Boeing awarded $45.5M for AH-64/CH-47 global material support, a sole-source contract

Contract Overview

Contract Amount: $45,543,730 ($45.5M)

Contractor: THE Boeing Company

Awarding Agency: Department of Defense

Start Date: 2019-11-19

End Date: 2020-11-18

Contract Duration: 365 days

Daily Burn Rate: $124.8K/day

Competition Type: NOT COMPETED

Pricing Type: FIXED PRICE INCENTIVE

Sector: Defense

Official Description: FIRST YEAR FPI DO FOR AH64 CH47 GLOBAL MATERIAL SUPPORT

Place of Performance

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

State: Missouri Government Spending

Plain-Language Summary

Department of Defense obligated $45.5 million to THE BOEING COMPANY for work described as: FIRST YEAR FPI DO FOR AH64 CH47 GLOBAL MATERIAL SUPPORT Key points: 1. Contract awarded to a single supplier, raising questions about price competitiveness. 2. Focus on global material support for critical aircraft indicates a high-stakes operational need. 3. Fixed Price Incentive contract type suggests shared risk between government and contractor. 4. Short duration of one year may indicate a need for interim support or a phased approach. 5. Lack of competition limits opportunities for smaller businesses to participate. 6. Contract value is significant, underscoring the importance of sustained aircraft readiness.

Value Assessment

Rating: questionable

The contract value of $45.5 million for one year of global material support for AH-64 and CH-47 aircraft appears substantial. Without comparable sole-source contracts or detailed cost breakdowns, it is difficult to benchmark the value for money. The fixed-price incentive structure aims to control costs, but the absence of competition inherently reduces the government's leverage in price negotiation. Further analysis of historical spending on similar support contracts would be necessary to provide a more definitive assessment.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one vendor, The Boeing Company, was solicited. This approach bypasses the standard competitive bidding process. While sole-source awards can be justified for unique capabilities or urgent needs, they typically result in higher prices and reduced innovation compared to full and open competition. The lack of multiple bidders means the government did not benefit from price discovery through market forces.

Taxpayer Impact: Taxpayers may be paying a premium due to the absence of competitive pressure. The government missed an opportunity to leverage market competition to secure the best possible price and terms.

Public Impact

The U.S. Army and potentially other branches operating AH-64 Apache and CH-47 Chinook helicopters benefit from ensured availability of critical materials. Services delivered include global material support, crucial for maintaining the operational readiness of these vital aircraft. Geographic impact is global, supporting military operations and readiness across various theaters. Workforce implications include the potential for continued employment at Boeing facilities involved in manufacturing and logistics for these aircraft components.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing and potentially increases costs for taxpayers.
Lack of transparency in the sole-source justification process.
Potential for cost overruns if the incentive structure is not effectively managed.
Dependence on a single supplier for critical aircraft components.

Positive Signals

Contract ensures continued operational readiness of essential military aircraft.
Fixed Price Incentive contract type aims to align contractor and government interests in cost control.
Boeing's established expertise in manufacturing and supporting these aircraft platforms.

Sector Analysis

This contract falls within the aerospace and defense manufacturing sector, specifically focusing on aircraft components and support. The market for military aircraft material support is often dominated by original equipment manufacturers due to proprietary knowledge and specialized production capabilities. Spending in this area is critical for national defense, with significant government investment directed towards maintaining fleet readiness. Comparable spending benchmarks would typically involve analyzing historical support contracts for similar platforms or other major defense systems.

Small Business Impact

As a sole-source award to a large prime contractor, this contract does not appear to include specific small business set-asides. There is no indication of subcontracting plans for small businesses within the provided data. This limits opportunities for small businesses to participate directly in this contract, although they may be suppliers to the prime contractor.

Oversight & Accountability

Oversight for this contract would primarily fall under the Defense Logistics Agency (DLA) and the Department of Defense's contracting and auditing functions. Accountability measures are embedded in the contract terms, particularly the Fixed Price Incentive (FPI) structure, which requires the contractor to meet performance targets. Transparency is limited due to the sole-source nature of the award. Inspector General jurisdiction would apply to any investigations of fraud, waste, or abuse related to the contract.

Related Government Programs

AH-64 Apache Helicopter Support
CH-47 Chinook Helicopter Support
Defense Logistics Agency Aircraft Parts Procurement
Fixed Price Incentive Contracts
Sole Source Defense Contracts

Risk Flags

Sole-source award
Potential for cost overruns
Limited transparency
Supply chain dependency

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $45.5 million to THE BOEING COMPANY. FIRST YEAR FPI DO FOR AH64 CH47 GLOBAL MATERIAL SUPPORT

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 Logistics Agency).

What is the total obligated amount?

The obligated amount is $45.5 million.

What is the period of performance?

Start: 2019-11-19. End: 2020-11-18.

What is Boeing's track record with similar global material support contracts for military aircraft?

The Boeing Company has a long-standing and extensive track record of providing global material support for various military aircraft platforms, including the AH-64 Apache and CH-47 Chinook. This includes managing complex supply chains, manufacturing spare parts, and ensuring timely delivery to operational units worldwide. Their experience encompasses numerous contracts with the Department of Defense and allied nations. While specific performance metrics for past contracts are not detailed here, Boeing's position as a primary manufacturer of these aircraft suggests a deep understanding of their material requirements and a capacity to fulfill global support needs. However, the effectiveness and cost-efficiency of their support services can vary across different contracts and time periods, necessitating ongoing performance monitoring.

How does the $45.5 million contract value compare to historical spending on AH-64 and CH-47 global material support?

Directly comparing the $45.5 million for this specific one-year delivery order to historical spending requires access to detailed historical contract data for AH-64 and CH-47 global material support. Annual spending on these platforms can fluctuate significantly based on operational tempo, fleet age, modernization programs, and the specific scope of support required. For instance, years with major deployments or extensive maintenance overhauls might see higher spending. Conversely, periods of reduced operational activity or successful cost-saving initiatives could lead to lower expenditures. Without a baseline of comparable annual spending figures for similar global material support, it is challenging to definitively state whether this $45.5 million represents an increase, decrease, or is in line with historical trends. The sole-source nature of this award also complicates direct value comparisons.

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

The primary risks associated with this sole-source contract are centered around cost and performance. Firstly, the lack of competition means the government has limited leverage to negotiate the best possible price, potentially leading to higher costs for taxpayers than if the contract were competed. Secondly, there's a risk of contractor complacency or reduced incentive to innovate and improve efficiency, as there is no direct competitive pressure. Thirdly, dependence on a single supplier for critical materials creates a vulnerability in the supply chain; any disruption at Boeing could have significant impacts on aircraft readiness. Finally, the Fixed Price Incentive (FPI) structure, while designed to share risk, can still lead to cost overruns if the target costs are not accurately estimated or if unforeseen issues arise, requiring careful monitoring and management by the government.

How effective is the Fixed Price Incentive (FPI) contract type in managing costs for aircraft material support?

The Fixed Price Incentive (FPI) contract type is designed to provide a middle ground between fixed-price and cost-reimbursement contracts, aiming for cost control while allowing for some flexibility. In this context, it establishes a target cost, a target profit, and a price ceiling. If the final cost is below the target, both the government and contractor share in the savings according to a predetermined formula. If the final cost exceeds the target but remains below the ceiling, the contractor absorbs a larger portion of the overrun. The effectiveness of FPI hinges on accurate initial cost estimating and robust government oversight. For material support, where demand can be variable, FPI can incentivize the contractor to manage costs efficiently to achieve shared savings. However, if the target cost is set too high, or if unforeseen technical issues drive costs up significantly, the price ceiling could be breached, leading to higher-than-expected government expenditure.

What are the implications of this contract being awarded in Missouri (MO) for the local economy and workforce?

The contract being awarded under the 'MO' (Missouri) designation suggests that a significant portion of the work, or at least the administrative contract award, is associated with facilities or personnel in Missouri. This implies potential benefits for the local economy and workforce in that state. The Boeing Company has substantial operations in Missouri, including facilities involved in aircraft manufacturing and support. This contract could sustain or create jobs related to production, logistics, quality assurance, and program management within Boeing's Missouri-based workforce. Furthermore, local suppliers and service providers supporting Boeing's operations in Missouri may also see indirect economic benefits. The duration and specific nature of the work will determine the long-term impact, but it generally signifies continued investment and activity for Boeing's Missouri presence.

Industry Classification

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

Product/Service Code: AEROSPACE CRAFT AND STRUCTURAL COMPONENTS

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: SPRPA118R002U

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: $275,998,567

Exercised Options: $275,998,567

Current Obligation: $45,543,730

Subaward Activity

Number of Subawards: 127

Total Subaward Amount: $31,862,133

Contract Characteristics

Multi-Year Contract: Yes

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: SPRPA120D005U

IDV Type: IDC

Timeline