DoD's $1.84B sole-source contract for aircraft engine logistics awarded to RTX Corporation shows concerning value

Contract Overview

Contract Amount: $1,838,656,695 ($1.8B)

Contractor: RTX Corporation

Awarding Agency: Department of Defense

Start Date: 2016-12-01

End Date: 2022-11-30

Contract Duration: 2,190 days

Daily Burn Rate: $839.6K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIXED PRICE INCENTIVE

Sector: Defense

Official Description: PERFORMANCE BASED LOGISTICS UCA

Place of Performance

Location: EAST HARTFORD, HARTFORD County, CONNECTICUT, 06118

State: Connecticut Government Spending

Plain-Language Summary

Department of Defense obligated $1.84 billion to RTX CORPORATION for work described as: PERFORMANCE BASED LOGISTICS UCA Key points: 1. The contract's value, exceeding $1.8 billion, warrants scrutiny for potential cost efficiencies. 2. Sole-source award to RTX Corporation limits competitive pressure, potentially inflating prices. 3. The fixed-price incentive contract type introduces performance-based risk for the government. 4. Long contract duration of 6 years suggests a need for ongoing performance monitoring. 5. The absence of small business set-asides raises questions about broader economic impact. 6. Aircraft engine parts manufacturing is a concentrated sector, potentially limiting competition.

Value Assessment

Rating: concerning

The $1.84 billion awarded to RTX Corporation for Performance Based Logistics (PBL) for aircraft engines appears high, especially given the sole-source nature of the award. Without competitive bidding, it is difficult to benchmark the pricing against market rates or similar contracts. The fixed-price incentive structure, while intended to align contractor and government interests, can lead to cost overruns if not managed meticulously. The significant investment suggests a critical need for robust oversight to ensure value for taxpayer money.

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 approach is typically justified when only one responsible source can provide the required supplies or services. However, it significantly reduces the government's ability to leverage competition to drive down prices and ensure the best possible value. The lack of bidders means the government accepted the terms and pricing proposed by RTX Corporation without alternative proposals to compare.

Taxpayer Impact: Sole-source awards can lead to higher costs for taxpayers as the government does not benefit from competitive pricing. This contract's substantial value amplifies the financial implications of the lack of competition.

Public Impact

The Department of the Navy benefits from sustained readiness of its aircraft engines through this logistics support. This contract ensures the availability of critical parts and maintenance services for naval aviation operations. The contract's impact is primarily on the military aviation sector and its supply chain. Workforce implications are likely within RTX Corporation's facilities and potentially its subcontractors, supporting specialized aerospace jobs.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price discovery and potential savings.
Fixed-price incentive contract requires careful monitoring to prevent cost overruns.
Long contract duration increases the risk of price escalation over time.
Lack of transparency in pricing due to sole-source nature.
Potential for contractor lock-in due to specialized nature of PBL.

Positive Signals

Performance-Based Logistics (PBL) aims to improve readiness and reduce total ownership costs.
RTX Corporation is a major defense contractor with established expertise in aerospace.
The contract supports critical military assets, ensuring operational capability.
Long-term partnership can foster efficiencies through integrated supply chain management.

Sector Analysis

This contract falls within the aerospace and defense sector, specifically focusing on aircraft engine manufacturing and support services. The market for military aircraft engine logistics is highly specialized, often dominated by a few large original equipment manufacturers (OEMs) like RTX Corporation due to proprietary technology and extensive support infrastructure. Comparable spending in this niche can be substantial, with long-term sustainment contracts being the norm for major defense platforms.

Small Business Impact

The data indicates that this contract was not set aside for small businesses, nor does it appear to have specific subcontracting goals mentioned. Given the sole-source nature and the specialized requirements for aircraft engine logistics, it is unlikely that small businesses would be primary awardees. However, there may be opportunities for small businesses to participate as subcontractors to RTX Corporation, depending on their capabilities and the specific needs of the PBL program.

Oversight & Accountability

Oversight for this contract would primarily reside within the Department of the Navy's contracting and program management offices. The fixed-price incentive structure necessitates close monitoring of performance metrics and cost expenditures to ensure the government receives the agreed-upon value. Transparency may be limited due to the sole-source nature, but contract performance reviews and audits by the Defense Contract Audit Agency (DCAA) would be standard oversight mechanisms.

Related Government Programs

Aircraft Engine Maintenance and Repair
Defense Logistics Support Services
Aerospace Parts Manufacturing
Performance Based Logistics Contracts
Department of the Navy Procurement

Risk Flags

Sole-source award
High contract value
Long contract duration
Fixed-price incentive structure

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $1.84 billion to RTX CORPORATION. PERFORMANCE BASED LOGISTICS UCA

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 $1.84 billion.

What is the period of performance?

Start: 2016-12-01. End: 2022-11-30.

What is the historical spending trend for Performance Based Logistics (PBL) for aircraft engines within the Department of Defense?

Historical spending on PBL for aircraft engines within the Department of Defense has been substantial and is a growing area of focus for sustainment strategies. Agencies like the Department of the Navy and Air Force frequently utilize PBL to ensure aircraft readiness while aiming for cost efficiencies over the total lifecycle of an engine. While specific aggregate data for aircraft engine PBL is not readily available in public databases, individual contract awards often run into hundreds of millions or billions of dollars over their multi-year durations. This trend reflects a strategic shift towards outcome-based support rather than traditional parts-and-labor contracts, driven by a desire to improve performance and manage long-term costs more effectively.

How does the pricing of this contract compare to similar sole-source PBL contracts for aircraft engines?

Directly comparing the pricing of this $1.84 billion sole-source contract to similar sole-source PBL contracts for aircraft engines is challenging without access to detailed pricing breakdowns and specific performance metrics. Sole-source awards inherently lack a competitive benchmark. However, the sheer magnitude of this contract suggests it covers a significant portion of the Navy's fleet or a particularly complex engine type. To assess value, one would need to compare the proposed per-flight-hour costs, spare parts pricing, and maintenance turnaround times against historical data for comparable platforms or against industry benchmarks for similar OEM support agreements, adjusted for contract duration and scope.

What are the primary risks associated with a sole-source, fixed-price incentive contract for long-term logistics support?

A sole-source, fixed-price incentive (FPI) contract for long-term logistics support presents several key risks. Firstly, the sole-source nature eliminates competitive pressure, potentially leading to inflated prices and reduced incentive for the contractor to innovate or offer cost savings. Secondly, the FPI structure, while aiming to share risk, can incentivize the contractor to exceed cost targets if the government's share of the excess cost is capped or if the target cost is set unrealistically low. For long-term support, there's also the risk of contractor lock-in, where the government becomes heavily reliant on a single provider, making future transitions difficult and costly. Finally, managing performance metrics effectively over a long duration is crucial to ensure the 'incentive' aspect remains meaningful and doesn't become a de facto fixed-price arrangement with potential for scope creep.

What is RTX Corporation's track record with Performance Based Logistics (PBL) contracts for the Department of Defense?

RTX Corporation, through its various legacy companies (including Pratt & Whitney), has a significant and extensive track record with Performance Based Logistics (PBL) contracts across numerous Department of Defense platforms, particularly for aircraft engines. They are a primary provider of PBL for many critical military aircraft, including fighter jets and transport planes. Their experience encompasses managing complex supply chains, ensuring high levels of fleet readiness, and delivering sustainment services. While specific performance outcomes vary by contract and platform, RTX is generally considered a leading entity in this domain, possessing the scale and technical expertise required for such large-scale, long-term support agreements.

How does the duration of this contract (6 years) impact its overall value proposition and risk profile?

The 6-year duration of this contract significantly influences its value proposition and risk profile. On the positive side, a longer duration allows for greater stability in planning and execution, potentially leading to economies of scale and more predictable operational costs for the Navy. It also fosters a deeper partnership between the government and RTX Corporation, enabling more integrated logistics solutions and potentially driving down total ownership costs over the engine's lifecycle. However, the extended period also increases the risk of price escalation due to inflation or unforeseen market changes. Furthermore, it heightens the risk of technological obsolescence if engine technology advances rapidly, or if the government's needs evolve beyond the contract's scope. Robust contract management and clear mechanisms for review and adjustment are critical to mitigate these long-term risks.

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: N0001915R0118

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: $2,101,006,041

Exercised Options: $2,101,006,041

Current Obligation: $1,838,656,695

Actual Outlays: $80,794,507

Subaward Activity

Number of Subawards: 68

Total Subaward Amount: $71,779,352

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline