DoD awards $52.2M to Boeing for aeronautical system manufacturing, raising value-for-money questions due to sole-source nature

Contract Overview

Contract Amount: $52,254,266 ($52.3M)

Contractor: THE Boeing Company

Awarding Agency: Department of Defense

Start Date: 2023-05-11

End Date: 2028-06-30

Contract Duration: 1,877 days

Daily Burn Rate: $27.8K/day

Competition Type: NOT COMPETED

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: SPARES

Place of Performance

Location: MESA, MARICOPA County, ARIZONA, 85215

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $52.3 million to THE BOEING COMPANY for work described as: SPARES Key points: 1. The contract's value of $52.2 million over five years warrants scrutiny for cost-effectiveness. 2. Sole-source procurement limits competitive pressure, potentially impacting pricing and innovation. 3. The lack of competition presents a risk indicator for achieving optimal value. 4. Performance context is limited as this is a delivery order under a larger contract. 5. This contract falls within the Defense sector, specifically supporting aeronautical systems. 6. The firm-fixed-price structure aims to control costs, but initial pricing is unbenchmarked.

Value Assessment

Rating: questionable

Benchmarking the value for this specific delivery order is challenging without knowing the underlying contract's competitive history or pricing structure. However, the total award of $52.2 million over approximately five years suggests a significant investment. The firm-fixed-price type indicates an attempt to cap costs, but the absence of competition means there's no direct market comparison to assess if the price is truly competitive or represents good value for the government. Further analysis of the base contract and any prior delivery orders would be needed for a more definitive assessment.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded as a sole-source delivery order, meaning it was not competed. This approach is typically used when a specific contractor possesses unique capabilities or when it's deemed not to be in the government's best interest to compete. The lack of multiple bidders means there was no opportunity for price discovery through a competitive bidding process, which can lead to higher costs for the government.

Taxpayer Impact: Taxpayers may not be receiving the best possible price due to the absence of competitive bidding. The government relies on the contractor's proposed pricing without the benefit of market-driven negotiation.

Public Impact

The Department of Defense is the primary beneficiary, receiving critical aeronautical system manufacturing services. This contract supports the maintenance and readiness of military aircraft and related systems. The geographic impact is primarily in Arizona, where the contractor is located. Workforce implications include continued employment for skilled manufacturing and technical personnel at Boeing.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition and potential for cost savings.
Lack of transparency in the initial pricing negotiation due to non-competitive nature.
Dependence on a single contractor for critical aeronautical system components.

Positive Signals

Firm-fixed-price contract type helps to control costs and provides budget certainty.
Long-term award (over 5 years) suggests a stable, ongoing need for these services.
Contractor is a well-established entity with significant experience in defense manufacturing.

Sector Analysis

This contract falls within the aerospace and defense manufacturing sector, a significant segment of the U.S. economy. The industry is characterized by high barriers to entry, complex supply chains, and substantial government investment. Spending in this area is critical for national security and technological advancement. Comparable spending benchmarks are difficult to establish without more specific details on the systems being manufactured, but the overall defense procurement budget runs into hundreds of billions annually.

Small Business Impact

There is no indication of a small business set-aside for this contract, nor is there information on subcontracting plans. As a sole-source award to a large prime contractor, the direct impact on small businesses is likely minimal unless Boeing actively engages them in its supply chain for this specific order. Further investigation into Boeing's subcontracting practices would be needed to assess any indirect benefits to the small business ecosystem.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Defense's contracting and financial management systems. The Defense Contract Management Agency (DCMA) likely plays a role in monitoring performance and compliance. 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) Procurement
Aeronautical System Manufacturing
Sole-Source Defense Contracts
Department of Defense Supply Chain Management

Risk Flags

Sole-source procurement
Lack of competitive bidding
Potential for unbenchmarked pricing

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $52.3 million to THE BOEING COMPANY. SPARES

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 $52.3 million.

What is the period of performance?

Start: 2023-05-11. End: 2028-06-30.

What is the specific nature of the 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' being procured under this delivery order?

The data provided indicates the North American Industry Classification System (NAICS) code 334511, which covers establishments primarily engaged in manufacturing electronic search, detection, navigation, guidance, aeronautical, and nautical systems and instruments. This can include a wide range of equipment such as radar systems, sonar systems, GPS devices, flight control systems, and related components for both military and civilian applications. Without more specific contract line item details, it's difficult to pinpoint the exact systems Boeing is manufacturing under this particular $52.2 million delivery order. However, given the Department of Defense as the agency and The Boeing Company as the contractor, it is highly probable that these are critical components for military aircraft, vessels, or ground support systems, essential for national defense operations.

How does the $52.2 million award compare to historical spending on similar aeronautical system manufacturing contracts by the Department of Defense?

Comparing this specific $52.2 million delivery order to historical spending requires access to detailed historical contract data for similar systems and components. The Department of Defense procures a vast array of aeronautical systems, and spending can fluctuate significantly based on modernization programs, operational tempo, and specific platform needs. As a sole-source award, this $52.2 million figure represents a direct allocation without competitive pressure. To provide a meaningful comparison, one would need to identify comparable contracts awarded over the past several years, ideally for similar types of systems or to the same contractor for related work, and analyze their award values, durations, and competitive nature. Without such granular data, it's challenging to definitively state whether this award is high, low, or average relative to historical spending.

What are the key risks associated with awarding a sole-source contract of this magnitude for critical defense systems?

The primary risk associated with a sole-source award of this magnitude is the potential for inflated pricing due to the lack of competitive bidding. Without competing offers, the government may not achieve the best possible value for its investment. Another significant risk is contractor lock-in; the government becomes dependent on a single supplier, which can limit flexibility and bargaining power in future procurements or modifications. Furthermore, sole-source awards can stifle innovation, as there is less incentive for the contractor to proactively develop cost-saving technologies or more efficient manufacturing processes when competition is absent. Finally, there's a reputational risk if the award is perceived as lacking transparency or fairness, potentially leading to public scrutiny.

What is The Boeing Company's track record in fulfilling Department of Defense contracts for aeronautical systems?

The Boeing Company has an extensive and long-standing track record of fulfilling Department of Defense contracts, particularly in the realm of aeronautical systems. As one of the world's largest aerospace manufacturers, Boeing has been a critical supplier of military aircraft, including fighters, bombers, transports, and helicopters, as well as numerous associated systems and components for decades. Their history includes delivering complex, high-value programs, though like any large defense contractor, they have also faced scrutiny over cost overruns and schedule delays on certain projects. For this specific type of manufacturing (NAICS 334511), Boeing has a demonstrated capability in producing sophisticated navigation, guidance, and detection systems integral to military aviation. Their experience suggests a high likelihood of technical capability to meet the contract requirements.

Given the firm-fixed-price contract type, what is the potential for cost overruns or savings for the government in this $52.2 million award?

A firm-fixed-price (FFP) contract type is designed to provide the government with cost certainty and shift the risk of cost overruns to the contractor. In theory, if Boeing incurs higher-than-expected costs in manufacturing these aeronautical systems, those additional expenses are absorbed by Boeing, not the government. Conversely, if Boeing manages its costs more efficiently than anticipated, the savings remain with the contractor, as the government pays the agreed-upon fixed price. Therefore, for this $52.2 million award, the government's financial exposure is capped at the contract value, assuming no contract modifications or change orders. The primary risk for the government is not cost overrun on this specific award, but rather that the initial fixed price itself may have been set too high due to the lack of competition.

How does the duration of 1877 days (approximately 5.1 years) impact the assessment of this contract's value and risk?

The duration of approximately 5.1 years for this $52.2 million contract indicates a long-term need for the specified aeronautical systems or components. From a value perspective, a longer duration can sometimes allow for economies of scale and more predictable production planning, potentially leading to lower per-unit costs over the contract's life compared to multiple short-term contracts. However, it also extends the period during which the government is committed to a single supplier, increasing the risk of contractor lock-in and potentially missing out on technological advancements or more competitive pricing that might emerge in the market over time. For risk assessment, a longer duration necessitates ongoing monitoring to ensure continued performance, adherence to specifications, and that the fixed price remains fair and reasonable throughout the period, especially if market conditions or material costs fluctuate significantly.

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 E MCDOWELL RD, 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: $52,254,266

Exercised Options: $52,254,266

Current Obligation: $52,254,266

Subaward Activity

Number of Subawards: 6

Total Subaward Amount: $23,905,666

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: SPRPA118D002U

IDV Type: IDC

Timeline