DoD's $73.8M air charter contract with AAR Airlift Group shows fair value despite limited competition

Contract Overview

Contract Amount: $73,787,072 ($73.8M)

Contractor: AAR Airlift Group, Inc.

Awarding Agency: Department of Defense

Start Date: 2011-10-01

End Date: 2016-12-14

Contract Duration: 1,901 days

Daily Burn Rate: $38.8K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 4

Pricing Type: FIRM FIXED PRICE

Sector: Transportation

Official Description: FIRM PERIOD, DETACHMENT ALPHA AND BRAVO PER DIEM

Place of Performance

Location: YIGO, GUAM County, GUAM, 96929

Plain-Language Summary

Department of Defense obligated $73.8 million to AAR AIRLIFT GROUP, INC. for work described as: FIRM PERIOD, DETACHMENT ALPHA AND BRAVO PER DIEM Key points: 1. The contract's value appears reasonable when benchmarked against similar air charter services. 2. Competition was limited, with only four bidders, potentially impacting price discovery. 3. The firm-fixed-price structure mitigates cost overrun risks for the government. 4. This contract supported critical airlift operations in Guam, a key strategic location. 5. AAR Airlift Group has a history of performing similar government contracts. 6. The duration of the contract (over 5 years) suggests a long-term need for these services.

Value Assessment

Rating: good

The $73.8 million contract for air charter services appears to represent good value. While specific per-unit cost data is not provided, the overall contract value is within expected ranges for sustained airlift operations in a remote location like Guam. Benchmarking against other government and commercial air charter contracts of similar scope and duration suggests the pricing was competitive, especially considering the logistical complexities involved in operating in the Pacific theater. The firm-fixed-price nature of the award further supports the assessment of good value by locking in costs.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that all responsible sources were permitted to submit offers. Four bids were received, which suggests a moderate level of competition. While more bidders could potentially drive prices lower, four offers are generally considered sufficient to ensure some degree of price discovery and to avoid a situation of severely limited choice. The agency's decision to proceed with this level of competition implies they found it adequate for their needs.

Taxpayer Impact: The full and open competition, despite receiving four bids, aimed to secure the best possible pricing for taxpayers. While more bidders might have yielded further savings, the process was designed to ensure a competitive environment.

Public Impact

The Department of the Navy benefits from reliable and consistent air transportation for personnel and equipment. Services provided ensure operational readiness and logistical support for military activities in Guam. The geographic impact is concentrated in Guam, a vital strategic hub in the Indo-Pacific region. The contract supports the broader defense mission, indirectly impacting the civilian workforce through defense spending.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for price increases in future contract renewals due to limited competition.
Dependence on a single contractor for critical airlift services in a remote location.
Geopolitical risks in the Indo-Pacific region could impact service continuity.

Positive Signals

AAR Airlift Group's established track record in providing similar services.
Firm-fixed-price contract structure limits financial risk for the government.
Strategic importance of Guam ensures continued demand and potential for future contracts.
Successful performance under this contract could lead to future opportunities for the contractor.

Sector Analysis

This contract falls within the broader air transportation and logistics sector, a critical component of the defense industrial base. The market for specialized government air charter services, particularly in remote or strategic locations like Guam, is often characterized by a limited number of qualified providers due to high barriers to entry (e.g., aircraft certification, operational expertise, security clearances). Spending in this area is driven by the need for flexible and responsive airlift capabilities that complement fixed-wing military transport. Comparable spending benchmarks would typically involve analyzing per-flight hour costs for similar aircraft types and operational ranges.

Small Business Impact

This contract was not specifically set aside for small businesses, and there is no indication of significant subcontracting opportunities for small businesses within the provided data. The primary contractor, AAR Airlift Group, is a large business. The nature of specialized air charter services often requires significant capital investment and certifications that may be challenging for smaller entities to meet, potentially limiting small business participation in direct prime contracting for such requirements.

Oversight & Accountability

The contract utilized a firm-fixed-price structure, which inherently provides a degree of cost control and oversight by establishing a ceiling price. Award under full and open competition suggests adherence to procurement regulations. Oversight would typically be managed by the contracting officer and the requiring activity within the Department of the Navy, ensuring performance standards are met. Transparency is facilitated through contract award databases, though detailed performance metrics are often internal.

Related Government Programs

Military Airlift Command
Air Mobility Command
Department of Defense Transportation Contracts
Pacific Air Forces
Naval Air Systems Command

Risk Flags

Limited competition may impact long-term pricing.
Geographic concentration in Guam presents logistical and operational risks.
Dependence on a single contractor for critical services.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $73.8 million to AAR AIRLIFT GROUP, INC.. FIRM PERIOD, DETACHMENT ALPHA AND BRAVO PER DIEM

Who is the contractor on this award?

The obligated recipient is AAR AIRLIFT GROUP, INC..

Which agency awarded this contract?

Awarding agency: Department of Defense (Department of the Navy).

What is the total obligated amount?

The obligated amount is $73.8 million.

What is the period of performance?

Start: 2011-10-01. End: 2016-12-14.

What is AAR Airlift Group's overall track record with the federal government, particularly in providing air charter services?

AAR Airlift Group, Inc. has a substantial history of contracting with the U.S. federal government, primarily through its Airlift Group division. Data indicates they have been awarded numerous contracts across various agencies, including the Department of Defense (specifically the Navy and Air Force), and other entities requiring aviation support. Their experience spans various types of aviation services, including cargo and personnel transport, often in challenging operational environments. The firm has demonstrated capability in operating specialized aircraft and meeting stringent regulatory and performance requirements. This specific contract with the Department of the Navy for services in Guam is one of many examples of their long-standing relationship with government aviation needs, suggesting a proven ability to perform complex logistical operations.

How does the average annual spending on this contract compare to other similar air charter contracts awarded by the Department of Defense?

The average annual spending for this contract, approximately $14.76 million ($73.79 million / 5 years), appears to be within a reasonable range for sustained, high-demand air charter services supporting military operations in a strategic location like Guam. Benchmarking against other Department of Defense (DoD) air charter contracts reveals significant variability based on aircraft type, duration, route complexity, and service level agreements. However, contracts for similar operational tempo and geographic scope in the Pacific theater often fall within a similar multi-million dollar annual expenditure bracket. Without access to specific per-flight hour costs or detailed service requirements for comparison contracts, a precise value-for-money assessment is difficult, but the overall contract value does not appear anomalous for its intended purpose and duration.

What are the primary risks associated with this contract, and how were they mitigated?

The primary risks associated with this contract include potential service disruptions due to the remote location of Guam, reliance on a single contractor for critical airlift, and the possibility of unforeseen cost increases despite the firm-fixed-price structure (e.g., fuel price volatility, regulatory changes). Mitigation strategies likely included robust performance standards and service level agreements within the contract, requiring AAR Airlift Group to maintain operational readiness and contingency plans. The firm-fixed-price nature itself mitigates financial risk for the government by capping costs. Furthermore, the selection process under full and open competition aimed to choose a contractor with a proven track record and the capacity to manage these operational risks effectively. The contract's duration also implies a stable, long-term requirement, reducing the risk of frequent re-procurement.

How effective has AAR Airlift Group been in fulfilling the requirements of this specific contract?

Assessing the effectiveness of AAR Airlift Group in fulfilling this specific contract requires access to performance reports, delivery metrics, and any documented issues or commendations. Publicly available data primarily focuses on the award and financial aspects, not granular performance outcomes. However, the contract's completion without apparent major disruptions (as indicated by its duration and finalization) suggests a generally satisfactory level of performance. The Department of the Navy would have internal mechanisms for monitoring contractor performance against contract requirements, including on-time delivery, safety standards, and operational availability. Continued contract awards or extensions, if they had occurred, would also serve as indirect indicators of satisfactory performance.

What are the historical spending patterns for nonscheduled chartered freight air transportation by the Department of the Navy?

Historical spending patterns for nonscheduled chartered freight air transportation by the Department of the Navy show a consistent requirement for flexible airlift capabilities, particularly for supporting operations in geographically dispersed areas or during surge requirements. Spending fluctuates based on global security postures, specific operational needs, and the availability of organic military airlift assets. While specific aggregate figures require detailed analysis of historical federal procurement data, the Navy frequently utilizes charter services for cargo and personnel movement when dedicated military transport is insufficient, unavailable, or less cost-effective. Contracts like the one awarded to AAR Airlift Group represent a significant portion of this spending category, especially for sustained operations in key strategic locations like the Western Pacific.

What is the significance of the 'Nonscheduled Chartered Freight Air Transportation' (ND) classification for this contract?

The classification 'Nonscheduled Chartered Freight Air Transportation' (ND) signifies that the contract was for air transport services that are not part of a regular, published flight schedule. This implies flexibility and on-demand capabilities, crucial for military logistics where operational needs can change rapidly. 'Freight' indicates the primary purpose is the movement of goods, though such contracts often accommodate personnel transport as well. 'Chartered' means the entire aircraft capacity is typically leased for the specific mission. This classification highlights the need for responsive, mission-tailored airlift solutions rather than routine, scheduled flights, justifying the use of specialized providers like AAR Airlift Group for operations in areas like Guam.

Industry Classification

NAICS: Transportation and Warehousing › Nonscheduled Air Transportation › Nonscheduled Chartered Freight Air Transportation

Product/Service Code: TRANSPORT, TRAVEL, RELOCATION › TRANSPORTATION OF THINGS

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: N0003311R1003

Offers Received: 4

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Aarcorp (UEI: 005425814)

Address: 2301 COMMERCE PARK DR NE, PALM BAY, FL, 32905

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

Financial Breakdown

Contract Ceiling: $78,881,707

Exercised Options: $77,431,954

Current Obligation: $73,787,072

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline