DoD's $290M non-competed engine parts contract awarded to RTX Corporation raises value concerns

Contract Overview

Contract Amount: $289,940,714 ($289.9M)

Contractor: RTX Corporation

Awarding Agency: Department of Defense

Start Date: 2019-08-15

End Date: 2023-01-31

Contract Duration: 1,265 days

Daily Burn Rate: $229.2K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Official Description: FMS LOT 12 NON ANNUAL

Place of Performance

Location: EAST HARTFORD, HARTFORD County, CONNECTICUT, 06118

State: Connecticut Government Spending

Plain-Language Summary

Department of Defense obligated $289.9 million to RTX CORPORATION for work described as: FMS LOT 12 NON ANNUAL Key points: 1. Significant contract value awarded without competition warrants scrutiny of pricing and value. 2. Sole-source award to RTX Corporation suggests limited market alternatives or strategic sourcing. 3. Contract duration of over three years indicates a long-term commitment to a single supplier. 4. The 'Aircraft Engine and Engine Parts Manufacturing' sector is critical for defense readiness. 5. Cost-plus contract type may incentivize spending, requiring robust oversight. 6. Lack of small business participation noted, potentially limiting broader economic impact.

Value Assessment

Rating: questionable

The contract's value of approximately $290 million, awarded non-competitively, raises questions about whether the Department of Defense achieved the best possible pricing. Without competitive bids, it is difficult to benchmark the value for money. The cost-plus incentive fee structure, while common for complex procurements, can lead to higher costs if not managed diligently. Further analysis of the specific engine parts and their market value is needed to definitively assess value.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded as 'NOT COMPETED,' indicating a sole-source procurement. This means only one bidder, RTX Corporation, was solicited. Such awards typically occur when a specific capability is required that only one source can provide, or in situations where competition is deemed impractical or not in the government's interest. The lack of competition limits price discovery and potentially leads to higher costs for the government.

Taxpayer Impact: Taxpayers may be paying a premium due to the absence of competitive pressure to drive down prices. The government's ability to negotiate favorable terms is diminished in a sole-source scenario.

Public Impact

The primary beneficiaries are the Department of Defense, ensuring the availability of critical aircraft engine parts for its fleet. Services delivered include the manufacturing and supply of essential engine components, vital for aircraft operational readiness. The geographic impact is primarily within the United States, supporting defense logistics and maintenance operations. Workforce implications include sustained employment within RTX Corporation's manufacturing facilities specializing in aerospace components.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Non-competitive award limits price discovery and potentially increases costs for taxpayers.
Cost-plus contract type can lead to cost overruns if not closely monitored.
Lack of small business involvement may limit opportunities for smaller enterprises in the supply chain.
Long contract duration without competition could reduce flexibility and responsiveness to market changes.

Positive Signals

Ensures critical supply chain for essential aircraft engine parts, supporting national security.
Award to a major defense contractor like RTX Corporation suggests a focus on established capabilities and reliability.
The contract supports ongoing operations and maintenance for existing defense assets.

Sector Analysis

The 'Aircraft Engine and Engine Parts Manufacturing' sector is a highly specialized and critical segment of the aerospace industry, with significant barriers to entry due to technological complexity and capital investment. Major players like RTX Corporation dominate this market. Federal spending in this area is essential for maintaining military readiness, and contracts often involve advanced materials and stringent quality control. Benchmarking against similar sole-source procurements for specialized aerospace components would be necessary for a more precise value assessment.

Small Business Impact

This contract was not set aside for small businesses, and the data indicates no small business participation ('sb': false). The award to a large prime contractor like RTX Corporation suggests that subcontracting opportunities for small businesses may exist, but they are not guaranteed or mandated by the contract structure itself. Without specific subcontracting plans or goals, the direct impact on the small business ecosystem is likely minimal, though indirect benefits through the prime contractor's supply chain are possible.

Oversight & Accountability

Oversight for this contract would fall under the Department of the Navy's contracting and program management offices. Given the cost-plus incentive fee structure, rigorous financial oversight and performance monitoring are crucial to ensure cost control and contractor performance. Transparency may be limited due to the sole-source nature, but contract modifications, performance reports, and payment data should be accessible through federal procurement databases. The Inspector General for the Department of Defense would have jurisdiction for audits and investigations.

Related Government Programs

Aircraft Engine Maintenance and Repair
Aerospace Component Manufacturing
Defense Logistics and Supply Chain Management
Military Aircraft Procurement

Risk Flags

Non-competitive award
Cost-plus contract type
Lack of small business participation
High contract value

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $289.9 million to RTX CORPORATION. FMS LOT 12 NON ANNUAL

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 $289.9 million.

What is the period of performance?

Start: 2019-08-15. End: 2023-01-31.

What is RTX Corporation's track record with similar sole-source contracts for aircraft engine parts?

RTX Corporation, through its various subsidiaries like Pratt & Whitney, has a long history of supplying aircraft engines and parts to the Department of Defense. They are a major defense contractor with extensive experience in sole-source and sole-proprietor procurements, often stemming from the proprietary nature of their engine designs and the need for specialized, long-term support. Analyzing past sole-source awards to RTX for similar components could reveal patterns in pricing, performance, and negotiation outcomes. However, specific data on past sole-source contracts for this exact 'LOT 12 NON ANNUAL' designation is not readily available in the provided data, necessitating deeper research into historical contract databases and defense spending reports to assess their consistent performance and pricing strategies in non-competitive environments.

How does the $290 million contract value compare to industry benchmarks for similar engine parts?

Benchmarking the $290 million contract value for 'FMS LOT 12 NON ANNUAL' parts against industry standards is challenging without specific details on the exact components, quantities, and technical specifications. Aircraft engine parts can range from relatively common components to highly specialized, proprietary items with vastly different cost structures. Given this is a sole-source award to RTX Corporation, a primary manufacturer, the pricing is likely influenced by their internal cost structures, R&D investments, and established profit margins, rather than direct market competition. To establish a benchmark, one would need to identify comparable parts procured competitively by other defense agencies or international allies, or consult industry cost-estimating guides for aerospace components, adjusting for inflation and technological advancements. The cost-plus incentive fee structure also implies that the final cost could deviate from initial estimates, further complicating direct comparisons.

What are the primary risks associated with a sole-source, cost-plus incentive fee contract for critical defense components?

The primary risks associated with a sole-source, cost-plus incentive fee (CPIF) contract for critical defense components are multifaceted. Firstly, the sole-source nature eliminates competitive pressure, potentially leading to inflated prices and reduced incentive for the contractor to optimize costs. The government may overpay for the goods or services. Secondly, the CPIF structure, while designed to incentivize performance and cost control, can still lead to cost overruns if the base cost estimates are inaccurate or if the incentive targets are not sufficiently challenging. The contractor might prioritize achieving incentive fees over genuine cost efficiency. Furthermore, reliance on a single supplier creates supply chain vulnerability; any disruption at RTX Corporation could have significant impacts on defense readiness. Finally, the lack of transparency inherent in sole-source awards makes it harder for oversight bodies and the public to scrutinize the value received.

What is the historical spending pattern for aircraft engine parts by the Department of Defense, and how does this contract fit?

The Department of Defense (DoD) historically spends billions of dollars annually on aircraft engine parts, encompassing procurement, maintenance, repair, and overhaul services. This spending is driven by the vast size and operational tempo of the U.S. military's aviation fleet, which includes numerous aircraft types requiring specialized engine components. Contracts for engine parts are often long-term and can be sole-source due to the proprietary nature of engine technology and the need for manufacturer-specific expertise. The $290 million contract for 'FMS LOT 12 NON ANNUAL' parts fits within this pattern as a significant, long-term commitment to ensure the supply of critical components. Its non-competed status is also not unusual for highly specialized or proprietary aerospace parts, reflecting the complex market dynamics and the government's reliance on established prime contractors like RTX Corporation for maintaining fleet readiness.

What are the implications of the 'Aircraft Engine and Engine Parts Manufacturing' NAICS code for this contract?

The North American Industry Classification System (NAICS) code 336412, 'Aircraft Engine and Engine Parts Manufacturing,' signifies that this contract falls within a highly specialized and technologically advanced sector of the manufacturing industry. Companies operating under this code are typically involved in the design, development, and production of complex engine systems and their components, often requiring significant research and development, precision engineering, and adherence to stringent quality and safety standards. Federal spending in this NAICS code is crucial for national defense, as modern military aircraft rely heavily on sophisticated and reliable engine technology. Contracts awarded under this code often involve high dollar values, long lead times, and can be subject to sole-source procurements due to the proprietary nature of the technology and the limited number of qualified manufacturers capable of meeting defense requirements. This classification underscores the strategic importance of the contract and the specialized capabilities of the awarded contractor, RTX Corporation.

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: N0001917R0092

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: $300,433,522

Exercised Options: $289,940,714

Current Obligation: $289,940,714

Actual Outlays: $31,733,261

Subaward Activity

Number of Subawards: 31

Total Subaward Amount: $6,907,530

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline