Boeing awarded $11.2M for software corrections, highlighting potential risks in sole-source defense contracts

Contract Overview

Contract Amount: $11,240,777 ($11.2M)

Contractor: THE Boeing Company

Awarding Agency: Department of Defense

Start Date: 2024-04-01

End Date: 2026-03-17

Contract Duration: 715 days

Daily Burn Rate: $15.7K/day

Competition Type: NOT COMPETED

Pricing Type: COST PLUS FIXED FEE

Sector: IT

Official Description: SOFTWARE CORRECTIONS

Place of Performance

Location: TUKWILA, KING County, WASHINGTON, 98108

State: Washington Government Spending

Plain-Language Summary

Department of Defense obligated $11.2 million to THE BOEING COMPANY for work described as: SOFTWARE CORRECTIONS Key points: 1. Contract awarded on a cost-plus-fixed-fee basis, which can incentivize higher spending. 2. Sole-source award suggests limited market research or unique contractor capabilities. 3. Long performance period of 715 days may indicate complex or evolving requirements. 4. Focus on software corrections points to potential existing system issues or maintenance needs. 5. Awarded by the Department of the Navy, indicating a critical defense-related need. 6. The contract's value is moderate, but the lack of competition warrants scrutiny.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to its sole-source nature and specific technical requirements. Cost-plus-fixed-fee contracts, while necessary for uncertain scopes, can lead to costs exceeding initial estimates if not managed tightly. Without competitive bids, it's difficult to ascertain if the fixed fee accurately reflects the effort required or if it includes a premium for lack of competition. The $11.2 million total value, spread over approximately two years, suggests a significant but not exceptionally large investment for defense software services.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded using a sole-source justification, meaning it was not competed among multiple vendors. This typically occurs when only one vendor possesses the necessary specialized skills, technology, or proprietary knowledge to fulfill the requirement. The lack of competition limits the government's ability to leverage market forces to achieve the best possible price and value. It raises questions about whether adequate market research was conducted to identify potential alternative sources or if the requirement was structured in a way that inherently favored a single provider.

Taxpayer Impact: Sole-source awards mean taxpayers may not benefit from competitive pricing, potentially leading to higher overall costs for the government. It also reduces opportunities for other businesses to compete for and win federal contracts.

Public Impact

The Department of the Navy benefits from essential software corrections to maintain operational readiness. This contract supports the ongoing maintenance and improvement of critical defense systems. The primary beneficiaries are the end-users of the software within the Navy's operational units. Workforce implications are likely internal to The Boeing Company, focusing on software engineers and developers.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price discovery and potential cost savings.
Cost-plus-fixed-fee structure can incentivize higher costs if not rigorously overseen.
The need for 'software corrections' may indicate underlying issues with existing systems that could lead to future costs.
Long contract duration could mask scope creep or evolving, unbudgeted requirements.

Positive Signals

The Boeing Company is a major defense contractor with extensive experience.
Awarding to a known entity can ensure continuity of service for critical systems.
The fixed fee component provides some cost certainty compared to pure cost-plus contracts.

Sector Analysis

This contract falls within the Computer Systems Design Services sector, a critical component of the broader IT and defense industries. The market for defense-related software development and maintenance is substantial, dominated by large aerospace and defense contractors. Spending in this area is driven by the need for advanced technological capabilities, cybersecurity, and system modernization. Comparable spending benchmarks are difficult to establish precisely due to the specialized nature of defense software, but significant government investment is consistently allocated to maintaining and upgrading complex defense platforms.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. The prime contractor, The Boeing Company, is a large business. There is no explicit information regarding subcontracting plans for small businesses within the provided data. Without specific subcontracting goals or reporting, the direct impact on the small business ecosystem is likely minimal, though large prime contractors often engage small businesses for specialized support.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy's contracting and program management offices. As a sole-source award, scrutiny may be higher to ensure the justification was sound and the pricing is fair. The cost-plus-fixed-fee structure necessitates robust financial oversight to monitor costs against the fixed fee and ensure efficient performance. Inspector General (IG) jurisdiction would apply for investigations into fraud, waste, or abuse, with the Defense Contract Audit Agency (DCAA) likely involved in auditing the contractor's costs.

Related Government Programs

Defense Software Development
IT Services for Military
Aerospace and Defense Contracting
Computer Systems Design Services
Naval Systems Modernization

Risk Flags

Sole Source Justification
Cost-Plus-Fixed-Fee Pricing
Potential for Cost Overruns
Limited Competition

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $11.2 million to THE BOEING COMPANY. SOFTWARE CORRECTIONS

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 $11.2 million.

What is the period of performance?

Start: 2024-04-01. End: 2026-03-17.

What is the specific nature of the 'software corrections' required under this contract?

The provided data does not specify the exact nature of the 'software corrections.' This could range from fixing bugs and security vulnerabilities to implementing minor enhancements or addressing compatibility issues with other systems. Given the sole-source award and the contractor being The Boeing Company, it is highly probable that these corrections relate to software developed or maintained by Boeing for a specific Department of the Navy platform or system. Further details would likely be found in the contract's statement of work (SOW), which is not included in the provided summary data. Understanding the specifics is crucial for assessing the necessity and potential risks associated with the contract.

How does the cost-plus-fixed-fee (CPFF) pricing structure compare to other contract types for similar services?

The Cost-Plus-Fixed-Fee (CPFF) structure is often used when the scope of work is not precisely defined or is expected to change, as is common in complex software development or correction projects. Unlike fixed-price contracts, CPFF allows the contractor to recover all allowable costs plus a predetermined fixed fee. This contrasts with Firm-Fixed-Price (FFP) contracts, where the price is set regardless of the contractor's costs, incentivizing efficiency but carrying higher risk for the contractor. Cost-reimbursement contracts, like CPFF, shift some risk to the government but can be necessary for R&D or services with high uncertainty. For software corrections, CPFF can be appropriate if the exact effort is unknown, but it requires diligent government oversight to manage costs effectively and ensure the fixed fee remains reasonable.

What due diligence was performed to justify a sole-source award to The Boeing Company?

The data indicates a 'sole-source' award, meaning the Department of the Navy determined that only The Boeing Company could fulfill this requirement. Justification for sole-source awards typically involves demonstrating that only one responsible source is available or capable of providing the required goods or services. This could be due to proprietary technology, unique expertise, existing system integration, or a lack of adequate competition identified through market research. Without access to the specific justification documentation (e.g., a Justification and Approval - J&A document), it's impossible to detail the exact due diligence. However, the government is obligated to conduct thorough market research to support such a determination and ensure it is in the best interest of the government.

What are the potential risks associated with a sole-source contract for software corrections?

Sole-source contracts for software corrections carry several risks. Firstly, the lack of competition can lead to higher prices than might be achieved through a competitive bidding process. Taxpayers may end up paying a premium. Secondly, without competitive pressure, there might be less incentive for the contractor to innovate or perform with maximum efficiency. Thirdly, the government's negotiating position is weakened, potentially leading to less favorable terms. Finally, reliance on a single source can create vendor lock-in and make future transitions to different providers more difficult and costly. For software corrections, this could mean ongoing dependence on Boeing for essential updates, even if other solutions become available.

How does this contract's duration (715 days) and value ($11.2M) compare to typical software maintenance contracts in the defense sector?

A duration of 715 days (approximately 23-24 months) is a substantial period for a software correction contract, suggesting either a complex set of ongoing issues or a long-term maintenance and support agreement rather than a one-off fix. The total value of $11.2 million, averaging roughly $4.8 million per year, is moderate for a major defense contractor like Boeing supporting a Navy system. Typical software maintenance contracts can vary widely, but longer durations often accompany larger, more critical systems where continuous support is paramount. Without knowing the specific system, it's hard to benchmark precisely, but this duration and value suggest a significant, ongoing requirement rather than a minor software patch.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Computer Systems Design and Related Services › Computer Systems Design Services

Product/Service Code: MODIFICATION OF EQUIPMENT › MODIFICATION OF EQUIPMENT

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0001920R0041

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Address: 7755 E MARGINAL WAY S, SEATTLE, WA, 98108

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: $11,249,800

Exercised Options: $11,249,800

Current Obligation: $11,240,777

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: N0001921D0010

IDV Type: IDC

Timeline