DoD's $2.68B LRIP 11 AAC contract to RTX Corporation shows limited competition and potential value concerns

Contract Overview

Contract Amount: $2,682,738,780 ($2.7B)

Contractor: RTX Corporation

Awarding Agency: Department of Defense

Start Date: 2016-11-08

End Date: 2022-06-30

Contract Duration: 2,060 days

Daily Burn Rate: $1.3M/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIXED PRICE INCENTIVE

Sector: Defense

Official Description: LRIP 11 AAC - FMS AND INTERNATIONAL PARTNERS

Place of Performance

Location: EAST HARTFORD, HARTFORD County, CONNECTICUT, 06118

State: Connecticut Government Spending

Plain-Language Summary

Department of Defense obligated $2.68 billion to RTX CORPORATION for work described as: LRIP 11 AAC - FMS AND INTERNATIONAL PARTNERS Key points: 1. Contract awarded through a sole-source justification, raising questions about price discovery and potential overpayment. 2. The fixed-price incentive contract type suggests a shared risk between the government and contractor, but oversight is crucial. 3. Long contract duration of 2060 days indicates a significant, long-term commitment for aircraft engine parts. 4. The contract falls under Aircraft Engine and Engine Parts Manufacturing, a critical sector for defense readiness. 5. Lack of small business participation noted, with no set-aside or subcontracting requirements specified. 6. The contract's value is substantial, necessitating rigorous performance monitoring and cost analysis.

Value Assessment

Rating: questionable

Benchmarking the value of this sole-source contract is challenging due to the lack of competitive bids. The fixed-price incentive structure aims to control costs, but without market comparisons, it's difficult to ascertain if the pricing is optimal. The substantial award amount suggests a significant investment, and the government's ability to achieve value for money hinges on effective negotiation and ongoing performance management. Further analysis of the incentive clauses and their triggers would be necessary to fully assess value.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded using a sole-source justification, meaning it was not competed among multiple vendors. This approach is typically used when only one responsible source can fulfill the requirement. The lack of competition limits the government's ability to leverage market forces to drive down prices and ensure the best possible value. While sole-source awards can be necessary in specific circumstances, they warrant heightened scrutiny regarding pricing and justification.

Taxpayer Impact: Taxpayers may face higher costs due to the absence of competitive pressure. The government's negotiating position is weakened, potentially leading to less favorable terms and prices compared to a competed procurement.

Public Impact

The primary beneficiaries are the Department of the Navy and potentially international partners through Foreign Military Sales (FMS), ensuring the availability of critical aircraft engine components. This contract supports the sustainment and readiness of specific aircraft platforms requiring these advanced engine parts. The geographic impact is primarily within Connecticut, where RTX Corporation is headquartered and likely performs much of the work. The contract sustains jobs within the aerospace manufacturing sector, particularly in engine and engine parts production.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition and may result in higher costs for taxpayers.
Lack of transparency in the justification for sole-sourcing requires further investigation.
Fixed-price incentive contract requires careful monitoring to ensure contractor performance aligns with cost objectives.
Long contract duration increases the risk of cost overruns or performance degradation over time.
No small business participation noted, potentially excluding valuable contributions from smaller firms.

Positive Signals

Award to a major defense contractor like RTX Corporation suggests access to advanced technology and manufacturing capabilities.
Fixed-price incentive contract structure can incentivize efficiency and cost control if managed effectively.
The contract supports critical defense readiness for the U.S. Navy's aircraft fleet.
Long-term nature of the contract provides stability for production and supply chain management.

Sector Analysis

This contract falls within the broader aerospace and defense sector, specifically focusing on aircraft engine manufacturing. The market for advanced military aircraft engines is highly concentrated, with a few major players dominating. RTX Corporation (through its Pratt & Whitney division) is a key entity in this space. Spending in this category is driven by the need for advanced technology, high reliability, and long-term sustainment of complex weapon systems. Comparable spending benchmarks would typically involve other large-scale engine procurements for military aircraft.

Small Business Impact

This contract does not appear to include any small business set-aside provisions, nor is there an indication of subcontracting goals for small businesses. The award to a large prime contractor like RTX Corporation suggests that the primary focus is on leveraging established capabilities. This lack of small business involvement means that opportunities for smaller firms to contribute to this significant defense program are likely limited, potentially impacting the broader small business ecosystem within the aerospace supply chain.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contracting and program management offices, with potential involvement from the Defense Contract Management Agency (DCMA) for performance monitoring. Inspector General (IG) jurisdiction would apply for investigations into fraud, waste, or abuse. Transparency is limited due to the sole-source nature, but contract modifications, performance reports, and payment data would be subject to internal review and potentially Freedom of Information Act (FOIA) requests, albeit with potential redactions.

Related Government Programs

F-35 Lightning II Program
F-15 Eagle Program
C-17 Globemaster III Program
Aircraft Engine Maintenance, Repair, and Overhaul (MRO)
Foreign Military Sales (FMS) Aircraft Programs

Risk Flags

Sole-source award
Lack of competition
Potential for cost overruns
Long contract duration
No small business participation

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $2.68 billion to RTX CORPORATION. LRIP 11 AAC - FMS AND INTERNATIONAL PARTNERS

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 $2.68 billion.

What is the period of performance?

Start: 2016-11-08. End: 2022-06-30.

What is the specific justification provided for awarding this contract on a sole-source basis?

The provided data indicates the contract was 'NOT COMPETED' and falls under a 'sole-source' category. While the specific justification document is not included, sole-source awards are typically justified when only one responsible source can provide the required goods or services. This often occurs due to unique technical requirements, proprietary technology, or the need for compatibility with existing systems where only one contractor can meet these demands. For aircraft engines, this could relate to specific engine models, unique performance characteristics, or established sustainment infrastructure that only the original equipment manufacturer possesses. A detailed review of the Justification and Approval (J&A) document would be necessary to understand the precise rationale and assess its validity.

How does the fixed-price incentive (FPI) contract type function in this context, and what are its implications for cost control?

A Fixed-Price Incentive (FPI) contract establishes a target cost, a target profit, and a price ceiling. The final price is determined by the contractor's actual costs, with the government and contractor sharing cost variances above or below the target cost, up to the ceiling. In this case, the government aims to incentivize RTX Corporation to control costs by sharing in any savings if actual costs are below the target. However, if costs exceed the target, both parties share the overrun, but the government's liability is capped at the price ceiling. The effectiveness of FPI hinges on realistic target setting and robust government oversight to ensure the contractor is genuinely motivated to achieve efficiencies rather than simply incurring costs up to the ceiling. The specific sharing ratio and ceiling price are critical elements in assessing its value-for-money potential.

What is the historical spending trend for similar aircraft engine contracts within the Department of the Navy?

Analyzing historical spending trends for similar aircraft engine contracts within the Department of the Navy requires access to broader contract databases and spending reports. However, it is generally understood that major aircraft engine procurements and sustainment contracts represent significant, long-term investments. Spending in this area is often characterized by large, multi-year awards due to the complexity and lifecycle costs of these systems. Trends are influenced by fleet modernization programs, operational tempo, and technological advancements. Without specific historical data for comparable engine programs (e.g., for different aircraft types or previous LRIP phases), it's difficult to provide a precise trend analysis. However, the consistent need for high-performance, reliable engines suggests sustained, substantial spending in this category over time.

What are the potential risks associated with the long duration (2060 days) of this contract?

The 2060-day duration (approximately 5.6 years) of this contract presents several potential risks. Firstly, it increases the likelihood of scope creep or the need for contract modifications if requirements evolve significantly over the contract period. Secondly, maintaining consistent performance and quality over such an extended timeframe can be challenging, potentially leading to degradation if oversight is not rigorous. Thirdly, economic factors like inflation or changes in material costs could impact the government's cost-effectiveness, especially if pricing mechanisms do not adequately account for long-term fluctuations. Finally, the longer the contract, the greater the potential impact of unforeseen technological obsolescence or the emergence of superior alternative solutions that the government might be locked out of due to the existing commitment.

Are there any performance metrics or key performance indicators (KPIs) associated with this contract that are publicly available?

Publicly available information typically does not detail specific Key Performance Indicators (KPIs) or granular performance metrics for individual defense contracts, especially those involving complex systems like aircraft engines. These metrics are usually defined within the contract's Statement of Work (SOW) or Performance Work Statement (PWS) and are used for internal government oversight and contractor evaluation. Common KPIs for engine contracts might include engine reliability rates (e.g., Mean Time Between Failures - MTBF), availability rates, turnaround times for maintenance and repair, and adherence to delivery schedules. The effectiveness of the Fixed-Price Incentive (FPI) structure also implies performance targets related to cost efficiency. Access to these specific KPIs would likely require a formal request through channels like the Freedom of Information Act (FOIA), and even then, sensitive performance data may be redacted.

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: N0001915R0083

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: $2,691,851,602

Exercised Options: $2,689,255,912

Current Obligation: $2,682,738,780

Actual Outlays: $75,497,285

Subaward Activity

Number of Subawards: 23

Total Subaward Amount: $8,479,499

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline