DoD awards $2.2B for F135 LRIP LOT 10, a sole-source acquisition for advanced engine parts

Contract Overview

Contract Amount: $2,213,245,789 ($2.2B)

Contractor: RTX Corporation

Awarding Agency: Department of Defense

Start Date: 2015-04-30

End Date: 2020-12-09

Contract Duration: 2,050 days

Daily Burn Rate: $1.1M/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIXED PRICE INCENTIVE

Sector: Defense

Official Description: F135 LRIP LOT 10 ADVANCED ACQUISITION CONTRACT

Place of Performance

Location: EAST HARTFORD, HARTFORD County, CONNECTICUT, 06118

State: Connecticut Government Spending

Plain-Language Summary

Department of Defense obligated $2.21 billion to RTX CORPORATION for work described as: F135 LRIP LOT 10 ADVANCED ACQUISITION CONTRACT Key points: 1. Contract awarded to RTX Corporation for advanced acquisition of F135 engine components. 2. This contract represents a significant investment in sustainment and modernization of a key defense asset. 3. The fixed-price incentive structure aims to balance cost control with performance incentives. 4. Sole-source nature raises questions about price competition and potential for cost overruns. 5. Long duration of the contract suggests a long-term commitment to the F135 program. 6. The contract value is substantial, reflecting the complexity and criticality of the F135 engine.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to its sole-source nature and specialized components. However, the substantial award amount of over $2.2 billion indicates a significant investment. Without competitive bids, it's difficult to definitively assess if the pricing reflects optimal value for money. The fixed-price incentive (FPI) contract type suggests an attempt to manage costs by incentivizing the contractor to meet certain performance targets while controlling expenditures. Further analysis would require detailed cost breakdowns and comparisons to similar sole-source procurements for advanced aerospace components.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one bidder, RTX Corporation, was solicited. This approach is typically used when a unique capability or proprietary technology is required, or when there is insufficient time to conduct a full and open competition. The lack of competition means that price discovery through market forces was not utilized, potentially leading to higher costs for the government compared to a competitive procurement. The government relied on negotiation to establish terms and pricing.

Taxpayer Impact: Taxpayers may face higher costs due to the absence of competitive bidding. The government's negotiation leverage is reduced, and the potential for inflated prices is a concern.

Public Impact

The primary beneficiaries are the U.S. Department of Defense and allied nations relying on the F135 engine for their fighter aircraft fleets. The contract supports the continued production and delivery of advanced components essential for the operational readiness of the F-35 Lightning II Joint Strike Fighter. Geographic impact is national, with potential benefits to the Connecticut economy where RTX Corporation has significant operations. Workforce implications include the sustainment of highly skilled jobs in aerospace engineering, manufacturing, and supply chain management.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition, potentially increasing costs for taxpayers.
Long-term nature of the contract requires ongoing scrutiny to ensure continued value.
Reliance on a single contractor for critical components poses supply chain risks.
Fixed-price incentive contracts can still lead to cost overruns if not managed effectively.

Positive Signals

Contract supports a critical national defense asset, ensuring operational readiness.
Fixed-price incentive structure provides some cost control and performance incentives.
Award to an established contractor with a track record in engine manufacturing.
Long-term nature allows for stable planning and resource allocation for the F135 program.

Sector Analysis

The F135 engine is a cornerstone of the F-35 Lightning II program, a joint venture involving multiple international partners. The aerospace and defense sector is characterized by high barriers to entry, significant R&D investment, and long product lifecycles. This contract falls within the 'Aircraft Engine and Engine Parts Manufacturing' industry, a specialized segment of the broader aerospace market. Comparable spending benchmarks are difficult to establish due to the unique nature of advanced military engine components and the sole-source award.

Small Business Impact

This contract does not appear to have a specific small business set-aside component, as indicated by 'sb': false. However, as a large prime contractor, RTX Corporation is likely to engage small businesses through subcontracting opportunities. The extent and nature of these subcontracting efforts will be crucial for assessing the impact on the small business ecosystem within the defense industrial base. Oversight of subcontracting plans is essential to ensure fair opportunities for small businesses.

Oversight & Accountability

Oversight for this contract is likely managed by the Defense Contract Management Agency (DCMA), which is responsible for ensuring contractor compliance with contract terms and performance standards. Accountability measures are embedded within the fixed-price incentive structure, linking contractor profit to performance. Transparency may be limited due to the sole-source nature and the proprietary information involved in advanced engine technology. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

F-35 Lightning II Joint Strike Fighter Program
Pratt & Whitney Engine Programs (part of RTX Corporation)
Defense Contract Management Agency (DCMA) Oversight
Aerospace Manufacturing and Supply Chain

Risk Flags

Sole-source procurement
High contract value
Long contract duration
Critical defense system component

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $2.21 billion to RTX CORPORATION. F135 LRIP LOT 10 ADVANCED ACQUISITION CONTRACT

Who is the contractor on this award?

The obligated recipient is RTX CORPORATION.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $2.21 billion.

What is the period of performance?

Start: 2015-04-30. End: 2020-12-09.

What is RTX Corporation's track record with the F135 engine program and similar sole-source contracts?

RTX Corporation, through its subsidiary Pratt & Whitney, is the sole designer and manufacturer of the F135 engine, the only engine option for the F-35 program. Their track record with this specific engine is extensive, spanning development, production, and sustainment. They have a long history in military engine manufacturing. Regarding similar sole-source contracts, RTX frequently secures sole-source awards for specialized components or upgrades due to the proprietary nature of their technology and the established integration with existing platforms like the F-35. While this provides continuity, it also necessitates rigorous government negotiation and oversight to ensure fair pricing and prevent potential cost escalations.

How does the pricing of this contract compare to previous F135 engine component procurements or similar sole-source aerospace contracts?

Direct comparison of pricing for this specific 'F135 LRIP LOT 10 ADVANCED ACQUISITION CONTRACT' to previous lots or similar sole-source aerospace contracts is challenging without access to detailed pricing data and negotiation outcomes. However, the overall trend in defense contracting, particularly for complex, sole-source systems like advanced jet engines, often sees price increases over time due to inflation, technological advancements, and evolving performance requirements. The fixed-price incentive (FPI) structure aims to cap government liability while incentivizing efficiency. Without competitive benchmarking, assessing whether the current pricing represents 'good value' relies heavily on the government's negotiation effectiveness and the contractor's demonstrated cost management.

What are the primary risks associated with this sole-source, long-duration contract for advanced engine parts?

The primary risks associated with this sole-source, long-duration contract include: 1. **Cost Overruns:** Lack of competition can reduce pressure on the contractor to minimize costs, potentially leading to prices higher than in a competitive environment. 2. **Technological Stagnation:** Without competitive pressure, there might be less incentive for the contractor to innovate or proactively seek cost-saving technological advancements. 3. **Supply Chain Vulnerability:** Over-reliance on a single source for critical components creates a vulnerability if the contractor faces production issues, financial instability, or geopolitical disruptions. 4. **Contract Management Burden:** The government bears a significant burden to meticulously oversee contract performance, costs, and adherence to terms due to the absence of market-driven price validation. 5. **Limited Flexibility:** Long-duration contracts can make it difficult to adapt to changing requirements or incorporate new technologies if they emerge during the contract period.

How effective is the Fixed Price Incentive (FPI) contract type in managing costs and ensuring performance for advanced aerospace components?

The Fixed Price Incentive (FPI) contract type is designed to provide a middle ground between firm-fixed-price and cost-plus contracts, aiming to balance cost control with performance. In an FPI contract, the final price is adjusted based on the contractor's performance against targets (e.g., cost, schedule, performance). It establishes a target cost, a target profit, and a price ceiling. If the final cost is below the target, both the government and contractor share in the savings (or the contractor keeps more profit). If the cost exceeds the target, the contractor's profit is reduced, and the government pays more, up to the ceiling. For advanced aerospace components, FPI can be effective if the targets are realistic and measurable, incentivizing the contractor to achieve desired outcomes efficiently. However, poorly defined targets or inadequate government oversight can still lead to cost overruns or suboptimal performance.

What are the historical spending patterns for F135 engine acquisition and sustainment, and how does this contract fit within that trend?

Historical spending on the F135 engine program, managed by Pratt & Whitney (RTX Corporation), has been substantial, reflecting the complexity and criticality of powering the F-35 fleet. Early years focused on development and initial low-rate production (LRIP), with costs gradually decreasing per unit as production scaled up. Sustainment costs, including spare parts, maintenance, and upgrades, represent a significant portion of the total lifecycle cost. This contract, 'F135 LRIP LOT 10 ADVANCED ACQUISITION CONTRACT,' falls within the production phase, specifically acquiring advanced components for Lot 10 aircraft. It represents a continuation of the established spending trajectory for F135 production, likely incorporating advancements and potentially higher unit costs for more sophisticated components compared to earlier lots, while aiming for economies of scale.

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

Solicitation ID: N0001914R6001

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, 06118

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

Financial Breakdown

Contract Ceiling: $2,350,342,250

Exercised Options: $2,350,016,493

Current Obligation: $2,213,245,789

Actual Outlays: $68,017,577

Subaward Activity

Number of Subawards: 6

Total Subaward Amount: $8,076,750

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline