DoD awards $6.6B for CMV-22 Osprey production, with limited competition and long-term delivery

Contract Overview

Contract Amount: $6,589,472,393 ($6.6B)

Contractor: Bell Boeing Joint Project Office

Awarding Agency: Department of Defense

Start Date: 2016-12-28

End Date: 2028-01-31

Contract Duration: 4,051 days

Daily Burn Rate: $1.6M/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIXED PRICE INCENTIVE

Sector: Defense

Official Description: CMV-22 PRODUCTION LOT 22 LONG LEAD-TIME ITEMS

Place of Performance

Location: AMARILLO, POTTER County, TEXAS, 79111

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $6.59 billion to BELL BOEING JOINT PROJECT OFFICE for work described as: CMV-22 PRODUCTION LOT 22 LONG LEAD-TIME ITEMS Key points: 1. Contract awarded for long-lead items for Osprey aircraft production, indicating a significant long-term commitment. 2. The contract's fixed-price incentive structure aims to balance cost control with performance incentives. 3. Sole-source award raises questions about price discovery and potential for cost overruns. 4. The extended performance period suggests a need for sustained production capacity for this critical asset. 5. Focus on long-lead items implies a strategic approach to managing complex supply chains. 6. The contract value represents a substantial investment in naval aviation capabilities.

Value Assessment

Rating: fair

Benchmarking the value of this contract is challenging due to its specific nature as a sole-source award for long-lead items. However, the fixed-price incentive (FPI) contract type suggests an attempt to control costs while incentivizing performance. Without comparable sole-source procurements or detailed cost breakdowns, a definitive value-for-money assessment is difficult. The extended duration and significant dollar amount warrant close monitoring of cost performance against targets.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one contractor was solicited. This approach is typically used when a unique capability or product is required, or when only one source is available. The lack of competition means that the government did not benefit from a bidding process that could drive down prices through market forces. This necessitates robust negotiation and oversight to ensure fair pricing.

Taxpayer Impact: Sole-source awards can lead to higher prices for taxpayers as the government lacks the leverage of competitive bidding. This underscores the importance of strong negotiation and justification for the sole-source determination.

Public Impact

The primary beneficiaries are the U.S. Navy and Marine Corps, who will receive the CMV-22 Osprey aircraft for various operational missions. The contract ensures the continued production of a critical tiltrotor aircraft, enhancing vertical lift and operational range capabilities. The contract's impact is primarily national, supporting U.S. defense readiness and power projection. Workforce implications include sustained employment for skilled labor in aerospace manufacturing, particularly in Texas where the contractor is located.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition, potentially leading to higher costs for taxpayers.
Long-lead time items can be susceptible to supply chain disruptions and cost increases.
Fixed-price incentive contracts require careful monitoring to ensure contractor performance meets targets without excessive cost growth.
The extended contract duration increases exposure to potential economic fluctuations and evolving technological requirements.

Positive Signals

The contract supports the production of a vital military asset, enhancing national security.
The FPI contract structure provides incentives for performance, potentially leading to better outcomes.
The award signifies a commitment to modernizing naval aviation capabilities.
Long-lead item procurement is a strategic approach to ensure timely delivery of complex aircraft.

Sector Analysis

The CMV-22 Osprey is part of the broader aerospace and defense manufacturing sector, specifically focusing on military aircraft. This sector is characterized by high R&D costs, long production cycles, and significant government procurement. The CMV-22 is a variant of the V-22 Osprey, designed for extended range operations, particularly for carrier-based logistics. Comparable spending benchmarks would involve other large-scale military aircraft production contracts, which often run into billions of dollars over multiple years.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. The prime contractor, Bell Boeing Joint Project Office, is a large aerospace entity. While large prime contractors often engage small businesses as subcontractors, the direct award to a joint venture of major corporations suggests limited direct opportunities for small businesses through this specific contract vehicle. Subcontracting plans would need to be reviewed to assess the extent of small business participation.

Oversight & Accountability

Oversight for this contract will primarily fall under the Department of Defense's contracting and program management offices. The Inspector General of the Department of Defense may conduct audits and investigations into cost, performance, and compliance. Transparency is facilitated through contract awards databases, but detailed cost breakdowns and performance metrics are often considered sensitive. The fixed-price incentive structure requires diligent monitoring of cost and schedule milestones.

Related Government Programs

V-22 Osprey Program
Naval Aviation Procurement
Military Aircraft Manufacturing
Long-Lead Time Material Procurement
Defense Production Contracts

Risk Flags

Sole Source Procurement
Long Lead Time Items
Fixed Price Incentive Contract
High Dollar Value Contract
Defense Production

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $6.59 billion to BELL BOEING JOINT PROJECT OFFICE. CMV-22 PRODUCTION LOT 22 LONG LEAD-TIME ITEMS

Who is the contractor on this award?

The obligated recipient is BELL BOEING JOINT PROJECT OFFICE.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $6.59 billion.

What is the period of performance?

Start: 2016-12-28. End: 2028-01-31.

What is the historical spending trend for the CMV-22 Osprey program?

The CMV-22 Osprey program represents a significant investment within the broader V-22 Osprey family. While specific CMV-22 production lot data is consolidated here, the V-22 program has seen consistent funding over many years, reflecting its strategic importance. Prior to this Lot 22 award, cumulative spending on V-22 variants has been in the tens of billions of dollars. This contract for Lot 22 long-lead items, valued at approximately $6.6 billion, continues this trend of substantial, multi-year investment. Analyzing historical spending patterns reveals a commitment to maintaining and expanding the V-22 fleet, driven by evolving operational requirements and the aircraft's unique capabilities. Future spending will depend on production rates, sustainment needs, and potential upgrades or new variants.

How does the pricing of this contract compare to similar military aircraft production contracts?

Direct price comparison for this specific CMV-22 Osprey Lot 22 long-lead item contract is challenging due to its sole-source nature and focus on long-lead components rather than fully assembled aircraft. However, the per-unit cost of V-22 aircraft, when fully produced, has historically been high compared to other military aircraft, reflecting its complex tiltrotor technology and specialized capabilities. The $6.6 billion award for long-lead items suggests a significant portion of the total program cost is allocated to securing these critical components well in advance. When benchmarked against other large, complex military aircraft programs (e.g., F-35, B-21), the overall investment magnitude is comparable, though the specific cost drivers and pricing structures may differ significantly. The fixed-price incentive (FPI) nature of this contract aims to provide cost control, but the sole-source award limits the government's ability to leverage competitive market forces for price discovery.

What are the primary risks associated with this contract, and how are they being mitigated?

The primary risks associated with this contract include supply chain disruptions for long-lead items, potential cost overruns due to the fixed-price incentive structure, and the inherent risks of sole-source procurement (lack of competitive pressure on price). Supply chain risks are mitigated through early procurement of long-lead items and potentially through close collaboration with key suppliers. Cost overrun risks are managed via the FPI contract type, which incentivizes the contractor to stay within target costs while sharing savings or overruns. The risk of paying a premium due to the sole-source award is a known factor, and mitigation relies heavily on robust government negotiation, cost analysis, and oversight to ensure the price is fair and reasonable given the circumstances. Programmatic risks, such as schedule delays or performance issues, are also inherent in complex aerospace manufacturing and are managed through contract milestones and performance metrics.

What is the contractor's track record with the V-22 Osprey program or similar complex defense contracts?

Bell Boeing Joint Project Office, a partnership between Bell Helicopter (Textron) and Boeing, has a long and established track record with the V-22 Osprey program. They have been responsible for the design, development, production, and sustainment of the V-22 fleet since its inception. While the program has faced historical challenges, including cost overruns and developmental issues early in its life, Bell Boeing has successfully scaled production and delivered a capable aircraft that is now a critical asset for the U.S. military. Their experience extends to other large, complex defense aerospace programs, demonstrating a capacity to manage intricate supply chains and advanced manufacturing processes. This extensive history with the V-22 provides a strong foundation for executing this long-lead item contract, though ongoing performance and cost management remain crucial.

How does this contract contribute to the overall effectiveness and readiness of the U.S. military?

This contract is crucial for maintaining and enhancing the operational readiness of the U.S. Navy and Marine Corps by ensuring the continued production of the CMV-22 Osprey. The CMV-22 variant is specifically designed to provide extended range logistics support, particularly for carrier strike groups, a capability previously lacking. By securing long-lead items now, the contract enables the timely delivery of these vital aircraft, allowing them to replace less capable platforms and fulfill critical mission requirements. The Osprey's unique tiltrotor design offers vertical take-off and landing (VTOL) capabilities combined with the speed and range of a turboprop aircraft, making it indispensable for certain operational scenarios. Therefore, this investment directly supports the military's ability to project power, conduct complex operations, and maintain logistical superiority in challenging environments.

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: N0001916R1001

Offers Received: 1

Pricing Type: FIXED PRICE INCENTIVE (L)

Evaluated Preference: NONE

Contractor Details

Address: 401 TILTROTOR DR PLANT A, AMARILLO, TX, 79111

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

Financial Breakdown

Contract Ceiling: $7,051,885,129

Exercised Options: $7,051,274,322

Current Obligation: $6,589,472,393

Actual Outlays: $264,909,479

Subaward Activity

Number of Subawards: 3178

Total Subaward Amount: $6,620,166,413

Contract Characteristics

Multi-Year Contract: Yes

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline