Boeing awarded $47M for non-recurring engineering, raising questions about competition and value

Contract Overview

Contract Amount: $47,165,539 ($47.2M)

Contractor: Boeing Aerospace Operations, Inc.

Awarding Agency: Department of Defense

Start Date: 2008-06-23

End Date: 2015-07-31

Contract Duration: 2,594 days

Daily Burn Rate: $18.2K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: IPBE PHASE I - NON-RECURRING ENGINEERING

Place of Performance

Location: OKLAHOMA CITY, OKLAHOMA County, OKLAHOMA, 73135

State: Oklahoma Government Spending

Plain-Language Summary

Department of Defense obligated $47.2 million to BOEING AEROSPACE OPERATIONS, INC. for work described as: IPBE PHASE I - NON-RECURRING ENGINEERING Key points: 1. Contract awarded through a non-competitive process, limiting price discovery. 2. Significant duration of over 7 years suggests a long-term need. 3. Cost-plus-fixed-fee structure may incentivize cost escalation. 4. Lack of clear performance metrics makes value assessment challenging. 5. Boeing's established role in aerospace suggests a strong incumbent advantage. 6. Geographic location in Oklahoma may have limited local competition.

Value Assessment

Rating: questionable

The $47.17 million awarded to Boeing for non-recurring engineering is difficult to benchmark due to the lack of competitive bidding and the specific nature of 'non-recurring engineering'. Without comparable contracts or detailed cost breakdowns, assessing value for money is challenging. The cost-plus-fixed-fee (CPFF) contract type, while common for R&D, can lead to higher costs if not closely managed. The long contract duration (over 7 years) also raises concerns about potential cost overruns and the initial price accuracy.

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. Boeing was the only entity considered for this work. This approach bypasses the standard competitive bidding process, which typically leads to better pricing and innovation through market forces. The absence of competition means taxpayers did not benefit from potential cost savings or alternative solutions that might have emerged from a bidding process.

Taxpayer Impact: Sole-source awards mean taxpayers likely paid a premium compared to a competitive scenario. Without multiple bids, there's no market pressure to drive down costs.

Public Impact

This contract supports the Department of Defense's aircraft manufacturing capabilities. It likely benefits Boeing Aerospace Operations, Inc. through revenue generation and continued program involvement. The work performed contributes to the broader defense industrial base. Workforce implications include employment for engineers and technical staff at Boeing facilities.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition limits price discovery and potentially increases costs for taxpayers.
Cost-plus-fixed-fee structure can incentivize higher spending if not rigorously overseen.
Long contract duration increases the risk of cost escalation and scope creep.
Limited transparency on specific deliverables makes it hard to assess true value.
The 'non-recurring engineering' nature is broad and could encompass undefined future costs.

Positive Signals

Awarded to a major aerospace contractor with a track record in defense.
Contract supports critical defense manufacturing capabilities.
Fixed fee component provides some cost certainty compared to pure cost-plus.
Contract managed by the Defense Contract Management Agency, suggesting oversight.

Sector Analysis

This contract falls within the Aircraft Manufacturing sector, a critical component of the broader aerospace and defense industry. The industry is characterized by high barriers to entry, significant R&D investment, and long product lifecycles. Spending in this sector is heavily influenced by government defense budgets and strategic priorities. Comparable spending benchmarks are difficult to establish for 'non-recurring engineering' as it is highly project-specific, but overall aircraft manufacturing contracts can range from millions to billions of dollars.

Small Business Impact

This contract was not awarded to a small business, nor does it appear to have specific small business set-aside provisions. As a sole-source award to a large prime contractor, the potential for small business subcontracting opportunities exists but is not guaranteed or mandated by the contract structure itself. The impact on the small business ecosystem is likely minimal unless Boeing actively engages small businesses for specific components or services related to this engineering effort.

Oversight & Accountability

Oversight for this contract is provided by the Defense Contract Management Agency (DCMA). As a cost-plus-fixed-fee contract, DCMA would be responsible for monitoring costs, ensuring compliance with contract terms, and verifying the allowability and allocability of expenses. Transparency is limited due to the sole-source nature and the proprietary details of engineering work. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Aircraft Manufacturing
Aerospace Defense Contracts
Non-Recurring Engineering Services
Department of Defense Procurement
Sole-Source Defense Contracts

Risk Flags

Sole-source award limits competition.
Cost-plus-fixed-fee contract type carries inherent cost escalation risks.
Long contract duration increases potential for cost overruns.
Lack of detailed scope definition hinders value assessment.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $47.2 million to BOEING AEROSPACE OPERATIONS, INC.. IPBE PHASE I - NON-RECURRING ENGINEERING

Who is the contractor on this award?

The obligated recipient is BOEING AEROSPACE OPERATIONS, INC..

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Contract Management Agency).

What is the total obligated amount?

The obligated amount is $47.2 million.

What is the period of performance?

Start: 2008-06-23. End: 2015-07-31.

What specific engineering tasks were included under 'IPBE PHASE I - NON-RECURRING ENGINEERING'?

The provided data does not detail the specific engineering tasks encompassed by 'IPBE PHASE I - NON-RECURRING ENGINEERING'. Non-recurring engineering (NRE) typically refers to the design, development, and testing activities required to bring a new product or system into production, or to make significant modifications to an existing one. This can include activities such as conceptual design, detailed design, prototyping, tooling development, and initial testing. Without further documentation or contract specifics, the exact scope remains undefined in the provided summary. This lack of specificity can make it difficult to assess the necessity and efficiency of the awarded funds.

Why was this contract awarded on a sole-source basis instead of being competed?

The data indicates the contract was 'NOT COMPETED', implying a sole-source award. Justifications for sole-source awards typically fall under specific exceptions to full and open competition, such as when only one responsible source can provide the required supplies or services, or when there is a compelling urgency. For a large contractor like Boeing in the aerospace sector, justifications might include unique capabilities, proprietary technology, or the need to maintain commonality with existing systems. However, without the specific justification document, the precise reason remains unknown. This lack of competition limits the government's ability to secure the best possible price and explore alternative solutions.

How does the Cost Plus Fixed Fee (CPFF) contract type compare to other pricing arrangements for this type of work?

The Cost Plus Fixed Fee (CPFF) contract type means the contractor (Boeing) is reimbursed for all allowable costs incurred, plus a predetermined fixed fee representing profit. This structure is often used for research and development or complex projects where the scope is not fully defined, offering flexibility. However, it carries risks: the fixed fee doesn't change with cost, potentially incentivizing the contractor to incur higher costs to justify the effort, while the government bears the cost risk. Compared to Firm-Fixed-Price (FFP), CPFF offers less cost certainty for the government. Compared to Cost Plus Incentive Fee (CPIF), CPFF lacks the direct incentive for the contractor to control costs to achieve a higher fee.

What is the significance of the contract duration (2594 days)?

A contract duration of 2594 days, approximately 7.1 years, is substantial for a non-recurring engineering effort. This extended timeline suggests that the project involves complex, long-term development or integration activities. Such durations can indicate a need for sustained engineering support, potentially related to the lifecycle development of a major system or platform. However, long contract periods also increase the risk of cost growth due to inflation, changing requirements, and potential inefficiencies accumulating over time. Rigorous oversight and milestone management are crucial to ensure the project stays on track and within budget over its lifespan.

What are the potential risks associated with Boeing's track record in managing large defense contracts?

Boeing is a major defense contractor with extensive experience, which can be a positive signal. However, like any large corporation, they have faced scrutiny regarding cost overruns, schedule delays, and quality issues on various large-scale defense programs. For this specific contract, potential risks include the contractor's ability to accurately estimate and control costs under the CPFF structure, manage the extended timeline effectively, and deliver the intended engineering outcomes without significant deviations. The lack of competition exacerbates these risks, as there is less external pressure to mitigate them proactively.

How does this spending compare to other non-recurring engineering contracts within the Department of Defense?

Direct comparison of this $47.17 million contract to other non-recurring engineering (NRE) contracts within the Department of Defense (DoD) is challenging without access to a comprehensive database of NRE procurements, including their specific scopes and contract types. NRE costs can vary dramatically based on the complexity of the system, the phase of development, and the specific technologies involved. While $47 million is a significant sum, it may be within the typical range for NRE related to major aircraft programs or significant system upgrades. However, the sole-source nature of this award makes it difficult to assess if this amount represents a competitive market price.

Industry Classification

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

Product/Service Code: AEROSPACE CRAFT COMPONENTS AND ACCESSORIES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0001908R0078

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: THE Boeing Company (UEI: 009256819)

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

Financial Breakdown

Contract Ceiling: $49,394,619

Exercised Options: $49,103,989

Current Obligation: $47,165,539

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline