Boeing awarded $21M contract for capsule refurbishment, raising questions about competition and value

Contract Overview

Contract Amount: $20,960,497 ($21.0M)

Contractor: THE Boeing Company

Awarding Agency: Department of Defense

Start Date: 2023-08-15

End Date: 2026-04-30

Contract Duration: 989 days

Daily Burn Rate: $21.2K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: CAPSULE REFURBISHMENT

Place of Performance

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

State: Missouri Government Spending

Plain-Language Summary

Department of Defense obligated $21.0 million to THE BOEING COMPANY for work described as: CAPSULE REFURBISHMENT Key points: 1. Contract awarded via sole-source justification, limiting price discovery and potentially increasing costs. 2. Significant contract value for aircraft engine and parts manufacturing, a key defense sector. 3. Long performance period of nearly 1000 days suggests a complex and lengthy refurbishment process. 4. Fixed-price contract type aims to control costs, but sole-source nature may negate savings. 5. Awarded by the Department of the Navy, indicating a critical need for aviation readiness. 6. Boeing's established role as a major defense contractor suggests a reliance on existing relationships.

Value Assessment

Rating: questionable

The $21 million contract for capsule refurbishment is difficult to benchmark due to its sole-source nature. Without competitive bids, it's challenging to determine if the pricing reflects fair market value. The fixed-price structure offers some cost control, but the lack of competition means taxpayers may not be receiving the best possible price. Further analysis would require comparing this to similar refurbishment contracts for comparable aircraft components, which are not readily available in the public domain.

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 is typically justified when only one responsible source is available or when urgent and compelling circumstances exist. The lack of competition means there was no opportunity for other qualified companies to bid, which can limit price negotiation and potentially lead to higher costs for the government.

Taxpayer Impact: The sole-source award means taxpayers did not benefit from the price reductions that typically occur in a competitive bidding environment. This could result in a higher overall expenditure for the capsule refurbishment.

Public Impact

The Department of the Navy benefits from the refurbishment of critical aircraft components, ensuring operational readiness. The services delivered are essential for maintaining the airworthiness and performance of naval aircraft. The contract's impact is primarily within the defense sector, supporting military aviation capabilities. The workforce implications are likely concentrated within The Boeing Company's specialized manufacturing and engineering divisions.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing, potentially leading to overpayment.
Lack of transparency in the procurement process due to non-competitive nature.
Long contract duration could introduce risks of cost overruns if not managed effectively.
Reliance on a single contractor may create dependency and reduce future negotiation leverage.

Positive Signals

Fixed-price contract type provides cost certainty if scope is well-defined.
Award to a major defense contractor like Boeing suggests access to specialized expertise.
Contract supports critical defense needs, ensuring operational readiness.

Sector Analysis

This contract falls within the Aircraft Engine and Engine Parts Manufacturing sector, a critical component of the aerospace and defense industry. The market is characterized by high barriers to entry, significant R&D investment, and a limited number of large, established players like Boeing. Government contracts often represent a substantial portion of revenue for companies in this space, driving innovation and maintaining specialized manufacturing capabilities. Benchmarking spending in this area is complex due to the specialized nature of components and the long-standing relationships between government agencies and prime contractors.

Small Business Impact

This contract does not appear to have a small business set-aside. Given the sole-source nature and the specialized requirements for aircraft capsule refurbishment, it is unlikely that small businesses would have been primary recipients of this award. There is no explicit information regarding subcontracting plans for small businesses, which could be a missed opportunity to engage the small business industrial base.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy's contracting and program management offices. The fixed-price nature of the contract provides a degree of accountability for cost. However, the sole-source justification warrants scrutiny to ensure it was appropriate and that the government received fair value. Transparency is limited due to the non-competitive award, and the Inspector General's office may investigate if any improprieties are suspected.

Related Government Programs

Aircraft Maintenance and Repair
Aerospace Manufacturing
Defense Procurement
Naval Aviation Support
Engine Component Manufacturing

Risk Flags

Sole-source award
Lack of competitive bidding
Potential for inflated pricing
Limited transparency in procurement

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $21.0 million to THE BOEING COMPANY. CAPSULE REFURBISHMENT

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 $21.0 million.

What is the period of performance?

Start: 2023-08-15. End: 2026-04-30.

What is The Boeing Company's track record with similar sole-source contracts for aircraft refurbishment?

The Boeing Company, as a major defense contractor, has a long history of receiving sole-source contracts, particularly for specialized military aircraft components and systems. These awards are often justified by proprietary technology, unique manufacturing capabilities, or the need to maintain commonality with existing fleets. While Boeing generally has a strong track record in delivering complex aerospace products, sole-source awards inherently lack the transparency and competitive pressure found in fully competed contracts. Analyzing past sole-source awards to Boeing for similar refurbishment work would require access to detailed contract histories and justifications to assess whether pricing was fair and competitive relative to the services provided and the market conditions at the time.

How does the $21 million value compare to other capsule refurbishment contracts?

Direct comparison of the $21 million value for this specific capsule refurbishment contract is challenging without more detailed information on the scope of work, the type of aircraft, and the specific components being refurbished. Sole-source awards, by their nature, are not subject to the same market forces as competitive bids, making direct value-for-money assessments difficult. However, in the broader context of aerospace and defense, $21 million is a significant sum, indicative of a complex and critical refurbishment effort. To provide a robust comparison, one would need to identify similar refurbishment projects, ideally competitively awarded, for comparable aircraft systems and analyze their costs on a per-unit or per-component basis, adjusting for inflation and differences in complexity.

What are the primary risks associated with this sole-source contract?

The primary risks associated with this sole-source contract stem from the lack of competition. This can lead to inflated pricing, as Boeing faces no pressure to offer its most competitive rates. There's also a risk of reduced innovation or efficiency, as the incentive to find cost-saving measures is diminished without competitive alternatives. Furthermore, the government may have less leverage in negotiating contract modifications or addressing performance issues. The long duration of the contract (nearly 1000 days) also introduces risks related to potential scope creep, unforeseen technical challenges, or changes in market conditions that could impact the final cost and delivery timeline if not meticulously managed.

How effective is the fixed-price contract type in mitigating risks for this specific award?

The fixed-price contract type is intended to shift cost risk from the government to the contractor, The Boeing Company. This means that Boeing is responsible for completing the work within the agreed-upon price, regardless of unforeseen cost increases. This structure can be effective in controlling the government's expenditure, provided the scope of work is clearly defined and the initial price is fair. However, the effectiveness of the fixed-price type is somewhat diminished by the sole-source nature of the award. If the initial price was not rigorously negotiated due to a lack of competition, the 'fixed' price might already be higher than it would be in a competitive scenario. Therefore, while it provides cost certainty, it doesn't guarantee optimal value.

What are the historical spending patterns for capsule refurbishment within the Department of the Navy?

Analyzing historical spending patterns for capsule refurbishment within the Department of the Navy is crucial for contextualizing this $21 million award. Without specific data, it's difficult to provide precise figures. However, naval aviation relies heavily on complex systems, and refurbishment of critical components like capsules is a recurring necessity to maintain fleet readiness. Spending in this area can fluctuate based on fleet age, operational tempo, and the introduction of new technologies. Historically, such specialized maintenance and refurbishment contracts have often been awarded to prime contractors like Boeing due to their unique capabilities and existing relationships with the Navy. Understanding the frequency and average cost of similar refurbishment efforts over the past 5-10 years would provide valuable insight into whether this $21 million award is an outlier or consistent with past expenditures.

Industry Classification

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

Product/Service Code: GUIDED MISSLES

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: $21,414,097

Exercised Options: $20,960,497

Current Obligation: $20,960,497

Subaward Activity

Number of Subawards: 1

Total Subaward Amount: $3,807,569

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