Boeing awarded $110M for non-recurring engineering and aircraft kits, with limited competition

Contract Overview

Contract Amount: $110,036,164 ($110.0M)

Contractor: THE Boeing Company

Awarding Agency: Department of Defense

Start Date: 2024-10-01

End Date: 2029-02-28

Contract Duration: 1,611 days

Daily Burn Rate: $68.3K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: NGEAU NON-RECURRING ENGINEERING (NRE) AND PRODUCTION OF A-KITS AND B-KITS.

Place of Performance

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

State: Missouri Government Spending

Plain-Language Summary

Department of Defense obligated $110.0 million to THE BOEING COMPANY for work described as: NGEAU NON-RECURRING ENGINEERING (NRE) AND PRODUCTION OF A-KITS AND B-KITS. Key points: 1. Contract awarded to a single, established prime contractor, raising questions about competitive pricing. 2. Significant portion of contract value allocated to non-recurring engineering (NRE), indicating upfront development costs. 3. The contract type (Cost Plus Fixed Fee) may incentivize cost overruns. 4. Limited competition suggests potential for higher prices and reduced innovation. 5. The contract duration of over 4 years points to a long-term need for these aircraft kits. 6. The prime contractor has a substantial existing relationship with the Department of Defense. 7. The contract is a delivery order under a larger indefinite-delivery/indefinite-quantity (IDIQ) vehicle, suggesting a pre-existing framework.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging without detailed cost breakdowns for NGEAU. However, the Cost Plus Fixed Fee (CPFF) contract type, coupled with limited competition, raises concerns about potential cost inefficiencies. CPFF contracts can sometimes lead to higher final costs as the contractor is reimbursed for allowable costs plus a fixed fee, which may not always align with the most economical approach. Comparing this to similar NRE and production contracts for aircraft components would be necessary for a more precise value assessment.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was not competed, indicating a sole-source award. This typically occurs when only one responsible source can provide the required supplies or services. The lack of competition means that the government did not explore alternative solutions or pricing from multiple vendors, which can limit price discovery and potentially lead to higher costs for taxpayers.

Taxpayer Impact: Sole-source awards mean taxpayers may not be receiving the best possible price due to the absence of competitive pressure. This can result in a higher overall expenditure for the required aircraft kits and associated engineering.

Public Impact

The primary beneficiaries are the Department of the Navy and its aviation programs, ensuring the availability of critical aircraft components. Services delivered include non-recurring engineering (NRE) and the production of A-Kits and B-Kits, essential for aircraft maintenance and upgrades. The geographic impact is primarily centered around the contractor's facilities in Missouri, where the kits will be produced. Workforce implications include employment opportunities at The Boeing Company and its subcontractors, particularly in specialized manufacturing and engineering roles.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to inflated pricing.
Cost Plus Fixed Fee contract type can incentivize cost overruns.
Limited transparency into the specific cost drivers for NRE.
Potential for vendor lock-in due to sole-source award.

Positive Signals

Award to a prime contractor with extensive experience in aerospace manufacturing.
Contract addresses critical needs for aircraft sustainment and readiness.
Delivery order structure allows for phased funding and delivery.

Sector Analysis

The aerospace and defense sector is characterized by high barriers to entry, complex supply chains, and significant R&D investment. Contracts for aircraft components and engineering services are substantial within this sector. The market for specialized aircraft kits and associated engineering is often dominated by a few large, established players like Boeing due to the technical expertise and certifications required. Spending benchmarks for similar NRE and production contracts can vary widely based on aircraft type and complexity, but are typically in the tens to hundreds of millions of dollars.

Small Business Impact

This contract was not competed and does not indicate any specific small business set-aside provisions. As a sole-source award to a large prime contractor, the direct impact on small businesses is likely limited unless Boeing actively engages them as subcontractors. There is no explicit information provided regarding subcontracting plans or goals for small businesses within this specific award.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contracting and program management offices. The Cost Plus Fixed Fee structure necessitates robust monitoring of costs and performance to ensure adherence to the fixed fee and allowable expenses. Inspector General (IG) jurisdiction would apply for investigations into fraud, waste, or abuse. Transparency is generally limited for sole-source awards, with details often restricted to government and contractor personnel.

Related Government Programs

Aircraft Component Manufacturing
Aerospace Engineering Services
Department of Defense Procurement
Naval Aviation Support
Non-Recurring Engineering (NRE)

Risk Flags

Sole-source award
Cost-plus contract type
Lack of competition
Potential for cost overruns

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $110.0 million to THE BOEING COMPANY. NGEAU NON-RECURRING ENGINEERING (NRE) AND PRODUCTION OF A-KITS AND B-KITS.

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 $110.0 million.

What is the period of performance?

Start: 2024-10-01. End: 2029-02-28.

What is the historical spending pattern for similar NGEAU contracts with The Boeing Company?

Analyzing historical spending for similar NGEAU (Non-Recurring Engineering and Production of A-Kits and B-Kits) contracts with The Boeing Company requires access to detailed procurement databases and contract award histories. Without specific historical data points for this exact type of kit and engineering, a precise comparison is difficult. However, The Boeing Company is a major defense contractor with a long history of supplying aircraft components and engineering services to the Department of Defense. Past awards for similar complex systems and components have often been in the multi-million to billion-dollar range, reflecting the scale and complexity of their defense contracts. Trends in their spending often correlate with defense budget allocations, specific aircraft platform needs (e.g., upgrades, new builds), and the competitive landscape for those specific components. It is common for large, established primes like Boeing to receive follow-on contracts or sole-source awards for specialized parts or engineering services where they possess unique capabilities or have already invested heavily in development.

How does the Cost Plus Fixed Fee (CPFF) contract type compare to other pricing arrangements for this type of work?

The Cost Plus Fixed Fee (CPFF) contract type is often used for research and development or complex services where the scope of work is not precisely defined at the outset, or where innovation is a key objective. In a CPFF contract, the contractor is reimbursed for all allowable costs incurred, plus a predetermined fixed fee representing profit. This contrasts with fixed-price contracts, where the price is set regardless of the actual costs incurred, offering greater cost certainty to the government but potentially higher risk for the contractor. Incentive fee contracts aim to motivate contractor performance by adjusting the fee based on achieving specific targets. For NGEAU (Non-Recurring Engineering and Production of A-Kits and B-Kits), CPFF can be advantageous if significant design evolution or unforeseen technical challenges are anticipated. However, it places a greater burden on government oversight to control costs, as the contractor has less financial incentive to minimize expenses compared to a fixed-price arrangement. The fixed fee component provides some cost predictability for the profit element, but the overall cost can still escalate if allowable costs increase significantly.

What are the specific risks associated with a sole-source award for aircraft kits?

A sole-source award for aircraft kits, such as this NGEAU contract, carries several inherent risks. The most significant is the lack of price competition, which can lead to the government paying a premium compared to what might be achieved in a competitive bidding process. This absence of market pressure can reduce the contractor's incentive to control costs or innovate. Furthermore, sole-source awards can create vendor lock-in, making it difficult and costly to switch to alternative suppliers in the future, even if better options become available. There's also a risk that the government may not be aware of or have access to the most advanced or cost-effective technologies if only one supplier is considered. Finally, without the scrutiny of multiple bids, there's a potential for less transparency in the cost build-up and profit margins, requiring enhanced government oversight to mitigate these risks.

What is the typical performance period for contracts involving non-recurring engineering (NRE)?

Contracts involving non-recurring engineering (NRE) typically have performance periods that vary significantly based on the complexity of the development effort, the specific technology involved, and the overall program timeline. NRE encompasses the initial design, development, testing, and qualification of a product or system, which can be a lengthy process. For aircraft components like A-Kits and B-Kits, NRE could span anywhere from a few months for minor design modifications to several years for entirely new systems or significant upgrades. The given contract's duration of over 4 years (from Oct 2024 to Feb 2029) suggests a substantial NRE effort combined with initial production runs. This extended period allows for iterative design, prototyping, rigorous testing, and integration into the broader aircraft platform, ensuring the final product meets stringent aerospace and defense standards before full-scale production or deployment.

How does the 'Aircraft Engine and Engine Parts Manufacturing' NAICS code relate to the contract's scope?

The North American Industry Classification System (NAICS) code 336412, 'Aircraft Engine and Engine Parts Manufacturing,' is highly relevant to this contract, although the contract's description is broader. While the contract specifies 'NGEAU NON-RECURRING ENGINEERING (NRE) AND PRODUCTION OF A-KITS AND B-KITS,' these kits are integral components of aircraft systems, often including or interfacing with engines and their related parts. A-Kits and B-Kits are typically defined as sets of parts required for specific aircraft configurations or modifications, which can encompass structural elements, avionics, and potentially engine-related sub-assemblies. Therefore, the manufacturing of these kits, especially if they involve engine-related systems or are produced by a company specializing in aircraft engine parts, falls squarely within the scope of NAICS 336412. This code signifies the industry sector involved in producing the physical hardware and components for aircraft engines and related systems.

Industry Classification

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

Product/Service Code: RESEARCH AND DEVELOPMENT › C – National Defense R&D Services

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: 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: $148,934,936

Exercised Options: $148,934,936

Current Obligation: $110,036,164

Subaward Activity

Number of Subawards: 4

Total Subaward Amount: $30,483,900

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