Navy awards $520.6M for AE1107C turboshaft engines to Rolls-Royce Corporation, a sole-source contract

Contract Overview

Contract Amount: $520,655,453 ($520.7M)

Contractor: Rolls-Royce Corporation

Awarding Agency: Department of Defense

Start Date: 2017-09-21

End Date: 2025-08-29

Contract Duration: 2,899 days

Daily Burn Rate: $179.6K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: AE1107C TURBOSHAFT ENGINES

Place of Performance

Location: INDIANAPOLIS, MARION County, INDIANA, 46225

State: Indiana Government Spending

Plain-Language Summary

Department of Defense obligated $520.7 million to ROLLS-ROYCE CORPORATION for work described as: AE1107C TURBOSHAFT ENGINES Key points: 1. The contract value of over $520 million for aircraft engine parts indicates significant investment in aviation sustainment. 2. Sole-source procurement raises questions about potential price inflation and lack of competitive pressure. 3. The long duration of the contract (2017-2025) suggests a critical, ongoing need for these specific engine components. 4. The primary contractor, Rolls-Royce Corporation, is a major player in the aerospace industry, implying established capabilities. 5. The contract's focus on engine parts places it within the broader defense industrial base for aircraft maintenance and readiness.

Value Assessment

Rating: questionable

Benchmarking the value of this sole-source contract is challenging without competitive data. However, the substantial award amount suggests a significant financial commitment. The firm fixed-price structure provides some cost certainty, but the absence of competition means there's no direct market comparison to assess if the pricing is optimal. Further analysis would require understanding the specific engine model's market value and Rolls-Royce's cost structure for these 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, Rolls-Royce Corporation, was considered. This typically occurs when a specific part or technology is proprietary or when there are unique capabilities required that only one entity possesses. The lack of competition limits price discovery and may result in higher costs for the government compared to a fully competed procurement.

Taxpayer Impact: Taxpayers may be paying a premium due to the absence of competitive bidding. Without multiple offers, there is less incentive for the contractor to offer the lowest possible price.

Public Impact

The U.S. Navy benefits from the continued supply of critical turboshaft engines for its aircraft fleet, ensuring operational readiness. This contract supports the maintenance and sustainment of naval aviation assets, crucial for national defense. The contract's geographic impact is primarily tied to Rolls-Royce Corporation's manufacturing and support facilities, likely within the United States. It sustains jobs within the aerospace manufacturing sector, particularly in specialized engine component production.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure, potentially leading to higher costs for taxpayers.
Long contract duration could mask inefficiencies or price increases over time without regular re-competition.
Dependence on a single supplier for critical engine components poses a supply chain risk.

Positive Signals

Firm fixed-price contract provides cost certainty for the duration of the award.
Rolls-Royce Corporation is a well-established and experienced manufacturer of aircraft engines.
Contract ensures continued availability of essential components for naval aviation readiness.

Sector Analysis

This contract falls within the Aircraft Engine and Engine Parts Manufacturing sector (NAICS 336412), a critical component of the aerospace and defense industry. The global market for aircraft engines and parts is substantial, dominated by a few major players like Rolls-Royce. This specific contract supports the sustainment of military aircraft, a key area of government spending within this sector. Comparable spending benchmarks would involve other large sole-source or competitively awarded contracts for similar high-value aerospace components.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb: false'. Furthermore, the prime contractor, Rolls-Royce Corporation, is a large business. There is no explicit information regarding subcontracting plans for small businesses within this data. Therefore, the direct impact on the small business ecosystem from this specific award is likely minimal, though the prime contractor may engage small businesses in its broader supply chain.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy's contracting and program management offices. As a definitive contract, it is subject to standard federal procurement regulations and oversight. Transparency is limited by the sole-source nature, but reporting requirements for contract performance and payments would still apply. The Inspector General for the Department of Defense would have jurisdiction for audits and investigations if any issues arise.

Related Government Programs

Aircraft Engine Manufacturing
Defense Logistics Agency (DLA) Aviation
Naval Air Systems Command (NAVAIR) Contracts
Aerospace Parts Procurement
Rolls-Royce Defense Contracts

Risk Flags

Sole Source Procurement
Potential for Price Inflation
Supply Chain Dependency

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $520.7 million to ROLLS-ROYCE CORPORATION. AE1107C TURBOSHAFT ENGINES

Who is the contractor on this award?

The obligated recipient is ROLLS-ROYCE 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 $520.7 million.

What is the period of performance?

Start: 2017-09-21. End: 2025-08-29.

What is the historical spending trend for AE1107C turboshaft engines by the Department of Defense?

Analyzing historical spending on AE1107C turboshaft engines requires access to detailed contract databases beyond the provided summary. However, the current award of $520.6 million, spanning from September 2017 to August 2025, suggests a consistent and significant need for these components over an extended period. The fact that this is a sole-source contract implies that previous procurements may also have been sole-source or that the need has evolved to a point where only Rolls-Royce can fulfill it. Without prior contract data, it's difficult to establish a precise spending trend, but the magnitude of this award indicates substantial and ongoing investment in these specific engines for naval aviation.

How does the per-unit cost of these AE1107C turboshaft engines compare to similar engines in the market?

Determining the per-unit cost for these AE1107C turboshaft engines is not possible with the provided data, as the total award amount and the number of units are not directly correlated in a way that allows for simple division. Furthermore, the contract is sole-source, making direct market comparisons difficult. The AE1107C is a specific turboshaft engine used in various applications, including the V-22 Osprey tiltrotor aircraft. Benchmarking its price would require access to Rolls-Royce's pricing structure for this specific engine model and comparing it against prices for comparable engines from other manufacturers (e.g., GE Aviation, Pratt & Whitney) used in similar military platforms, considering factors like thrust, fuel efficiency, and maintenance requirements. The sole-source nature inherently limits the ability to perform a robust competitive price analysis.

What are the specific risks associated with a sole-source contract for critical aircraft engine components?

Sole-source contracts for critical components like aircraft engines present several risks. Firstly, the lack of competition can lead to inflated prices, as the government does not benefit from the cost-saving pressures inherent in a competitive bidding process. Secondly, there's a risk of vendor lock-in, where the government becomes overly dependent on a single supplier, potentially limiting future flexibility and negotiation power. Thirdly, if the sole-source provider experiences production issues, quality control problems, or financial instability, it could severely disrupt the supply chain for essential military assets, impacting readiness. Finally, without competitive benchmarking, it's harder to ensure the government is receiving the best value for its investment over the long term.

What is the track record of Rolls-Royce Corporation in fulfilling large defense contracts, particularly for engine components?

Rolls-Royce Corporation has a long and extensive track record as a major global manufacturer of aerospace engines, including for military applications. They are a key supplier for numerous defense programs worldwide, including engines for fighter jets, transport aircraft, and helicopters. Their experience encompasses design, manufacturing, and sustainment services for complex engine systems. While specific performance metrics for every contract are not publicly detailed, Rolls-Royce is generally recognized as a capable and established provider in the defense sector. However, like any large contractor, they may have faced challenges or scrutiny on specific contracts related to delivery schedules, cost overruns, or technical issues, which would be detailed in specific contract performance reports or IG investigations if they occurred.

How does the 'Aircraft Engine and Engine Parts Manufacturing' (NAICS 336412) sector typically operate in terms of government contracting?

The Aircraft Engine and Engine Parts Manufacturing sector (NAICS 336412) is characterized by high barriers to entry, significant research and development costs, and stringent quality and performance requirements, particularly for defense applications. Government contracting within this sector often involves large, long-term agreements due to the complexity and lifecycle support needs of aircraft engines. Contracts can range from initial development and production to sustainment, upgrades, and spare parts. While some procurements are competitively bid, especially for newer platforms or standardized parts, sole-source or limited-competition contracts are common for proprietary technologies, unique engine models, or when specialized maintenance and support are required from the original equipment manufacturer (OEM). The industry is dominated by a few major global players, including Rolls-Royce, GE Aviation, and Pratt & Whitney.

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: N0001916R0019

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Rolls-Royce Holdings PLC

Address: 450 S MERIDIAN ST, INDIANAPOLIS, IN, 46225

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

Financial Breakdown

Contract Ceiling: $949,585,656

Exercised Options: $919,471,893

Current Obligation: $520,655,453

Actual Outlays: $42,125,087

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Timeline