Navy awards $26.5M for LM2500 engine overhauls, with a significant portion for parts
Contract Overview
Contract Amount: $26,523,525 ($26.5M)
Contractor: AIR NEW Zealand Engineering Services
Awarding Agency: Department of Defense
Start Date: 2018-08-31
End Date: 2020-12-19
Contract Duration: 841 days
Daily Burn Rate: $31.5K/day
Competition Type: FULL AND OPEN COMPETITION
Number of Offers Received: 2
Pricing Type: FIRM FIXED PRICE
Sector: Defense
Official Description: LM2500 ENGINE OVERHAUL- FFP
Plain-Language Summary
Department of Defense obligated $26.5 million to AIR NEW ZEALAND ENGINEERING SERVICES for work described as: LM2500 ENGINE OVERHAUL- FFP Key points: 1. Contract value suggests a substantial component for parts procurement alongside overhaul services. 2. The firm-fixed-price structure aims to control costs for the Department of the Navy. 3. Competition was full and open, indicating potential for competitive pricing. 4. The contract duration of 841 days covers a significant period for engine maintenance. 5. This contract falls under Turbine and Turbine Generator Set Units Manufacturing. 6. The award amount is moderate within the context of major defense equipment maintenance.
Value Assessment
Rating: good
The total award of $26.5 million for LM2500 engine overhauls appears reasonable given the complexity and specialized nature of gas turbine engine maintenance. While specific per-unit overhaul costs are not detailed, the firm-fixed-price (FFP) contract type suggests that the contractor, Air New Zealand Engineering Services, assumed the risk for cost overruns. Benchmarking against similar engine overhaul contracts would provide a clearer picture, but the scale of the award is consistent with high-value aerospace maintenance services.
Cost Per Unit: N/A
Competition Analysis
Competition Level: full-and-open
The contract was awarded under full and open competition, indicating that multiple qualified bidders had the opportunity to submit proposals. This competitive environment is generally favorable for price discovery and achieving market-based pricing. The presence of two bids suggests a reasonable level of interest, though a higher number of bidders could potentially drive prices even lower.
Taxpayer Impact: Taxpayers benefit from the competitive process, which is expected to yield a more cost-effective outcome compared to sole-source or limited competition awards.
Public Impact
The primary beneficiaries are the U.S. Navy's aviation units that rely on operational LM2500 engines for their vessels. The contract delivers essential maintenance and overhaul services for critical gas turbine engines. Geographic impact is primarily focused on the locations where the Navy operates these engines, with the overhaul work likely performed at the contractor's facilities. Workforce implications include skilled technicians and engineers at Air New Zealand Engineering Services, as well as potential impacts on Navy personnel managing the engines.
Waste & Efficiency Indicators
Waste Risk Score: 50 / 10
Warning Flags
- Potential for cost creep if the 'parts' component is not tightly managed within the FFP structure.
- Dependence on a single contractor for specialized overhaul services could pose supply chain risks.
- The duration of the contract might not align perfectly with evolving engine technology or operational tempo changes.
Positive Signals
- Firm-fixed-price contract provides cost certainty for the government.
- Full and open competition suggests a robust bidding process.
- Award to an established entity like Air New Zealand Engineering Services implies a level of expertise and reliability.
Sector Analysis
The aerospace and defense MRO (Maintenance, Repair, and Overhaul) sector is highly specialized, with significant barriers to entry due to technical expertise, certifications, and capital investment. LM2500 engines are widely used in naval vessels, making their maintenance a critical component of defense readiness. Spending in this area is substantial, driven by the need to maintain aging fleets and ensure operational availability. Comparable spending benchmarks would involve analyzing other large-scale engine overhaul contracts within the defense sector.
Small Business Impact
This contract does not appear to have specific small business set-aside provisions, as indicated by 'sb': false. However, the prime contractor, Air New Zealand Engineering Services, may engage small businesses as subcontractors for specific components or services, though this is not explicitly detailed in the provided data. The impact on the small business ecosystem would depend on the subcontracting opportunities generated.
Oversight & Accountability
Oversight for this contract would primarily fall under the Department of the Navy's contracting and program management offices. The firm-fixed-price nature of the contract shifts much of the cost risk to the contractor, but performance monitoring, quality assurance, and adherence to delivery schedules would be key oversight areas. Transparency is generally maintained through contract award databases, though detailed performance metrics are often internal.
Related Government Programs
- Naval Aviation Maintenance
- Gas Turbine Engine Support
- Defense Logistics Agency (DLA) Contracts
- Aerospace Component Manufacturing
- Military Sealift Command Support
Risk Flags
- Potential for cost overruns if parts costs are underestimated.
- Quality assurance critical for complex aerospace maintenance.
- Contract duration may require adjustments for evolving needs.
Tags
defense, department-of-the-navy, turbine-manufacturing, engine-overhaul, firm-fixed-price, full-and-open-competition, aerospace, maintenance-repair-overhaul, gas-turbine-engine, delivery-order
Frequently Asked Questions
What is this federal contract paying for?
Department of Defense awarded $26.5 million to AIR NEW ZEALAND ENGINEERING SERVICES. LM2500 ENGINE OVERHAUL- FFP
Who is the contractor on this award?
The obligated recipient is AIR NEW ZEALAND ENGINEERING SERVICES.
Which agency awarded this contract?
Awarding agency: Department of Defense (Department of the Navy).
What is the total obligated amount?
The obligated amount is $26.5 million.
What is the period of performance?
Start: 2018-08-31. End: 2020-12-19.
What is the breakdown of the $26.5 million award between overhaul labor and parts?
The provided data does not specify the exact breakdown between overhaul labor and parts for the $26.5 million award. The description 'LM2500 ENGINE OVERHAUL- FFP' indicates both services and potentially associated parts are included. Given the significant value, it is highly probable that a substantial portion is allocated to the procurement of specialized parts required for the overhaul process. Without a detailed breakdown, it's difficult to assess the value-for-money specifically for the labor component versus the parts.
How does the price per overhaul compare to industry benchmarks for LM2500 engines?
Direct comparison to industry benchmarks for LM2500 engine overhauls is challenging without more granular data on the scope of work and specific parts replaced. The total award of $26.5 million over approximately two years (August 2018 - December 2020) suggests a significant investment. However, the 'Turbine and Turbine Generator Set Units Manufacturing' NAICS code and the nature of military contracts often involve higher costs due to stringent quality requirements, specialized certifications, and potential for unique configurations or upgrades. A precise per-unit cost benchmark would require access to similar FFP contracts for LM2500 overhauls with detailed cost breakdowns.
What is the track record of Air New Zealand Engineering Services with the Department of Defense?
Air New Zealand Engineering Services (now known as Originair) has a history of providing aviation maintenance and engineering services. While specific details of their past contracts with the Department of Defense are not provided in this data snippet, their ability to win a full and open competition for a significant engine overhaul contract suggests they possess the necessary certifications, capabilities, and experience required by the Navy. Further investigation into their contract history with DoD would reveal the extent and nature of their previous work.
What are the risks associated with a firm-fixed-price contract for complex engine overhauls?
While FFP contracts are designed to provide cost certainty, risks can still arise. For complex engine overhauls, the primary risk is that the contractor may underestimate the scope of work or the cost of necessary parts, leading to potential quality compromises to maintain profitability. Conversely, if the initial estimate was too high, the government might overpay. Another risk is scope creep, where unforeseen issues require additional work not initially accounted for, potentially leading to change orders or disputes if not managed carefully. The government must still actively monitor performance and quality to ensure the contract's objectives are met.
How many LM2500 engines were covered under this contract?
The provided data indicates 'no': 2, which likely refers to the number of engines or units covered under this specific contract award. This suggests that two LM2500 engines underwent overhaul as part of this $26.5 million contract. This number is crucial for understanding the per-unit cost implications, although the total value also includes parts and potentially other associated services.
What is the historical spending trend for LM2500 engine overhauls by the Department of the Navy?
The provided data snippet focuses on a single contract award and does not offer historical spending trends for LM2500 engine overhauls by the Department of the Navy. To analyze historical spending, one would need to query contract databases for similar awards over multiple fiscal years, looking at the total obligated amounts, number of contracts, and average award values. This would reveal patterns in demand, pricing fluctuations, and contractor concentration over time.
Industry Classification
NAICS: Manufacturing › Engine, Turbine, and Power Transmission Equipment Manufacturing › Turbine and Turbine Generator Set Units Manufacturing
Product/Service Code: SUPPORT SVCS (PROF, ADMIN, MGMT) › PROFESSIONAL SERVICES
Competition & Pricing
Extent Competed: FULL AND OPEN COMPETITION
Solicitation Procedures: SUBJECT TO MULTIPLE AWARD FAIR OPPORTUNITY
Solicitation ID: N6449816R5099
Offers Received: 2
Pricing Type: FIRM FIXED PRICE (J)
Evaluated Preference: NONE
Contractor Details
Address: GEOFFREY ROBERTS ROAD,, AUCKLAND
Business Categories: Category Business, Foreign Owned, International Organization, Not Designated a Small Business, Special Designations
Financial Breakdown
Contract Ceiling: $26,523,525
Exercised Options: $26,523,525
Current Obligation: $26,523,525
Actual Outlays: $5,962,419
Contract Characteristics
Commercial Item: COMMERCIAL ITEM
Cost or Pricing Data: NO
Parent Contract
Parent Award PIID: N6449817D4001
IDV Type: IDC
Timeline
Start Date: 2018-08-31
Current End Date: 2020-12-19
Potential End Date: 2020-12-19 00:00:00
Last Modified: 2020-09-21
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