Boeing's $60.4M Navy contract for Trident II navigation subsystems awarded without competition

Contract Overview

Contract Amount: $60,444,578 ($60.4M)

Contractor: THE Boeing Company

Awarding Agency: Department of Defense

Start Date: 2012-10-01

End Date: 2016-12-22

Contract Duration: 1,543 days

Daily Burn Rate: $39.2K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Official Description: FY13/FY14 TRIDENT II NAVIGATION SUBSYSTEM

Place of Performance

Location: HUNTINGTON BEACH, ORANGE County, CALIFORNIA, 92647

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $60.4 million to THE BOEING COMPANY for work described as: FY13/FY14 TRIDENT II NAVIGATION SUBSYSTEM Key points: 1. Contract awarded on a cost-plus incentive fee basis, potentially leading to cost overruns. 2. Sole-source award limits price discovery and may not represent the best value. 3. Long contract duration of over 4 years suggests a complex and ongoing need. 4. Performance risk is moderate given the specialized nature of the navigation subsystem. 5. This contract falls within the Defense sector, specifically supporting naval strategic systems. 6. No small business set-aside was applied, indicating a focus on large prime contractors.

Value Assessment

Rating: questionable

The contract's value of $60.4 million for engineering services related to the Trident II navigation subsystem is difficult to benchmark without comparable sole-source awards. The cost-plus incentive fee (CPIF) structure means that while there are incentives for cost control, the government's liability is not capped, introducing potential for higher-than-expected costs. Without competitive bidding, it's challenging to definitively assess if this pricing represents fair market value or if a more cost-effective solution could have been secured through open competition.

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. This typically occurs when only one responsible source is available or when a compelling justification for other than full and open competition exists. The lack of competition means there were no other bidders to compare against, and price discovery was limited to negotiations between the government and The Boeing Company.

Taxpayer Impact: Sole-source awards can potentially lead to higher costs for taxpayers as the absence of competition removes the downward pressure on pricing that multiple bids would typically provide.

Public Impact

The primary beneficiary is the Department of the Navy, ensuring the continued operational readiness of the Trident II submarine ballistic missile system. Services delivered include engineering support critical for the maintenance and upgrade of the navigation subsystems. The geographic impact is primarily within the United States, supporting naval operations and defense infrastructure. Workforce implications include specialized engineering roles within The Boeing Company and potentially its subcontractors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure on pricing.
Cost-plus incentive fee structure carries inherent risk of cost escalation.
Lack of transparency in the justification for sole-source award.
Long contract duration may indicate potential for scope creep.
No small business subcontracting goals explicitly mentioned.

Positive Signals

Contract awarded to a known, experienced defense contractor (Boeing).
Focus on a critical strategic defense system (Trident II).
Incentive fee structure aims to align contractor and government interests on cost.
Contract supports ongoing readiness of a vital national security asset.

Sector Analysis

This contract falls within the Defense sector, specifically supporting strategic missile systems. The market for specialized engineering services for such critical platforms is highly concentrated, often dominated by a few large defense contractors with the necessary expertise and security clearances. Comparable spending benchmarks are difficult to establish due to the unique nature of the Trident II program and the typical sole-source or limited-competition awards for its components.

Small Business Impact

This contract was not set aside for small businesses, and there is no explicit indication of subcontracting requirements for small businesses. The nature of the work, involving highly specialized engineering for a strategic defense system, likely requires capabilities typically found in larger, established defense contractors. This suggests limited direct opportunities for small businesses to participate as prime contractors on this specific award, though they may be involved further down the supply chain.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of the Navy's contracting and program management offices. Accountability measures are embedded within the Cost Plus Incentive Fee (CPIF) structure, which incentivizes performance and cost control. Transparency is limited due to the sole-source nature of the award; however, contract details and performance reports are usually available through official channels, subject to security classifications.

Related Government Programs

Trident II D5 Life Extension Program
Submarine Modernization Programs
Ballistic Missile Defense Systems
Naval Strategic Weapons Systems
Department of Defense Engineering Services

Risk Flags

Sole-source award
Cost-plus contract type
Long contract duration
Specialized defense system component

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $60.4 million to THE BOEING COMPANY. FY13/FY14 TRIDENT II NAVIGATION SUBSYSTEM

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 $60.4 million.

What is the period of performance?

Start: 2012-10-01. End: 2016-12-22.

What is The Boeing Company's track record with the Trident II program and similar defense contracts?

The Boeing Company has a long-standing and significant history of involvement with the U.S. Navy's strategic weapons programs, including the Trident II (D5) missile system. As a major defense contractor, Boeing has extensive experience in aerospace engineering, manufacturing, and systems integration. Their track record with complex, high-stakes defense contracts is generally robust, characterized by the ability to handle intricate technical requirements and large-scale production. However, like many large defense firms, they have also faced scrutiny over contract costs and performance on specific projects. For the Trident II program specifically, Boeing has been a key player in various sustainment, modernization, and component supply efforts, indicating a deep institutional knowledge and established relationship with the Navy for this critical platform.

How does the $60.4 million value compare to historical spending on Trident II navigation subsystems?

Determining precise historical spending comparisons for the Trident II navigation subsystems is challenging due to the classified nature of much of the program's budget and the typical sole-source or limited-competition awards for specialized components. The $60.4 million figure represents the total value of this specific definitive contract awarded in 2012 for a period extending to 2016. Annual spending on navigation subsystems can fluctuate significantly based on modernization cycles, sustainment needs, and research and development efforts. Without access to detailed historical contract data for this specific subsystem, it's difficult to establish a direct per-year or per-contract benchmark. However, given the complexity and strategic importance of the Trident II, sustained investment in its components, including navigation, is expected over its multi-decade service life.

What are the primary risks associated with this sole-source, cost-plus incentive fee contract?

The primary risks associated with this sole-source, cost-plus incentive fee (CPIF) contract are twofold. Firstly, the sole-source nature means the government did not benefit from competitive bidding, potentially leading to a higher price than might have been achieved in an open market. This limits the government's leverage in price negotiations. Secondly, the CPIF structure, while designed to incentivize cost efficiency, places the government on the hook for costs incurred, plus a fee that varies based on performance against targets. This structure carries the risk of cost overruns if targets are not met or if unforeseen technical challenges arise, increasing the final contract cost beyond initial estimates. There's also a risk related to contractor performance and adherence to schedule, although the incentive fee aims to mitigate this.

How effective is the cost-plus incentive fee (CPIF) structure in ensuring value for money for this contract?

The effectiveness of the Cost-Plus Incentive Fee (CPIF) structure in ensuring value for money for this contract is mixed and depends heavily on the specific targets and oversight applied. CPIF aims to provide value by incentivizing the contractor to control costs and meet performance objectives. If the targets for cost, schedule, and performance are well-defined, challenging, and aligned with government needs, the contractor is motivated to achieve them to maximize their fee. However, if targets are set too leniently, or if oversight is weak, the 'incentive' aspect may be diminished, and the government could end up paying more than necessary. For a sole-source contract, the CPIF structure is particularly important as it attempts to introduce some level of cost control that competition would otherwise provide. The ultimate value for money hinges on the negotiation of these targets and the rigor of government monitoring throughout the contract's life.

What are the implications of the contract's duration (1543 days) for program management and cost control?

The contract duration of 1543 days (approximately 4.2 years) has several implications for program management and cost control. A longer duration suggests a complex, long-term requirement for the Trident II navigation subsystems, likely involving sustainment, upgrades, or integration into ongoing fleet operations. From a program management perspective, it necessitates sustained oversight, resource allocation, and stakeholder engagement over an extended period. For cost control, a longer duration increases the potential for cost volatility due to factors like inflation, changes in material costs, and evolving technical requirements. It also provides more opportunities for performance variances that could impact the final cost under a CPIF structure. Effective management requires robust baseline planning, regular performance reviews, and proactive risk mitigation to keep costs aligned with objectives over the multi-year span.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Architectural, Engineering, and Related Services › Engineering Services

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

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE (V)

Evaluated Preference: NONE

Contractor Details

Address: 5301 BOLSA AVE, HUNTINGTON BEACH, CA, 92647

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $63,232,244

Exercised Options: $60,898,867

Current Obligation: $60,444,578

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline