DoD's $23.8M R&D contract with Boeing for advanced aircraft technology shows mixed value and competition signals

Contract Overview

Contract Amount: $23,839,302 ($23.8M)

Contractor: THE Boeing Company

Awarding Agency: Department of Defense

Start Date: 2007-07-02

End Date: 2009-04-30

Contract Duration: 668 days

Daily Burn Rate: $35.7K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: COST PLUS FIXED FEE

Sector: R&D

Official Description: 81-5019-07

Place of Performance

Location: HUNTINGTON BEACH, ORANGE County, CALIFORNIA, 92647

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $23.8 million to THE BOEING COMPANY for work described as: 81-5019-07 Key points: 1. The contract's cost-plus-fixed-fee structure may incentivize cost overruns, though the fixed fee provides some cost certainty. 2. With only two bidders, the competition level suggests potential for higher pricing than a more robustly competed contract. 3. The contract's duration and cost warrant scrutiny for potential performance risks and budget adherence. 4. This R&D effort aligns with broader defense modernization goals, focusing on technological advancement in aviation. 5. The contract falls within the aerospace and defense sector, a critical area for national security and technological innovation.

Value Assessment

Rating: fair

The $23.8 million contract awarded to The Boeing Company for research and development in physical, engineering, and life sciences appears to be a significant investment. Benchmarking this against similar R&D contracts is challenging without more specific project details. However, the cost-plus-fixed-fee (CPFF) pricing structure, while common for R&D, carries inherent risks of cost escalation. The fixed fee component offers some predictability, but the overall value for money depends heavily on the successful development of the intended technology and its future application.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that all responsible sources were permitted to submit bids. However, with only two bidders, the level of competition was limited. This suggests that while the process was open, the market for this specific type of advanced R&D may be concentrated among a few key players. Limited competition can sometimes lead to less aggressive pricing compared to scenarios with multiple bidders vying for the contract.

Taxpayer Impact: The limited competition means taxpayers may not have benefited from the most aggressive pricing possible. While the process was open, the scarcity of qualified bidders could have resulted in a higher final cost than if more companies had competed.

Public Impact

The primary beneficiaries are the Department of Defense, which stands to gain advanced aircraft technologies, and The Boeing Company, through contract revenue and technological development. The services delivered are research and development focused on advancing physical, engineering, and life sciences related to aerospace. The geographic impact is primarily centered around Boeing's operations in California, where the contract is managed. Workforce implications include employment for highly skilled engineers, scientists, and technicians involved in cutting-edge R&D projects.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost-plus-fixed-fee contracts can lead to cost overruns if not managed tightly.
Limited competition (2 bidders) may result in less favorable pricing for the government.
The contract duration of 668 days requires careful monitoring to ensure timely completion and budget adherence.

Positive Signals

Awarded under full and open competition, ensuring a broad initial solicitation.
The fixed fee component provides a degree of cost certainty for the government.
Focus on R&D aligns with strategic defense modernization objectives.

Sector Analysis

The aerospace and defense sector is characterized by high R&D investment, long product development cycles, and significant government procurement. This contract fits within the broader trend of defense spending aimed at maintaining technological superiority. Comparable spending benchmarks for advanced aerospace R&D can vary widely, but contracts in the hundreds of millions are common for major platform development, making this a mid-tier R&D investment.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. Furthermore, Boeing, as a large prime contractor, is unlikely to subcontract a significant portion to small businesses unless specifically mandated or if it aligns with their supply chain strategy. The absence of set-asides means direct opportunities for small businesses are limited, though they might indirectly benefit through Boeing's broader supply chain.

Oversight & Accountability

Oversight for this contract would typically be managed by the Defense Contract Management Agency (DCMA), which is responsible for ensuring contractor performance and compliance. Accountability measures are embedded in the contract terms, including reporting requirements and performance milestones. Transparency is facilitated through contract databases like FPDS, though detailed project specifics may be sensitive. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Advanced Aircraft Technology Development
Defense Research and Development Programs
Aerospace Engineering Services
Department of Defense Procurement

Risk Flags

Cost Overrun Risk
Limited Competition
Technical Feasibility Uncertainty
Schedule Slippage Potential

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $23.8 million to THE BOEING COMPANY. 81-5019-07

Who is the contractor on this award?

The obligated recipient is THE BOEING COMPANY.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $23.8 million.

What is the period of performance?

Start: 2007-07-02. End: 2009-04-30.

What is The Boeing Company's track record with similar cost-plus-fixed-fee R&D contracts with the Department of Defense?

The Boeing Company has a long history of working with the Department of Defense (DoD) on various contract types, including Cost-Plus-Fixed-Fee (CPFF). CPFF contracts are common for research and development efforts where the scope of work can evolve or is not fully defined at the outset. Boeing's extensive experience in aerospace R&D means they are accustomed to the requirements and challenges associated with this contract structure. Historically, their performance on such contracts has varied, as is typical for large, complex projects. Success often depends on clear communication, robust project management, and effective government oversight to manage risks related to cost and schedule. While specific performance metrics for past CPFF R&D contracts are not publicly detailed here, Boeing's continued selection for such work suggests a generally satisfactory performance history, albeit with the inherent risks associated with R&D and CPFF structures.

How does the $23.8 million contract value compare to other R&D contracts in the physical, engineering, and life sciences sector?

The $23.8 million contract value for R&D in physical, engineering, and life sciences falls within a moderate range for such specialized work. Large-scale defense R&D programs, particularly those involving major platform development or cutting-edge technology like advanced materials or propulsion systems, can easily reach hundreds of millions or even billions of dollars. Conversely, smaller, more focused research projects or feasibility studies might be in the low millions. This contract's value suggests a significant but not program-defining R&D effort. It is substantial enough to warrant dedicated resources and attention but likely represents a component of a larger technological advancement strategy rather than a standalone, multi-billion dollar initiative. Benchmarking requires detailed comparison of the specific R&D scope, duration, and complexity, but $23.8 million indicates a serious investment in a particular area of scientific or engineering inquiry.

What are the primary risks associated with this specific contract, considering its type and duration?

The primary risks associated with this Cost-Plus-Fixed-Fee (CPFF) contract, with a duration of 668 days (approximately 22 months), revolve around cost control, schedule adherence, and technical performance. For CPFF contracts, the risk of cost overruns is inherent, as the contractor is reimbursed for allowable costs plus a fixed fee. If costs exceed initial estimates, the government bears the burden, although the fixed fee provides some incentive for the contractor to manage costs efficiently to maximize their profit margin. The duration of nearly two years means that market conditions, technological advancements, or unforeseen challenges could impact the project's relevance or feasibility. Technical risks include the possibility that the research objectives may not be fully achievable within the allocated budget and timeframe, or that the developed technology may not perform as expected. Effective risk mitigation requires robust government oversight, clear communication channels, and proactive management of potential issues.

How does the 'full and open competition' with only two bidders impact price discovery and potential value for taxpayers?

While the contract was awarded under 'full and open competition,' the presence of only two bidders significantly limits effective price discovery. Full and open competition theoretically allows any responsible source to submit an offer, maximizing the pool of potential competitors. However, when only two entities submit bids, the market is highly concentrated. This concentration can lead to tacit collusion or simply a lack of aggressive bidding, as the two competitors may be aware of each other's capabilities and market position. Consequently, the government might not receive the most competitive pricing achievable if there were, for example, five or more bidders. For taxpayers, this means the potential for a higher cost than might have been achieved in a more robustly competed environment. While the government still aims for best value, the limited number of offers restricts the leverage available during negotiations and the pressure on bidders to offer the lowest possible price.

What are the implications of the 'DEFINITIVE CONTRACT' type for government flexibility and contractor commitment?

The designation of this contract as a 'DEFINITIVE CONTRACT' implies that it is a final, binding agreement that supersedes preliminary arrangements like letter contracts or basic ordering agreements. For the government, this means a firm commitment to the terms and conditions outlined, including the scope of work, price (even if cost-reimbursable with a fixed fee), and delivery schedule. This provides stability for planning and budgeting. For the contractor, The Boeing Company, it signifies a clear obligation to perform the work as specified. Definitive contracts are typically used when the terms are well-defined enough to be finalized. In the context of R&D, this suggests that while the specific technical outcomes might be uncertain, the overall objectives, parameters, and financial framework of the research effort were sufficiently established to warrant a final agreement, providing a solid foundation for the project's execution.

What is the significance of the NAICS code '541710' and its relation to the contract's purpose?

The North American Industry Classification System (NAICS) code '541710' specifically designates 'Research and Development in the Physical, Engineering, and Life Sciences.' This code precisely categorizes the nature of the work performed under this contract. It indicates that the $23.8 million awarded to The Boeing Company is intended for scientific inquiry and experimentation aimed at discovering or developing new knowledge, products, or processes within these broad scientific domains. This contrasts with codes related to manufacturing, services, or construction. The application of this code confirms that the contract's core purpose is innovation and technological advancement, aligning with the Department of Defense's strategic goals to maintain a technological edge through investment in cutting-edge research.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Scientific Research and Development Services › Research and Development in the Physical, Engineering, and Life Sciences

Product/Service Code: RESEARCH AND DEVELOPMENT › General Science and Technology R&D Services

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: BASIC RESEARCH

Offers Received: 2

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

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

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $24,139,302

Exercised Options: $23,839,302

Current Obligation: $23,839,302

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline