Air Force awards $40M contract for aircraft spares, with McDonnell Douglas as incumbent

Contract Overview

Contract Amount: $40,000,529 ($40.0M)

Contractor: THE Boeing Company

Awarding Agency: Department of Defense

Start Date: 2005-07-18

End Date: 2011-04-29

Contract Duration: 2,111 days

Daily Burn Rate: $18.9K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS INCENTIVE

Sector: Defense

Official Description: 200510!000411!5700!FA8102!OC-ALC/LAD !F3365701D2050 !A!N! !N!SD12 ! !20050718!20080118!076200344!076200344!009256819!N!MCDONNELL DOUGLAS CORPORATION !2401 E WARDLOW ROAD !LONG BEACH !CA!90807!43000!037!06!LONG BEACH !LOS ANGELES !CALIFORNIA!+000002200000!N!N!000000000000!R414!SYSTEMS ENGINEERING SERVICES !A1A!AIRFRAMES AND SPARES !288 !B1-B CMUP !336413!E! !5!B!S! ! ! !20200930!B!F! !N!Z!D!N!V!1!001!N!1A!Z!Y!Z! ! !N!C!N! ! ! !A!A!A!A!000!A!B!N! ! ! ! ! ! !0001! !

Place of Performance

Location: LONG BEACH, LOS ANGELES County, CALIFORNIA, 90807

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $40.0 million to THE BOEING COMPANY for work described as: 200510!000411!5700!FA8102!OC-ALC/LAD !F3365701D2050 !A!N! !N!SD12 ! !20050718!20080118!076200344!076200344!009256819!N!MCDONNELL DOUGLAS CORPORATION !2401 E WARDLOW ROAD !LONG BEACH !CA!90807!43000!037!06!LONG BEACH !LOS … Key points: 1. Contract awarded for aircraft spares, indicating ongoing need for sustainment. 2. The contract type suggests a focus on managing costs while incentivizing performance. 3. Limited competition raises questions about potential price overruns and value for money. 4. The incumbent contractor's historical performance will be a key indicator of future success. 5. This contract falls within the broader category of aircraft manufacturing and sustainment. 6. The duration of the contract suggests a long-term commitment to supporting the aircraft fleet.

Value Assessment

Rating: fair

The contract's cost-plus incentive fee structure aims to balance cost control with performance. However, without detailed breakdowns of labor, materials, and overhead, a precise value-for-money assessment is challenging. Benchmarking against similar sustainment contracts for comparable aircraft platforms would be necessary to determine if the $40 million award represents a fair price. The lack of competition further complicates this assessment, as it limits the ability to gauge market-driven pricing.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one contractor was solicited. This approach is typically used when a specific contractor possesses unique capabilities, proprietary data, or is the sole provider of necessary parts or services. The lack of competition means that the government did not benefit from a bidding process that could have driven down prices through market forces.

Taxpayer Impact: Sole-source awards can potentially lead to higher costs for taxpayers as there is no competitive pressure to ensure the lowest possible price.

Public Impact

The primary beneficiaries are the U.S. Air Force units operating the specific aircraft requiring these spares. The contract delivers essential aircraft spares, crucial for maintaining operational readiness and flight safety. The geographic impact is primarily centered around the contractor's facility in Long Beach, California, and the Air Force bases receiving the parts. Workforce implications include continued employment for personnel involved in manufacturing, logistics, and quality assurance at the contractor's site.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing, potentially increasing costs.
Cost-plus incentive fee contracts can sometimes lead to cost overruns if not managed tightly.
Lack of transparency in detailed cost components makes independent value assessment difficult.

Positive Signals

Contract aims to ensure availability of critical aircraft spares, supporting mission readiness.
Incentive fee structure encourages contractor performance and efficiency.
Long contract duration suggests a stable supply chain for essential components.

Sector Analysis

This contract falls within the aerospace and defense sector, specifically focusing on aircraft sustainment and parts manufacturing. The market for aircraft spares is characterized by specialized production, long lead times, and often, proprietary technology. The $40 million award is a moderate-sized contract within this sector, supporting the operational readiness of Air Force fleets. Comparable spending benchmarks would involve analyzing other sustainment contracts for similar aircraft types across different military branches.

Small Business Impact

There is no indication of small business set-asides or subcontracting requirements in the provided data. As a sole-source award to a large prime contractor, the direct impact on small businesses is likely minimal unless the prime contractor voluntarily engages them for subcontracting opportunities. Further analysis would be needed to determine if any subcontracting plans were included in the contract.

Oversight & Accountability

Oversight for this contract would typically be managed by the Air Force's contracting and program management offices. Accountability measures are embedded in the cost-plus incentive fee structure, which links contractor payment to performance metrics. Transparency is limited by the sole-source nature and the proprietary aspects of aircraft manufacturing, though contract award details are publicly available.

Related Government Programs

Aircraft Parts and Components
Air Force Sustainment Programs
Aerospace Manufacturing Contracts
Defense Logistics Support

Risk Flags

Sole-source award
Cost-plus contract type
Potential for cost overruns
Lack of competitive benchmarking

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $40.0 million to THE BOEING COMPANY. 200510!000411!5700!FA8102!OC-ALC/LAD !F3365701D2050 !A!N! !N!SD12 ! !20050718!20080118!076200344!076200344!009256819!N!MCDONNELL DOUGLAS CORPORATION !2401 E WARDLOW ROAD !LONG BEACH !CA!90807!43000!037!06!LONG BEACH !LOS ANGELES !CALIFORNIA!+000002200000!N!N!000000000000!R414!SYSTEMS ENGINEERING SERVICES !A1A!AIRFRAMES AND SPARES !288 !B1-B CMUP !336413!E! !5!B!S! ! ! !202

Who is the contractor on this award?

The obligated recipient is THE BOEING COMPANY.

Which agency awarded this contract?

Awarding agency: Department of Defense (Department of the Air Force).

What is the total obligated amount?

The obligated amount is $40.0 million.

What is the period of performance?

Start: 2005-07-18. End: 2011-04-29.

What was the historical performance of McDonnell Douglas Corporation (now Boeing) on similar aircraft spare parts contracts with the Air Force?

McDonnell Douglas Corporation, prior to its acquisition by Boeing, had a long history of supplying aircraft and related components to the U.S. military. Their performance on similar contracts would generally be assessed based on on-time delivery rates, quality of parts, adherence to specifications, and cost control. While specific historical data for this exact contract's predecessor is not detailed here, the company's overall reputation in defense contracting suggests a capacity to meet complex requirements. However, a thorough review would involve examining past performance reviews, any incurred penalties or awards, and customer satisfaction feedback from the Air Force for comparable contracts over the years.

How does the $40 million contract value compare to the total lifecycle cost of the aircraft platform it supports?

The $40 million contract value represents a portion of the overall lifecycle cost for the specific aircraft platform. Lifecycle costs encompass acquisition, operation, sustainment, and disposal. Sustainment, including spare parts, often constitutes a significant portion of these costs over the aircraft's operational life. Without knowing the specific aircraft type and its projected operational lifespan, it's difficult to provide a precise comparison. However, $40 million for spares suggests a substantial need, potentially indicating a mature fleet requiring ongoing support or a platform with high operational tempo. Further analysis would require data on the total number of aircraft, their expected service life, and the projected annual sustainment budget for the platform.

What are the specific risks associated with a sole-source award for aircraft spares, and how are they mitigated?

The primary risk of a sole-source award for aircraft spares is the potential for inflated pricing due to the lack of competition. This can lead to reduced value for taxpayer money. Other risks include potential complacency from the contractor regarding quality or delivery schedules, as there is no immediate competitive threat. Mitigation strategies employed by the government often include robust negotiation tactics, detailed cost analysis, establishing performance metrics within the contract, and potentially conducting market research to ensure the sole-source justification is still valid. For long-term sole-source arrangements, periodic reviews and potential re-competition at future milestones are also common mitigation efforts.

What is the typical profit margin for contractors on cost-plus incentive fee contracts in the aerospace and defense sector?

Profit margins on Cost-Plus Incentive Fee (CPIF) contracts in the aerospace and defense sector can vary significantly based on factors like contract complexity, risk, performance incentives, and market conditions. Generally, the base profit fee is negotiated, and then additional profit is earned if performance targets (cost, schedule, technical) are exceeded, up to a pre-defined ceiling. Conversely, underperformance can lead to reduced profit. While specific figures are often proprietary, industry averages for CPIF contracts might see total profit (base fee plus incentive) ranging from 7% to 15% of the total contract cost, though this can be higher or lower depending on the specific incentives and risks involved.

How has spending on aircraft spares evolved over the past decade, and does this contract align with historical trends?

Spending on aircraft spares within the Department of Defense has generally remained a significant and consistent component of the overall defense budget, driven by the need to maintain aging fleets and ensure operational readiness. Trends over the past decade have seen fluctuations influenced by deployment tempos, modernization programs, and budget constraints. While this specific $40 million award is a single data point, it aligns with the ongoing requirement for sustainment. Analyzing broader historical spending patterns for aircraft spares, particularly within the Air Force, would reveal whether this contract represents a typical investment level or a deviation, potentially due to specific fleet needs or upcoming modernization efforts.

Industry Classification

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

Product/Service Code: SUPPORT SVCS (PROF, ADMIN, MGMT) › PROFESSIONAL SERVICES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: COST PLUS INCENTIVE (V)

Evaluated Preference: NONE

Contractor Details

Address: 2600 WESTMINSTER AVE, SEAL BEACH, CA, 47

Business Categories: Category Business, Not Designated a Small Business

Contract Characteristics

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: F3365701D2050

IDV Type: IDC

Timeline