Boeing awarded $156.7M for IRST BLOCK II LRIP III SYSTEMS, a sole-source aircraft manufacturing contract

Contract Overview

Contract Amount: $156,714,300 ($156.7M)

Contractor: THE Boeing Company

Awarding Agency: Department of Defense

Start Date: 2018-12-28

End Date: 2024-11-04

Contract Duration: 2,138 days

Daily Burn Rate: $73.3K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIXED PRICE INCENTIVE

Sector: Defense

Official Description: IRST BLOCK II LRIP III SYSTEMS

Place of Performance

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

State: Missouri Government Spending

Plain-Language Summary

Department of Defense obligated $156.7 million to THE BOEING COMPANY for work described as: IRST BLOCK II LRIP III SYSTEMS Key points: 1. Contract awarded to a single, established provider, raising questions about potential price efficiencies. 2. Long-term contract duration suggests a sustained need for these specialized aircraft systems. 3. Fixed Price Incentive contract type aims to balance cost control with performance incentives. 4. Sole-source award indicates limited market alternatives or unique contractor capabilities. 5. Significant contract value highlights the importance of this acquisition for naval aviation. 6. Focus on LRIP (Low Rate Initial Production) suggests this is an early stage of a larger program.

Value Assessment

Rating: fair

Benchmarking the value of this sole-source contract is challenging without comparable bids. The fixed-price incentive structure suggests an attempt to manage costs, but the absence of competition limits external validation of pricing. The total award value of $156.7 million over approximately six years indicates a substantial investment, and its effectiveness will depend on the successful delivery of the specified systems and achievement of performance targets.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one vendor, The Boeing Company, was solicited. This approach is typically justified when a unique capability is required, or when there are significant barriers to entry for other potential suppliers. The lack of competition means that price discovery through a bidding process did not occur, potentially leading to higher costs than if multiple vendors had competed.

Taxpayer Impact: Taxpayers may not benefit from the cost savings that typically arise from competitive bidding processes. The government relies on negotiation and oversight to ensure a fair price in sole-source situations.

Public Impact

The primary beneficiaries are the Department of the Navy, which will receive advanced aircraft systems. This contract supports the development and production of critical components for naval aviation capabilities. The contract is geographically focused on Missouri, where Boeing's relevant facilities are located, potentially impacting the local workforce. It ensures the continued modernization and operational readiness of naval air assets.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure on pricing.
Long contract duration increases exposure to potential cost overruns or scope creep.
Fixed Price Incentive contracts can lead to higher costs if performance targets are met easily.
Lack of transparency in sole-source negotiation process.

Positive Signals

Boeing is a major defense contractor with a proven track record.
Fixed Price Incentive contract type includes performance incentives, potentially driving efficiency.
Contract supports critical national defense capabilities for the Navy.
Long-term nature suggests a strategic investment in advanced technology.

Sector Analysis

This contract falls within the Aircraft Manufacturing sector, a significant segment of the broader aerospace and defense industry. The market is characterized by high barriers to entry, substantial R&D investment, and a limited number of large, established players like Boeing. Spending in this area is driven by defense modernization needs and technological advancements. Comparable spending benchmarks would typically involve other major aircraft production contracts for military applications.

Small Business Impact

The contract data indicates that small business participation was not a primary consideration, as the award was made to a large prime contractor and there is no indication of a small business set-aside. Subcontracting opportunities may exist, but the extent to which small businesses will benefit is not detailed in this award notice. The overall impact on the small business ecosystem is likely indirect, through potential Tier 2 or Tier 3 supply chain opportunities.

Oversight & Accountability

Oversight for this contract will be managed by the Department of the Navy, likely through contracting officers and program managers. Accountability measures are embedded in the Fixed Price Incentive contract type, which links contractor profit to performance metrics. Transparency is limited due to the sole-source nature of the award, but contract modifications and performance reports are typically available through federal procurement databases. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

F/A-18 Super Hornet Production
Naval Air Systems Command (NAVAIR) Contracts
Advanced Aircraft Systems Development
Defense Production Act Investments

Risk Flags

Sole-source award
Long contract duration
Potential for cost overruns in FPI contracts
Reliance on a single supplier

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $156.7 million to THE BOEING COMPANY. IRST BLOCK II LRIP III SYSTEMS

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 $156.7 million.

What is the period of performance?

Start: 2018-12-28. End: 2024-11-04.

What is the specific capability or system being procured under IRST BLOCK II LRIP III?

The 'IRST BLOCK II LRIP III SYSTEMS' refers to the Low Rate Initial Production (LRIP) Phase III of the Infrared Search and Track (IRST) Block II program. The IRST system is an advanced sensor that detects and tracks airborne targets using infrared radiation, providing a passive capability that complements radar. It is designed to enhance situational awareness and target identification, particularly in electronic warfare environments where radar might be jammed or detected. LRIP is a crucial phase where the system's design is finalized, manufacturing processes are refined, and initial production quantities are manufactured before moving to full-rate production.

How does the Fixed Price Incentive (FPI) contract type function in this context?

A Fixed Price Incentive (FPI) contract is a type of cost-reimbursement contract where the contractor and the government share the costs or savings based on the final cost of the contract. In this case, there is a target cost, a target profit, and a price ceiling. If the final cost is below the target cost, both parties share in the savings according to a predetermined formula. If the final cost exceeds the target cost, the contractor bears an increasing share of the overrun up to the price ceiling. This structure incentivizes the contractor (Boeing) to control costs while meeting performance specifications for the IRST Block II systems.

What are the risks associated with a sole-source award for advanced defense systems?

Sole-source awards, like this one to Boeing, carry inherent risks. The primary risk is the potential for inflated pricing due to the absence of competitive bidding, which can lead to reduced value for taxpayer money. There's also a risk of complacency from the sole provider, potentially impacting innovation or responsiveness compared to a competitive environment. Furthermore, reliance on a single supplier can create supply chain vulnerabilities and limit flexibility if the government needs to pivot or scale production rapidly. Effective negotiation and robust oversight are critical to mitigate these risks.

What is the historical spending trend for similar aircraft manufacturing contracts by the Department of the Navy?

Historical spending on aircraft manufacturing contracts by the Department of the Navy is substantial and fluctuates based on modernization cycles and specific platform needs. Major programs like the F/A-18, F-35, and various helicopter platforms represent billions of dollars over their lifecycles. Contracts for specialized systems like IRST are often part of larger platform upgrades or new system integrations. While specific historical data for IRST Block II LRIP III is not provided, the Navy consistently invests heavily in advanced aviation technologies, with contract values often in the tens to hundreds of millions of dollars for development and initial production phases of complex systems.

How does the duration of this contract (2138 days) impact its overall risk profile?

The contract duration of approximately 2138 days (around 5.8 years) is significant and impacts the risk profile in several ways. A longer duration allows for the phased development, testing, and production of complex systems like the IRST Block II, which can be beneficial for managing technical challenges and refining manufacturing processes. However, it also increases the exposure to economic risks, such as inflation, changes in material costs, and potential shifts in defense priorities or budgets over the contract period. For the contractor, it provides a stable revenue stream, while for the government, it necessitates sustained oversight and budget planning. The FPI structure aims to mitigate some cost risks over this extended period.

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

Solicitation ID: N0001919R0019

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: $213,851,484

Exercised Options: $156,714,300

Current Obligation: $156,714,300

Subaward Activity

Number of Subawards: 15

Total Subaward Amount: $109,483,016

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline