Boeing's $251.7M SBSS Block 10 Maintenance Contract Awarded Sole Source by DoD

Contract Overview

Contract Amount: $251,701,171 ($251.7M)

Contractor: THE Boeing Company

Awarding Agency: Department of Defense

Start Date: 2008-06-24

End Date: 2015-06-20

Contract Duration: 2,552 days

Daily Burn Rate: $98.6K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS AWARD FEE

Sector: Defense

Official Description: SBSS BLOCK 10 MAINTENANCE&OPERATIONS

Place of Performance

Location: SEAL BEACH, ORANGE County, CALIFORNIA, 90740

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $251.7 million to THE BOEING COMPANY for work described as: SBSS BLOCK 10 MAINTENANCE&OPERATIONS Key points: 1. Contract awarded on a sole-source basis, raising questions about potential price inflation and lack of competitive pressure. 2. Significant duration of over 2500 days suggests a long-term reliance on a single provider. 3. Award type 'Cost Plus Award Fee' can incentivize contractor performance but also carries inherent cost-plus risks. 4. The contract falls under 'Other Guided Missile and Space Vehicle Parts and Auxiliary Equipment Manufacturing,' a specialized sector. 5. High dollar value indicates critical support for a significant defense program. 6. Lack of competition may limit opportunities for innovative solutions from other vendors.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to its sole-source nature and specialized domain. Without competitive bids, it's difficult to ascertain if the $251.7 million represents a fair market price. The 'Cost Plus Award Fee' structure means the final cost could exceed initial estimates, depending on performance metrics. Compared to similar sole-source maintenance contracts in highly specialized defense sectors, the pricing might be within a typical range, but the absence of competition prevents a definitive value-for-money assessment.

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. The Department of Defense likely justified this by citing reasons such as unique capabilities, proprietary technology, or the need for continuity of operations with an existing provider. The lack of competition means there were no other bidders, and therefore no direct price comparison or negotiation leverage that would typically arise from a competitive bidding process.

Taxpayer Impact: Taxpayers may have paid a premium due to the absence of competitive pressure. Without competing offers, the government had limited ability to negotiate the lowest possible price, potentially leading to higher overall expenditure.

Public Impact

The primary beneficiaries are the Department of Defense, ensuring the continued operation and maintenance of the SBSS Block 10 system. Services delivered include essential maintenance and operational support for a critical space-based defense asset. The geographic impact is likely global, given the nature of space-based surveillance systems, though direct operational sites may be concentrated. Workforce implications include the continued employment of specialized personnel by The Boeing Company to support this contract.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive opportunities and potentially inflates costs.
Long contract duration (over 7 years) may indicate a lack of market dynamism or vendor lock-in.
Cost-plus award fee structure introduces inherent risk of cost overruns.
Lack of transparency in sole-source justification can obscure true necessity.
Specialized nature of the equipment may create barriers to entry for potential competitors.

Positive Signals

Boeing's established track record in aerospace and defense likely ensures reliable service delivery.
Award fee structure incentivizes performance, potentially leading to high-quality maintenance.
Continuity of operations is maintained for a critical national security asset.
Specialized expertise is retained within the contractor, crucial for complex systems.

Sector Analysis

The aerospace and defense sector is characterized by high barriers to entry, significant R&D investment, and often, government-driven procurement. Contracts for specialized systems like space vehicles and their support are typically awarded to a limited number of prime contractors with proven capabilities. The market size for such specialized maintenance and operations is substantial, driven by national security imperatives. This contract fits within the 'Guided Missile and Space Vehicle Parts' manufacturing sub-sector, which demands highly technical expertise and adherence to stringent quality and security standards.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. Furthermore, the 'ss': false flag suggests it was not specifically designated for small businesses. Given the sole-source nature and the specialized domain of space vehicle maintenance, it is unlikely that significant subcontracting opportunities for small businesses would be mandated or readily available, unless Boeing proactively engages them for specific components or services not directly related to the core sole-source justification.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contracting and program management offices, potentially including the Defense Contract Management Agency (DCMA) given the agency listed. Accountability measures are embedded within the 'Cost Plus Award Fee' structure, which links contractor payment to performance metrics. Transparency is limited due to the sole-source nature, but contract modifications and performance reports would be subject to internal DoD review and potentially Freedom of Information Act (FOIA) requests, albeit with redactions for sensitive information. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Space Surveillance Systems
Missile Defense Programs
Satellite Operations and Maintenance
Defense Logistics Agency Support Contracts
Aerospace Manufacturing and Support

Risk Flags

Sole Source Justification
Cost Plus Contract Risk
Lack of Competition
Long Contract Duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $251.7 million to THE BOEING COMPANY. SBSS BLOCK 10 MAINTENANCE&OPERATIONS

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 $251.7 million.

What is the period of performance?

Start: 2008-06-24. End: 2015-06-20.

What specific performance metrics are used in the 'Cost Plus Award Fee' structure for this contract, and how do they ensure value for money?

The specific performance metrics for the Cost Plus Award Fee (CPAF) structure are not publicly detailed in the provided data. Typically, CPAF contracts link a portion of the contractor's fee to achieving specific performance objectives, which can include factors like on-time delivery, quality standards, technical performance, and cost control. For this SBSS Block 10 Maintenance & Operations contract, these metrics would likely be tailored to ensure the reliability, availability, and operational readiness of the space-based system. The 'award' portion of the fee is earned if the contractor meets or exceeds these predefined targets. While CPAF aims to incentivize performance, the 'cost-plus' element means the government pays the allowable costs plus a fee, which can lead to higher total costs compared to fixed-price contracts if costs are not well-managed or if the performance targets are not sufficiently stringent to offset potential cost increases.

Given the sole-source nature, what justification did the Department of Defense provide for not competing this contract?

The provided data indicates the contract was 'NOT COMPETED,' which is synonymous with a sole-source award. While the specific justification is not detailed, common reasons for sole-source procurements in defense include: 1) Unique capabilities or proprietary technology held exclusively by one contractor (e.g., Boeing's specific expertise or intellectual property related to the SBSS Block 10 system). 2) Essential follow-on support for highly specialized equipment where only the original manufacturer can provide necessary maintenance, parts, or upgrades. 3) Urgent and compelling needs where competition is not feasible within the required timeframe. For a system like SBSS Block 10, it's probable that Boeing's intimate knowledge of the system's design, manufacturing, and operational requirements made them the only viable option for ensuring continuity and avoiding significant risks associated with transitioning to a new provider.

How does the contract duration of over 2500 days (approximately 7 years) impact the overall cost and potential for innovation?

A contract duration of over 2500 days (approximately 7 years) for maintenance and operations suggests a long-term commitment to a specific system and provider. From a cost perspective, such long durations can offer stability and predictability, potentially allowing for economies of scale in planning and resource allocation. However, it also carries risks: 1) Price escalation: Over an extended period, costs for labor, materials, and overhead can increase, and without periodic re-competition, these increases may not be fully mitigated by market forces. 2) Vendor lock-in: The government becomes heavily reliant on the incumbent contractor, making it difficult and potentially costly to switch providers even if better alternatives emerge. 3) Stifled innovation: A long-term sole-source contract may reduce the incentive for the incumbent to innovate aggressively, as there is less competitive pressure to develop more efficient or advanced solutions. Conversely, it allows the contractor to amortize investments over a longer period.

What are the potential risks associated with awarding a 'Cost Plus Award Fee' contract for a critical defense system?

The 'Cost Plus Award Fee' (CPAF) contract type carries specific risks, particularly for critical defense systems. The primary risk is that the 'cost-plus' nature means the government agrees to reimburse the contractor for all allowable costs incurred, plus a fee. This can lead to cost overruns if the contractor's cost management is weak or if unforeseen issues drive up expenses. Unlike fixed-price contracts, there is less direct financial incentive for the contractor to control costs rigorously, as they are generally reimbursed. The 'award fee' component is intended to mitigate this by providing an additional incentive for meeting or exceeding performance targets. However, the effectiveness of this fee depends heavily on how well the performance metrics are defined and measured. If the metrics are poorly defined or easily achieved, the award fee might not adequately compensate for cost inefficiencies, potentially leading to a higher total contract price than anticipated.

Can we compare the per-unit cost or overall value of this contract to similar SBSS Block 10 maintenance contracts or other space-based defense systems?

Direct comparison of the per-unit cost or overall value of this $251.7 million SBSS Block 10 Maintenance & Operations contract is extremely difficult, primarily because it was awarded sole-source and pertains to a highly specialized defense system. Publicly available data rarely includes granular cost breakdowns or performance metrics for such sensitive programs. Furthermore, comparing it to 'similar' contracts is challenging due to the unique nature of space-based defense assets, their technological complexity, and the specific operational requirements. Benchmarking would ideally involve comparing costs against industry standards for similar maintenance services or against previous contracts for the same system. However, the sole-source award inherently limits the ability to establish a competitive market price. Without access to detailed cost data, performance reports, and comparable sole-source or competed contracts within the niche of space-based surveillance maintenance, a robust value-for-money assessment against benchmarks remains elusive.

Industry Classification

NAICS: Manufacturing › Aerospace Product and Parts Manufacturing › Other Guided Missile and Space Vehicle Parts and Auxiliary Equipment Manufacturing

Product/Service Code: RESEARCH AND DEVELOPMENT › Space R&D Services

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: COST PLUS AWARD FEE (R)

Evaluated Preference: NONE

Contractor Details

Address: 2201 SEAL BEACH BLVD, SEAL BEACH, CA, 90740

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Manufacturer of Goods, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $293,467,862

Exercised Options: $293,467,862

Current Obligation: $251,701,171

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline