DoD awards $43M for spare parts to Boeing, raising questions about competition and value

Contract Overview

Contract Amount: $43,014,075 ($43.0M)

Contractor: THE Boeing Company

Awarding Agency: Department of Defense

Start Date: 2019-09-20

End Date: 2021-11-30

Contract Duration: 802 days

Daily Burn Rate: $53.6K/day

Competition Type: NOT COMPETED

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: SPARE PARTS

Place of Performance

Location: MESA, MARICOPA County, ARIZONA, 85215

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $43.0 million to THE BOEING COMPANY for work described as: SPARE PARTS Key points: 1. Contract awarded on a sole-source basis, limiting price discovery and potentially increasing costs. 2. Significant contract value for specialized aerospace components suggests a critical need for these parts. 3. Lack of competition is a key risk indicator for potential overpayment and reduced value for money. 4. The contract duration of over two years indicates a sustained requirement for these spare parts. 5. Boeing's established role as a primary manufacturer for many defense systems likely influenced the sole-source award. 6. Performance context is limited due to the nature of spare parts procurement, focusing on delivery rather than complex service metrics.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging without comparable sole-source awards for similar specialized spare parts. The firm-fixed-price structure provides some cost certainty, but the absence of competition means there's no direct market comparison to assess if the pricing is optimal. The total award amount of over $43 million for spare parts suggests a substantial investment, and without competitive bidding, it's difficult to ascertain if taxpayers received the best possible value.

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 a specific manufacturer's product is required, often due to proprietary technology, existing system integration, or unique capabilities. The lack of competition means there was no opportunity for other suppliers to bid, which can limit price negotiation and potentially lead to higher costs for the government.

Taxpayer Impact: Sole-source awards mean taxpayers do not benefit from the cost savings that typically arise from competitive bidding processes. This can result in higher overall spending for essential goods and services.

Public Impact

The primary beneficiaries are the Department of Defense and its operational readiness, ensuring aircraft and related systems remain functional. Services delivered include the provision of critical spare parts essential for maintaining complex aerospace and defense equipment. Geographic impact is primarily within the United States, supporting defense logistics and maintenance operations. Workforce implications include supporting jobs within The Boeing Company and its supply chain involved in manufacturing and delivering these parts.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure, potentially leading to higher prices.
Lack of transparency in pricing due to no competitive bidding.
Dependence on a single supplier for critical components can create supply chain risks.
Potential for cost overruns if market prices fluctuate and are not effectively negotiated.
Difficulty in benchmarking value for money without comparable contract data.

Positive Signals

Firm-fixed-price contract provides cost certainty for the government.
Boeing's established expertise and track record in defense manufacturing.
Ensures availability of critical parts for national defense readiness.
Contract supports a key US defense contractor and its supply chain.

Sector Analysis

This contract falls within the aerospace and defense manufacturing sector, specifically focusing on the production and supply of spare parts for complex defense systems. The market for such specialized components is often dominated by original equipment manufacturers like Boeing due to proprietary designs and stringent qualification requirements. Comparable spending benchmarks are difficult to establish precisely due to the specialized nature and sole-source award, but overall defense spending on sustainment and spare parts runs into billions annually.

Small Business Impact

This contract does not appear to involve a small business set-aside. As a sole-source award to a large prime contractor, there is no direct indication of subcontracting opportunities for small businesses within this specific award document. The impact on the small business ecosystem is indirect, relying on Boeing's own subcontracting practices for parts and services not produced in-house.

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 auditing costs. Transparency is limited due to the sole-source nature, but contract awards are generally reported in federal procurement databases. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Defense Logistics Agency (DLA) Spare Parts Procurement
Boeing Defense, Space & Security Contracts
Aerospace Component Manufacturing
Naval Aviation Sustainment
Air Force Aircraft Maintenance Support

Risk Flags

Sole-source award
Lack of competitive bidding
Potential for price inflation
Limited transparency in cost justification

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $43.0 million to THE BOEING COMPANY. SPARE PARTS

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 $43.0 million.

What is the period of performance?

Start: 2019-09-20. End: 2021-11-30.

What is Boeing's track record with sole-source defense contracts for spare parts?

The Boeing Company has a long history of receiving sole-source contracts for spare parts, particularly for its major defense platforms like the F/A-18, C-17, and various helicopter models. These awards are often necessitated by the proprietary nature of the components, the need for specialized tooling and expertise held only by the original manufacturer, and the critical requirement for interoperability and safety. While these contracts ensure the availability of essential parts, they also represent a recurring area of scrutiny regarding pricing and value for money due to the inherent lack of competition. Government accountability offices, such as the Government Accountability Office (GAO), have frequently reviewed sole-source procurements, often recommending increased competition where feasible or more robust price negotiation strategies when competition is not possible.

How does the $43 million award compare to historical spending on similar spare parts?

Comparing this specific $43 million award for spare parts to historical spending is challenging without granular data on the exact types of parts procured and the specific platforms they support. However, the Department of Defense consistently spends billions of dollars annually on sustainment, maintenance, and spare parts across all its branches and weapon systems. Awards of this magnitude are not uncommon for major defense platforms, especially when dealing with complex, high-value components. The key concern with such figures, particularly in sole-source contexts, is whether the price reflects fair market value or includes a premium due to the lack of competitive pressure. Historical analysis often reveals that sole-source procurements can be significantly more expensive than competitively awarded contracts for similar items, highlighting the importance of rigorous negotiation and justification for non-competitive awards.

What are the primary risks associated with a sole-source award for critical spare parts?

The primary risks associated with a sole-source award for critical spare parts revolve around cost, supply chain, and strategic dependence. Without competition, the government loses the leverage to negotiate the lowest possible price, potentially leading to inflated costs and reduced value for money. This can strain defense budgets and necessitate difficult trade-offs in other areas. Furthermore, relying on a single supplier for critical components creates a vulnerability in the supply chain; any disruption at the supplier's end—whether due to production issues, labor disputes, or geopolitical factors—can directly impact military readiness. Strategically, it can foster an over-reliance on a single contractor, potentially limiting the government's flexibility in future procurement decisions or system upgrades.

What measures are in place to ensure the effectiveness and performance of delivered spare parts?

The effectiveness and performance of delivered spare parts are ensured through a multi-layered approach involving stringent quality assurance, testing, and acceptance protocols. The contract itself specifies technical requirements, performance standards, and acceptance criteria that The Boeing Company must meet. Before acceptance, parts may undergo rigorous inspection, testing, and certification processes, often conducted by government quality assurance representatives. Furthermore, the Defense Logistics Agency (DLA) and relevant military branches maintain extensive data on part reliability and performance in the field. Any failures or defects are typically documented, feeding back into future procurement decisions and potentially leading to contract remedies or adjustments if performance standards are not met.

How does this contract fit into the broader context of Defense Logistics Agency (DLA) spare parts procurement?

This contract represents a specific instance within the DLA's vast mission to procure and manage spare parts for the U.S. military. The DLA is responsible for ensuring that the right parts are available at the right time and place to support military operations. While the DLA often seeks competitive solicitations, it also manages a significant portfolio of sole-source procurements, particularly for items unique to specific platforms or where only the original equipment manufacturer can provide the necessary parts. This contract with Boeing likely aligns with the DLA's strategy to maintain the readiness of specific weapon systems by securing essential components, even if it requires a non-competitive approach due to technical or logistical constraints.

Industry Classification

NAICS: Manufacturing › Navigational, Measuring, Electromedical, and Control Instruments Manufacturing › Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing

Product/Service Code: AEROSPACE CRAFT COMPONENTS AND ACCESSORIES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 5000 EAST MCDOWELL ROAD, MESA, AZ, 85215

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: $43,014,075

Exercised Options: $43,014,075

Current Obligation: $43,014,075

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: SPRPA118D002U

IDV Type: IDC

Timeline