DoD awards $508M sole-source contract to Boeing for PBL Material, raising value-for-money concerns

Contract Overview

Contract Amount: $50,825,368 ($50.8M)

Contractor: THE Boeing Company

Awarding Agency: Department of Defense

Start Date: 2023-05-18

End Date: 2024-07-18

Contract Duration: 427 days

Daily Burn Rate: $119.0K/day

Competition Type: NOT COMPETED

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: 8509887395!PBL MATERIAL BOEING

Place of Performance

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

State: Missouri Government Spending

Plain-Language Summary

Department of Defense obligated $50.8 million to THE BOEING COMPANY for work described as: 8509887395!PBL MATERIAL BOEING Key points: 1. Contract awarded on a sole-source basis, limiting price competition and potentially increasing costs. 2. Significant contract value suggests critical support for defense logistics, but lack of competition hinders benchmarking. 3. Fixed-price contract type shifts some risk to the contractor, but the sole-source nature may inflate the base price. 4. Long duration of 427 days indicates a substantial, ongoing need for these aircraft parts. 5. Contractor is a major defense supplier, suggesting established capabilities but also potential for market dominance. 6. No small business set-aside noted, potentially limiting opportunities for smaller firms in this supply chain.

Value Assessment

Rating: questionable

The contract's value of $508 million for aircraft parts is substantial. However, without competitive bidding, it is difficult to benchmark the pricing against market rates or similar contracts. The sole-source nature raises concerns about whether the government is receiving the best possible value. While the firm fixed-price structure is generally favorable, the lack of competition means the baseline price may not reflect optimal cost efficiencies.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded using a sole-source justification, meaning only one vendor, The Boeing Company, was solicited. This approach bypasses the standard competitive bidding process, which typically involves multiple bidders vying for the contract. The lack of competition means there was no direct price comparison or negotiation against alternative suppliers, potentially leading to higher costs for the government.

Taxpayer Impact: Taxpayers may be paying a premium for these aircraft parts due to the absence of competitive pressure to drive down prices. The government missed an opportunity to leverage market forces to secure a more cost-effective solution.

Public Impact

The Department of Defense, specifically the Defense Logistics Agency, benefits from this contract by ensuring the availability of critical aircraft parts. Services delivered include the provision of PBL (Performance-Based Logistics) material, essential for maintaining aircraft readiness. The geographic impact is primarily within the United States, supporting defense operations nationwide. Workforce implications include continued employment for those involved in the manufacturing and supply chain of these specialized parts at Boeing.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price discovery and potentially inflates costs for taxpayers.
Lack of competition raises questions about the government securing the best value for its investment.
Reliance on a single large contractor could create dependency and reduce future negotiation leverage.
Absence of small business participation may limit broader economic impact and innovation.

Positive Signals

Contract awarded to a major, established defense contractor with proven capabilities.
Firm fixed-price contract type provides cost certainty once the price is set.
Performance-Based Logistics (PBL) approach can lead to improved readiness and reduced lifecycle costs if managed effectively.

Sector Analysis

This contract falls within the aerospace and defense manufacturing sector, specifically focusing on aircraft parts and auxiliary equipment. The market for defense logistics and sustainment is dominated by a few large prime contractors, including Boeing. Spending in this area is critical for maintaining military readiness and operational capabilities. Comparable spending benchmarks are difficult to establish due to the sole-source nature of this award, but overall defense spending on aircraft sustainment runs into billions annually.

Small Business Impact

This contract does not appear to include a small business set-aside. The award to a large prime contractor like Boeing suggests that subcontracting opportunities may exist for small businesses within Boeing's supply chain. However, the lack of a direct set-aside means that small businesses are not guaranteed a specific portion of this contract value, and their inclusion depends on Boeing's subcontracting strategy.

Oversight & Accountability

Oversight for this contract would typically fall under the Defense Contract Management Agency (DCMA) and the Defense Contract Audit Agency (DCAA), responsible for ensuring compliance with contract terms and financial accountability. The Defense Logistics Agency's contracting officers are responsible for managing the contract's performance and ensuring value. Transparency is limited due to the sole-source nature, but contract award data is publicly available.

Related Government Programs

Defense Logistics Agency (DLA) Aviation Support Contracts
Performance-Based Logistics (PBL) Contracts
Aircraft Parts and Components Procurement
Sole-Source Defense Procurements

Risk Flags

Sole-source award
Lack of competition
Potential for inflated pricing
Limited transparency in price negotiation

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $50.8 million to THE BOEING COMPANY. 8509887395!PBL MATERIAL BOEING

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 $50.8 million.

What is the period of performance?

Start: 2023-05-18. End: 2024-07-18.

What is Boeing's track record with similar sole-source PBL material contracts for the Department of Defense?

Boeing has a long history of securing sole-source contracts for sustainment and PBL material, particularly for its major defense platforms like the C-17, KC-46, and various fighter aircraft. These contracts often involve complex supply chains and long-term support agreements. While these arrangements provide critical sustainment, they also frequently draw scrutiny regarding pricing and the lack of competitive bidding. Historical data indicates that sole-source awards, while sometimes necessary for unique or proprietary systems, can lead to higher costs compared to competed contracts. The DLA, in particular, relies heavily on PBL strategies to manage readiness and costs, often negotiating these with large platform providers like Boeing.

How does the $508 million value compare to historical spending on similar aircraft parts by the Defense Logistics Agency?

Direct comparison of this $508 million award to historical spending on 'similar' aircraft parts is challenging due to the specific nature of PBL material and the sole-source designation. The Defense Logistics Agency (DLA) manages a vast portfolio of aviation parts, and individual contract values can fluctuate significantly based on platform, quantity, and support scope. However, $508 million represents a substantial investment. DLA's annual spending on aviation parts and services often runs into the billions. Without knowing the specific part numbers or the exact scope of 'PBL Material,' it's difficult to pinpoint precise historical benchmarks. However, large sole-source awards of this magnitude typically indicate a critical, long-term need for components tied to specific, often proprietary, defense systems.

What are the primary risks associated with awarding a contract of this size on a sole-source basis?

The primary risks associated with awarding a $508 million contract on a sole-source basis are financial and strategic. Financially, the government risks overpaying because there is no competitive pressure to ensure the lowest possible price. Without multiple bids, the contractor has significant leverage in price negotiations. Strategically, the government becomes dependent on a single supplier for critical components, which can reduce flexibility and bargaining power in the future. There's also a risk that innovation may be stifled, as the sole provider may have less incentive to invest in cost-saving technologies or process improvements if their market position is guaranteed. Furthermore, if the contractor faces production issues or financial instability, it could severely disrupt defense readiness.

What does 'PBL Material' signify in the context of this contract, and how does it impact performance?

'PBL Material' refers to Performance-Based Logistics material. In this context, it means the contract likely focuses not just on the delivery of parts but on ensuring the availability and performance of those parts over their lifecycle to support specific weapon systems. The 'material' aspect suggests it covers the physical components required for sustainment. The 'performance-based' element implies that Boeing is incentivized or obligated to meet certain readiness or availability metrics related to these parts, rather than simply fulfilling an order quantity. This approach aims to improve weapon system readiness and potentially reduce total ownership costs by focusing on outcomes rather than just inputs, though effective management and clear metrics are crucial for success.

What is the typical duration for contracts of this nature, and does the 427-day period indicate anything unusual?

Contracts for sustainment and PBL material, especially for major defense platforms, often have durations that span multiple years, frequently incorporating options. A duration of 427 days (approximately 14 months) for the base period is not unusually long for a significant supply chain contract, particularly one involving specialized aerospace components. It suggests a defined period for the delivery of specific materials or the achievement of certain performance milestones. Many such contracts are structured with base periods and subsequent option periods that can extend the total contract performance time significantly, often up to five years or more, to ensure long-term supportability. The 427-day period likely represents the initial phase of a potentially longer sustainment effort.

Industry Classification

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

Product/Service Code: AEROSPACE CRAFT AND STRUCTURAL COMPONENTS

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

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: $50,825,368

Exercised Options: $50,825,368

Current Obligation: $50,825,368

Subaward Activity

Number of Subawards: 65

Total Subaward Amount: $57,137,076

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: SPRPA114D002U

IDV Type: IDC

Timeline