Boeing awarded $115M for FA-18 spares, raising questions about competition and value

Contract Overview

Contract Amount: $115,387,726 ($115.4M)

Contractor: THE Boeing Company

Awarding Agency: Department of Defense

Start Date: 2018-09-14

End Date: 2025-02-28

Contract Duration: 2,359 days

Daily Burn Rate: $48.9K/day

Competition Type: NOT COMPETED

Pricing Type: FIXED PRICE INCENTIVE

Sector: Defense

Official Description: FA-18 SPARES REQUIREMENTS

Place of Performance

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

State: Missouri Government Spending

Plain-Language Summary

Department of Defense obligated $115.4 million to THE BOEING COMPANY for work described as: FA-18 SPARES REQUIREMENTS Key points: 1. Limited competition may have impacted pricing and value for taxpayer dollars. 2. The contract's duration suggests a long-term need for these critical aircraft parts. 3. Performance risk is moderate given the fixed-price incentive structure. 4. This contract supports the sustainment of a key military aircraft platform. 5. The sole-source nature warrants scrutiny of the justification and pricing. 6. Boeing's established role as the prime contractor for the FA-18 likely influenced the award.

Value Assessment

Rating: questionable

The $115.4 million award to Boeing for FA-18 spares lacks a clear benchmark due to its sole-source nature. Without competitive bidding, it is difficult to definitively assess if the pricing represents fair market value. The fixed-price incentive (FPI) contract type aims to control costs, but the absence of competing offers means there's no external validation of the negotiated price. Further analysis would require access to cost data and comparisons with similar sole-source procurements for other aircraft parts.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one bidder, The Boeing Company, was solicited. This approach is typically used when only one responsible source is available or when a compelling justification exists. The lack of competition means that the government did not benefit from a range of proposals and potential price reductions that often arise from a competitive bidding process. This limits the government's ability to explore alternative solutions or achieve the lowest possible price.

Taxpayer Impact: Sole-source awards can lead to higher costs for taxpayers as the absence of competition reduces pressure on the contractor to offer the most competitive pricing. This necessitates robust government oversight to ensure the price is fair and reasonable.

Public Impact

The primary beneficiaries are the U.S. Navy and Marine Corps, ensuring the operational readiness of their FA-18 Super Hornet and Growler fleets. This contract delivers essential spare parts required for the maintenance and repair of FA-18 aircraft. The geographic impact is national, supporting naval aviation readiness across various bases and deployments. Workforce implications include continued employment for personnel involved in the manufacturing and supply chain of these specialized aircraft components at Boeing facilities.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price discovery and potentially increases costs for taxpayers.
Lack of competition may reduce incentives for Boeing to innovate or offer cost efficiencies.
Long contract duration (2018-2025) could mask inefficiencies or price creep over time.
Reliance on a single contractor for critical spares can create supply chain vulnerabilities.

Positive Signals

Fixed-price incentive contract structure aims to share risk and reward cost control.
Boeing's established expertise with the FA-18 platform ensures familiarity and potentially efficient execution.
Contract supports the sustainment of a critical defense asset, ensuring operational capability.
Delivery orders provide flexibility in acquiring specific parts as needed.

Sector Analysis

This contract falls within the aerospace and defense manufacturing sector, specifically focusing on aircraft parts. The market for specialized military aircraft components is often dominated by original equipment manufacturers like Boeing due to proprietary knowledge, design control, and established supply chains. While the overall defense spending in this sub-sector is substantial, competition for specific platform spares can be limited, often leading to sole-source or limited-source awards. Benchmarking is challenging without access to detailed cost breakdowns or comparable sole-source awards for similar high-value, specialized components.

Small Business Impact

This contract does not appear to include a small business set-aside. Given the sole-source nature and the prime contractor being The Boeing Company, there is no explicit mechanism for small business participation through set-asides. Subcontracting opportunities for small businesses would depend on Boeing's internal procurement practices and their existing relationships with small business suppliers within the aerospace ecosystem. Without specific subcontracting plans mandated or reported, the direct impact on small businesses is unclear.

Oversight & Accountability

Oversight for this contract is managed by the Defense Contract Management Agency (DCMA). The fixed-price incentive (FPI) contract type includes provisions for performance monitoring and cost control. Transparency is limited due to the sole-source nature, but contract awards are generally reported in federal procurement databases. Accountability rests with Boeing to deliver required parts within the agreed-upon terms and with the DoD to ensure fair pricing and contract compliance. Inspector General reviews may occur if specific performance or cost issues arise.

Related Government Programs

FA-18 Super Hornet Sustainment
Naval Aviation Readiness Programs
Defense Logistics Agency (DLA) Spare Parts Procurement
Aircraft Component Manufacturing Contracts

Risk Flags

Sole-source award
Lack of competitive bidding
Potential for cost overruns
Long contract duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $115.4 million to THE BOEING COMPANY. FA-18 SPARES REQUIREMENTS

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 $115.4 million.

What is the period of performance?

Start: 2018-09-14. End: 2025-02-28.

What is Boeing's track record with FA-18 spare parts contracts?

The Boeing Company has a long-standing relationship with the FA-18 program, having served as the prime contractor for its production and sustainment. This includes extensive experience in manufacturing and supplying spare parts. Historical data indicates numerous awards for FA-18 components and support services. While specific performance metrics for past spare parts contracts are not publicly detailed, Boeing's continued role suggests a generally satisfactory performance in meeting the Navy's and Marine Corps' requirements. However, the sole-source nature of this particular award warrants scrutiny to ensure that past performance is not being leveraged to bypass competitive processes unnecessarily.

How does the pricing of this contract compare to similar sole-source procurements for aircraft parts?

Direct comparison of pricing for this $115.4 million FA-18 spares contract is challenging due to the proprietary nature of defense contracting and the specific requirements of each procurement. Sole-source awards inherently lack the price discovery mechanism of competitive bidding. To assess value, one would typically benchmark against similar sole-source contracts for comparable aircraft parts, considering factors like complexity, material costs, and production volume. Without access to detailed cost breakdowns or a database of comparable sole-source awards with similar specifications, a precise value-for-money assessment is difficult. The fixed-price incentive (FPI) structure suggests an attempt to manage costs, but the baseline price is not publicly validated.

What are the primary risks associated with this sole-source contract?

The primary risk associated with this sole-source contract is the potential for inflated pricing due to the absence of competition. Without competing bids, there is less pressure on The Boeing Company to offer the most cost-effective solution. Another risk is reduced incentive for innovation or efficiency improvements, as the contractor may face less pressure to optimize processes. Furthermore, reliance on a single supplier for critical components can create supply chain vulnerabilities. If Boeing experiences production issues or delays, it could directly impact the operational readiness of the FA-18 fleet. The long duration of the contract also presents a risk of price creep or complacency over time.

How effective is the fixed-price incentive (FPI) contract type in managing costs for this FA-18 spares contract?

The Fixed-Price Incentive (FPI) contract type is designed to provide a middle ground between fixed-price and cost-reimbursement contracts, aiming to control costs while allowing for some flexibility. In this FA-18 spares contract, the FPI structure likely establishes a target cost, a target profit, and a price ceiling. If Boeing achieves costs below the target, both parties share in the savings. If costs exceed the target but remain below the ceiling, the government pays the actual cost plus a negotiated profit, with the contractor absorbing a portion of the overrun. This structure incentivizes Boeing to manage costs effectively to maximize their profit, while the price ceiling protects the government from excessive spending. However, the effectiveness is contingent on the realism of the initial cost targets and the government's ability to monitor performance.

What are the historical spending patterns for FA-18 spare parts, and how does this award fit in?

Historical spending on FA-18 spare parts has been substantial, reflecting the operational tempo and sustainment needs of a large fleet of advanced fighter jets operated by the U.S. Navy and Marine Corps. Annual spending can fluctuate based on fleet readiness requirements, modernization programs, and the availability of parts. This $115.4 million award, spanning from 2018 to 2025, represents a significant, long-term investment in ensuring the continued availability of these critical components. It fits within the broader pattern of ongoing sustainment efforts for the FA-18 platform, which is expected to remain a key asset for the foreseeable future. The sole-source nature of this specific award suggests a focus on maintaining continuity and leveraging the incumbent's expertise for a defined period.

Industry Classification

NAICS: Manufacturing › Aerospace Product and Parts Manufacturing › Other Aircraft Parts and Auxiliary Equipment Manufacturing

Product/Service Code: AEROSPACE CRAFT COMPONENTS AND ACCESSORIES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: SPRPA118R018U

Pricing Type: FIXED PRICE INCENTIVE (L)

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: $115,387,726

Exercised Options: $115,387,726

Current Obligation: $115,387,726

Subaward Activity

Number of Subawards: 88

Total Subaward Amount: $143,622,857

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: SPRPA114D002U

IDV Type: IDC

Timeline