DoD's $269M propulsion sustainment contract awarded to RTX Corporation raises value-for-money questions

Contract Overview

Contract Amount: $268,988,683 ($269.0M)

Contractor: RTX Corporation

Awarding Agency: Department of Defense

Start Date: 2020-01-01

End Date: 2024-11-30

Contract Duration: 1,795 days

Daily Burn Rate: $149.9K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Official Description: LOT 13 NON-ANNUAL PROPULSION SUSTAINMENT

Place of Performance

Location: EAST HARTFORD, HARTFORD County, CONNECTICUT, 06118

State: Connecticut Government Spending

Plain-Language Summary

Department of Defense obligated $269.0 million to RTX CORPORATION for work described as: LOT 13 NON-ANNUAL PROPULSION SUSTAINMENT Key points: 1. The contract's cost-plus-incentive-fee structure may incentivize higher spending without guaranteed performance gains. 2. Lack of competition suggests potential for inflated pricing and reduced innovation. 3. Long duration and high value indicate significant taxpayer exposure. 4. The contract's focus on sustainment rather than new development may limit long-term strategic advantage. 5. Performance context is limited due to the 'not competed' award, making it difficult to assess efficiency. 6. The contract falls within the Aircraft Engine and Engine Parts Manufacturing sector, a critical area for defense readiness.

Value Assessment

Rating: questionable

The $269 million contract awarded to RTX Corporation for propulsion sustainment lacks a competitive benchmark, making a direct value-for-money assessment challenging. The cost-plus-incentive-fee (CPIF) pricing structure, while offering flexibility, can lead to cost overruns if not meticulously managed. Without comparable contracts or detailed performance metrics, it is difficult to ascertain if the pricing is fair and reasonable. The absence of competition further raises concerns about whether taxpayers are receiving the best possible value.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded using a 'not competed' procedure, indicating a sole-source or limited competition scenario. The lack of a competitive bidding process means that multiple potential suppliers were not evaluated, which can hinder price discovery and potentially lead to higher costs for the government. The rationale for not competing this requirement is not detailed, but it suggests a reliance on a single provider for critical propulsion sustainment services.

Taxpayer Impact: The absence of competition means taxpayers may be paying a premium for these services, as there was no market pressure to drive down costs. This also limits opportunities for innovative solutions from a broader range of suppliers.

Public Impact

The Department of the Navy benefits from sustained operational readiness of its aircraft propulsion systems. This contract ensures the availability of critical maintenance and repair services for complex engine components. The geographic impact is primarily within the United States, supporting naval aviation bases and maintenance facilities. Workforce implications include the employment of specialized technicians and engineers for engine sustainment.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to higher costs for taxpayers.
Cost-plus-incentive-fee structure could incentivize increased spending.
Limited transparency due to sole-source award.
Long contract duration increases long-term financial commitment.
Potential for vendor lock-in with critical sustainment services.

Positive Signals

Ensures critical propulsion sustainment, vital for naval aviation readiness.
RTX Corporation is a known entity in the aerospace and defense sector.
CPIF contract structure allows for flexibility in addressing unforeseen technical challenges.
Long-term contract provides stability for sustainment operations.

Sector Analysis

This contract operates within the Aircraft Engine and Engine Parts Manufacturing sector, a specialized and high-value segment of the aerospace and defense industry. The market is characterized by high barriers to entry due to complex technology, stringent quality requirements, and significant R&D investment. Major players like RTX Corporation dominate this space. Comparable spending benchmarks are difficult to establish without more specific details on the services provided, but sustainment contracts for complex defense systems often represent substantial long-term investments.

Small Business Impact

The data indicates that this contract was not awarded to small businesses (ss: false, sb: false). There is no explicit mention of small business set-asides or subcontracting requirements. This suggests that the primary awardee, RTX Corporation, will likely perform the majority of the work, with limited direct benefit to the small business ecosystem unless subcontracting opportunities are proactively pursued by the prime contractor.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Defense's contracting and financial management oversight mechanisms. The Inspector General's office may conduct audits and investigations into the contract's performance and financial execution. Transparency is limited due to the sole-source nature of the award, but reporting requirements within the CPIF structure should provide some level of accountability regarding costs and performance incentives.

Related Government Programs

Aircraft Engine Manufacturing
Defense Logistics and Sustainment
Naval Aviation Support Contracts
Propulsion System Maintenance

Risk Flags

Lack of Competition
Potential for Cost Overruns (CPIF)
Long-Term Financial Commitment
Limited Transparency

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $269.0 million to RTX CORPORATION. LOT 13 NON-ANNUAL PROPULSION SUSTAINMENT

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 $269.0 million.

What is the period of performance?

Start: 2020-01-01. End: 2024-11-30.

What is RTX Corporation's track record with similar propulsion sustainment contracts for the Department of Defense?

RTX Corporation, through its subsidiaries like Pratt & Whitney, has a long and extensive history of providing propulsion systems and sustainment services to the Department of Defense. They are a primary contractor for many major military aircraft engine programs. While their track record is generally strong in terms of technological development and production, specific performance data on sustainment contracts, especially regarding cost efficiency and responsiveness, would be needed for a comprehensive assessment. Past performance reviews and contract award histories would provide more granular insights into their reliability and value delivery in similar sustainment roles.

How does the cost-plus-incentive-fee (CPIF) structure compare to other contract types for sustainment services in terms of value for money?

Cost-plus-incentive-fee (CPIF) contracts are designed to share risks and rewards between the government and the contractor. They aim to incentivize the contractor to control costs and meet performance targets by establishing a target cost and a fee that is adjusted based on actual costs and performance outcomes. Compared to fixed-price contracts, CPIF offers more flexibility for complex or uncertain requirements, potentially leading to better technical outcomes. However, compared to firm-fixed-price (FFP) contracts, CPIF carries a higher risk of cost overruns if targets are not well-defined or if contractor performance is not rigorously monitored. For sustainment, where unforeseen issues can arise, CPIF can be appropriate, but it requires robust government oversight to ensure value for money.

What are the primary risks associated with a sole-source award for critical defense sustainment services?

The primary risks associated with a sole-source award for critical defense sustainment services include lack of price competition, which can lead to inflated costs for taxpayers. It also reduces the incentive for the contractor to innovate or improve efficiency, as there is no direct market pressure from competitors. Furthermore, it creates a dependency on a single provider, potentially leading to supply chain vulnerabilities or difficulties in transitioning to alternative solutions if performance issues arise or strategic needs change. This can also limit the government's leverage in negotiations.

What are the potential implications of this contract's long duration (ending Nov 2024, started Jan 2020) on future defense spending and technological adaptation?

The long duration of this contract, spanning nearly five years, implies a significant and sustained commitment of defense funds towards maintaining existing propulsion systems. While ensuring operational readiness, such long-term sustainment contracts can potentially lock in current technologies and limit the agility to adopt newer, more advanced propulsion systems that may emerge during the contract period. This could lead to a situation where the military continues to invest heavily in sustaining older platforms, potentially at the expense of investing in next-generation capabilities. It also means that budget allocations are committed for an extended period, reducing flexibility for other defense priorities.

How does the $269 million total value compare to typical spending on aircraft engine sustainment within the Department of the Navy?

The $269 million total value for this propulsion sustainment contract is substantial and falls within the expected range for major sustainment programs within the Department of the Navy, particularly for high-performance aircraft. The Navy operates a large fleet of aircraft with complex engine systems requiring continuous maintenance, repair, and overhaul. While specific benchmarks vary greatly depending on the aircraft type, engine model, and scope of services (e.g., depot-level maintenance, component repair, spare parts), contracts in the hundreds of millions of dollars for long-term sustainment are not uncommon for major fleet support. A more precise comparison would require analyzing the specific engine types and the scope of sustainment activities covered.

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: N0001919R0044

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: $298,332,788

Exercised Options: $268,988,683

Current Obligation: $268,988,683

Subaward Activity

Number of Subawards: 22

Total Subaward Amount: $11,231,213

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline