DoD's $20.8M T408 Engine Cost Reduction Initiative with GE faces scrutiny over limited competition
Contract Overview
Contract Amount: $20,811,032 ($20.8M)
Contractor: General Electric Company
Awarding Agency: Department of Defense
Start Date: 2020-09-14
End Date: 2025-07-15
Contract Duration: 1,765 days
Daily Burn Rate: $11.8K/day
Competition Type: NOT COMPETED
Number of Offers Received: 1
Pricing Type: COST PLUS FIXED FEE
Sector: Defense
Official Description: T408 COST REDUCTION INITIATIVE (CRI)
Place of Performance
Location: LYNN, ESSEX County, MASSACHUSETTS, 01905
Plain-Language Summary
Department of Defense obligated $20.8 million to GENERAL ELECTRIC COMPANY for work described as: T408 COST REDUCTION INITIATIVE (CRI) Key points: 1. The contract aims to reduce costs for T408 engines, a critical component for military aircraft. 2. Sole-source award to General Electric Company raises questions about price discovery and potential overspending. 3. Lack of competition limits opportunities for alternative solutions and potentially higher quality at lower costs. 4. The Defense sector relies heavily on specialized parts, making competition challenging but essential for fiscal responsibility.
Value Assessment
Rating: questionable
The contract's Cost Plus Fixed Fee structure, combined with a sole-source award, makes it difficult to assess value. Without competitive bids, it's hard to benchmark pricing against similar contracts or market rates.
Cost Per Unit: N/A
Competition Analysis
Competition Level: sole-source
This contract was not competed, awarded directly to General Electric Company. This limits price discovery and may result in higher costs than if multiple vendors had competed.
Taxpayer Impact: The lack of competition could lead to taxpayers paying more than necessary for T408 engine cost reductions.
Public Impact
Taxpayers may be overpaying due to the absence of competitive bidding. The Department of Defense might miss out on innovative cost-saving solutions from other manufacturers. Ensuring fair pricing for critical defense components is vital for national security and fiscal health.
Waste & Efficiency Indicators
Waste Risk Score: 50 / 10
Warning Flags
- Sole-source award
- Cost-plus contract type
- Lack of transparency in pricing
Positive Signals
- Focus on cost reduction
- Long-term contract duration
Sector Analysis
This contract falls within the Defense sector, specifically Aircraft Engine and Engine Parts Manufacturing. Spending in this area is critical for maintaining military readiness, but often involves high-value, specialized components where competition can be limited.
Small Business Impact
The contract was awarded to General Electric Company, a large business. There is no indication of small business participation in this specific award, which is common for highly specialized defense manufacturing contracts.
Oversight & Accountability
The award was managed by the Defense Contract Management Agency. Further oversight is needed to ensure the cost-plus fixed fee structure is managed effectively and that the cost reduction initiative yields genuine savings.
Related Government Programs
- Aircraft Engine and Engine Parts Manufacturing
- Department of Defense Contracting
- Defense Contract Management Agency Programs
Risk Flags
- Potential for overpricing due to sole-source award.
- Cost-plus contract type can lead to less incentive for aggressive cost savings compared to fixed-price contracts.
- Lack of transparency regarding specific cost reduction targets and performance metrics.
- Limited opportunity for innovation from non-incumbent suppliers.
Tags
aircraft-engine-and-engine-parts-manufac, department-of-defense, ma, delivery-order, 10m-plus
Frequently Asked Questions
What is this federal contract paying for?
Department of Defense awarded $20.8 million to GENERAL ELECTRIC COMPANY. T408 COST REDUCTION INITIATIVE (CRI)
Who is the contractor on this award?
The obligated recipient is GENERAL ELECTRIC COMPANY.
Which agency awarded this contract?
Awarding agency: Department of Defense (Defense Contract Management Agency).
What is the total obligated amount?
The obligated amount is $20.8 million.
What is the period of performance?
Start: 2020-09-14. End: 2025-07-15.
What specific cost reduction targets has the DoD set for this initiative, and how will their achievement be measured?
The provided data does not specify the exact cost reduction targets or the metrics for measuring their achievement. A thorough review would require access to the contract's statement of work and performance metrics. The effectiveness of the Cost Plus Fixed Fee structure in driving down costs needs careful monitoring by the Defense Contract Management Agency to ensure the initiative meets its objectives.
Are there any plans to explore competitive bidding for future phases or similar cost reduction initiatives for T408 engines?
The current award is sole-source, indicating no competition for this specific contract. While the data doesn't explicitly state future plans, the DoD generally aims for competition where feasible to ensure best value. Future solicitations for T408 engine support or modifications should ideally incorporate competitive elements to leverage market forces for cost savings and innovation.
How does the fixed fee component of this contract incentivize General Electric Company to achieve significant cost reductions?
In a Cost Plus Fixed Fee contract, the contractor is reimbursed for allowable costs plus a predetermined fixed fee. This structure incentivizes the contractor to control costs to maximize their profit margin, as the fee remains constant regardless of the final cost. However, the effectiveness of this incentive depends heavily on the accuracy of the initial cost estimates and robust oversight.
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
Offers Received: 1
Pricing Type: COST PLUS FIXED FEE (U)
Evaluated Preference: NONE
Contractor Details
Address: 1000 WESTERN AVE, LYNN, MA, 01905
Business Categories: Category Business, Corporate Entity Not Tax Exempt, Not Designated a Small Business, Special Designations, U.S.-Owned Business
Financial Breakdown
Contract Ceiling: $21,094,139
Exercised Options: $21,094,139
Current Obligation: $20,811,032
Contract Characteristics
Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED
Cost or Pricing Data: NO
Parent Contract
Parent Award PIID: N0001916G0005
IDV Type: BOA
Timeline
Start Date: 2020-09-14
Current End Date: 2025-07-15
Potential End Date: 2025-07-15 00:00:00
Last Modified: 2025-10-10
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