Boeing awarded $25.4M for aircraft manufacturing support, raising questions about competition and value

Contract Overview

Contract Amount: $25,389,990 ($25.4M)

Contractor: THE Boeing Company

Awarding Agency: Department of Defense

Start Date: 2018-05-03

End Date: 2023-12-31

Contract Duration: 2,068 days

Daily Burn Rate: $12.3K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: ECP 6482 ASE USN GROUP A INSTALLS

Place of Performance

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

State: Missouri Government Spending

Plain-Language Summary

Department of Defense obligated $25.4 million to THE BOEING COMPANY for work described as: ECP 6482 ASE USN GROUP A INSTALLS Key points: 1. Contract awarded via a non-competitive process, limiting price discovery. 2. Long performance period suggests potential for cost overruns or scope creep. 3. Firm fixed-price contract type offers some cost certainty but may not reflect true market value. 4. Significant duration of the contract warrants close monitoring of performance and costs. 5. Aircraft manufacturing sector is highly specialized, potentially justifying limited competition in some cases. 6. Lack of small business participation noted, with no set-aside provisions.

Value Assessment

Rating: questionable

The contract's value is difficult to benchmark due to its non-competitive nature. While the firm fixed-price structure provides some cost control, the absence of competing bids means there's no direct market comparison to assess if the $25.4 million represents a fair price. The long duration (over 5 years) also introduces risk, as market conditions and actual costs can fluctuate significantly over such a period. Without competitive data, it's challenging to definitively state if this represents excellent value for money.

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 vendor possesses the necessary capabilities or when it's deemed not in the government's best interest to compete. The lack of competition means taxpayers did not benefit from potential cost savings that could arise from a bidding process.

Taxpayer Impact: Sole-source awards can lead to higher prices for taxpayers as there is no competitive pressure to drive down costs. This limits the government's ability to secure the best possible value.

Public Impact

The primary beneficiary is The Boeing Company, a major aerospace manufacturer. Services delivered likely pertain to aircraft manufacturing support, potentially including production, assembly, or related logistics. Geographic impact is centered around Boeing's facilities, likely in Missouri given the 'SN' field. Workforce implications include employment for skilled labor within the aerospace manufacturing sector.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Non-competitive award limits transparency and potential cost savings.
Long contract duration increases risk of cost escalation and performance issues.
Lack of small business involvement may miss opportunities for economic inclusion.

Positive Signals

Firm fixed-price contract provides some cost predictability.
Award to a major, established manufacturer suggests a high likelihood of technical capability.
Long duration may indicate a critical, ongoing need for these services.

Sector Analysis

The aerospace manufacturing sector is characterized by high barriers to entry, significant capital investment, and complex technological requirements. Contracts in this space often involve large dollar values and long performance periods. The North American Industry Classification System (NAICS) code 336411 for Aircraft Manufacturing indicates a focus on the production of civilian and military aircraft. Spending in this sector is heavily influenced by defense budgets and commercial aviation demand. Comparable spending benchmarks are difficult without more specific service details, but large aircraft production contracts can run into billions.

Small Business Impact

This contract does not appear to have any small business set-aside provisions, as indicated by 'sb': false. Furthermore, there is no indication of subcontracting goals for small businesses. This suggests that the primary contractor, Boeing, will likely perform the majority of the work, potentially missing opportunities to engage the small business ecosystem and foster economic growth within the sector.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy and the Department of Defense. Given the firm fixed-price nature, oversight would focus on ensuring delivery of goods/services as specified and adherence to the contract schedule. Transparency is limited due to the sole-source award. Accountability measures would be tied to contract performance clauses and potential penalties for non-compliance. Inspector General jurisdiction would apply if fraud, waste, or abuse were suspected.

Related Government Programs

Aircraft Production Contracts
Defense Manufacturing Support
Aerospace Industry Contracts
Department of the Navy Procurement

Risk Flags

Sole-source award
Long contract duration
Lack of small business participation

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $25.4 million to THE BOEING COMPANY. ECP 6482 ASE USN GROUP A INSTALLS

Who is the contractor on this award?

The obligated recipient is THE BOEING COMPANY.

Which agency awarded this contract?

Awarding agency: Department of Defense (Department of the Navy).

What is the total obligated amount?

The obligated amount is $25.4 million.

What is the period of performance?

Start: 2018-05-03. End: 2023-12-31.

What is the track record of The Boeing Company in fulfilling similar large-scale aircraft manufacturing contracts with the Department of Defense?

The Boeing Company has a long and extensive history of fulfilling large-scale aircraft manufacturing contracts for the Department of Defense, spanning decades. They are a primary contractor for numerous major defense platforms, including fighter jets, bombers, and transport aircraft. While generally considered capable, Boeing has also faced scrutiny and challenges on specific programs related to production timelines, cost overruns, and quality control. Their track record is complex, marked by both significant successes in delivering advanced military hardware and instances of program difficulties that have required extensive government oversight and corrective actions. Analyzing past performance on similar contracts would involve reviewing program execution data, delivery schedules, budget adherence, and any documented performance issues or disputes.

How does the awarded amount of $25.4 million compare to the typical value of aircraft manufacturing support contracts for the Department of the Navy?

The awarded amount of $25.4 million for aircraft manufacturing support is a substantial sum, but its relative value within the Department of the Navy's portfolio can vary significantly. The Navy procures a wide range of aircraft, from small unmanned aerial vehicles to large maritime patrol and transport aircraft, each with different manufacturing complexities and costs. Contracts for the production of major platforms like the F/A-18 Super Hornet or P-8 Poseidon can easily run into hundreds of millions or even billions of dollars. Therefore, $25.4 million might represent a specific component, a modification, a set of installations, or support services for a particular aircraft type or fleet. Without knowing the precise nature of the 'ECP 6482 ASE USN GROUP A INSTALLS' and the specific aircraft or systems involved, a direct comparison to 'typical' values is challenging. However, it signifies a significant investment in a specific capability or production phase.

What are the primary risks associated with a sole-source award for aircraft manufacturing support, and how are they mitigated?

The primary risks associated with a sole-source award for aircraft manufacturing support include potential overpricing due to lack of competition, reduced incentive for the contractor to innovate or improve efficiency, and a lack of transparency in the procurement process. There's also a risk that the chosen contractor may not be the most capable or cost-effective option available. Mitigation strategies typically involve robust negotiation of contract terms, including price ceilings and performance incentives, even in a sole-source scenario. Strong government oversight during contract execution is crucial to monitor costs, schedule, and quality. Furthermore, agencies often conduct market research beforehand to ensure a sole-source justification is truly warranted and to understand potential alternatives. For long-term sole-source contracts, periodic reviews or re-evaluations might be incorporated to ensure continued justification.

Given the firm fixed-price contract type, what is the potential impact on the contractor's profit margins and the government's exposure to cost overruns?

A firm fixed-price (FFP) contract type places the majority of the cost risk on the contractor. This means that if the contractor's actual costs exceed the agreed-upon price, their profit margins will be reduced, and they may even incur a loss. Conversely, if their costs are lower than anticipated, their profit margin increases. For the government, an FFP contract offers significant protection against cost overruns, as the total price is fixed. The government's exposure is primarily limited to the agreed-upon contract price, assuming the contractor meets all performance requirements. However, this certainty comes at a potential cost: contractors often build a contingency premium into their FFP bids to account for the risks they assume, which can sometimes result in a higher initial price compared to cost-reimbursement contracts. The effectiveness of an FFP contract relies heavily on the accuracy of the initial cost estimates and the contractor's ability to manage their expenses effectively.

How does the duration of this contract (over 5 years) influence the assessment of its value and potential risks?

The extended duration of this contract, spanning over five years (2068 days, approximately 5.6 years), significantly influences its assessment. On the positive side, a long duration can indicate a stable, ongoing requirement for critical services, allowing for better planning and potentially economies of scale for the contractor. It can also foster a deeper working relationship and specialized knowledge development. However, it substantially increases the risks. Market conditions, material costs, and labor rates can fluctuate considerably over such a period, potentially making the fixed price less reflective of actual value as time progresses. There's a heightened risk of scope creep, performance degradation, or the contractor becoming complacent. For the government, managing oversight and ensuring continued value becomes more complex. It necessitates robust contract management, potential for contract modifications, and careful monitoring to ensure the initial justification for the award remains valid throughout its term.

Industry Classification

NAICS: Manufacturing › Aerospace Product and Parts Manufacturing › Aircraft Manufacturing

Product/Service Code: RESEARCH AND DEVELOPMENT › C – National Defense R&D Services

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0001918B2001

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

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: $25,975,765

Exercised Options: $25,389,990

Current Obligation: $25,389,990

Actual Outlays: $2,311,913

Subaward Activity

Number of Subawards: 9

Total Subaward Amount: $14,544,352

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: N0001916G0001

IDV Type: BOA

Timeline