Boeing awarded $624.5M for engineering services, primarily for aircraft manufacturing, with no competition

Contract Overview

Contract Amount: $624,516,597 ($624.5M)

Contractor: THE Boeing Company

Awarding Agency: Department of Defense

Start Date: 2009-04-27

End Date: 2016-05-31

Contract Duration: 2,591 days

Daily Burn Rate: $241.0K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST NO FEE

Sector: Defense

Official Description: ENGINEERING SERVICES-TRAVEL CLINS

Place of Performance

Location: OKLAHOMA CITY, OKLAHOMA County, OKLAHOMA, 73135

State: Oklahoma Government Spending

Plain-Language Summary

Department of Defense obligated $624.5 million to THE BOEING COMPANY for work described as: ENGINEERING SERVICES-TRAVEL CLINS Key points: 1. Significant contract value suggests a critical need for specialized engineering support. 2. Lack of competition raises concerns about potential overpricing and limited innovation. 3. Long contract duration (over 7 years) indicates a sustained requirement for these services. 4. The contract's focus on aircraft manufacturing aligns with the prime contractor's core competencies. 5. Performance and status are currently rated as 'OK', suggesting no immediate issues. 6. The absence of small business involvement warrants further investigation into subcontracting opportunities.

Value Assessment

Rating: questionable

The total award of $624.5 million for engineering services is substantial. Without a competitive bidding process, it is difficult to benchmark the value for money. The contract type 'COST NO FEE' suggests that the government reimburses costs but does not pay a fee, which can sometimes lead to less incentive for cost control by the contractor. Comparing this to similar engineering service contracts, especially those that were competed, would be crucial to assess if the pricing is reasonable and if the government is receiving fair value.

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 is available or in cases of urgent need. The lack of competition means that potential alternative providers were not considered, and the government did not benefit from a range of proposals and pricing strategies. This can limit price discovery and potentially lead to higher costs than if the contract had been openly competed.

Taxpayer Impact: For taxpayers, a sole-source award means there is a higher risk of paying more than necessary. Without competitive pressure, the contractor may not have the same incentive to offer the lowest possible price, potentially leading to a less efficient use of public funds.

Public Impact

The primary beneficiary is the Department of Defense, likely receiving critical engineering support for its aircraft programs. Services delivered include specialized engineering expertise essential for the maintenance, modification, or development of aircraft. The geographic impact is likely concentrated around facilities where Boeing operates and where these aircraft are based or maintained. Workforce implications include the employment of highly skilled engineers and technical personnel within The Boeing Company.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to inflated costs for taxpayers.
Sole-source awards can stifle innovation by excluding potential new entrants.
Long-term contracts without re-competition can reduce contractor accountability over time.
Absence of small business set-aside raises questions about broader economic impact.

Positive Signals

Contract awarded to a major defense contractor with established expertise in aircraft manufacturing.
Performance and status are rated 'OK', indicating satisfactory execution to date.
Contract type 'COST NO FEE' may limit direct financial risk to the government on profit margins.

Sector Analysis

This contract falls within the aerospace and defense sector, specifically focusing on engineering services for aircraft manufacturing. The aerospace industry is characterized by high barriers to entry, significant R&D investment, and long product development cycles. The total value of this contract is substantial, reflecting the complexity and scale of engineering support required for major defense platforms. Comparable spending benchmarks would typically involve other large-scale engineering support contracts awarded to prime defense contractors for aircraft programs, often in the hundreds of millions of dollars.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb: false'. The large value and sole-source nature suggest that subcontracting opportunities for small businesses might be limited or dependent on Boeing's internal subcontracting plans. It is important to assess whether Boeing is actively seeking to include small businesses in its supply chain for this contract to ensure broader economic benefits and foster the small business ecosystem within the defense industrial base.

Oversight & Accountability

Oversight for this contract is managed by the Defense Contract Management Agency (DCMA). The 'st: OK' and 'sn: OK' status indicators suggest that performance and financial reporting are currently meeting expectations. Transparency regarding the justification for the sole-source award and detailed cost breakdowns would be important for assessing accountability. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Aircraft Manufacturing
Aerospace Engineering Services
Defense Contractor Support
Cost-Reimbursement Contracts
Sole-Source Procurements

Risk Flags

Sole-source award
Lack of competition
Potential for cost overruns
Limited innovation
Long contract duration without re-competition

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $624.5 million to THE BOEING COMPANY. ENGINEERING SERVICES-TRAVEL CLINS

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 $624.5 million.

What is the period of performance?

Start: 2009-04-27. End: 2016-05-31.

What is the specific justification provided by the Department of Defense for awarding this contract on a sole-source basis to The Boeing Company?

The provided data does not include the specific justification for the sole-source award. Typically, sole-source contracts are justified under specific circumstances outlined in federal acquisition regulations, such as the existence of only one responsible source, urgent and compelling needs, or specific national security requirements. Without the official justification document, it's impossible to definitively state why competition was precluded. However, given the contractor (Boeing) and the nature of the work (engineering services for aircraft manufacturing), potential justifications could include unique technical expertise, proprietary data rights, or the need for seamless integration with existing platforms where Boeing is the original equipment manufacturer.

How does the 'COST NO FEE' contract type impact the government's financial exposure and the contractor's incentive for cost control compared to other contract types?

A 'COST NO FEE' (CNF) contract type means the government reimburses the contractor for all allowable costs incurred in performing the contract, but the contractor does not receive any additional profit or fee. This structure significantly limits the government's financial exposure regarding profit margins, as the contractor's compensation is limited to their incurred costs. However, it can reduce the contractor's incentive for aggressive cost control, as they are guaranteed to be reimbursed for all legitimate expenses without a direct profit motive tied to cost savings. This contrasts with fixed-price contracts, where the contractor bears more risk and has a stronger incentive to manage costs efficiently to maximize profit, or cost-plus-incentive-fee contracts, which offer bonuses for meeting or exceeding cost targets.

What are the potential risks associated with a sole-source award of this magnitude and duration for engineering services?

Sole-source awards, especially for large sums ($624.5M) and long durations (over 7 years), carry several risks. Firstly, the lack of competition can lead to higher prices than might be achieved through a competitive process, as the contractor faces no direct pressure to offer the lowest bid. Secondly, it can stifle innovation, as potential competitors are excluded from proposing new solutions or technologies. Thirdly, there's a risk of contractor complacency; without the threat of losing future business to competitors, the incumbent might be less motivated to maintain peak performance or efficiency. Lastly, it raises concerns about the government's ability to leverage the broader market for specialized skills and potentially discover more cost-effective solutions.

Given the 'Aircraft Manufacturing' North American Industry Classification System (NAICS) code, what specific types of engineering services might be included under this contract?

The NAICS code 336411, 'Aircraft Manufacturing,' suggests that the engineering services procured under this contract are directly related to the design, development, production, modification, and sustainment of aircraft. This could encompass a wide range of specialized engineering disciplines, including but not limited to: systems engineering, structural engineering, avionics engineering, propulsion systems engineering, aerodynamic analysis, materials science, manufacturing process engineering, test and evaluation engineering, and software engineering for flight control systems. The services likely support the entire lifecycle of an aircraft program, from initial concept and design through production and post-delivery support.

How does the contract's performance and status being rated 'OK' influence the assessment of its value and risk?

A rating of 'OK' for performance and status suggests that the contract is currently being executed satisfactorily, meeting the basic requirements without significant issues or exceptional performance. From a risk perspective, 'OK' indicates that the immediate risks of contract failure or major problems are low. However, it does not necessarily imply optimal value for money. A contract can be 'OK' in execution while still being overpriced due to the lack of competition. Therefore, while the 'OK' status mitigates immediate performance risk, it does not resolve concerns about cost-effectiveness or the potential benefits missed due to the sole-source nature of the award.

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 NO FEE (S)

Evaluated Preference: NONE

Contractor Details

Address: 2600 WESTMINSTER AVE, SEAL BEACH, CA, 90740

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $629,480,001

Exercised Options: $629,480,001

Current Obligation: $624,516,597

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: F3365701D2050

IDV Type: IDC

Timeline