Boeing awarded $3.15B for EA-18G aircraft manufacturing, a sole-source contract with fixed-price incentive terms

Contract Overview

Contract Amount: $3,154,449,063 ($3.2B)

Contractor: THE Boeing Company

Awarding Agency: Department of Defense

Start Date: 2014-06-30

End Date: 2019-06-30

Contract Duration: 1,826 days

Daily Burn Rate: $1.7M/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIXED PRICE INCENTIVE

Sector: Defense

Official Description: EA-18 G AIRCRAFT

Place of Performance

Location: SAINT LOUIS, SAINT LOUIS County, MISSOURI, 63134

State: Missouri Government Spending

Plain-Language Summary

Department of Defense obligated $3.15 billion to THE BOEING COMPANY for work described as: EA-18 G AIRCRAFT Key points: 1. Contract awarded to a single supplier suggests potential for higher pricing and limited innovation. 2. The fixed-price incentive structure aims to control costs but requires careful monitoring of performance. 3. Long contract duration of 5 years may indicate complex production requirements or strategic fleet planning. 4. Sole-source nature raises questions about the availability of competitive alternatives and market dynamics. 5. Significant investment in aircraft manufacturing highlights ongoing defense priorities and technological needs. 6. The contract's value represents a substantial portion of the defense budget allocated to specific aircraft platforms.

Value Assessment

Rating: fair

This contract's value of over $3 billion for EA-18G aircraft manufacturing is substantial. Without direct comparable contracts for the same platform and quantity, a precise value-for-money assessment is challenging. However, the sole-source nature of the award inherently limits the opportunity for price discovery through competition, which could lead to less favorable pricing compared to a competed procurement. The fixed-price incentive (FPI) contract type suggests an attempt to balance cost control with performance incentives, but the ultimate cost-effectiveness will depend on the contractor's ability to meet targets and the government's oversight.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one bidder, The Boeing Company, was solicited. This approach is typically used when there is a lack of competition, such as when a specific capability is only available from one source, or for follow-on production where it is deemed not to be in the government's best interest to compete. The absence of multiple bidders means that price discovery through competitive negotiation was not utilized, potentially impacting the final price.

Taxpayer Impact: Sole-source awards can result in higher costs for taxpayers as the government does not benefit from the competitive pressure that typically drives down prices. This necessitates robust government oversight to ensure fair pricing.

Public Impact

The primary beneficiaries are the U.S. Navy, which receives advanced electronic warfare aircraft critical for its operations. This contract supports the production of EA-18G Growler aircraft, enhancing the U.S. military's electronic attack capabilities. The geographic impact is concentrated in Missouri, where The Boeing Company's facility is located, supporting local employment and the regional economy. Workforce implications include the employment of skilled labor in aerospace manufacturing, engineering, and related support functions at Boeing.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure, potentially leading to higher costs.
Fixed-price incentive contracts require diligent government oversight to ensure cost targets are met.
Long-term nature of the contract may lock the government into a specific technology or supplier.
Dependence on a single supplier for critical defense assets poses a strategic risk.

Positive Signals

The contract is with a well-established defense contractor with a proven track record in aircraft manufacturing.
The fixed-price incentive structure includes performance targets, aiming for efficiency and effectiveness.
The EA-18G is a critical platform for U.S. naval aviation, indicating strategic importance and likely high quality.

Sector Analysis

The aerospace and defense sector is characterized by high barriers to entry, significant R&D investment, and long production cycles. This contract falls within the aircraft manufacturing sub-sector, specifically focusing on specialized electronic warfare platforms. The global defense market for aircraft is substantial, with major players like Boeing, Lockheed Martin, and Northrop Grumman dominating. Spending benchmarks for similar complex military aircraft programs often run into billions of dollars over their lifecycle, reflecting the advanced technology and stringent requirements involved.

Small Business Impact

This contract does not appear to include specific small business set-asides, as indicated by 'sb': false. The prime contractor, The Boeing Company, is a large aerospace manufacturer. While Boeing may engage small businesses as subcontractors, the primary award is not directed towards small business participation. This means the direct economic benefit to the small business ecosystem from this specific prime contract award is likely limited, though subcontracting opportunities could exist.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy's contracting and program management offices. The fixed-price incentive (FPI) contract type necessitates close monitoring of performance metrics, cost accumulation, and milestone achievement to ensure the government receives the best value and that contractor incentives align with program goals. Transparency is generally maintained through contract awards databases and reporting requirements, though specific details of performance and cost may be sensitive. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse.

Related Government Programs

F/A-18 Super Hornet Program
Naval Aviation Procurement
Electronic Warfare Systems
Defense Aircraft Manufacturing
Fixed-Price Incentive Contracts

Risk Flags

Sole Source Award
Potential for Cost Overruns (FPI)
Lack of Competition
Long-Term Supplier Dependency

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $3.15 billion to THE BOEING COMPANY. EA-18 G AIRCRAFT

Who is the contractor on this award?

The obligated recipient is THE BOEING COMPANY.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $3.15 billion.

What is the period of performance?

Start: 2014-06-30. End: 2019-06-30.

What is the historical spending trend for EA-18G aircraft procurement by the Department of the Navy?

Historical spending data for EA-18G aircraft procurement reveals a consistent and significant investment by the Department of the Navy over several years. Prior to this $3.15 billion award, the Navy had already procured numerous EA-18G aircraft, reflecting the platform's critical role in electronic warfare. Annual spending has fluctuated based on production schedules, congressional appropriations, and specific contract awards, often ranging from hundreds of millions to over a billion dollars in peak years. This $3.15 billion contract represents a major tranche of funding for continued production, indicating a long-term commitment to maintaining and expanding the EA-18G fleet. Analyzing past awards shows a pattern of sole-source or limited competition procurements for this specialized aircraft, often with Boeing as the sole manufacturer.

How does the unit cost of the EA-18G under this contract compare to previous awards or similar aircraft?

Determining the precise unit cost for the EA-18G under this $3.15 billion contract is complex due to the fixed-price incentive (FPI) structure and the inclusion of various support elements, not just the airframes themselves. However, based on publicly available data for previous EA-18G procurements, the unit cost has historically been in the range of $70 million to over $100 million per aircraft, depending on the specific contract, quantity, and year. This contract, covering an unspecified number of aircraft over its duration, likely falls within or potentially exceeds this range, especially considering inflation and program maturity. Without knowing the exact number of aircraft procured under this specific award, a direct comparison is difficult. However, the sole-source nature and the FPI terms suggest that achieving lower unit costs through competitive bidding was not prioritized, which could lead to a higher effective unit price compared to a highly competitive scenario.

What are the key performance metrics and incentives within this Fixed Price Incentive (FPI) contract?

A Fixed Price Incentive (FPI) contract, like the one awarded for the EA-18G aircraft, establishes a target cost, target profit, and a price ceiling. The key performance metrics are tied to the contractor's ability to meet or exceed production schedules, quality standards, and potentially specific technical performance requirements for the aircraft. The incentive lies in the cost-sharing arrangement: if the final cost is below the target cost, both the government and the contractor share in the savings (often at a predetermined ratio). Conversely, if the final cost exceeds the target cost but remains below the price ceiling, the contractor's profit is reduced, and the government pays a portion of the overrun. The price ceiling represents the maximum amount the government will pay. Effective oversight focuses on monitoring the contractor's cost performance against the target and ensuring that the incentives drive efficient production without compromising quality or safety.

What is The Boeing Company's track record with producing complex military aircraft, particularly the EA-18G?

The Boeing Company has a long and extensive track record in the design, development, and manufacturing of complex military aircraft, including significant contributions to naval aviation. Boeing is the original equipment manufacturer (OEM) for the EA-18G Growler, having taken over production from Northrop Grumman. Their experience with the F/A-18 Super Hornet platform, upon which the EA-18G is based, provides a deep understanding of its systems and manufacturing processes. Boeing has consistently delivered EA-18G aircraft to the U.S. Navy and allied nations, fulfilling numerous contracts over the years. While specific performance details of past contracts are often proprietary, Boeing's continued role as the sole provider for the EA-18G suggests a generally satisfactory performance record in terms of production capability, quality, and meeting delivery schedules, albeit often within sole-source or limited-competition frameworks.

What are the risks associated with a sole-source award for a critical defense platform like the EA-18G?

Sole-source awards for critical defense platforms like the EA-18G present several significant risks. Firstly, the lack of competition can lead to higher acquisition costs for taxpayers, as the government does not benefit from the price reductions typically driven by competitive bidding. Secondly, it can stifle innovation, as the sole contractor may have less incentive to invest in process improvements or alternative technologies when their market position is guaranteed. Thirdly, it creates a dependency on a single supplier, making the supply chain vulnerable to disruptions caused by the contractor's financial instability, labor disputes, or geopolitical issues. Finally, it can reduce the government's leverage in contract negotiations and oversight, as switching suppliers for such a complex and integrated system is often prohibitively expensive and time-consuming.

Industry Classification

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

Product/Service Code: AEROSPACE CRAFT AND STRUCTURAL COMPONENTS

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0001913R0102

Offers Received: 1

Pricing Type: FIXED PRICE INCENTIVE (L)

Evaluated Preference: NONE

Contractor Details

Address: 6200 JS MCDONNELL BLVD, SAINT LOUIS, MO, 63134

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

Financial Breakdown

Contract Ceiling: $3,246,094,147

Exercised Options: $3,225,521,238

Current Obligation: $3,154,449,063

Actual Outlays: $1,344,762

Subaward Activity

Number of Subawards: 192

Total Subaward Amount: $991,731,607

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline