DoD's $262M aircraft engine procurement from RTX Corporation lacked competition, raising value concerns

Contract Overview

Contract Amount: $262,186,259 ($262.2M)

Contractor: RTX Corporation

Awarding Agency: Department of Defense

Start Date: 2017-12-01

End Date: 2021-10-31

Contract Duration: 1,430 days

Daily Burn Rate: $183.3K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Official Description: LRIP 11 NA PROCUREMENT

Place of Performance

Location: EAST HARTFORD, HARTFORD County, CONNECTICUT, 06118

State: Connecticut Government Spending

Plain-Language Summary

Department of Defense obligated $262.2 million to RTX CORPORATION for work described as: LRIP 11 NA PROCUREMENT Key points: 1. The contract's value, while substantial, was awarded without open competition, potentially impacting price discovery. 2. Performance was structured as Cost Plus Incentive Fee, which can incentivize cost overruns. 3. The duration of the contract (1430 days) suggests a long-term commitment to a single supplier. 4. The absence of small business participation is noted, with no set-aside provisions. 5. The procurement falls within the Aircraft Engine and Engine Parts Manufacturing sector, a critical defense industry.

Value Assessment

Rating: questionable

Benchmarking the value of this $262 million contract is challenging due to its sole-source nature. Without competitive bids, it's difficult to ascertain if the pricing reflects market rates or represents a premium. The Cost Plus Incentive Fee (CPIF) structure, while offering flexibility, can sometimes lead to higher final costs compared to fixed-price contracts if not managed rigorously. Further analysis would require access to detailed cost breakdowns and comparisons with similar sole-source procurements for comparable engine components.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning there was no open competition among multiple bidders. This approach is typically justified when only one responsible source can provide the required goods or services. However, the lack of competition limits the government's ability to leverage market forces to achieve the best possible price and value. The absence of multiple bids means that price discovery through competitive negotiation was not a factor in this award.

Taxpayer Impact: Taxpayers may have paid a premium due to the lack of competitive pressure. Without competing offers, the government has less leverage to negotiate lower prices, potentially leading to less efficient use of public funds.

Public Impact

The primary beneficiaries are the Department of Defense, specifically the Department of the Navy, ensuring the availability of critical aircraft engine components. The services delivered include the procurement of aircraft engines and related parts, essential for maintaining naval aviation readiness. The geographic impact is primarily within Connecticut, where RTX Corporation (Pratt & Whitney) is a major employer and industrial base. Workforce implications include the sustainment of highly skilled manufacturing and engineering jobs within the aerospace sector.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing and potential taxpayer savings.
Cost Plus Incentive Fee contract type can lead to cost escalation if not closely monitored.
Lack of transparency in pricing due to non-competitive nature.
Long contract duration may reduce flexibility for future technological advancements or alternative suppliers.

Positive Signals

Ensures supply of critical, potentially specialized, aircraft engine components for national defense.
RTX Corporation is a known entity with established capabilities in this manufacturing sector.
CPIF structure can incentivize contractor performance towards specific goals, if well-defined.

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. This sector is characterized by high barriers to entry, significant R&D investment, and a limited number of major players. The market size is substantial, driven by both military and commercial aviation demand. Comparable spending benchmarks are difficult to establish precisely due to the proprietary nature of engine technologies and the specific configurations required by the military. However, spending in this sector is consistently high due to the complexity and cost of these systems.

Small Business Impact

This contract was not awarded as a small business set-aside, and there is no indication of significant subcontracting opportunities for small businesses within the provided data. The prime contractor, RTX Corporation, is a large aerospace manufacturer. The absence of specific small business provisions suggests that the focus was on direct procurement from the prime, potentially limiting the direct economic benefit to the small business ecosystem for this specific award.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Defense's contracting and financial management regulations. The Cost Plus Incentive Fee structure necessitates robust oversight to monitor costs, track performance against incentive targets, and ensure compliance. Accountability measures would be embedded in the contract's terms and conditions, including reporting requirements and potential penalties or rewards tied to performance. Transparency may be limited due to the sole-source nature and the proprietary information often associated with defense manufacturing.

Related Government Programs

Department of Defense Aircraft Procurement
Naval Aviation Readiness Programs
Aerospace Manufacturing Contracts
Propulsion Systems Procurement

Risk Flags

Sole-source award
Lack of competition
Cost-plus contract type
Potential for cost overruns

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $262.2 million to RTX CORPORATION. LRIP 11 NA PROCUREMENT

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 $262.2 million.

What is the period of performance?

Start: 2017-12-01. End: 2021-10-31.

What is the track record of RTX Corporation (Pratt & Whitney) in delivering aircraft engines to the Department of Defense?

RTX Corporation, through its Pratt & Whitney division, has a long and established history as a major supplier of aircraft engines to the Department of Defense. They are a key player in military aviation, providing engines for a wide range of aircraft platforms, including fighters, bombers, and transport planes. Their track record includes numerous contracts for development, production, and sustainment of engine systems. While generally recognized for technological capability, like any large defense contractor, they have been subject to scrutiny regarding contract performance, cost, and schedule on various programs over the years. Specific performance on this particular contract would require detailed review of delivery schedules, quality metrics, and cost variances.

How does the Cost Plus Incentive Fee (CPIF) structure compare to other contract types in terms of value for money for the government?

Cost Plus Incentive Fee (CPIF) contracts are designed to share risks and rewards between the government and the contractor. The government agrees to pay the actual costs incurred by the contractor, plus a fee that is adjusted based on performance against pre-defined targets (e.g., cost, schedule, technical performance). Compared to fixed-price contracts, CPIF offers more flexibility when costs are uncertain or difficult to estimate upfront, which is common in complex R&D or specialized manufacturing. However, CPIF can potentially lead to higher overall costs than fixed-price contracts if the incentive targets are not well-defined or if the contractor's cost-saving efforts are insufficient. Value for money depends heavily on the government's ability to establish realistic targets and effectively monitor contractor performance and costs throughout the contract lifecycle.

What are the primary risks associated with sole-source procurements in the defense sector?

Sole-source procurements, like this one, carry several inherent risks for the government. The most significant risk is the potential for inflated pricing due to the absence of competitive pressure. Without competing bids, the government loses a key mechanism for negotiating the best possible price. Another risk is reduced innovation, as contractors may have less incentive to develop cost-saving efficiencies or introduce new technologies if they are guaranteed the contract. Furthermore, sole-source awards can create vendor lock-in, making it difficult and costly to switch suppliers in the future. This can also lead to a lack of transparency in cost structures and performance metrics, making effective oversight more challenging.

What is the typical lifecycle cost of an aircraft engine, and how does this contract contribute to it?

The lifecycle cost of an aircraft engine is substantial, encompassing not only the initial procurement cost but also the costs associated with maintenance, repair, overhaul, spare parts, and eventual disposal. Procurement represents only a fraction of the total lifecycle cost, which can often be several times the initial purchase price over the engine's operational lifespan. This contract, valued at $262 million, likely covers the initial procurement or a significant production run of engines. Its contribution to the lifecycle cost is primarily in the acquisition phase. The long-term sustainment and maintenance costs, which are often managed through separate contracts, will constitute the larger portion of the overall lifecycle expenditure for these engines.

Spending on aircraft engines and related parts is a significant component of the overall defense budget, particularly within the aerospace and defense sector. While specific figures fluctuate annually

Spending on aircraft engines and related parts is a significant component of the overall defense budget, particularly within the aerospace and defense sector. While specific figures fluctuate annually, major defense procurement categories include aircraft (airframes), ships, armored vehicles, missiles, and electronics systems. Aircraft engines are high-value, technologically complex items, often representing a substantial portion of an aircraft's total cost. Compared to categories like basic materials or less complex equipment, aircraft engine procurement commands a higher price per unit. However, in terms of total dollar value, spending on major platforms like aircraft carriers or fighter jet fleets might exceed engine-specific procurement in certain fiscal years. It remains a critical and consistently high-cost area within defense spending.

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: N0001916R0007

Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE (V)

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

Financial Breakdown

Contract Ceiling: $262,186,259

Exercised Options: $262,186,259

Current Obligation: $262,186,259

Actual Outlays: $13,238,806

Subaward Activity

Number of Subawards: 9

Total Subaward Amount: $116,311,474

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline