DoD's $1.2B F135 engine parts contract awarded to RTX Corporation without competition

Contract Overview

Contract Amount: $1,214,623,683 ($1.2B)

Contractor: RTX Corporation

Awarding Agency: Department of Defense

Start Date: 2013-08-27

End Date: 2019-06-30

Contract Duration: 2,133 days

Daily Burn Rate: $569.4K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIXED PRICE INCENTIVE

Sector: Defense

Official Description: F135 LRIP 8 LONG LEAD-TIME ITEMS

Place of Performance

Location: EAST HARTFORD, HARTFORD County, CONNECTICUT, 06118

State: Connecticut Government Spending

Plain-Language Summary

Department of Defense obligated $1.21 billion to RTX CORPORATION for work described as: F135 LRIP 8 LONG LEAD-TIME ITEMS Key points: 1. Significant investment in long-lead time items for a critical defense platform. 2. Sole-source award raises concerns about price discovery and potential for cost overruns. 3. Contract duration of over five years suggests a long-term commitment to this supplier. 4. Focus on engine parts highlights the importance of sustainment and maintenance for aircraft readiness. 5. The 'Aircraft Engine and Engine Parts Manufacturing' sector is highly specialized and consolidated. 6. Fixed Price Incentive contract type aims to balance cost control with performance incentives.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to its sole-source nature and specialized components. Without competitive bids, it's difficult to ascertain if the $1.2 billion price reflects fair market value. The fixed-price incentive structure suggests an attempt to manage costs, but the lack of competition inherently limits the government's leverage in price negotiations. Comparisons to similar sole-source awards for critical defense components might show similar pricing patterns, but this doesn't necessarily indicate optimal value for taxpayer dollars.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning RTX Corporation was the only bidder considered. This approach is typically justified for highly specialized or proprietary components where only one supplier possesses the necessary capabilities or technology. The lack of competition means the government did not benefit from a bidding process that could drive down prices through market forces. This raises questions about whether alternative suppliers were thoroughly explored or if the sole-source justification is robust.

Taxpayer Impact: Sole-source awards limit the government's ability to secure the best possible prices, potentially leading to higher costs for taxpayers. Without competitive pressure, there is less incentive for the contractor to offer the most cost-effective solutions.

Public Impact

The primary beneficiaries are the U.S. Department of Defense and allied nations relying on the F135 fighter jet. Services delivered include the manufacturing of long-lead time items essential for F135 engine production and sustainment. Geographic impact is national, supporting a critical defense industrial base, with specific benefits to Connecticut where RTX operates. Workforce implications include the retention of highly skilled manufacturing and engineering jobs within RTX Corporation.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition and taxpayer value.
Long contract duration may lock in costs without flexibility.
Dependence on a single supplier for critical components poses supply chain risk.

Positive Signals

Addresses long-lead time items, crucial for maintaining production schedules.
Fixed Price Incentive contract type includes performance incentives.
Supports a critical national defense asset (F135 fighter jet).

Sector Analysis

The F135 engine is a cornerstone of the Joint Strike Fighter program, a highly advanced and expensive military aircraft. The market for such specialized aerospace components is characterized by high barriers to entry, significant R&D investment, and a limited number of qualified manufacturers. RTX Corporation (through its Pratt & Whitney division) is a dominant player in this niche. Comparable spending benchmarks would likely be within the defense aerospace sector, specifically for complex engine systems, but direct comparisons are difficult due to the unique nature of the F135.

Small Business Impact

This contract does not appear to involve a small business set-aside. Given the specialized nature of F135 engine components and the sole-source award to a large prime contractor like RTX Corporation, the direct impact on small businesses is likely minimal unless they are subcontractors to RTX. The absence of subcontracting plans specifically mentioned in the provided data makes it difficult to assess the flow-down of work to the small business ecosystem.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contracting and program management offices. Accountability measures are embedded within the Fixed Price Incentive contract type, which links contractor profit to performance against cost targets. Transparency is a concern due to the sole-source nature; however, contract modifications and performance reports would be subject to internal DoD review and potentially Inspector General oversight if performance issues or fraud are suspected.

Related Government Programs

F-35 Lightning II Joint Strike Fighter Program
Pratt & Whitney Engine Contracts
Long Lead Time Material Procurement
Defense Aircraft Engine Manufacturing
Fixed Price Incentive Contracts

Risk Flags

Sole Source Justification
Potential for Cost Overruns
Supply Chain Dependency
Lack of Competitive Bidding

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $1.21 billion to RTX CORPORATION. F135 LRIP 8 LONG LEAD-TIME ITEMS

Who is the contractor on this award?

The obligated recipient is RTX CORPORATION.

Which agency awarded this contract?

Awarding agency: Department of Defense (Department of the Navy).

What is the total obligated amount?

The obligated amount is $1.21 billion.

What is the period of performance?

Start: 2013-08-27. End: 2019-06-30.

What is the historical spending trend for F135 LRIP 8 LONG LEAD-TIME ITEMS with RTX Corporation?

The provided data represents a single award of $1,214,623,682.72 for F135 LRIP 8 LONG LEAD-TIME ITEMS to RTX CORPORATION. This specific data point pertains to a definitive contract awarded on August 27, 2013, with an estimated completion date of June 30, 2019. To understand the historical spending trend, one would need to examine a series of contracts for 'long lead-time items' for various Lot Production Runs (LRIP) of the F135 engine over several years. This would involve analyzing the total obligated amounts, contract types, and any year-over-year increases or decreases in spending for these critical components. Without access to a broader dataset of historical F135 engine component contracts, a comprehensive trend analysis is not possible based solely on this single record.

How does the pricing of this contract compare to similar sole-source awards for defense aircraft engine components?

Directly comparing the pricing of this $1.2 billion sole-source contract for F135 engine long-lead items to 'similar' sole-source awards is inherently difficult without specific comparative data. Sole-source awards are often justified by unique technological requirements, proprietary designs, or the absence of viable alternatives, which can lead to pricing that differs significantly from competitively bid contracts. To perform a robust comparison, one would need to identify other sole-source contracts for comparable complex engine components (e.g., critical parts for other advanced fighter jets or large transport aircraft) awarded around the same period. Key metrics for comparison would include the total contract value, the duration of the contract, the specific components being procured, and the contractor's profit margins, if publicly available. However, the specialized nature of the F135 program and RTX Corporation's (Pratt & Whitney's) established role suggest that pricing may reflect the high R&D, manufacturing complexity, and strategic importance of the platform.

What are the primary risks associated with a sole-source award of this magnitude for critical defense components?

A sole-source award of this magnitude ($1.2 billion) for critical defense components like F135 engine long-lead items presents several significant risks. Firstly, the lack of competition means the government has limited leverage to negotiate the best possible price, potentially leading to inflated costs for taxpayers. Secondly, there's a risk of contractor complacency; without competitive pressure, the incentive to innovate or improve efficiency might be reduced. Thirdly, dependence on a single supplier creates a vulnerability in the supply chain. Any disruption at RTX Corporation (e.g., production issues, labor disputes, geopolitical events) could severely impact the F135 program's readiness and delivery schedules. Finally, the justification for sole-sourcing needs rigorous scrutiny to ensure it remains valid throughout the contract's life, as market conditions or technological alternatives could emerge.

What is the expected impact of this contract on the F135 program's overall cost and schedule?

This contract for $1.2 billion in F135 engine long-lead time items is crucial for maintaining the production schedule of the F135 fighter jet program. Long-lead items are components that require significant manufacturing time, so securing them early is essential to avoid delays. The fixed-price incentive (FPI) contract type suggests that while there's a target cost and price, RTX Corporation has an incentive to control costs to achieve a better profit margin, while the government benefits if costs are below target. However, the sole-source nature introduces uncertainty regarding the 'target cost' itself. If the negotiated target cost is too high, or if cost overruns occur and are shared according to the FPI terms, the overall program cost could increase beyond initial projections. Conversely, effective cost management by RTX could help stabilize program expenses.

How does the 'Aircraft Engine and Engine Parts Manufacturing' sector's structure influence competition for contracts like this?

The 'Aircraft Engine and Engine Parts Manufacturing' sector is highly concentrated, characterized by a few dominant global players, such as RTX Corporation (Pratt & Whitney), General Electric Aviation, and Rolls-Royce. This oligopolistic structure results from extremely high barriers to entry, including massive R&D investments, complex manufacturing processes, stringent quality control requirements, and long development cycles. Consequently, for advanced military aircraft engines like the F135, there are often very few, if any, alternative suppliers capable of producing critical components. This limited competition naturally leads to sole-source or limited-source contracting scenarios, as seen in this award, where the government must rely on established prime contractors and their existing supply chains.

What are the implications of the Fixed Price Incentive (FPI) contract type for this sole-source award?

The Fixed Price Incentive (FPI) contract type is an attempt to introduce cost control and performance alignment in a situation where a fixed-price contract might be too risky for the contractor due to uncertainties, or where a cost-plus contract offers too little incentive for efficiency. For this sole-source award, the FPI structure establishes a target cost, a target profit, and a price ceiling. If the final cost is below the target, both the contractor and the government share in the savings according to a pre-negotiated formula. If the final cost exceeds the target but remains below the ceiling, the contractor's profit is reduced, and the government pays the actual cost plus a reduced profit. If the cost exceeds the ceiling, the contractor absorbs the overrun above the ceiling. This structure aims to motivate the contractor to manage costs effectively while ensuring the government is protected from unlimited cost increases, though the effectiveness hinges on the realism of the initial target cost and ceiling.

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: FIXED PRICE INCENTIVE (L)

Evaluated Preference: NONE

Contractor Details

Parent Company: Rockwell Collins Australia PTY Limited

Address: 400 MAIN ST, EAST HARTFORD, CT, 06108

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

Financial Breakdown

Contract Ceiling: $1,216,248,235

Exercised Options: $1,214,623,883

Current Obligation: $1,214,623,683

Actual Outlays: $13,245,805

Subaward Activity

Number of Subawards: 3

Total Subaward Amount: $315,021

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline