DoD awards $85M for turbine generator sets, with Rolls-Royce Corporation as the sole awardee

Contract Overview

Contract Amount: $85,160,209 ($85.2M)

Contractor: Rolls-Royce Corporation

Awarding Agency: Department of Defense

Start Date: 2007-03-21

End Date: 2022-09-30

Contract Duration: 5,672 days

Daily Burn Rate: $15.0K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: MTG SET

Place of Performance

Location: INDIANAPOLIS, MARION County, INDIANA, 46225

State: Indiana Government Spending

Plain-Language Summary

Department of Defense obligated $85.2 million to ROLLS-ROYCE CORPORATION for work described as: MTG SET Key points: 1. The contract value of $85.16 million over its duration suggests a significant investment in critical defense infrastructure. 2. The award to a single contractor, Rolls-Royce Corporation, warrants scrutiny regarding the competitive landscape and potential for price optimization. 3. The long duration of the contract (over 15 years) indicates a need for sustained supply and potential for long-term price stability or escalation. 4. The fixed-price nature of the contract shifts cost overrun risks to the contractor, which can be beneficial for the government if managed effectively. 5. The absence of small business set-asides suggests the contract may not have been structured to specifically encourage small business participation. 6. The contract's focus on turbine and turbine generator set units points to a specialized manufacturing requirement within the defense sector.

Value Assessment

Rating: fair

The contract value of $85.16 million for turbine and turbine generator set units over more than 15 years appears substantial. Benchmarking this against similar, specialized defense manufacturing contracts is challenging without more specific details on the units' specifications and performance requirements. The firm fixed-price structure is generally favorable for cost control, but the long duration could lead to price adjustments if not carefully managed. Without comparative data on per-unit costs or market rates for comparable equipment, a definitive value-for-money assessment is difficult.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that multiple bidders were theoretically allowed to participate. However, the data shows only two bids were received, and the award went to Rolls-Royce Corporation. While competition was solicited broadly, the low number of bids might suggest barriers to entry, specialized requirements, or limited market capacity for this specific type of equipment. This level of competition could impact price discovery and potentially lead to less aggressive pricing than a more robust bidding environment.

Taxpayer Impact: With only two bids received, taxpayers may not have benefited from the most competitive pricing achievable. The government secured a contract, but the potential for savings from broader competition appears limited.

Public Impact

The primary beneficiaries are the Department of Defense, which receives critical turbine and turbine generator set units for its operations. The services delivered include the manufacturing and supply of specialized power generation equipment essential for military readiness. The geographic impact is likely concentrated around defense installations that require reliable power generation, potentially worldwide. Workforce implications include employment opportunities within Rolls-Royce Corporation and its supply chain, particularly in manufacturing and engineering roles.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Limited competition (2 bids) may have resulted in a higher price than if more bidders had participated.
The long contract duration (over 15 years) increases the risk of price escalation or obsolescence if not managed proactively.
Lack of specific details on performance metrics makes it difficult to assess the true value and effectiveness of the awarded equipment.

Positive Signals

Firm fixed-price contract structure shifts cost overrun risk to the contractor.
Award to a known entity (Rolls-Royce) suggests a degree of confidence in their capability to deliver specialized equipment.
The contract addresses a critical need for power generation within the defense sector, ensuring operational readiness.

Sector Analysis

The defense manufacturing sector, particularly for specialized power generation equipment like turbine and turbine generator sets, is characterized by high barriers to entry, significant R&D investment, and stringent quality requirements. Contracts in this space are often awarded through complex procurement processes due to the critical nature of the equipment. Spending in this area is driven by military modernization, operational readiness, and the need for reliable power in diverse and demanding environments. Comparable spending benchmarks would typically involve other large-scale defense equipment procurements, but the specific nature of turbine sets makes direct comparisons difficult without detailed specifications.

Small Business Impact

The data indicates that this contract was not set aside for small businesses, and the 'sb' field is false. This suggests that the procurement was open to all responsible sources, and small businesses were not specifically targeted for this award. Consequently, there are no direct subcontracting implications for small businesses arising from a set-aside provision. The impact on the small business ecosystem is likely minimal unless Rolls-Royce Corporation voluntarily engages small businesses in its supply chain for components or services.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contracting and program management offices, with support from the Defense Contract Management Agency (DCMA). Accountability measures are embedded in the contract terms, including delivery schedules, quality standards, and payment milestones. Transparency is facilitated through contract databases like FPDS, which record award details. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse related to the contract.

Related Government Programs

Defense Logistics Agency (DLA) procurement of equipment
Naval Sea Systems Command (NAVSEA) contracts
Air Force Materiel Command (AFMC) procurements
Army Contracting Command (ACC) awards
General Services Administration (GSA) Federal Supply Schedule contracts for industrial equipment

Risk Flags

Limited competition
Long contract duration
Potential for price escalation over time

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $85.2 million to ROLLS-ROYCE CORPORATION. MTG SET

Who is the contractor on this award?

The obligated recipient is ROLLS-ROYCE CORPORATION.

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Contract Management Agency).

What is the total obligated amount?

The obligated amount is $85.2 million.

What is the period of performance?

Start: 2007-03-21. End: 2022-09-30.

What is the historical spending pattern for turbine and turbine generator sets by the Department of Defense?

Analyzing historical spending for turbine and turbine generator sets by the Department of Defense requires access to comprehensive procurement data over extended periods. While this specific contract awarded $85.16 million, understanding the broader trend involves looking at similar awards, contract modifications, and the frequency of such procurements. Factors influencing historical spending include military modernization programs, operational tempo, and the lifecycle of existing power generation equipment. Without a detailed historical analysis of specific turbine set procurements, it's difficult to ascertain if this $85.16 million award represents an increase, decrease, or stable level of investment. However, the long duration of this contract suggests a sustained commitment to this capability.

How does the price per unit for these turbine generator sets compare to market rates or similar government contracts?

A precise per-unit cost comparison for these turbine generator sets is not feasible with the provided data alone. The contract value of $85.16 million is for an unspecified number of units and includes manufacturing, potentially installation, and support over a long period. To benchmark effectively, one would need to know the exact quantity of units, their specifications (e.g., power output, fuel type, efficiency), and the contract's breakdown of costs. Comparing this to market rates for commercial turbine generators or other government contracts for similar equipment would require detailed specification matching. The firm fixed-price nature suggests the government aimed to lock in a price, but without comparative data, assessing its competitiveness is challenging.

What are the specific risks associated with a sole-source or limited-competition award for critical defense equipment?

A sole-source or limited-competition award for critical defense equipment, such as turbine generator sets, carries several risks. Primarily, it can lead to higher costs for taxpayers due to reduced price pressure from a lack of robust competition. There's also a risk of complacency from the awarded contractor, potentially impacting innovation or responsiveness. Furthermore, reliance on a single supplier can create supply chain vulnerabilities; if the contractor faces production issues, financial instability, or geopolitical challenges, the defense mission could be jeopardized. While this contract was technically 'full and open,' receiving only two bids and awarding to one entity narrows the competitive benefit significantly.

What is Rolls-Royce Corporation's track record with similar defense contracts?

Rolls-Royce Corporation has a well-established and extensive track record in supplying complex systems, including engines and power generation equipment, to the defense sector globally. They are known for their expertise in aerospace and defense manufacturing. For turbine and generator sets specifically, their history likely includes numerous contracts with various defense agencies for naval vessels, aircraft, and ground support systems. Assessing their performance on this specific $85.16 million contract would involve reviewing past performance evaluations, on-time delivery rates, quality metrics, and any past disputes or contract issues related to similar equipment. Generally, major defense contractors like Rolls-Royce are expected to meet stringent performance and quality standards.

How does the duration of this contract (over 15 years) impact its overall value and risk profile?

The extended duration of this contract, spanning over 15 years, significantly impacts its value and risk profile. From a value perspective, it allows for long-term planning and potentially lower per-unit costs through economies of scale and sustained production. It also ensures a stable supply of critical equipment, reducing the risk of operational disruptions. However, the long timeframe introduces considerable risks. Market conditions, technological advancements, and inflation can change dramatically over such a period, potentially making the contracted price less favorable over time. There's also an increased risk of contractor performance degradation, obsolescence of the equipment, or unforeseen geopolitical events affecting supply. Robust contract management and contingency planning are crucial to mitigate these long-term risks.

What are the potential implications of the 'Turbine and Turbine Generator Set Units Manufacturing' (NAICS 333611) classification for this contract?

The NAICS code 333611, 'Turbine and Turbine Generator Set Units Manufacturing,' signifies that this contract is for the production of specialized machinery used for generating power through turbines. This classification indicates a high level of technical complexity and precision engineering is required. Companies operating under this code typically possess advanced manufacturing capabilities, significant R&D investment, and adhere to rigorous quality control standards. For the government, this means the procurement is likely focused on high-performance, reliable power solutions essential for critical operations, such as military bases or naval vessels. The classification also suggests a relatively concentrated market of manufacturers capable of meeting these demanding specifications.

Industry Classification

NAICS: Manufacturing › Engine, Turbine, and Power Transmission Equipment Manufacturing › Turbine and Turbine Generator Set Units Manufacturing

Product/Service Code: ELECTRIC WIRE, POWER DISTRIB EQPT

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: N0002406R4206

Offers Received: 2

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: $220,261,301

Exercised Options: $98,816,701

Current Obligation: $85,160,209

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline