Boeing awarded $99.6M for Navy and RAAF aircraft retrofit kits, with no competition

Contract Overview

Contract Amount: $99,618,739 ($99.6M)

Contractor: THE Boeing Company

Awarding Agency: Department of Defense

Start Date: 2017-06-26

End Date: 2020-02-29

Contract Duration: 978 days

Daily Burn Rate: $101.9K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIXED PRICE INCENTIVE

Sector: Defense

Official Description: THE PURPOSE OF THIS BILATERAL ORDER AGAINST BASIC ORDERING AGREEMENT N00019-16-G-0001 IS TO PROCURE AYC-1539 RETROFIT KITS FOR THE US NAVY AND THE ROYAL AUSTRALIAN AIR FORCE IN ACCORDANCE WITH ECP 6213R2, TRAILING EDGE FLAP RETROFIT REDESIGN (TEFR2) FOR FY17 WITH AN OPTION FOR ADDITIONAL QUANTITIES IN FY18.

Place of Performance

Location: SAINT LOUIS, SAINT LOUIS County, MISSOURI, 63134

State: Missouri Government Spending

Plain-Language Summary

Department of Defense obligated $99.6 million to THE BOEING COMPANY for work described as: THE PURPOSE OF THIS BILATERAL ORDER AGAINST BASIC ORDERING AGREEMENT N00019-16-G-0001 IS TO PROCURE AYC-1539 RETROFIT KITS FOR THE US NAVY AND THE ROYAL AUSTRALIAN AIR FORCE IN ACCORDANCE WITH ECP 6213R2, TRAILING EDGE FLAP RETROFIT REDESIGN (TEFR2) FOR FY17 WITH AN OPTION FOR AD… Key points: 1. Contract awarded to a single, established supplier, raising questions about price competitiveness. 2. The contract covers retrofitting existing aircraft, suggesting a focus on sustainment rather than new capabilities. 3. A significant portion of the contract value is tied to future year options, introducing budget uncertainty. 4. The use of a Fixed Price Incentive contract type suggests a shared risk between the government and contractor. 5. The contract is for aircraft manufacturing, a sector with high barriers to entry and consolidation. 6. The retrofitting effort addresses specific engineering change proposals, indicating a targeted upgrade.

Value Assessment

Rating: fair

The awarded amount of $99.6 million for AYC-1539 retrofit kits appears substantial. Without specific benchmarks for similar retrofit programs or detailed cost breakdowns, it is difficult to definitively assess value for money. The use of a Fixed Price Incentive contract suggests an attempt to control costs while allowing for adjustments based on performance. However, the lack of competition limits the ability to benchmark pricing against market alternatives.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was not competed, indicating a sole-source award. The justification for this approach is not provided in the data, but it typically arises when only one source can fulfill the requirement due to unique capabilities, proprietary technology, or urgent needs. The absence of competition means that potential cost savings from a competitive bidding process were not realized, and the government did not benefit from a range of technical solutions.

Taxpayer Impact: Taxpayers may have paid a premium due to the lack of competitive pressure. Without competing the requirement, there is less assurance that the price reflects the lowest possible cost for the required goods and services.

Public Impact

The U.S. Navy and the Royal Australian Air Force will benefit from upgraded aircraft with improved performance or safety. The services delivered include the procurement and installation of specific retrofit kits (AYC-1539) based on engineering change proposals. The geographic impact is primarily on military bases where these aircraft are operated by the U.S. and Australian forces. Workforce implications may include specialized manufacturing and installation jobs within The Boeing Company and its supply chain.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition limits price discovery and potentially increases costs for taxpayers.
Reliance on a single contractor for critical aircraft modifications could create future dependency.
The use of options for additional quantities introduces uncertainty in long-term budget planning.
Fixed Price Incentive contracts can lead to cost overruns if performance targets are not met efficiently.

Positive Signals

Addresses specific, documented engineering requirements (ECP 6213R2) for aircraft modernization.
Involves a major defense contractor with established experience in aircraft manufacturing and sustainment.
Includes both U.S. and allied nation requirements, indicating potential for interoperability and shared defense capabilities.
The contract duration suggests a planned, phased implementation of the retrofits.

Sector Analysis

The Aircraft Manufacturing sector (NAICS 336411) is characterized by high capital investment, complex supply chains, and significant government procurement. This contract fits within the defense aerospace segment, focusing on the sustainment and upgrade of existing platforms rather than the development of new ones. Spending in this sector is heavily influenced by defense budgets and geopolitical factors. Comparable spending benchmarks would typically involve other major aircraft modification or production contracts.

Small Business Impact

The data indicates that this contract was not set aside for small businesses (ss: false, sb: false). As a sole-source award to a large prime contractor, The Boeing Company, the direct impact on small businesses is likely through subcontracting opportunities. The extent to which Boeing will utilize small business subcontractors for this specific retrofit program is not detailed, but large defense contracts often involve a tiered subcontracting structure.

Oversight & Accountability

Oversight for this contract would typically be managed by the Defense Contract Management Agency (DCMA), as indicated by the 'sa' field. Accountability measures are embedded within the Fixed Price Incentive contract type, which links profit to performance against cost targets. Transparency is limited by the sole-source nature of the award; however, contract modifications and performance reports would be subject to internal government review and potentially public reporting through systems like FPDS.

Related Government Programs

Aircraft Modification Programs
Foreign Military Sales
Defense Sustainment Contracts
Naval Aviation Support
Air Force Equipment Modernization

Risk Flags

Sole-source award lacks competitive pricing.
Potential for cost overruns in Fixed Price Incentive contract.
Reliance on a single contractor for critical modifications.
Future year options introduce budget uncertainty.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $99.6 million to THE BOEING COMPANY. THE PURPOSE OF THIS BILATERAL ORDER AGAINST BASIC ORDERING AGREEMENT N00019-16-G-0001 IS TO PROCURE AYC-1539 RETROFIT KITS FOR THE US NAVY AND THE ROYAL AUSTRALIAN AIR FORCE IN ACCORDANCE WITH ECP 6213R2, TRAILING EDGE FLAP RETROFIT REDESIGN (TEFR2) FOR FY17 WITH AN OPTION FOR ADDITIONAL QUANTITIES IN FY18.

Who is the contractor on this award?

The obligated recipient is THE BOEING COMPANY.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $99.6 million.

What is the period of performance?

Start: 2017-06-26. End: 2020-02-29.

What is the historical spending pattern for AYC-1539 retrofit kits or similar aircraft modifications with The Boeing Company?

Analyzing historical spending requires access to broader contract databases beyond this single award. However, The Boeing Company is a major defense contractor with extensive experience in aircraft production and sustainment. Past contracts for similar retrofit programs, such as upgrades to existing fighter jets or transport aircraft, would provide context. Without specific historical data for this particular kit or comparable retrofits, it's challenging to establish a trend. Generally, large-scale modification programs can span multiple years and involve significant cumulative spending, especially when incorporating new technologies or addressing obsolescence. The current award of approximately $99.6 million for FY17 with options for FY18 suggests a substantial, but potentially part of a larger, multi-year effort.

How does the pricing of the AYC-1539 retrofit kits compare to market rates for similar aircraft modifications?

Direct comparison to market rates is difficult due to the sole-source nature of this award and the proprietary nature of specific retrofit kits. Typically, competitive bidding allows for price discovery by soliciting offers from multiple vendors. In a sole-source scenario, the government relies on negotiation and cost analysis to ensure fair pricing. Benchmarking would involve identifying contracts for similar types of modifications (e.g., aerodynamic enhancements, avionics upgrades) on comparable aircraft platforms, performed by different contractors. The absence of competition here means that a true market-based price comparison is not feasible, and the government's negotiation leverage is reduced.

What are the specific performance metrics and risk indicators associated with this Fixed Price Incentive contract?

A Fixed Price Incentive (FPI) contract aims to share the risk between the government and the contractor. Performance metrics are typically tied to achieving specific cost, schedule, and performance targets. For this AYC-1539 retrofit, key indicators would likely include the successful integration of the kits, adherence to the retrofitting schedule, and meeting the technical specifications outlined in ECP 6213R2. Risk indicators could involve potential production delays, unforeseen technical challenges during installation, or cost overruns that exceed the target price, leading to increased government expenditure up to a ceiling price. The contract structure incentivizes the contractor to control costs to maximize profit, but also protects the government from unlimited cost increases.

What is the expected impact of these retrofits on the operational capabilities and lifespan of the U.S. Navy and Royal Australian Air Force aircraft?

The retrofitting of aircraft with AYC-1539 kits, based on Engineering Change Proposal 6213R2 (Trailing Edge Flap Redesign), is intended to enhance or maintain the operational capabilities of the affected aircraft. Redesigned trailing edge flaps can improve aerodynamic efficiency, potentially leading to better fuel economy, increased maneuverability, or enhanced stability during flight. Such modifications can also address structural fatigue or obsolescence, thereby extending the service life of the aircraft. The specific benefits depend on the original design limitations and the objectives of the redesign, but generally, these retrofits aim to ensure the platforms remain effective and safe for continued operations.

What is the rationale behind awarding this contract on a sole-source basis rather than through full and open competition?

The provided data indicates the contract was 'NOT COMPETED'. Common justifications for sole-source awards include that the property or services are available only from a single responsible source, or that the public exigency will not permit a delay incident to competitive bidding. For aircraft modifications, this could stem from unique technical expertise held by the original manufacturer (Boeing), proprietary design data, or the need for seamless integration with existing systems. Without the specific justification cited by the agency, it is presumed that one of these factors, or a combination, led to the decision to award without competition, prioritizing specialized capability or urgency over competitive pricing.

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

Offers Received: 1

Pricing Type: FIXED PRICE INCENTIVE (L)

Evaluated Preference: NONE

Contractor Details

Address: 6200 JS MCDONNELL BLVD, SAINT LOUIS, MO, 63134

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

Financial Breakdown

Contract Ceiling: $99,618,739

Exercised Options: $99,618,739

Current Obligation: $99,618,739

Subaward Activity

Number of Subawards: 4

Total Subaward Amount: $4,778,939

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: N0001916G0001

IDV Type: BOA

Timeline