. The lack of competition means that the government did not solicit bids from multiple vendors, which can limit price discovery and potentially lead to higher costs than if the contract had been competed. The absence of a competitive process here is a significant factor in assessing the overall value and efficiency of this procurement.

Taxpayer Impact: Taxpayers may be paying a premium due to the absence of competitive bidding. The government's ability to negotiate favorable terms and pricing is diminished when only one supplier is considered.

Public Impact

The primary beneficiary is the Department of the Air Force, ensuring operational readiness of aircraft. The service delivered is the provision of spare engines for specific aircraft, crucial for maintenance and flight operations. The geographic impact is likely concentrated around Air Force bases where these aircraft are operated and maintained. Workforce implications are minimal for the public, but critical for the maintenance crews and supply chain supporting these engines.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition and potential cost savings for taxpayers.
Lack of transparency in pricing due to no competitive bidding process.
Dependence on a single supplier for critical aircraft components can create supply chain risks.

Positive Signals

Firm fixed-price contract shifts cost overrun risk to the contractor.
Ensures availability of critical spare parts for Air Force operational readiness.

Sector Analysis

The aerospace and defense sector is characterized by high barriers to entry, specialized manufacturing capabilities, and significant R&D investment. Contracts for aircraft engines and parts are often awarded to a limited number of prime manufacturers due to proprietary technology and complex supply chains. The market for specific engine spare parts can be highly concentrated, with original equipment manufacturers often holding exclusive rights. This contract fits within the 'Aircraft Engine and Engine Parts Manufacturing' sub-sector, which is a critical component of the broader aerospace industry.

Small Business Impact

This contract was not set aside for small businesses, nor does it appear to involve significant subcontracting opportunities for small businesses based on the information provided. Large, specialized defense procurements like this are typically awarded to prime contractors with the necessary technical expertise and manufacturing capacity, often excluding smaller firms unless they are part of a larger supply chain managed by the prime. The absence of small business participation in this specific award is not unusual for this type of high-value, sole-source defense contract.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contracting and financial management systems. Accountability measures are inherent in the firm fixed-price contract type, which obligates the contractor to deliver specified goods at an agreed-upon price. Transparency is limited due to the sole-source nature of the award, making public scrutiny of pricing and justification more difficult. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Aircraft Engine Maintenance and Repair
Defense Logistics Agency (DLA) Spare Parts Procurement
Air Force Materiel Command (AFMC) Contracts
Rolls-Royce Aerospace Group Spending

Risk Flags

Sole-source award
Lack of competition
Potential for inflated pricing
Supply chain dependency on a single vendor

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $38.8 million to ROLLS-ROYCE DEUTSCHLAND LTD & CO KG. BACN E-11A SPARE ENGINES - ROLLS ROYCE BR710 A2-20

Who is the contractor on this award?

The obligated recipient is ROLLS-ROYCE DEUTSCHLAND LTD & CO KG.

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 $38.8 million.

What is the period of performance?

Start: 2021-03-12. End: 2022-03-12.

What is the track record of Rolls-Royce Deutschland Ltd & Co KG with the Department of Defense?

Rolls-Royce Deutschland Ltd & Co KG, a subsidiary of the global Rolls-Royce plc, has a long-standing relationship with the Department of Defense, particularly the Air Force, as a key supplier of engines and spare parts for various aircraft platforms. Historical data indicates numerous contracts awarded for engine components, maintenance, and overhaul services. While specific performance metrics for past contracts are not detailed here, the company's continued selection for critical defense procurements suggests a generally accepted capability and reliability. However, the frequency and value of sole-source awards compared to competed contracts would be a key area for further investigation to assess consistent value for taxpayer money.

How does the price of these spare engines compare to similar contracts or market rates?

Direct comparison of the $38.8 million total contract value to similar contracts or market rates is difficult without specific details on the exact engine models, quantities, and configurations procured. However, the fact that this was a sole-source award suggests that competitive benchmarking was not performed. Typically, sole-source procurements may result in prices higher than those achieved through open competition. To assess value, one would need to compare this award to previous sole-source awards for the same or comparable parts, or to prices obtained by other government agencies or commercial entities for similar Rolls-Royce engines, if such data is publicly available. The absence of competition inherently limits the ability to confirm optimal pricing.

What are the primary risks associated with this sole-source contract?

The primary risks associated with this sole-source contract are centered around cost and supply chain. Without competition, there is a reduced incentive for the contractor to offer the lowest possible price, potentially leading to overpayment by the government. Furthermore, reliance on a single supplier for critical spare engines can create vulnerabilities in the supply chain. Any disruption in production or delivery by Rolls-Royce Deutschland could directly impact the operational readiness of the Air Force's aircraft. The government also has less leverage in negotiating terms and conditions compared to a competitive scenario.

What is the historical spending pattern for BACN E-11A spare engines?

Analyzing the historical spending pattern for BACN E-11A spare engines requires access to comprehensive contract databases. This specific contract, valued at $38.8 million, covers the period from March 2021 to March 2022. Without further data, it's difficult to establish a long-term trend. However, the sole-source nature of this award suggests that such procurements may be recurring needs for specific, potentially specialized, aircraft components. Understanding the total expenditure on these engines over multiple years, and whether previous awards were also sole-source or competed, would provide crucial context for assessing the overall investment and potential for cost efficiencies.

What is the justification for awarding this contract on a sole-source basis?

The justification for awarding this contract on a sole-source basis typically stems from specific circumstances outlined in federal acquisition regulations (FAR). Common reasons include the existence of only one responsible source capable of providing the required spare engines, such as when the parts are proprietary to the original equipment manufacturer (OEM) and no authorized distributors or alternative suppliers exist. Another possibility is that the requirement is a follow-on to a previous contract where competition is not feasible or cost-effective. The specific justification document for this contract would detail the rationale, such as unique technical requirements, urgent needs, or the unavailability of competitive options for these particular Rolls-Royce BR710 A2-20 engines.

Industry Classification

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

Product/Service Code: AEROSPACE CRAFT AND STRUCTURAL COMPONENTS

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Rolls-Royce Holdings PLC

Address: ESCHENWEG 11OT DAHLEWITZ, BLANKENFELDE-MAHLOW

Business Categories: Category Business, Foreign Owned, International Organization, Not Designated a Small Business, Special Designations

Financial Breakdown

Contract Ceiling: $38,756,334

Exercised Options: $38,756,334

Current Obligation: $38,756,334

Contract Characteristics

Commercial Item: COMMERCIAL ITEM

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: FA872621D0004

IDV Type: IDC

Timeline