DoD awards $96M for AE1107C turboshaft engines, with limited competition and a long-term delivery schedule

Contract Overview

Contract Amount: $96,169,248 ($96.2M)

Contractor: Rolls-Royce Corporation

Awarding Agency: Department of Defense

Start Date: 2022-12-23

End Date: 2024-12-31

Contract Duration: 739 days

Daily Burn Rate: $130.1K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: AE1107C TURBOSHAFT ENGINES

Place of Performance

Location: INDIANAPOLIS, MARION County, INDIANA, 46225

State: Indiana Government Spending

Plain-Language Summary

Department of Defense obligated $96.2 million to ROLLS-ROYCE CORPORATION for work described as: AE1107C TURBOSHAFT ENGINES Key points: 1. The contract value of $96.2 million for turboshaft engines indicates a significant investment in aviation sustainment. 2. Limited competition for this contract may lead to higher prices and reduced innovation. 3. The long duration of the contract (739 days) suggests a need for sustained supply chain support. 4. The firm fixed-price nature of the contract shifts cost risk to the contractor. 5. The absence of small business set-asides warrants further investigation into subcontracting opportunities. 6. The contract's focus on aircraft engine parts manufacturing places it within a critical defense industrial base sector.

Value Assessment

Rating: fair

Benchmarking the value of this contract is challenging without specific engine model performance data and detailed component breakdowns. However, the $96.2 million award for a single definitive contract for turboshaft engines suggests a substantial procurement. Comparing this to similar engine procurements for naval aviation would be necessary to assess if the pricing is competitive. The firm fixed-price structure provides cost certainty but relies on accurate initial pricing by the contractor.

Cost Per Unit: N/A

Competition Analysis

Competition Level: limited

The contract was awarded on a 'NOT COMPETED' basis, indicating that the Department of the Navy did not solicit offers from multiple sources. This suggests that either only one source was capable of meeting the requirement, or there were other justifications for not competing the award. The lack of open competition limits the government's ability to explore alternative solutions and potentially secure more favorable pricing through a competitive bidding process.

Taxpayer Impact: The limited competition means taxpayers may not be receiving the best possible price for these critical engine components, as the usual downward pressure of multiple bids is absent.

Public Impact

The primary beneficiaries are the Department of the Navy and its aviation units, ensuring operational readiness of aircraft. The services delivered include the supply of AE1107C turboshaft engines, essential for specific aircraft platforms. The geographic impact is primarily within Indiana, where Rolls-Royce Corporation is located, potentially supporting local jobs and the regional economy. Workforce implications include the need for skilled labor in aircraft engine manufacturing and maintenance at the contractor's facility.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Limited competition raises concerns about potential overpayment and lack of innovation.
Lack of transparency in the 'not competed' justification requires further scrutiny.
The long contract duration could lead to price escalation if market conditions change significantly.

Positive Signals

Firm fixed-price contract provides cost certainty for the government.
Rolls-Royce is a known entity in engine manufacturing, suggesting a degree of reliability.
The contract supports critical defense capabilities, ensuring operational readiness.

Sector Analysis

The aerospace and defense sector is characterized by high barriers to entry, complex supply chains, and significant R&D investment. Aircraft engine manufacturing, specifically, is a specialized niche dominated by a few global players. This contract for turboshaft engines fits within the broader defense industrial base, supporting the sustainment of naval aviation assets. Comparable spending benchmarks would involve analyzing other engine procurements for similar aircraft types across different military branches.

Small Business Impact

This contract does not appear to have a small business set-aside (ss=false, sb=false). The prime contractor, Rolls-Royce Corporation, is a large business. This raises questions about whether opportunities for small businesses were considered for subcontracting roles. A thorough review of the subcontracting plan would be necessary to understand the extent to which small businesses will participate in fulfilling this contract and contribute to the broader small business ecosystem.

Oversight & Accountability

Oversight for this contract will likely be managed by the Department of the Navy's contracting and program management offices. Accountability measures are embedded in the firm fixed-price contract terms, requiring delivery of specified engines. Transparency is limited by the 'not competed' award, but contract modifications and performance reports should be available through federal procurement databases. Inspector General jurisdiction would apply if any fraud, waste, or abuse is suspected.

Related Government Programs

Aircraft Engine Manufacturing
Turboshaft Engines
Naval Aviation Sustainment
Defense Industrial Base
Aerospace Parts Procurement

Risk Flags

Limited competition
Potential for uncompetitive pricing
Lack of transparency in award justification

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $96.2 million to ROLLS-ROYCE CORPORATION. AE1107C TURBOSHAFT ENGINES

Who is the contractor on this award?

The obligated recipient is ROLLS-ROYCE 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 $96.2 million.

What is the period of performance?

Start: 2022-12-23. End: 2024-12-31.

What is the specific aircraft platform these AE1107C turboshaft engines are intended for, and what is the operational history of these engines on that platform?

The AE1107C turboshaft engine is primarily associated with the V-22 Osprey tiltrotor aircraft. The V-22 Osprey has had a complex operational history, including initial development challenges and ongoing sustainment requirements. Understanding the specific role of these engines in the Osprey's mission profile (e.g., troop transport, special operations, search and rescue) is crucial for assessing the contract's necessity. The operational history of the AE1107C itself, including any known reliability issues or performance metrics, would provide context for the need for this significant procurement. Data on engine lifespan, maintenance intervals, and failure rates would help determine if this award represents a routine replenishment or addresses a specific performance gap.

How does the per-unit cost of the AE1107C engine under this contract compare to historical pricing or other government contracts for similar engines?

Directly comparing the per-unit cost is difficult without knowing the exact number of engines procured under this $96.2 million definitive contract. However, if we assume a hypothetical number of engines, we could derive a unit price. For instance, if 10 engines were procured, the unit price would be approximately $9.62 million. This figure would then need to be benchmarked against previous awards for the AE1107C or comparable turboshaft engines used in similar military applications. Factors such as inflation, technological upgrades, and the specific terms of the firm fixed-price agreement would influence this comparison. The 'not competed' nature of the award suggests that a robust market-based price comparison might not have been feasible, potentially leading to a less competitive price point than if multiple bids were solicited.

What are the specific risks associated with a 'not competed' award for critical aircraft engine components, and how are these risks being mitigated?

A 'not competed' award, especially for critical components like turboshaft engines, carries several risks. The primary risk is the potential for inflated pricing due to the absence of competitive pressure, meaning taxpayers may overpay. Another risk is the lack of incentive for the sole-source provider to innovate or improve efficiency, as they face no direct competition. Furthermore, it can limit the government's access to alternative technologies or suppliers that might offer better performance or value. Mitigation strategies typically involve rigorous price analysis by the contracting agency, potentially using historical data or independent cost estimates. Strong contract management, including detailed performance monitoring and clear delivery schedules, is also essential. Transparency in the justification for 'not competed' status is crucial for accountability, though often limited in practice.

What is the expected lifespan and maintenance schedule for the AE1107C engines procured under this contract, and how does this align with the overall operational readiness goals of the Navy's V-22 Osp

The expected lifespan and maintenance schedule for the AE1107C engines are critical factors in assessing the long-term value and operational impact of this contract. Turboshaft engines, particularly those used in demanding military environments like the V-22 Osprey, have defined operational hours before requiring major overhauls or replacement. This contract, with its end date of December 31, 2024, likely covers the supply of new engines or major components needed to meet the fleet's operational tempo and planned maintenance cycles. Aligning this procurement with the Navy's readiness goals means ensuring that the engines are available when needed and that their service life contributes to the overall mission capability of the V-22 fleet, minimizing downtime and maximizing flight hours.

Given the 'not competed' status, what steps has the Department of the Navy taken to ensure fair and reasonable pricing for these turboshaft engines?

When a contract is awarded on a 'not competed' basis, the Department of the Navy is still obligated to ensure fair and reasonable pricing. This typically involves conducting a thorough price analysis. Such an analysis might include reviewing historical pricing data for the same or similar items, examining the contractor's cost proposals (if required), and potentially obtaining independent government cost estimates. For complex items like aircraft engines, this could involve detailed breakdowns of material, labor, and overhead costs. The contracting officer must document the basis for their determination that the price is fair and reasonable. Without competition, the government relies heavily on its own analytical capabilities and negotiation skills to achieve this.

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: N0001922R0012

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Rolls-Royce Holdings PLC

Address: 450 S MERIDIAN ST, INDIANAPOLIS, IN, 46225

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Foreign Owned, Foreign-Owned and U.S.-Incorporated Business, Manufacturer of Goods, Not Designated a Small Business, Special Designations

Financial Breakdown

Contract Ceiling: $96,169,248

Exercised Options: $96,169,248

Current Obligation: $96,169,248

Subaward Activity

Number of Subawards: 8

Total Subaward Amount: $3,483,201

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Timeline