DoD awards $833.8M contract for long-lead engine parts, raising questions about competition and value
Contract Overview
Contract Amount: $833,800,020 ($833.8M)
Contractor: General Electric Company
Awarding Agency: Department of Defense
Start Date: 2018-07-30
End Date: 2024-12-16
Contract Duration: 2,331 days
Daily Burn Rate: $357.7K/day
Competition Type: NOT COMPETED
Number of Offers Received: 1
Pricing Type: FIRM FIXED PRICE
Sector: Defense
Official Description: IGF:OT:IGF ADVANCE ACQUISITION CONTRACT- LONG LEAD MATERIAL FOR LOT 23 (FY2019) F414-GE-400 ENGINE
Place of Performance
Location: LYNN, ESSEX County, MASSACHUSETTS, 01905
Plain-Language Summary
Department of Defense obligated $833.8 million to GENERAL ELECTRIC COMPANY for work described as: IGF:OT:IGF ADVANCE ACQUISITION CONTRACT- LONG LEAD MATERIAL FOR LOT 23 (FY2019) F414-GE-400 ENGINE Key points: 1. Contract awarded on a sole-source basis, limiting price discovery and potentially increasing costs. 2. Significant duration of over 5 years suggests a long-term need for critical engine components. 3. The contract's value is substantial, requiring careful oversight to ensure taxpayer funds are used efficiently. 4. Focus on long-lead material indicates a strategic effort to secure future production capabilities. 5. The absence of competition warrants scrutiny of the justification for sole-source award. 6. Performance risk is mitigated by a firm-fixed-price structure, shifting cost overruns to the contractor.
Value Assessment
Rating: questionable
The contract's value of $833.8 million for long-lead engine parts is significant. Without competitive bidding, it is difficult to benchmark the pricing against market rates or similar contracts. The sole-source nature raises concerns about whether the government secured the best possible price. Further analysis would be needed to compare the unit costs of these parts to historical data or industry averages for similar engine components.
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. This approach is typically used when only one responsible source can provide the required goods or services. The lack of competition means that potential savings from a bidding process were forgone, and the government relied on negotiation to establish the contract terms and price.
Taxpayer Impact: Taxpayers may have paid a premium due to the absence of competitive pressure. The sole-source award necessitates robust negotiation and oversight to ensure fair pricing.
Public Impact
The Department of Defense benefits from securing critical long-lead time materials for aircraft engines. This contract supports the manufacturing and supply chain for advanced aircraft engine components. The primary beneficiaries are likely military aviation programs requiring these specific engine parts. The contract supports jobs within the aerospace manufacturing sector, particularly at General Electric.
Waste & Efficiency Indicators
Waste Risk Score: 50 / 10
Warning Flags
- Sole-source award limits competitive pricing and potentially increases cost to taxpayers.
- Long contract duration of over 5 years may not reflect current market efficiencies.
- Lack of transparency in pricing due to non-competitive award.
- Potential for cost overruns if not meticulously managed, despite firm-fixed-price structure.
Positive Signals
- Firm-fixed-price contract structure shifts cost overrun risk to the contractor.
- Secures essential long-lead time materials, crucial for maintaining aircraft readiness.
- Award to a known, established contractor (General Electric) may reduce performance risk.
- Supports critical defense industrial base capabilities.
Sector Analysis
This contract falls within the Aircraft Engine and Engine Parts Manufacturing sector (NAICS 336412). This is a highly specialized and capital-intensive industry dominated by a few major players. The market size for such components is directly tied to defense spending and the operational needs of military aircraft fleets. Benchmarking spending in this sector is challenging due to proprietary technologies and limited public data on specific component costs.
Small Business Impact
The contract data indicates that this was not a small business set-aside, and there is no explicit mention of subcontracting goals for small businesses. Given the specialized nature of aircraft engine components and the sole-source award to a large prime contractor, the direct impact on the small business ecosystem may be limited unless the prime contractor actively engages small businesses in its supply chain.
Oversight & Accountability
Oversight for this contract would primarily fall under the Defense Contract Management Agency (DCMA), responsible for ensuring contractor performance and compliance. The firm-fixed-price nature provides some cost control, but the sole-source award means that the initial price negotiation and justification require thorough review. Transparency is limited due to the non-competitive nature, making detailed public scrutiny of value-for-money challenging.
Related Government Programs
- F414-GE-400 Engine Production
- Long-Lead Time Material Acquisition
- Defense Aircraft Component Manufacturing
- Sole-Source Defense Contracts
- Aircraft Engine Parts Procurement
Risk Flags
- Sole-source award
- Lack of competition
- High contract value
- Long contract duration
Tags
defense, department-of-defense, aircraft-engine-manufacturing, long-lead-material, sole-source, definitive-contract, firm-fixed-price, general-electric, massachusetts, fy2019-acquisition, dcma
Frequently Asked Questions
What is this federal contract paying for?
Department of Defense awarded $833.8 million to GENERAL ELECTRIC COMPANY. IGF:OT:IGF ADVANCE ACQUISITION CONTRACT- LONG LEAD MATERIAL FOR LOT 23 (FY2019) F414-GE-400 ENGINE
Who is the contractor on this award?
The obligated recipient is GENERAL ELECTRIC 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 $833.8 million.
What is the period of performance?
Start: 2018-07-30. End: 2024-12-16.
What is the specific justification for awarding this contract on a sole-source basis?
The provided data indicates the contract was 'NOT COMPETED'. Typically, sole-source awards are justified under specific circumstances outlined in federal acquisition regulations, such as when only one responsible source can provide the required supplies or services, or in cases of urgent and compelling need. For this specific contract, the justification would likely stem from the unique nature of the long-lead time materials required for the F414-GE-400 engine, potentially involving proprietary technology or specialized manufacturing processes only available from General Electric. A detailed review of the Justification for Other Than Full and Open Competition (JOFOC) document would be necessary to understand the precise rationale.
How does the pricing of this contract compare to similar sole-source awards for aircraft engine components?
Direct comparison of pricing for sole-source contracts is inherently difficult due to the lack of competitive benchmarking. Without access to the negotiated price breakdown and the specific technical specifications of the long-lead materials, it's challenging to assess value for money. However, the significant value of $833.8 million suggests a substantial quantity or high complexity of the components. To evaluate fairness, one would typically look at historical pricing trends for similar components from the same contractor, or if available, pricing data from other sole-source awards for comparable items within the defense sector, while acknowledging the unique aspects of each procurement.
What are the primary risks associated with this sole-source contract, and how are they being managed?
The primary risk with a sole-source contract is the potential for inflated pricing due to the absence of competition. Another risk could be contractor performance issues, although the firm-fixed-price structure shifts cost overrun risk to the contractor. The long duration (over 5 years) also presents a risk of obsolescence or changing requirements. These risks are managed through the firm-fixed-price agreement, which caps the government's liability for cost increases. Robust oversight by the Defense Contract Management Agency (DCMA) is crucial for monitoring performance, schedule, and ensuring compliance with contract terms. The government's negotiation team also plays a critical role in establishing a fair initial price.
What is the expected impact of this contract on the F414-GE-400 engine program's readiness and future capabilities?
This contract is specifically for 'long-lead material' for the F414-GE-400 engine. Long-lead time items are components that require significant manufacturing time, often exceeding the assembly time of the final product. By securing these materials now, the Department of Defense is ensuring the continued availability of critical parts needed for the production, maintenance, and sustainment of aircraft equipped with the F414-GE-400 engine. This proactive acquisition strategy is vital for maintaining operational readiness and supporting the long-term operational life of the affected military platforms.
What has been General Electric's track record with similar large, sole-source defense contracts?
General Electric (GE) is a major defense contractor with extensive experience in producing aircraft engines and related components. They have a long history of securing large contracts, including sole-source awards, for critical defense systems. While specific details on past sole-source contracts and their performance outcomes are often proprietary or require deep dives into contract databases, GE's continued role as a primary engine supplier suggests a generally reliable performance record. However, like any large contractor, they may have faced scrutiny on pricing or delivery schedules in specific instances, necessitating ongoing government oversight.
How does this contract's value compare to overall historical spending on the F414-GE-400 engine program?
Determining the exact historical spending on the F414-GE-400 engine program requires access to comprehensive contract databases and program budget information. This $833.8 million contract represents a significant investment specifically for long-lead materials. It's important to note that this figure is likely a portion of the total program cost, which would also include engine production, research and development, sustainment, and other support services over the engine's lifecycle. Without broader program spending data, it's difficult to place this single contract's value in the complete historical context of the entire F414-GE-400 program.
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: N0001918R1061
Offers Received: 1
Pricing Type: FIRM FIXED PRICE (J)
Evaluated Preference: NONE
Contractor Details
Address: 1000 WESTERN AVE, LYNN, MA, 01905
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: $945,591,780
Exercised Options: $833,800,020
Current Obligation: $833,800,020
Actual Outlays: $1,037,761,097
Subaward Activity
Number of Subawards: 76
Total Subaward Amount: $29,895,674
Contract Characteristics
Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED
Cost or Pricing Data: NO
Timeline
Start Date: 2018-07-30
Current End Date: 2024-12-16
Potential End Date: 2024-12-16 00:00:00
Last Modified: 2025-04-22
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