Boeing awarded $146M for DSU-38A/B Precision Laser Guidance Sets, a sole-source contract

Contract Overview

Contract Amount: $146,347,454 ($146.3M)

Contractor: THE Boeing Company

Awarding Agency: Department of Defense

Start Date: 2018-05-04

End Date: 2021-06-30

Contract Duration: 1,153 days

Daily Burn Rate: $126.9K/day

Competition Type: NOT COMPETED

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: DSU-38A/B PRECISION LASER GUIDANCE SET

Place of Performance

Location: SAINT LOUIS, SAINT LOUIS County, MISSOURI, 63134

State: Missouri Government Spending

Plain-Language Summary

Department of Defense obligated $146.3 million to THE BOEING COMPANY for work described as: DSU-38A/B PRECISION LASER GUIDANCE SET Key points: 1. Contract awarded on a sole-source basis, limiting price competition. 2. Firm Fixed Price contract type suggests cost certainty for the government. 3. Contract duration of 1153 days indicates a significant, long-term need. 4. The contract falls under Small Arms, Ordnance, and Ordnance Accessories Manufacturing. 5. Awarded by the Department of Defense, highlighting strategic defense procurement. 6. No small business set-aside was applied to this procurement.

Value Assessment

Rating: fair

The contract value of $146.3 million for DSU-38A/B Precision Laser Guidance Sets is substantial. Without specific benchmark data for this particular guidance set, it is difficult to definitively assess value for money. However, the sole-source nature of the award raises concerns about potential overpricing compared to a competitive environment. The firm fixed-price structure provides cost predictability, but the absence of competitive pressure may have led to a higher unit cost than might otherwise be achieved.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning it was not competed. This typically occurs when only one responsible source can provide the required supplies or services. The lack of competition means that the government did not benefit from multiple bidders vying for the contract, which can limit price discovery and potentially lead to higher costs.

Taxpayer Impact: Taxpayers may have paid a premium due to the absence of competitive bidding. Without a competitive process, there is less pressure on the contractor to offer the lowest possible price.

Public Impact

The Department of Defense is the primary beneficiary, receiving critical precision laser guidance sets. These guidance sets are essential for enhancing the accuracy and effectiveness of munitions. The contract supports advanced ordnance manufacturing capabilities within the defense industrial base. The geographic impact is primarily centered around the contractor's operations in Missouri.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing and potential cost savings for taxpayers.
Lack of transparency in the justification for sole-source award.
Potential for contractor lock-in due to specialized nature of the product.

Positive Signals

Firm Fixed Price contract provides cost certainty for the government.
Award supports a critical defense capability, ensuring operational readiness.
Long-term contract duration suggests a stable and ongoing requirement.

Sector Analysis

The DSU-38A/B Precision Laser Guidance Set falls within the defense manufacturing sector, specifically focusing on ordnance and related accessories. This is a specialized area within the broader aerospace and defense industry. The market for such advanced guidance systems is often characterized by high barriers to entry due to technological complexity and stringent qualification requirements. Comparable spending benchmarks would typically be found within other DoD contracts for similar precision-guided munitions components, but specific data is not readily available.

Small Business Impact

This contract was not set aside for small businesses, nor does it appear to have specific subcontracting requirements for small businesses indicated in the provided data. The award to The Boeing Company, a large prime contractor, suggests that the primary focus was on securing the required technology and production capacity, rather than specifically fostering small business participation in this particular procurement.

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. The firm fixed-price nature of the contract provides a degree of accountability regarding cost. Transparency regarding the sole-source justification and any subsequent modifications would be subject to federal procurement regulations and reporting requirements.

Related Government Programs

Precision Guided Munitions (PGM) procurement
Ordnance and Armaments Systems
Defense Electronics and Avionics
Air-to-Ground Munitions Components

Risk Flags

Sole-source award
Lack of competition
Potential for cost overruns due to non-competitive pricing

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $146.3 million to THE BOEING COMPANY. DSU-38A/B PRECISION LASER GUIDANCE SET

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 $146.3 million.

What is the period of performance?

Start: 2018-05-04. End: 2021-06-30.

What is the specific function and operational importance of the DSU-38A/B Precision Laser Guidance Set?

The DSU-38A/B Precision Laser Guidance Set is a component designed to enhance the accuracy of munitions by enabling them to home in on laser-designated targets. This technology allows for "fire-and-forget" capabilities or precision targeting from standoff ranges, significantly increasing the effectiveness of strike missions and reducing collateral damage. Its operational importance lies in providing warfighters with a critical tool for engaging targets with high precision, thereby improving mission success rates and force protection. The "DSU" designation often implies a specific type of guidance unit, likely for air-dropped munitions, contributing to the overall lethality and precision of the U.S. military's arsenal.

Why was this contract awarded on a sole-source basis, and what are the implications for cost?

Sole-source awards are typically justified when only one responsible source can provide the required supplies or services, often due to proprietary technology, unique capabilities, or essential integration with existing systems. For the DSU-38A/B, this could mean that The Boeing Company holds unique patents or manufacturing processes for this specific guidance set, or that it is the only entity capable of producing it to the required military specifications and integrating it with existing platforms. The implication for cost is significant: without competition, the government loses the benefit of price negotiation that arises from multiple bidders. This can lead to higher unit prices than might be achieved in a competitive environment, as the contractor faces less pressure to minimize costs to win the award. While the firm fixed-price (FFP) contract type offers cost certainty, the initial price may be inflated due to the lack of competition.

How does the $146.3 million contract value compare to historical spending on similar guidance systems?

Direct historical spending comparisons for the DSU-38A/B Precision Laser Guidance Set are challenging without access to specific contract databases detailing unit costs and quantities over time. However, the $146.3 million award over approximately three years (May 2018 - June 2021) suggests a substantial investment in this technology. Large-scale procurements of advanced guidance systems for military platforms can easily run into hundreds of millions or even billions of dollars over their lifecycle. Given the sole-source nature and the specialized technology involved, this contract value is plausible within the context of defense procurement for high-value, critical components. Without comparative data on unit prices or total program costs for similar systems from other manufacturers or previous iterations, a definitive value-for-money assessment relative to market rates is difficult.

What are the potential risks associated with a sole-source contract for critical defense components like this?

Sole-source contracts for critical defense components carry several inherent risks. Firstly, the lack of competition can lead to higher costs for the government, as mentioned previously. Secondly, it creates a dependency on a single supplier, potentially leading to contractor lock-in. If the sole-source contractor experiences production issues, financial instability, or decides to discontinue the product line, the government may face significant disruption in supply and difficulty finding alternatives. Thirdly, without the scrutiny of a competitive bidding process, there's a reduced incentive for the contractor to innovate or improve efficiency beyond what is contractually required. Finally, the justification for sole-sourcing must be robust to ensure that it is truly necessary and not a result of poor planning or market manipulation.

What is the role of the Defense Contract Management Agency (DCMA) in overseeing this type of contract?

The Defense Contract Management Agency (DCMA) plays a crucial role in overseeing contracts like the DSU-38A/B Precision Laser Guidance Set, especially when they are awarded to large prime contractors like Boeing. DCMA's responsibilities include ensuring that the contractor meets the terms and conditions of the contract, delivering the required goods or services on time, and adhering to quality standards. For a firm fixed-price contract, DCMA would monitor progress, verify delivery, and ensure that the contractor is performing as agreed. They also play a role in contract administration, including managing modifications, processing payments, and ensuring compliance with regulations. In essence, DCMA acts as the government's eyes and ears on the ground, ensuring that taxpayer money is being spent effectively and that critical defense needs are being met.

Industry Classification

NAICS: Manufacturing › Other Fabricated Metal Product Manufacturing › Small Arms, Ordnance, and Ordnance Accessories Manufacturing

Product/Service Code: AMMUNITION AND EXPLOSIVES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0001914R0044

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 6200 JS MCDONNELL BLVD, SAINT LOUIS, MO, 63134

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

Financial Breakdown

Contract Ceiling: $146,347,454

Exercised Options: $146,347,454

Current Obligation: $146,347,454

Subaward Activity

Number of Subawards: 15

Total Subaward Amount: $60,875,790

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: N0001916D1002

IDV Type: IDC

Timeline