DoD awards $67M for T56 engine upgrade kits, raising questions about competition and value

Contract Overview

Contract Amount: $67,076,433 ($67.1M)

Contractor: Rolls-Royce Corporation

Awarding Agency: Department of Defense

Start Date: 2019-12-04

End Date: 2020-08-03

Contract Duration: 243 days

Daily Burn Rate: $276.0K/day

Competition Type: NOT COMPETED

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: T56 ENGINE 3.5 UPGRADE KITS PART NUMBER 23094134

Place of Performance

Location: INDIANAPOLIS, MARION County, INDIANA, 46225

State: Indiana Government Spending

Plain-Language Summary

Department of Defense obligated $67.1 million to ROLLS-ROYCE CORPORATION for work described as: T56 ENGINE 3.5 UPGRADE KITS PART NUMBER 23094134 Key points: 1. The contract was awarded on a sole-source basis, limiting price discovery and potentially increasing costs. 2. The duration of the contract is relatively short, suggesting a focus on immediate needs rather than long-term sustainment. 3. The specific part number indicates a focus on a particular component, potentially indicating a niche requirement. 4. The awarding agency, Defense Logistics Agency, typically handles sustainment and readiness for military equipment. 5. The North American Industry Classification System (NAICS) code points to aircraft engine manufacturing, a specialized sector. 6. The contract type is Firm Fixed Price, which shifts some risk to the contractor but requires careful negotiation to ensure fair pricing.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to its sole-source nature and the specific nature of the 'T56 ENGINE 3.5 UPGRADE KITS'. Without competitive bids, it's difficult to ascertain if the $67 million price represents fair market value. The contract's value per day is approximately $276,035, which seems high for upgrade kits, but this needs to be compared against the complexity and criticality of the upgrade. The lack of comparable contracts in the public domain further complicates a direct value 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, Rolls-Royce Corporation, was solicited. This approach bypasses the competitive bidding process, which typically leads to better pricing and innovation. The absence of competition means there's no direct comparison to gauge if alternative suppliers could have offered a lower price or superior solution. This procurement strategy may be justified by unique capabilities or urgent needs, but it warrants scrutiny regarding the necessity of sole-sourcing.

Taxpayer Impact: Sole-source awards can lead to higher costs for taxpayers as the government lacks the leverage of a competitive market to drive down prices. This limits the potential for cost savings that could be redirected to other defense priorities.

Public Impact

The primary beneficiaries are likely military aviation units that operate aircraft equipped with T56 engines, ensuring improved performance and reliability. The services delivered involve the provision of specific upgrade kits, enhancing the operational capabilities of existing aircraft. The geographic impact is likely concentrated where T56-equipped aircraft are stationed or deployed, potentially worldwide. Workforce implications may include specialized technicians for installation and maintenance of the upgraded engine components.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may result in inflated pricing.
Sole-source awards can indicate potential single points of failure in the supply chain.
Specific upgrade kits might become obsolete if not part of a broader modernization strategy.

Positive Signals

Ensures continued operational readiness for critical T56-powered aircraft.
Firm Fixed Price contract provides cost certainty for the government.
Rolls-Royce is a known entity with established expertise in aircraft engines.

Sector Analysis

The aerospace and defense sector is characterized by high barriers to entry, significant R&D investment, and long product lifecycles. Aircraft engine manufacturing, a sub-sector, is dominated by a few major global players like Rolls-Royce. Spending in this area is driven by military readiness requirements and the need to maintain aging fleets. The market size for aircraft engine parts and upgrades is substantial, with government contracts forming a significant portion of demand. This contract fits within the sustainment and modernization segment of the defense industrial base.

Small Business Impact

This contract does not appear to involve small business set-asides, as indicated by the 'sb': false field. Given the specialized nature of aircraft engine components and the sole-source award to a large corporation like Rolls-Royce, it is unlikely that small businesses would be directly involved as prime contractors. However, Rolls-Royce may utilize small businesses as subcontractors, though this information is not detailed in the provided data. The absence of set-asides means opportunities for small business participation are not explicitly prioritized in this specific award.

Oversight & Accountability

Oversight for this contract would primarily fall under the Defense Contract Management Agency (DCMA) and potentially the Defense Contract Audit Agency (DCAA) for financial audits. The Defense Logistics Agency (DLA) is responsible for contract administration. Transparency is limited due to the sole-source nature, but contract award data is publicly available through systems like FPDS. Inspector General investigations could be initiated if any fraud, waste, or abuse is suspected, particularly concerning the justification for sole-sourcing and the pricing.

Related Government Programs

T56 Engine Sustainment Programs
Aircraft Component Modernization
Defense Logistics Agency Procurement
Rolls-Royce Defense Contracts
Military Aircraft Parts Manufacturing

Risk Flags

Sole-source award
Potential for uncompetitive pricing
Lack of transparency in competition
Dependence on a single supplier

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $67.1 million to ROLLS-ROYCE CORPORATION. T56 ENGINE 3.5 UPGRADE KITS PART NUMBER 23094134

Who is the contractor on this award?

The obligated recipient is ROLLS-ROYCE CORPORATION.

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Logistics Agency).

What is the total obligated amount?

The obligated amount is $67.1 million.

What is the period of performance?

Start: 2019-12-04. End: 2020-08-03.

What is the historical spending by the DoD on T56 engine upgrade kits, and how does this award compare?

Historical spending data for specific 'T56 ENGINE 3.5 UPGRADE KITS' is not readily available in a consolidated public format. However, the Defense Logistics Agency (DLA) has consistently awarded contracts for T56 engine components and sustainment over many years, reflecting the long service life of aircraft utilizing this engine, such as the C-130 Hercules and P-3 Orion. The $67 million awarded in this instance represents a significant single award for a specific upgrade kit. Without more granular historical data on similar upgrade kits, a direct comparison is difficult. However, the total annual spending by DLA and other DoD entities on T56 sustainment can run into hundreds of millions of dollars, making this award a notable, but not unprecedented, expenditure within that broader context.

What are the specific technical improvements or benefits provided by the 'T56 ENGINE 3.5 UPGRADE KITS'?

The provided data does not detail the specific technical improvements or benefits of the 'T56 ENGINE 3.5 UPGRADE KITS'. Generally, engine upgrade kits aim to enhance performance, improve fuel efficiency, extend operational life, reduce maintenance requirements, or meet new environmental or safety standards. For the T56 engine, which is a mature turboprop, upgrades often focus on reliability improvements, increased power output for specific missions, or modernization of control systems. The '3.5' designation might refer to a specific revision or performance tier of the upgrade. Further technical documentation or a statement of work would be required to ascertain the precise advantages conferred by these kits.

What is Rolls-Royce Corporation's track record with T56 engine contracts and sole-source awards?

Rolls-Royce Corporation has a long-standing and extensive track record as the original equipment manufacturer (OEM) for the T56 engine and its components. They are a primary, if not sole, source for many specialized parts and upgrade kits due to proprietary designs and manufacturing expertise. Consequently, Rolls-Royce frequently receives sole-source or limited-competition contracts for T56 sustainment and upgrades. Their performance on these contracts is generally considered reliable, given their deep technical knowledge and established supply chain. However, the consistent reliance on sole-source awards for critical components necessitates careful government oversight to ensure fair pricing and explore potential competition where feasible, perhaps through authorized repair facilities or alternative parts manufacturers over the long term.

Are there any known risks associated with the sole-source procurement of these specific engine upgrade kits?

The primary risk associated with the sole-source procurement of these T56 engine upgrade kits is the potential for inflated pricing due to the lack of competitive pressure. Without competing bids, the government may pay more than necessary. Another risk is the potential for vendor lock-in, where the reliance on a single supplier for critical components can limit future flexibility and bargaining power. Furthermore, if Rolls-Royce faces production issues or supply chain disruptions, the sole-source nature of this contract could lead to significant delays in aircraft availability. The government must ensure robust contract oversight and potentially explore alternative sourcing strategies for future procurements to mitigate these risks.

How does the $67 million contract value compare to the total lifecycle cost of T56 engines or similar military aircraft programs?

The $67 million contract value for T56 engine upgrade kits is a significant sum for a single award but must be viewed within the broader context of military aircraft sustainment. The total lifecycle cost of military aircraft, including engines, can easily run into billions of dollars over decades of operation. For a mature platform like the C-130, which relies heavily on the T56, sustainment costs, including parts, maintenance, and upgrades, are substantial and ongoing. This $67 million award represents a portion of the overall sustainment budget for T56-powered fleets. While high for a specific component upgrade, it is likely a fraction of the total cost of operating and maintaining these aircraft over their remaining service lives, which could span many more years.

Industry Classification

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

Product/Service Code: ENGINES AND TURBINES AND COMPONENT

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Rolls-Royce Holdings PLC (UEI: 217127290)

Address: 450 S MERIDIAN ST, INDIANAPOLIS, IN, 46225

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Foreign Owned, Foreign-Owned and U.S.-Incorporated Business, Manufacturer of Goods, Not Designated a Small Business, Special Designations

Financial Breakdown

Contract Ceiling: $67,076,433

Exercised Options: $67,076,433

Current Obligation: $67,076,433

Contract Characteristics

Commercial Item: COMMERCIAL ITEM

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: SPE4AX20D9405

IDV Type: IDC

Timeline