Department of Defense awards $30.4M for aircraft engine maintenance, with limited competition

Contract Overview

Contract Amount: $30,402,151 ($30.4M)

Contractor: Rolls-Royce Corporation

Awarding Agency: Department of Defense

Start Date: 2018-10-09

End Date: 2018-12-31

Contract Duration: 83 days

Daily Burn Rate: $366.3K/day

Competition Type: NOT COMPETED

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: MAINTENANCE AND RELATED SERVICES AT NASK, NASM,AND NAS PENSACOLA. FY19 FUNDING PMT N61340-19-NORFP-PMA-273-0002

Place of Performance

Location: INDIANAPOLIS, MARION County, INDIANA, 46225

State: Indiana Government Spending

Plain-Language Summary

Department of Defense obligated $30.4 million to ROLLS-ROYCE CORPORATION for work described as: MAINTENANCE AND RELATED SERVICES AT NASK, NASM,AND NAS PENSACOLA. FY19 FUNDING PMT N61340-19-NORFP-PMA-273-0002 Key points: 1. The contract focuses on essential maintenance for aircraft engines, critical for operational readiness. 2. Awarded to Rolls-Royce Corporation, a significant player in the aerospace manufacturing sector. 3. The contract duration is relatively short, suggesting a need for ongoing, potentially recurring services. 4. The firm-fixed-price structure aims to control costs, but the limited competition raises questions about optimal pricing. 5. The specific North American Industry Classification System (NAICS) code points to specialized aircraft engine manufacturing and repair. 6. The contract was issued as a delivery order against a previous award, indicating a continuation of services.

Value Assessment

Rating: fair

The contract value of $30.4 million for approximately 3 months of service appears high on a monthly basis. Benchmarking against similar maintenance contracts for large aircraft engines is difficult without more detailed service scope. However, the short duration and the nature of the services suggest a significant operational requirement. The firm-fixed-price contract type provides cost certainty for the government, but the lack of robust competition may have led to a higher price than could have been achieved in a more open bidding environment.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded as a sole-source action, meaning only one bidder was solicited. This typically occurs when a specific contractor possesses unique capabilities or when the requirement is a follow-on to a previous contract where competition was previously established. The lack of competition limits the government's ability to explore alternative solutions or leverage market dynamics to secure the best possible price and terms.

Taxpayer Impact: Sole-source awards can result in higher costs for taxpayers as there is no competitive pressure to drive down prices. This limits the government's ability to achieve optimal value for money.

Public Impact

The primary beneficiaries are the Department of Defense and its operational units relying on the serviced aircraft. The services delivered ensure the continued airworthiness and operational readiness of critical military aircraft. The geographic impact is primarily at NAS Pensacola, Florida, where the maintenance is likely performed or managed. Workforce implications include specialized technicians and support staff employed by Rolls-Royce Corporation.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Limited competition may lead to suboptimal pricing and reduced value for taxpayer funds.
Sole-source awards can stifle innovation and prevent the government from accessing potentially better solutions from other vendors.
The short contract duration might indicate a need for more comprehensive, long-term maintenance planning.
Lack of transparency in the sole-source justification could obscure potential cost efficiencies.

Positive Signals

The firm-fixed-price contract type provides cost certainty for the government.
Rolls-Royce Corporation is a known entity with established expertise in aircraft engine maintenance.
The contract addresses a critical operational need for the Department of Defense.

Sector Analysis

This contract falls within the aerospace and defense manufacturing sector, specifically focusing on the maintenance and repair of complex aircraft engines. The market for such specialized services is often dominated by a few key original equipment manufacturers (OEMs) like Rolls-Royce due to proprietary knowledge and technical requirements. Comparable spending benchmarks are difficult to establish without detailed service scope, but large military aircraft engine maintenance is a significant and costly segment of defense spending.

Small Business Impact

This contract does not appear to involve small business set-asides. As a sole-source award to a large corporation, there are no direct subcontracting opportunities for small businesses mandated by this specific award. The impact on the small business ecosystem is minimal in the context of this particular contract, though Rolls-Royce may engage small businesses in its 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 contract compliance and performance. Accountability measures are inherent in the firm-fixed-price structure, which holds the contractor responsible for delivering services within the agreed-upon price. Transparency is limited due to the sole-source nature of the award, with details of the justification for this approach not publicly elaborated.

Related Government Programs

Aircraft Engine Maintenance Contracts
Department of Defense Aircraft Procurement
Naval Air Station Operations and Maintenance
Aerospace Manufacturing and Repair Services

Risk Flags

Limited Competition
Potential for Overpricing
Vendor Lock-in

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $30.4 million to ROLLS-ROYCE CORPORATION. MAINTENANCE AND RELATED SERVICES AT NASK, NASM,AND NAS PENSACOLA. FY19 FUNDING PMT N61340-19-NORFP-PMA-273-0002

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 $30.4 million.

What is the period of performance?

Start: 2018-10-09. End: 2018-12-31.

What is the historical spending pattern for aircraft engine maintenance at NAS Pensacola with Rolls-Royce Corporation?

Analyzing historical spending requires access to a broader dataset of previous contracts. This specific award (N61340-19-NORFP-PMA-273-0002) is a delivery order issued on October 9, 2018, with an end date of December 31, 2018, valued at $30.4 million. Without prior delivery orders under the same basic contract or other related contracts for similar services at NAS Pensacola with Rolls-Royce, it's challenging to establish a definitive historical spending pattern. However, the fact that this is a delivery order suggests a pre-existing contractual relationship, implying some level of prior spending. Further investigation into the parent contract and previous awards would be necessary to understand the full historical context and identify trends in spending for these maintenance services.

How does the cost per day or per engine for this contract compare to industry benchmarks for similar aircraft engine maintenance?

Determining a precise cost per day or per engine is difficult without knowing the exact number of engines serviced, the specific types of engines, and the scope of maintenance performed (e.g., routine checks, major overhauls). The contract value is $30.4 million for a period of approximately 83 days (October 9 to December 31, 2018). This yields a daily burn rate of roughly $366,291. Industry benchmarks for aircraft engine maintenance vary significantly based on engine model, complexity, and service level. For large, high-performance military jet engines, daily operational costs can be substantial. However, without more granular data on the services rendered and the specific engine types, a direct comparison to industry benchmarks is speculative. The sole-source nature of the award also complicates direct price comparisons, as competitive pressures are absent.

What specific risks are associated with a sole-source award for critical aircraft engine maintenance?

A primary risk of a sole-source award for critical aircraft engine maintenance is the potential for inflated pricing due to the lack of competitive bidding. Without competing offers, the government may pay more than necessary. Another risk is reduced innovation, as the incumbent contractor may have less incentive to develop more cost-effective or efficient maintenance procedures. Furthermore, reliance on a single source can create vulnerabilities if the contractor experiences financial difficulties, operational disruptions, or changes in its business strategy. There's also a risk of vendor lock-in, making it difficult and costly to switch to a different provider in the future, even if performance or pricing becomes unsatisfactory.

What is the track record of Rolls-Royce Corporation in fulfilling Department of Defense aircraft engine maintenance contracts?

Rolls-Royce Corporation has a long-standing and extensive track record of providing engines and maintenance services to the Department of Defense and other military organizations globally. They are a major original equipment manufacturer (OEM) for a wide range of military aircraft, including fighter jets, bombers, transport planes, and helicopters. Their experience encompasses design, manufacturing, and comprehensive lifecycle support, including maintenance, repair, and overhaul (MRO). While specific performance metrics for individual contracts are not always publicly available, Rolls-Royce is generally considered a reputable and capable provider in this highly specialized field. However, like any large contractor, they may have faced performance issues or disputes on specific contracts over their history.

What are the potential long-term implications of relying on a single provider for this type of specialized maintenance?

The long-term implications of relying on a single provider like Rolls-Royce for specialized aircraft engine maintenance can be significant. It can lead to a dependency that reduces the government's bargaining power over time. As the sole provider, Rolls-Royce may have considerable leverage in future contract negotiations, potentially leading to escalating costs. It also limits the government's ability to foster a competitive market for these critical services, which could stifle the development of alternative technologies or maintenance approaches by other companies. Furthermore, if Rolls-Royce's strategic focus shifts away from certain engine types or military support, the DoD could face challenges in securing necessary maintenance, potentially impacting fleet readiness.

Industry Classification

NAICS: Manufacturing › Aerospace Product and Parts Manufacturing › Aircraft Engine and Engine Parts Manufacturing

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

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0001913R2005

Pricing Type: FIRM FIXED PRICE (J)

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, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $30,402,151

Exercised Options: $30,402,151

Current Obligation: $30,402,151

Contract Characteristics

Consolidated Contract: Yes

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: N0001914D0016

IDV Type: IDC

Timeline