Navy awards $115M for initial spares to Boeing, a sole-source contract for aircraft engine parts

Contract Overview

Contract Amount: $115,135,530 ($115.1M)

Contractor: THE Boeing Company

Awarding Agency: Department of Defense

Start Date: 2023-07-31

End Date: 2028-08-31

Contract Duration: 1,858 days

Daily Burn Rate: $62.0K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: FY23 INITIAL SPARES

Place of Performance

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

State: Missouri Government Spending

Plain-Language Summary

Department of Defense obligated $115.1 million to THE BOEING COMPANY for work described as: FY23 INITIAL SPARES Key points: 1. Contract awarded to a single supplier raises questions about price competitiveness. 2. Long-term contract duration suggests a need for ongoing support for critical aircraft. 3. Sole-source nature limits opportunities for new entrants and potentially higher costs. 4. Focus on initial spares indicates a critical phase in aircraft lifecycle management. 5. Geographic concentration in Missouri for delivery warrants attention to supply chain resilience.

Value Assessment

Rating: questionable

Benchmarking the value of this sole-source contract for initial spares is challenging without competitive bids. The firm-fixed-price structure provides some cost certainty, but the absence of competition means there's no direct market comparison to assess if the pricing is optimal. The $115 million award over five years for aircraft engine parts suggests a significant investment, and without a competitive process, it's difficult to ascertain if taxpayers are receiving the best possible value.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one vendor, The Boeing Company, was solicited. This approach bypasses the typical competitive bidding process, which usually involves multiple companies vying for the contract. While sole-source awards can be justified in specific circumstances, such as when only one supplier possesses the necessary capabilities or proprietary technology, it significantly reduces price discovery and can lead to higher costs for the government.

Taxpayer Impact: The lack of competition means taxpayers may be paying a premium, as there was no pressure from competing bids to drive down the price. This limits the government's ability to secure the most cost-effective solution.

Public Impact

The U.S. Navy benefits from the acquisition of essential aircraft engine parts, ensuring operational readiness. This contract supports the maintenance and sustainment of critical naval aviation assets. The primary geographic impact is in Missouri, where the spares will be delivered. The contract supports jobs within The Boeing Company and its supply chain, particularly in the aerospace manufacturing sector.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing and potential cost savings for taxpayers.
Long contract duration (5 years) may lock in potentially suboptimal pricing if market conditions change.
Lack of transparency in the sole-source justification process could hide inefficiencies.
Dependence on a single supplier for critical engine parts poses a supply chain risk.

Positive Signals

Firm-fixed-price contract provides cost certainty for the government.
Award to a major aerospace manufacturer like Boeing suggests access to established quality and expertise.
Focus on initial spares indicates proactive planning for aircraft sustainment.

Sector Analysis

The aerospace and defense sector is characterized by high barriers to entry, complex supply chains, and significant government investment. Contracts for aircraft engine parts are crucial for maintaining fleet readiness and operational capability. The market for such specialized components is often dominated by a few large manufacturers due to the intricate engineering, testing, and certification requirements. This $115 million award falls within the typical spending range for sustainment and spare parts for major military aircraft platforms.

Small Business Impact

This contract does not appear to include a small business set-aside. As a sole-source award to a large prime contractor, there is a potential for limited subcontracting opportunities for small businesses unless specifically mandated or pursued by the prime. The impact on the small business ecosystem would depend on Boeing's subcontracting strategy and whether they actively seek to engage small businesses for parts of this requirement.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy's contracting and program management offices. The Defense Contract Management Agency (DCMA) likely provides quality assurance and delivery oversight. Transparency is limited due to the sole-source nature, but contract modifications and performance reports would be subject to internal review. The Inspector General of the Department of Defense could investigate if any improprieties are suspected.

Related Government Programs

Aircraft Engine Maintenance and Repair
Defense Logistics Agency (DLA) Spare Parts Procurement
Naval Aviation Sustainment Programs
Aerospace Manufacturing Contracts

Risk Flags

Sole-source award
Potential for uncompetitive pricing
Long-term contract duration
Dependence on single supplier

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $115.1 million to THE BOEING COMPANY. FY23 INITIAL SPARES

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 $115.1 million.

What is the period of performance?

Start: 2023-07-31. End: 2028-08-31.

What is The Boeing Company's track record with the Department of Defense, particularly for aircraft engine parts?

The Boeing Company has a long and extensive history of contracting with the Department of Defense, including the Department of the Navy. They are a major defense contractor involved in the design, manufacturing, and sustainment of a wide range of military aircraft and related systems. For aircraft engine parts specifically, Boeing often acts as the prime integrator or manufacturer for its platforms, meaning they are a primary source for many components, including spares. Their track record generally includes delivering complex systems and parts, though like any large contractor, they have faced scrutiny over cost, schedule, and performance on various programs. Specific performance data for engine parts contracts would require deeper analysis of individual contract histories and performance metrics.

How does the $115 million value compare to similar initial spare parts contracts for naval aircraft?

Comparing the $115 million value for initial spares to similar contracts is challenging without knowing the specific aircraft platform and the complexity of its engine systems. However, for major naval aviation platforms, initial spare parts packages can represent a significant portion of the total acquisition cost, often ranging from tens to hundreds of millions of dollars, depending on the aircraft's size, mission, and engine type. This $115 million award over five years suggests a substantial requirement, potentially for a new or significantly upgraded aircraft, or a large fleet. Without competitive data, it's difficult to benchmark if this specific value is high or low relative to market expectations for comparable systems.

What are the primary risks associated with a sole-source award for critical aircraft engine parts?

The primary risks associated with a sole-source award for critical aircraft engine parts include inflated pricing due to the lack of competition, potential for reduced innovation, and a heightened dependence on a single supplier. Without competitive pressure, the contractor may have less incentive to offer the most cost-effective solutions or to invest in process improvements that could lower costs. Furthermore, if the sole-source supplier experiences production issues, supply chain disruptions, or financial difficulties, it could severely impact the Navy's ability to obtain necessary parts, jeopardizing aircraft readiness. This also limits the government's leverage in negotiations.

How effective is the firm-fixed-price (FFP) contract type in managing costs for this type of procurement?

The firm-fixed-price (FFP) contract type is generally considered effective for managing costs when the scope of work is well-defined and the risks are understood, as is often the case with spare parts. Under an FFP contract, the contractor assumes most of the cost risk, agreeing to a set price regardless of their actual costs. This provides the government with cost certainty and predictability. For initial spares, where the items are typically standardized or based on existing designs, FFP is a suitable choice. However, the effectiveness in ensuring the 'best' price is still contingent on the initial negotiation and the presence (or absence) of competition.

What are the historical spending patterns for aircraft engine parts by the Department of the Navy?

Historical spending patterns for aircraft engine parts by the Department of the Navy are substantial and represent a significant portion of their overall aviation maintenance, repair, and overhaul (MRO) budget. The Navy operates a diverse fleet of aircraft, each with unique engine requirements, leading to continuous demand for spare parts, consumables, and repair services. Annual spending can fluctuate based on fleet readiness goals, new aircraft introductions, major overhauls, and depot-level maintenance cycles. While specific aggregate figures for 'initial spares' are not readily available without detailed analysis, the Navy consistently allocates billions of dollars annually towards sustaining its aviation assets, with engine components being a critical and costly element.

What are the implications of the 5-year contract duration (ending August 2028) for long-term sustainment planning?

The 5-year duration of this contract (ending August 2028) indicates a strategic approach to ensuring the availability of critical initial spare parts for a specific period, likely aligning with the operational lifecycle or a key sustainment phase of the associated aircraft. This duration provides the Navy with a degree of predictability in sourcing these essential components, potentially locking in pricing and supply for the medium term. It suggests that these spares are not a one-time purchase but are integral to ongoing operations and maintenance. However, it also means that for needs beyond this period, new contract actions will be required, necessitating continued planning and potential re-competition or sole-source justification.

Industry Classification

NAICS: Manufacturing › Aerospace Product and Parts Manufacturing › Aircraft Engine and Engine Parts Manufacturing

Product/Service Code: AEROSPACE CRAFT COMPONENTS AND ACCESSORIES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 6200 JAMES S 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: $115,135,530

Exercised Options: $115,135,530

Current Obligation: $115,135,530

Subaward Activity

Number of Subawards: 29

Total Subaward Amount: $52,230,304

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: N0001921G0006

IDV Type: BOA

Timeline