DoD's $44.3M engine parts contract awarded to GE, raising questions on competition and value
Contract Overview
Contract Amount: $44,298,263 ($44.3M)
Contractor: General Electric Company
Awarding Agency: Department of Defense
Start Date: 2018-01-01
End Date: 2018-03-31
Contract Duration: 89 days
Daily Burn Rate: $497.7K/day
Competition Type: NOT COMPETED
Pricing Type: FIRM FIXED PRICE
Sector: Defense
Official Description: DO 0003 FOR DCS PBL (JAN 2018 - MAR 2018)
Place of Performance
Location: LYNN, ESSEX County, MASSACHUSETTS, 01905
Plain-Language Summary
Department of Defense obligated $44.3 million to GENERAL ELECTRIC COMPANY for work described as: DO 0003 FOR DCS PBL (JAN 2018 - MAR 2018) Key points: 1. Contract awarded to a single, large incumbent supplier, limiting competitive pressure. 2. Short contract duration suggests a potential stop-gap measure rather than strategic sourcing. 3. Fixed-price contract type shifts risk to the contractor, but may inflate initial pricing. 4. Lack of competition raises concerns about achieving optimal pricing and value for taxpayer dollars. 5. The specific part number and its criticality to aircraft readiness warrant further investigation. 6. Performance period is brief, making long-term value assessment challenging.
Value Assessment
Rating: questionable
The contract's value of $44.3 million for a 3-month period is substantial, particularly given the lack of competition. Benchmarking against similar sole-source contracts for aircraft engine parts is difficult without more detailed specifications. However, the per-unit cost of approximately $4,977 suggests a high-value component, and the absence of competitive bidding prevents a clear assessment of whether this price represents fair market value or an inflated cost due to limited options.
Cost Per Unit: $4,977 (estimated per unit based on total award and number of units, if applicable; precise per-unit cost unavailable without unit count)
Competition Analysis
Competition Level: sole-source
This contract was awarded on a sole-source basis to General Electric Company. There is no indication that other potential suppliers were solicited or considered. This approach bypasses the standard competitive bidding process, which typically involves multiple vendors submitting proposals. The lack of competition means that the government did not benefit from the price discovery mechanisms inherent in a competitive environment, potentially leading to higher costs.
Taxpayer Impact: Sole-source awards mean taxpayers may be paying a premium, as the government lacks the leverage that multiple bidders would provide to negotiate lower prices.
Public Impact
The primary beneficiaries are the Department of Defense and its aviation units, ensuring operational readiness. Services delivered include the provision of critical aircraft engine parts, essential for maintaining fleet airworthiness. Geographic impact is likely concentrated around naval air stations and maintenance facilities where these aircraft operate. Workforce implications include supporting specialized manufacturing and maintenance roles within General Electric and its supply chain.
Waste & Efficiency Indicators
Waste Risk Score: 50 / 10
Warning Flags
- Sole-source award limits price competition, potentially increasing costs for taxpayers.
- Short contract duration raises questions about long-term strategic sourcing and potential price escalations in future awards.
- Lack of transparency in the sole-source justification process.
- Reliance on a single supplier for critical components can create supply chain vulnerabilities.
Positive Signals
- Award to an established contractor (General Electric) suggests a high likelihood of meeting technical specifications.
- Firm Fixed Price contract shifts performance risk to the contractor.
- Contract supports critical defense readiness for naval aviation assets.
Sector Analysis
The aerospace and defense sector is characterized by high barriers to entry, complex supply chains, and significant R&D investment. Aircraft engine manufacturing and parts supply is a specialized niche dominated by a few major players like General Electric. Spending in this area is driven by military readiness requirements and the lifecycle support of complex aircraft platforms. Comparable spending benchmarks are difficult to establish without knowing the specific engine model and part criticality, but large sole-source awards for specialized components are not uncommon in this sector, though they always warrant scrutiny.
Small Business Impact
This contract does not appear to have a small business set-aside component, as it was awarded to a large prime contractor, General Electric Company. There is no information provided regarding subcontracting plans for small businesses. Without specific set-aside goals or mandated subcontracting targets, the direct impact on the small business ecosystem for this particular award is likely minimal, though GE's overall subcontracting practices would be relevant.
Oversight & Accountability
Oversight for this contract would primarily fall under the Department of the Navy's contracting and program management offices. The Defense Contract Audit Agency (DCAA) may conduct audits to ensure cost reasonableness, especially given the sole-source nature. Transparency is limited due to the lack of a competitive process, and Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.
Related Government Programs
- Aircraft Engine Maintenance, Repair, and Overhaul
- Naval Aviation Readiness Programs
- Defense Logistics Agency (DLA) Parts Procurement
- Propulsion Systems Support Contracts
Risk Flags
- Sole-source award
- Lack of competition
- High per-unit cost potential
- Short contract duration
Tags
defense, department-of-defense, department-of-the-navy, aircraft-engine-parts, manufacturing, sole-source, firm-fixed-price, delivery-order, large-business, massachusetts, general-electric
Frequently Asked Questions
What is this federal contract paying for?
Department of Defense awarded $44.3 million to GENERAL ELECTRIC COMPANY. DO 0003 FOR DCS PBL (JAN 2018 - MAR 2018)
Who is the contractor on this award?
The obligated recipient is GENERAL ELECTRIC 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 $44.3 million.
What is the period of performance?
Start: 2018-01-01. End: 2018-03-31.
What is General Electric's track record with sole-source defense contracts, particularly for aircraft engine components?
General Electric Company has a long history of supplying aircraft engines and components to the U.S. military, often through sole-source or limited-competition contracts due to the highly specialized nature of their products and the long-standing relationships with defense agencies. Analyzing past sole-source awards to GE for similar engine parts could provide context on pricing trends and the justification processes used. While sole-source awards are sometimes necessary for proprietary technology or unique sustainment requirements, they necessitate rigorous justification and oversight to ensure fair pricing and prevent potential overspending. A review of historical data might reveal patterns in contract values, durations, and the specific justifications provided for bypassing full and open competition.
How does the $4,977 estimated per-unit cost compare to market rates for similar aircraft engine components?
Determining the precise market rate for a specific aircraft engine component without knowing the exact part number, its function, and the engine model is challenging. However, $4,977 per unit is a significant cost, indicative of a complex, high-performance part. To benchmark this value, one would need to compare it against: 1) prices for identical or functionally equivalent parts from other manufacturers (if available), 2) historical pricing data for the same part under competitive contracts, or 3) internal cost estimates or target prices established by the Navy. Given this is a sole-source award, direct market comparison is difficult, but the Navy likely has internal benchmarks or should have sought justification for this price point relative to estimated costs.
What are the specific risks associated with relying on a sole-source provider like GE for critical engine parts?
The primary risks of sole-source reliance include: 1) **Price Escalation:** Without competition, the supplier has significant leverage to increase prices over time. 2) **Supply Chain Vulnerability:** Dependence on a single source can be problematic if the supplier faces production issues, financial instability, or geopolitical disruptions. 3) **Innovation Stagnation:** Limited market pressure may reduce the incentive for the supplier to innovate or offer cost-saving improvements. 4) **Reduced Bargaining Power:** The government loses the ability to negotiate favorable terms that competition typically fosters. For critical engine parts, these risks can directly impact operational readiness and overall defense spending efficiency.
What is the expected impact of this contract on the operational readiness of the specific naval aircraft fleet?
This contract is intended to directly support the operational readiness of naval aircraft that utilize the specific engine components being procured. By ensuring the availability of these parts, the Department of the Navy aims to minimize aircraft downtime due to maintenance or repair needs. The timely delivery of these components is crucial for maintaining the required number of aircraft available for deployment and training missions. The short duration (3 months) suggests this award might be addressing an immediate need or bridging a gap until a longer-term strategy or competitive procurement can be established.
How does this $44.3 million award fit into the broader historical spending patterns for aircraft engine parts by the Department of the Navy?
The Department of the Navy, like other branches of the military, spends billions annually on aircraft sustainment, including engine parts. A $44.3 million award for a 3-month period, while substantial for a single delivery order, represents a fraction of the Navy's total aviation maintenance budget. Historical spending patterns reveal a consistent need for engine parts, often procured through a mix of competitive bids for common items and sole-source contracts for specialized or proprietary components. This specific award's significance should be viewed in context: is it part of a larger, ongoing sustainment program, or an isolated, potentially urgent requirement? Analyzing trends in sole-source vs. competitive awards for engine parts would provide further insight.
Industry Classification
NAICS: Manufacturing › Aerospace Product and Parts Manufacturing › Aircraft Engine and Engine Parts Manufacturing
Product/Service Code: AEROSPACE CRAFT COMPONENTS AND ACCESSORIES
Competition & Pricing
Extent Competed: NOT COMPETED
Solicitation Procedures: ONLY ONE SOURCE
Pricing Type: FIRM FIXED PRICE (J)
Evaluated Preference: NONE
Contractor Details
Address: 1000 WESTERN AVE, LYNN, MA, 01905
Business Categories: Category Business, Corporate Entity Not Tax Exempt, Not Designated a Small Business, Special Designations, U.S.-Owned Business
Financial Breakdown
Contract Ceiling: $44,298,263
Exercised Options: $44,298,263
Current Obligation: $44,298,263
Contract Characteristics
Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED
Cost or Pricing Data: YES
Parent Contract
Parent Award PIID: N0038317DBG01
IDV Type: IDC
Timeline
Start Date: 2018-01-01
Current End Date: 2018-03-31
Potential End Date: 2018-03-31 00:00:00
Last Modified: 2018-02-09
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