DoD's $58.6M turbine contract to Rolls-Royce Corporation shows concerning value and limited competition

Contract Overview

Contract Amount: $58,578,198 ($58.6M)

Contractor: Rolls-Royce Corporation

Awarding Agency: Department of Defense

Start Date: 2008-04-21

End Date: 2022-09-30

Contract Duration: 5,275 days

Daily Burn Rate: $11.1K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: BASELINE ATG

Place of Performance

Location: INDIANAPOLIS, MARION County, INDIANA, 46225

State: Indiana Government Spending

Plain-Language Summary

Department of Defense obligated $58.6 million to ROLLS-ROYCE CORPORATION for work described as: BASELINE ATG Key points: 1. The contract's value proposition appears questionable given the lack of competitive bidding. 2. Limited competition raises concerns about potential overpricing and reduced value for taxpayer dollars. 3. The long duration and cost-plus contract type may increase financial risk. 4. Performance context is limited without specific delivery or operational metrics. 5. This contract falls within the Defense sector, specifically related to turbine manufacturing. 6. The absence of small business involvement is noted.

Value Assessment

Rating: questionable

Benchmarking the value of this $58.6 million contract is challenging due to the sole-source nature and lack of detailed performance data. The Cost Plus Fixed Fee (CPFF) structure, while common for complex projects, can incentivize cost overruns if not managed tightly. Without comparable sole-source contracts or detailed cost breakdowns, it's difficult to definitively assess if the pricing reflects fair market value. The extended duration of over 13 years also adds complexity to value assessment.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning it was not competed among multiple vendors. This approach is typically used when only one vendor possesses the necessary capabilities or when urgency dictates a direct award. The lack of competition means there was no opportunity for price discovery through a bidding process, potentially leading to higher costs for the government.

Taxpayer Impact: Sole-source awards limit the government's ability to secure the best possible price through competitive negotiation, potentially resulting in less efficient use of taxpayer funds.

Public Impact

The primary beneficiary is the Department of Defense, which receives critical turbine components. The contract supports the manufacturing and sustainment of essential defense equipment. The geographic impact is primarily in Indiana, where the contractor is located. Workforce implications include employment at Rolls-Royce Corporation and its supply chain.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition.
Cost-plus contract type carries inherent risk of cost escalation.
Long contract duration increases exposure to market and technological changes.
Lack of transparency in specific performance metrics hinders accountability.
No small business set-aside indicates limited opportunities for smaller enterprises.

Positive Signals

Awarded to a known entity (Rolls-Royce Corporation) with established capabilities.
Contract supports critical defense needs.
Long duration may indicate a stable, long-term requirement.

Sector Analysis

The turbine and turbine generator set units manufacturing sector is a critical component of the aerospace and defense industries. Companies like Rolls-Royce Corporation are key players in this high-technology market, which requires significant R&D investment and specialized manufacturing capabilities. Government spending in this area is often driven by national security requirements for aircraft engines, power generation, and other specialized applications. Comparable spending benchmarks are difficult to establish for sole-source, long-term defense contracts due to unique specifications and limited market visibility.

Small Business Impact

This contract did not include a small business set-aside, nor is there an indication of significant subcontracting to small businesses. The sole-source nature of the award further limits opportunities for small businesses to participate in this specific contract. This suggests that the primary benefits of this contract accrue to the large prime contractor, with limited direct impact on the broader small business ecosystem for this particular procurement.

Oversight & Accountability

Oversight for this contract would typically fall under the Defense Contract Management Agency (DCMA), responsible for ensuring contractor performance and compliance. The Cost Plus Fixed Fee structure necessitates robust financial oversight to monitor costs and ensure the fixed fee remains appropriate. Transparency is limited by the sole-source nature and the proprietary information often associated with defense manufacturing. Inspector General jurisdiction would apply to investigations of fraud, waste, or abuse.

Related Government Programs

Aircraft Engine Manufacturing
Turbine Generator Set Manufacturing
Defense Procurement
Aerospace Components

Risk Flags

Sole Source Award
Cost-Plus Contract Type
Long Contract Duration
Lack of Competition

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $58.6 million to ROLLS-ROYCE CORPORATION. BASELINE ATG

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 $58.6 million.

What is the period of performance?

Start: 2008-04-21. End: 2022-09-30.

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

Historical spending on turbine and turbine generator set units by the Department of Defense is substantial, reflecting the critical role these components play in aviation and power generation for military operations. While specific aggregate figures for this exact NAICS code (333611) are not readily available in public databases without extensive searching, the DoD consistently invests billions annually in aerospace and related manufacturing. Contracts for engines, power units, and associated components are common across various branches. The duration and value of individual contracts can vary significantly based on the specific application, technological complexity, and whether they are for new development, production, or sustainment. This particular $58.6 million contract with Rolls-Royce Corporation, spanning over 13 years, represents a significant, long-term investment in a specific capability, but it is likely one of many such investments within the broader defense industrial base.

How does the Cost Plus Fixed Fee (CPFF) contract type typically impact cost and performance compared to other contract types?

The Cost Plus Fixed Fee (CPFF) contract type is characterized by the government reimbursing the contractor for all allowable costs incurred, plus a predetermined fixed fee representing profit. This structure is often used when the scope of work is not precisely defined or when there is significant uncertainty, such as in research and development or complex manufacturing. From a cost perspective, CPFF contracts carry a higher risk of cost escalation for the government compared to fixed-price contracts, as the contractor is incentivized to incur costs to achieve the fixed fee. However, it can provide cost certainty for the contractor, potentially encouraging participation in high-risk projects. For performance, the fixed fee can provide some incentive for the contractor to control costs to maximize their profit margin, but the primary incentive is often tied to meeting technical specifications rather than strict cost adherence. Robust government oversight is crucial to manage costs effectively and ensure the contractor is not incentivized to overspend.

What are the risks associated with a sole-source award for a contract of this magnitude and duration?

Sole-source awards, especially for large, long-duration contracts like this $58.6 million turbine deal, present several significant risks. The primary risk 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. Without competing offers, there's less pressure on the contractor to innovate on cost-efficiency or offer the most advantageous terms. Furthermore, a sole-source award can reduce the incentive for the contractor to perform exceptionally well, as they face no direct threat of losing future business to competitors on this specific contract. This can also stifle innovation within the broader market by limiting opportunities for other capable firms to enter or expand their share. The extended duration amplifies these risks, as market conditions, technological advancements, and the contractor's own performance can change significantly over 13+ years without the benefit of periodic competitive re-evaluation.

What is Rolls-Royce Corporation's track record with government contracts, particularly in turbine manufacturing?

Rolls-Royce Corporation has a long and established track record as a major supplier to government entities, particularly within the defense and aerospace sectors. They are a well-known manufacturer of jet engines and power systems for military aircraft, naval vessels, and other defense applications. Their history with government contracts includes numerous large-scale awards, often involving complex engineering, manufacturing, and sustainment services. While specific performance metrics for all past contracts are not publicly detailed, Rolls-Royce is generally recognized for its technical expertise and capabilities in this specialized field. However, like any large defense contractor, they may have faced scrutiny or challenges on specific contracts related to cost, schedule, or performance, which is typical in the complex world of defense procurement. Their extensive experience suggests a deep understanding of government contracting requirements and processes.

How does this contract compare to other federal spending on turbine and turbine generator set units?

Comparing this specific $58.6 million contract to overall federal spending on turbine and turbine generator set units is challenging due to data limitations and the specialized nature of the procurement. Federal spending in this category is often embedded within larger defense procurement programs (e.g., aircraft, ships) or energy initiatives. The $58.6 million figure, spread over more than 13 years, represents a significant but not necessarily dominant portion of the total federal outlay for such equipment. It is likely indicative of a specific, long-term need for specialized turbine technology, possibly for a particular platform or system. Without access to detailed spending breakdowns across all agencies and contract types, it's difficult to establish a precise benchmark. However, given Rolls-Royce's specialization, this contract likely represents a substantial investment in a critical capability for the Department of Defense.

What are the potential implications of the 'IN' status code for this contract?

The 'IN' status code for this contract typically indicates 'In Process' or 'In Progress,' suggesting that the contract is active and ongoing. For a contract that began in 2008 and is scheduled to end in 2022 (based on the provided end date), an 'IN' status would confirm that it is currently being performed or has recently concluded its performance period and is in the final stages of closeout. This status does not inherently signal risk or exceptional value but rather reflects the operational lifecycle of the contract. It implies that funds have been obligated, work is being performed or has been performed, and payments are being made according to the contract terms. Further analysis would be needed to determine if the contract is on schedule and within budget, which is not directly conveyed by the 'IN' status code alone.

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: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0002407R4208

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

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: $59,134,027

Exercised Options: $59,134,027

Current Obligation: $58,578,198

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline