DoD awards $33.8M firm-fixed-price contract to General Electric for aircraft engines, raising value-for-money questions

Contract Overview

Contract Amount: $33,820,400 ($33.8M)

Contractor: General Electric Company

Awarding Agency: Department of Defense

Start Date: 2005-12-23

End Date: 2007-12-31

Contract Duration: 738 days

Daily Burn Rate: $45.8K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: 200608!330868!1700!N00383!NAVAL INVENTORY CONTROL POINT !FA810405G0003 !A!N! !N!GB19 ! !20051223!20060930!001408509!001408509!001367960!N!GENERAL ELECTRIC COMPANY !1000 WESTERN AVE !LYNN !MA!01905!37490!009!25!LYNN !ESSEX !MASS !+000034000000!N!N!000000000000!2840!GAS TURBINES AND JET ENGINES, ACFT & COMPS !A1B!AIRCRAFT ENGINES AND SPARES !000 !NOT DISCERNABLE !336412!E! !4! ! ! ! ! !99990909!B! ! !A! !D!U!J!1!001!N!1A!A!Y!Z! ! !N!C!N! ! ! !A!A!A!A!000!A!C!Y! ! ! ! !1700!N00383!0001! !

Place of Performance

Location: LYNN, ESSEX County, MASSACHUSETTS, 01905

State: Massachusetts Government Spending

Plain-Language Summary

Department of Defense obligated $33.8 million to GENERAL ELECTRIC COMPANY for work described as: 200608!330868!1700!N00383!NAVAL INVENTORY CONTROL POINT !FA810405G0003 !A!N! !N!GB19 ! !20051223!20060930!001408509!001408509!001367960!N!GENERAL ELECTRIC COMPANY !1000 WESTERN AVE !LYNN !MA!01905!37490!009!25!LYNN !ESSE… Key points: 1. Contract awarded on a non-competitive basis, limiting price discovery and potentially increasing costs. 2. Significant contract value for aircraft engines suggests a critical component for military operations. 3. Long contract duration of 738 days may indicate complex requirements or potential for cost overruns. 4. The firm-fixed-price structure shifts risk to the contractor, but without competition, the baseline price is unverified. 5. Geographic concentration in Massachusetts for the contractor warrants monitoring for regional economic impact. 6. The specific product code for aircraft engines points to a specialized and high-value defense procurement.

Value Assessment

Rating: questionable

The contract value of $33.8 million for aircraft engines is substantial. Without competitive bidding, it is difficult to benchmark the pricing against market rates or similar contracts. The firm-fixed-price (FFP) type is generally favorable for cost control, but the lack of competition here means the initial price may not reflect true value-for-money. Further analysis would require access to historical pricing data for similar GE engines or comparable products from other manufacturers.

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 significantly limits the government's ability to solicit bids from multiple vendors and secure the most advantageous pricing. The absence of competition raises concerns about whether the government obtained the best possible value. It is unclear why this contract was not competed, which could be due to factors like proprietary technology, urgent need, or lack of available alternatives.

Taxpayer Impact: Taxpayers may have paid a premium for these aircraft engines due to the lack of competitive pressure to drive down costs. Without a competitive process, there is a higher risk that the awarded price is not the lowest achievable.

Public Impact

The primary beneficiaries are likely components of the U.S. military that utilize these specific aircraft engines for their operations. The contract delivers critical aircraft engine components, essential for maintaining the operational readiness of military aircraft. The geographic impact is concentrated in Lynn, Massachusetts, where General Electric's facility is located, potentially supporting local employment and economic activity. Workforce implications include the utilization of skilled labor in advanced manufacturing and aerospace engineering at General Electric.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition raises concerns about potential overpricing and reduced value for taxpayer funds.
Sole-source awards can stifle innovation by not encouraging other companies to develop competing products.
The long contract duration could lead to scope creep or unforeseen cost increases if not managed tightly.
Dependence on a single supplier for critical components can create supply chain vulnerabilities.

Positive Signals

Firm-fixed-price contract shifts cost overrun risk to the contractor.
General Electric is a well-established manufacturer with a track record in aerospace, suggesting technical capability.
The contract supports the operational readiness of military assets, a key government objective.

Sector Analysis

The aerospace and defense sector is characterized by high barriers to entry, significant R&D investment, and long product development cycles. Aircraft engines represent a critical and high-value segment within this industry. Spending in this area is often driven by military modernization programs and sustainment requirements. Comparable spending benchmarks would typically involve analyzing other large-scale engine procurements for military aircraft, which are often sole-sourced or limited competition due to specialized requirements and contractor capabilities.

Small Business Impact

This contract does not appear to have a small business set-aside component, as it was awarded to a large corporation, General Electric. There is no explicit information regarding subcontracting plans for small businesses within this award. The focus on a large prime contractor for such a specialized item suggests that opportunities for small businesses might be limited to lower-tier supply chain roles, if any.

Oversight & Accountability

Oversight for this contract would fall under the Department of Defense's contract management structure, likely through the Defense Contract Management Agency (DCMA). Accountability measures are typically embedded in the contract terms, including performance standards and delivery schedules. Transparency is limited due to the sole-source nature of the award; however, contract award data is publicly available through federal procurement databases. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Aircraft Engine Procurement
Defense Logistics Agency Contracts
Naval Aviation Support Contracts
General Electric Defense Contracts

Risk Flags

Sole-source award
Lack of competition
Potential for overpricing
Long contract duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $33.8 million to GENERAL ELECTRIC COMPANY. 200608!330868!1700!N00383!NAVAL INVENTORY CONTROL POINT !FA810405G0003 !A!N! !N!GB19 ! !20051223!20060930!001408509!001408509!001367960!N!GENERAL ELECTRIC COMPANY !1000 WESTERN AVE !LYNN !MA!01905!37490!009!25!LYNN !ESSEX !MASS !+000034000000!N!N!000000000000!2840!GAS TURBINES AND JET ENGINES, ACFT & COMPS !A1B!AIRCRAFT ENGINES AND SPARES !000 !NOT DISCERNABLE !336412!E! !4! ! ! ! ! !999

Who is the contractor on this award?

The obligated recipient is GENERAL ELECTRIC 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 $33.8 million.

What is the period of performance?

Start: 2005-12-23. End: 2007-12-31.

What is General Electric's track record with similar sole-source defense contracts?

General Electric has a long history of supplying engines and related components to the U.S. military, often through sole-source or limited-competition contracts due to the specialized nature of their products and established relationships. Analyzing past sole-source awards to GE for similar engine types would be crucial. This includes examining the contract values, durations, and any reported performance issues or cost variances. Without specific data on prior sole-source awards for this exact engine model or series, a general assessment suggests that GE is a frequent recipient of such contracts, highlighting a potential pattern of limited competition in this specific defense sub-sector.

How does the $33.8 million contract value compare to industry benchmarks for aircraft engines?

Benchmarking the $33.8 million contract value for aircraft engines is challenging without knowing the specific engine model, quantity, and configuration. However, aircraft engines are high-value, technologically advanced components. Prices can range from hundreds of thousands to millions of dollars per unit, depending on the type and power. For context, a single advanced fighter jet engine can cost upwards of $3-5 million. Therefore, $33.8 million could represent a significant number of engines or a few highly complex ones. A firm-fixed-price award suggests the government has a defined scope, but the lack of competition prevents a direct comparison to market-driven prices.

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

The primary risks associated with this sole-source contract are financial and strategic. Financially, the lack of competition increases the risk of paying a non-competitive price, potentially exceeding what could have been achieved through bidding. Strategically, reliance on a single supplier for critical components can create supply chain vulnerabilities and reduce leverage in future negotiations. There's also a risk that without competitive pressure, the contractor may have less incentive to innovate or offer cost-saving improvements. The long duration could also introduce risks related to obsolescence or changing operational requirements.

What is the historical spending pattern for aircraft engines by the Department of Defense?

The Department of Defense historically spends billions of dollars annually on aircraft engines, encompassing procurement of new engines, spare parts, and sustainment services. Spending patterns are influenced by fleet modernization, operational tempo, and geopolitical factors. Major engine manufacturers like General Electric, Pratt & Whitney, and Rolls-Royce are significant recipients of these funds. Contracts often involve long-term sustainment agreements and can be sole-sourced or limited competition due to the highly specialized nature of the technology and the long lifecycle of military aircraft. Analyzing historical spending data reveals a consistent and substantial investment in aviation propulsion systems.

What are the implications of the firm-fixed-price (FFP) contract type in this context?

The firm-fixed-price (FFP) contract type is generally preferred by the government as it places the risk of cost overruns on the contractor. This means General Electric is obligated to deliver the specified aircraft engines at the agreed-upon price, regardless of their actual costs. This structure incentivizes the contractor to manage their expenses efficiently. However, in a sole-source scenario, the 'fixed price' is determined without competitive validation, potentially leading to a higher initial price than if multiple bids were solicited. While FFP offers cost certainty to the buyer, the absence of competition here diminishes the value-for-money aspect.

Industry Classification

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

Product/Service Code: ENGINES AND TURBINES AND COMPONENT

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: ONE NEUMANN WAY, CINCINNATI, OH, 90

Business Categories: Category Business, Not Designated a Small Business

Parent Contract

Parent Award PIID: FA810405G0003

IDV Type: IDC

Timeline