DoD's $23.3M Rolls-Royce Engine Parts Contract: Value and Competition Under Scrutiny

Contract Overview

Contract Amount: $23,299,650 ($23.3M)

Contractor: Rolls-Royce Corporation

Awarding Agency: Department of Defense

Start Date: 2024-12-01

End Date: 2025-11-30

Contract Duration: 364 days

Daily Burn Rate: $64.0K/day

Competition Type: NOT AVAILABLE FOR COMPETITION

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: SELSS FOLLOW ON CY3 ACTIVE AND RESERVE

Place of Performance

Location: INDIANAPOLIS, MARION County, INDIANA, 46225

State: Indiana Government Spending

Plain-Language Summary

Department of Defense obligated $23.3 million to ROLLS-ROYCE CORPORATION for work described as: SELSS FOLLOW ON CY3 ACTIVE AND RESERVE Key points: 1. The contract's value appears reasonable given the specialized nature of aircraft engine parts. 2. Limited competition raises concerns about potential overpricing and reduced value for taxpayer dollars. 3. The firm fixed-price structure offers some cost certainty, but the lack of competition limits its effectiveness. 4. Performance context is limited due to the short duration and focus on parts delivery. 5. This contract falls within the Defense sector, specifically supporting aircraft engine maintenance. 6. The absence of small business set-asides suggests a focus on large, specialized suppliers.

Value Assessment

Rating: fair

Benchmarking the value of this contract is challenging without specific part details and market rates. However, the $23.3 million for a one-year delivery order for specialized aircraft engine parts from a sole-source provider like Rolls-Royce suggests a potentially high per-unit cost. Compared to similar sole-source contracts for proprietary aerospace components, the pricing might be within an expected range, but the lack of competition prevents a robust value-for-money assessment. Further analysis would require detailed cost breakdowns and comparisons to open-market alternatives, if any exist.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, indicating that only one bidder, Rolls-Royce Corporation, was considered capable of fulfilling the requirement. This typically occurs when a product is proprietary or requires unique expertise. The limited competition means there was no opportunity for price discovery through a bidding process, potentially leading to higher costs for the government. The absence of multiple bidders restricts the government's ability to negotiate favorable terms based on competitive offers.

Taxpayer Impact: Sole-source awards limit the government's leverage in price negotiations, potentially resulting in higher expenditures for taxpayers. The lack of competition means taxpayers may not benefit from the cost savings that typically arise from a competitive bidding environment.

Public Impact

The primary beneficiaries are the Department of Defense and its active and reserve components, ensuring the operational readiness of aircraft. The contract delivers essential aircraft engine and engine parts, crucial for maintaining military aviation capabilities. The geographic impact is primarily within the Department of Defense's operational theaters, though the parts themselves are manufactured by Rolls-Royce. Workforce implications are likely concentrated within Rolls-Royce's manufacturing and support facilities, maintaining specialized jobs in the aerospace sector.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition and potential value for money.
Lack of transparency in pricing due to limited competition.
Dependence on a single supplier for critical aircraft engine parts.
Potential for cost overruns if not rigorously managed due to lack of competitive pressure.

Positive Signals

Firm fixed-price contract provides cost certainty for the awarded items.
Award to a known, established supplier (Rolls-Royce) with a track record in aerospace.
Ensures continued availability of critical parts for DoD aircraft readiness.

Sector Analysis

This contract falls within the Defense Industrial Base sector, specifically focusing on the manufacturing and supply of aircraft engines and parts. The aerospace manufacturing market is characterized by high barriers to entry, significant R&D investment, and a limited number of major global players like Rolls-Royce. Government contracts are a substantial driver of revenue for this sector, particularly for specialized components where original equipment manufacturers often hold intellectual property and sole-source supply rights. Comparable spending benchmarks are difficult to establish without specific part numbers and quantities, but the overall defense aerospace market is valued in the hundreds of billions.

Small Business Impact

This contract does not appear to include any specific small business set-asides, which is common for highly specialized aerospace components typically manufactured by large corporations. Rolls-Royce Corporation is a major international company, not a small business. There is no explicit information provided regarding subcontracting plans to small businesses. The absence of set-asides means that opportunities for small businesses within this specific contract are unlikely, though they may be involved in the broader defense supply chain.

Oversight & Accountability

Oversight for this contract will primarily reside with the Department of the Navy, a component of the Department of Defense. Accountability measures are embedded in the firm fixed-price contract terms, requiring delivery of specified parts. Transparency is limited due to the sole-source nature of the award. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse, but day-to-day oversight focuses on contract compliance and performance monitoring by the contracting officer's representative.

Related Government Programs

Department of Defense Aircraft Procurement
Department of Defense Aircraft Maintenance and Repair
Rolls-Royce Aerospace Engine Support Contracts
Naval Aviation Readiness Programs

Risk Flags

Sole-source award
Lack of competition
Potential for price escalation
Limited transparency

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $23.3 million to ROLLS-ROYCE CORPORATION. SELSS FOLLOW ON CY3 ACTIVE AND RESERVE

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 $23.3 million.

What is the period of performance?

Start: 2024-12-01. End: 2025-11-30.

What is Rolls-Royce Corporation's track record with the Department of Defense for similar engine parts?

Rolls-Royce Corporation has a long-standing relationship with the Department of Defense, supplying engines and parts for various military aircraft platforms. Their track record includes providing components for fighter jets, transport aircraft, and helicopters. Historical data indicates consistent, though sometimes costly, delivery of critical engine components. The DoD relies on Rolls-Royce for specific engine models due to their proprietary technology and manufacturing expertise. While generally reliable in terms of delivery, past contracts have sometimes faced scrutiny regarding pricing and the necessity of sole-source awards, necessitating careful oversight to ensure fair value.

How does the $23.3 million value compare to similar sole-source contracts for aircraft engine parts?

Comparing the $23.3 million value directly to similar sole-source contracts is challenging without specific part numbers, quantities, and engine models. However, for a one-year delivery order of specialized, proprietary aircraft engine components from a major manufacturer like Rolls-Royce, this figure is not inherently unreasonable within the defense aerospace context. Sole-source awards for such critical, high-technology items often command premium pricing due to the lack of competition and the significant R&D investment involved. Benchmarking would require access to classified or proprietary pricing data for comparable sole-source procurements of engine parts for similar military platforms.

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

The primary risk associated with this sole-source contract is the potential for inflated pricing due to the absence of competitive bidding. Without competing offers, the government has limited leverage to negotiate the best possible price, potentially leading to reduced value for taxpayer money. Another risk is the dependency on a single supplier for critical components; any disruption in Rolls-Royce's supply chain or production could impact military readiness. Furthermore, the lack of transparency inherent in sole-source awards can make it difficult to fully assess cost reasonableness and identify potential inefficiencies.

How effective is a firm fixed-price contract in mitigating cost risks for sole-source procurements?

A firm fixed-price (FFP) contract is generally effective in mitigating cost risks for the government by establishing a ceiling price that the contractor must adhere to. For this sole-source contract, the FFP structure provides cost certainty for the specific parts being procured, meaning the government will not pay more than the agreed-upon price. However, the effectiveness is somewhat diminished by the sole-source nature. While the price is fixed, the initial negotiation of that fixed price is crucial. If the baseline price was not competitively determined, the FFP structure simply locks in a potentially higher cost, rather than ensuring the lowest possible cost.

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 show a consistent and significant investment, often in the billions of dollars annually, to maintain its fleet of aircraft. A substantial portion of this spending is directed towards original equipment manufacturers (OEMs) like Rolls-Royce and General Electric, particularly for proprietary components and engine overhauls. These expenditures are driven by the high cost of advanced aerospace technology, the need for specialized maintenance, and the long operational life of military aircraft. Spending often fluctuates based on fleet readiness requirements, modernization programs, and the introduction of new aircraft platforms.

What is the potential impact of this contract on the broader aerospace parts market?

The impact of this specific $23.3 million contract on the broader aerospace parts market is likely minimal, given its size relative to the overall industry and its specialized nature. However, it reflects a common procurement strategy within the defense sector where sole-source awards for proprietary components are standard practice. This reinforces the market position of major OEMs like Rolls-Royce and can influence pricing expectations for similar components across the defense aerospace supply chain. It also highlights the ongoing reliance of military branches on established, large-scale manufacturers for critical systems.

Industry Classification

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

Product/Service Code: MAINT, REPAIR, REBUILD EQUIPMENT › MAINT, REPAIR, REBUILD OF EQUIPMENT

Competition & Pricing

Extent Competed: NOT AVAILABLE FOR COMPETITION

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0001921R0033

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: $23,301,350

Exercised Options: $23,299,650

Current Obligation: $23,299,650

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: N0001923D0014

IDV Type: IDC

Timeline