Navy's $28M F/A-18E/F Service Life Modifications contract awarded to Boeing raises value concerns

Contract Overview

Contract Amount: $28,162,639 ($28.2M)

Contractor: THE Boeing Company

Awarding Agency: Department of Defense

Start Date: 2018-11-30

End Date: 2023-02-28

Contract Duration: 1,551 days

Daily Burn Rate: $18.2K/day

Competition Type: NOT COMPETED

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: F/A-18E/F SERVICE LIFE MODIFICATIONS

Place of Performance

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

State: Missouri Government Spending

Plain-Language Summary

Department of Defense obligated $28.2 million to THE BOEING COMPANY for work described as: F/A-18E/F SERVICE LIFE MODIFICATIONS Key points: 1. The contract's cost-plus-fixed-fee structure may incentivize higher spending without guaranteed cost savings. 2. Limited competition for this sole-source award suggests potential for inflated pricing and reduced value for taxpayer dollars. 3. The extended performance period of over 1500 days indicates a long-term commitment with ongoing financial exposure. 4. The absence of small business participation raises questions about broader economic impact and equitable distribution of federal funds. 5. This modification to existing aircraft platforms highlights the continuous investment required to maintain aging military assets.

Value Assessment

Rating: questionable

The $28.16 million awarded for F/A-18E/F Service Life Modifications to The Boeing Company warrants scrutiny. As a sole-source, cost-plus-fixed-fee contract, it lacks the competitive pressure typically seen in other aircraft modification contracts, potentially leading to less favorable pricing. Benchmarking against similar service life extension programs for other aircraft platforms or even previous F/A-18 modifications would be necessary to definitively assess value, but the structure itself presents inherent risks to achieving optimal cost-effectiveness.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning it was not competed among multiple vendors. This approach is often justified when a specific contractor possesses unique capabilities or intellectual property essential for the service. However, it significantly limits price discovery and competitive negotiation, potentially resulting in higher costs for the government compared to a fully competed procurement. The lack of bidders means the government did not benefit from a range of proposals and pricing strategies.

Taxpayer Impact: The sole-source nature of this award means taxpayers may not be receiving the best possible price for these critical aircraft modifications, as competitive pressures that drive down costs were absent.

Public Impact

The primary beneficiaries are the U.S. Navy's F/A-18E/F Super Hornet fleet, ensuring their continued operational readiness. Services delivered include modifications to extend the service life of these advanced fighter jets. The geographic impact is primarily centered around the contractor's facilities in Missouri, where the work is performed. Workforce implications include the retention of skilled labor in aircraft manufacturing and modification within the defense industrial base.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing, potentially increasing costs for taxpayers.
Cost-plus-fixed-fee structure may not incentivize maximum cost efficiency.
Lack of small business participation limits broader economic benefits.
Long performance period increases long-term financial commitment and risk.
Modification of aging platforms indicates ongoing sustainment costs for legacy systems.

Positive Signals

Ensures continued operational capability of critical F/A-18E/F aircraft.
Supports the existing defense industrial base and associated skilled workforce.
Addresses a specific, potentially unique, technical requirement for aircraft life extension.

Sector Analysis

The aerospace and defense sector is characterized by high R&D costs, long product cycles, and significant government procurement. Contracts for aircraft modifications and sustainment are a substantial part of this market. The F/A-18E/F Super Hornet is a key platform for the U.S. Navy, and ensuring its longevity through service life modifications is crucial. Spending in this area is often driven by strategic defense needs and the lifecycle management of major weapon systems, with limited competition common for specialized upgrades.

Small Business Impact

This contract does not appear to include a small business set-aside, nor is there information indicating significant subcontracting opportunities for small businesses. The award to a large prime contractor like Boeing suggests that the primary focus is on the prime's capabilities. This could limit the direct economic benefits to the small business ecosystem within the aerospace sector for this specific contract, although Boeing may engage small businesses in its broader supply chain.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of the Navy's contracting and program management offices. The cost-plus-fixed-fee structure necessitates close monitoring of costs incurred by the contractor to ensure they align with the fixed fee and the overall project scope. Transparency may be limited due to the sole-source nature, but the Inspector General's office within the Department of Defense would have jurisdiction to investigate any potential fraud, waste, or abuse.

Related Government Programs

F/A-18 Hornet Sustainment Programs
Naval Aviation Readiness Programs
Aircraft Service Life Extension Programs
Defense Contract Modifications
Aerospace Manufacturing Contracts

Risk Flags

Sole-source award
Cost-plus-fixed-fee contract type
Lack of small business participation

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $28.2 million to THE BOEING COMPANY. F/A-18E/F SERVICE LIFE MODIFICATIONS

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 $28.2 million.

What is the period of performance?

Start: 2018-11-30. End: 2023-02-28.

What is The Boeing Company's track record with F/A-18 modifications and service life programs?

The Boeing Company is the original manufacturer of the F/A-18E/F Super Hornet and has a long-standing history of producing, modifying, and sustaining these aircraft for the U.S. Navy and international partners. Their track record includes numerous contracts for upgrades, repairs, and life extension initiatives aimed at maintaining the fleet's readiness and extending its operational lifespan. While extensive, the specifics of past performance on similar service life modification contracts, including cost performance and adherence to schedule, would require a detailed review of historical contract data and performance reports. Generally, as the OEM, Boeing possesses the most intimate knowledge of the aircraft's design and maintenance requirements, which is often a key factor in sole-source awards for complex modifications.

How does the cost-plus-fixed-fee (CPFF) structure compare to other contract types for aircraft modifications in terms of value for money?

The Cost-Plus-Fixed-Fee (CPFF) contract type is often used when the scope of work is not precisely defined or involves significant uncertainties, such as research and development or complex modifications where unforeseen issues may arise. In CPFF contracts, the contractor is reimbursed for allowable costs plus a fixed fee representing profit. While this structure allows flexibility, it can be less cost-effective for the government compared to fixed-price contracts, as the contractor has less incentive to control costs beyond what is necessary to complete the work within the scope. Fixed-price incentive fee (FPIF) or firm-fixed-price (FFP) contracts generally offer better value by directly linking contractor profit to cost savings and performance. For routine modifications with well-defined scopes, FFP or FPIF contracts are typically preferred for maximizing value.

What are the primary risks associated with sole-source awards for major defense equipment modifications?

Sole-source awards for major defense equipment modifications carry several inherent risks. The most significant is the lack of price competition, which can lead to inflated costs for the government as the contractor faces no pressure to offer the lowest possible price. This can result in reduced value for taxpayer money. Another risk is reduced innovation, as without competitive proposals, there may be less incentive for contractors to propose novel or more efficient solutions. Furthermore, sole-source awards can create dependency on a single supplier, potentially limiting future flexibility and increasing vulnerability if that supplier faces production issues or significant price increases. Ensuring robust oversight and negotiation is critical to mitigate these risks.

What is the historical spending trend for F/A-18E/F service life modifications, and how does this contract fit within that pattern?

Historical spending on F/A-18E/F service life modifications reflects the ongoing need to maintain and extend the operational capabilities of this aging fleet. The U.S. Navy has consistently invested in programs designed to upgrade avionics, structural components, and other systems to keep the Super Hornets relevant and safe for extended service. This $28.16 million contract appears to be part of a larger, ongoing sustainment strategy rather than a one-off expenditure. Without access to detailed historical contract databases for this specific modification type, it's difficult to pinpoint exact trends. However, it is reasonable to assume that such modifications are recurring necessities for major defense platforms, with spending fluctuating based on specific upgrade requirements, fleet size, and budgetary allocations.

Are there specific performance metrics or key performance indicators (KPIs) associated with this contract that can be used to assess its effectiveness?

The provided data does not specify the performance metrics or Key Performance Indicators (KPIs) associated with this particular contract. For a Cost-Plus-Fixed-Fee (CPFF) contract, performance is often evaluated based on the contractor's adherence to the defined scope of work, timely completion of milestones, and the quality of the modifications delivered. The fixed fee itself can be seen as an incentive for the contractor to complete the work efficiently. However, the effectiveness in terms of achieving the ultimate goal – extending the service life of the aircraft by a quantifiable amount or improving specific performance characteristics – would typically be assessed through separate technical evaluations and operational feedback from the Navy. Detailed KPIs would usually be outlined in the contract's Statement of Work (SOW) or Performance Work Statement (PWS).

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

Pricing Type: COST PLUS FIXED FEE (U)

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: $28,162,639

Exercised Options: $28,162,639

Current Obligation: $28,162,639

Actual Outlays: $6,539,933

Subaward Activity

Number of Subawards: 10

Total Subaward Amount: $8,181,806

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: N0001918D0001

IDV Type: IDC

Timeline