Department of Defense awards $1.63B contract to The Boeing Company for aircraft manufacturing

Contract Overview

Contract Amount: $1,632,290,426 ($1.6B)

Contractor: THE Boeing Company

Awarding Agency: Department of Defense

Start Date: 2003-12-03

End Date: 2012-12-31

Contract Duration: 3,316 days

Daily Burn Rate: $492.2K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Place of Performance

Location: RIDLEY PARK, DELAWARE County, PENNSYLVANIA, 19078

State: Pennsylvania Government Spending

Plain-Language Summary

Department of Defense obligated $1.63 billion to THE BOEING COMPANY for work described as: Key points: 1. Contract awarded on a firm-fixed-price basis, indicating a defined cost for services. 2. Long duration of 3316 days suggests a significant, long-term requirement. 3. Sole-source award raises questions about potential lack of competition and price optimization. 4. Contract falls under Aircraft Manufacturing, a critical sector for defense operations. 5. Significant dollar value points to a high-impact procurement for the agency.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to its long duration and sole-source nature. Without competitive bids, it's difficult to ascertain if the $1.63 billion represents optimal pricing. The firm-fixed-price structure offers cost certainty but doesn't inherently guarantee value for money if the initial price was not aggressively negotiated. Further analysis would require comparing the per-unit cost of aircraft or related services to industry benchmarks or similar sole-source procurements.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning it was not competed among multiple vendors. This approach is typically used when only one vendor can provide the required goods or services, or in cases of urgent need. The lack of competition means that price discovery through market forces was bypassed, potentially leading to higher costs for the government compared to a competitive procurement.

Taxpayer Impact: Taxpayers may have paid a premium due to the absence of competitive bidding, as the government did not benefit from the cost-saving pressures inherent in a multi-bidder scenario.

Public Impact

The primary beneficiaries are the Department of Defense and its operational units requiring aircraft manufacturing capabilities. The contract supports the delivery of essential aircraft manufacturing services, crucial for national security. The geographic impact is primarily centered around The Boeing Company's facilities, likely in Pennsylvania. This contract has significant workforce implications, supporting jobs within the aerospace and manufacturing sectors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure, potentially impacting cost-effectiveness.
Long contract duration increases exposure to potential cost overruns or scope creep if not managed tightly.
Lack of transparency in the sole-source justification could obscure potential alternatives or better pricing.

Positive Signals

Firm-fixed-price contract provides cost certainty for the government.
Award to a major defense contractor like Boeing suggests access to specialized capabilities and established production lines.
Long-term nature of the contract indicates a stable, ongoing requirement, potentially leading to efficiencies through sustained production.

Sector Analysis

The aerospace and defense sector is characterized by high barriers to entry, significant R&D investment, and long product development cycles. Aircraft manufacturing, a key sub-sector, involves complex engineering and production processes. This contract represents a substantial investment within this sector, likely contributing to the sustainment or modernization of military aviation assets. Comparable spending benchmarks would typically involve analyzing other large-scale aircraft procurement or sustainment contracts within the DoD.

Small Business Impact

This contract does not appear to have a small business set-aside component (ss=false, sb=false). As a sole-source award to a large prime contractor, there is a potential for subcontracting opportunities for small businesses within Boeing's supply chain. However, the extent to which small businesses will benefit depends on Boeing's subcontracting strategy and the specific requirements of the contract.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contracting and program management offices. Accountability measures would be embedded in the contract's performance metrics and reporting requirements. Transparency is limited due to the sole-source nature, but contract award details are publicly available. Inspector General jurisdiction would apply to any allegations of fraud, waste, or abuse.

Related Government Programs

Aircraft Procurement
Defense Manufacturing
Aerospace Industry Support
Military Aviation Sustainment

Risk Flags

Sole-source award
Long contract duration
Lack of competitive benchmarking

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $1.63 billion to THE BOEING COMPANY. See the official description on USAspending.

Who is the contractor on this award?

The obligated recipient is THE BOEING COMPANY.

Which agency awarded this contract?

Awarding agency: Department of Defense (Department of the Army).

What is the total obligated amount?

The obligated amount is $1.63 billion.

What is the period of performance?

Start: 2003-12-03. End: 2012-12-31.

What is The Boeing Company's track record with similar sole-source defense contracts?

The Boeing Company has a long history of securing large defense contracts, including those awarded on a sole-source basis. These often relate to specialized aircraft, upgrades, or sustainment services where unique capabilities or existing platforms necessitate a single provider. While specific details of past sole-source awards require granular data analysis, Boeing's extensive experience in the defense sector suggests a familiarity with the processes and requirements associated with such contracts. However, the absence of competition in sole-source awards inherently limits the ability to benchmark pricing against alternatives, making a direct comparison of value challenging without access to detailed cost breakdowns and justification documents.

How does the $1.63 billion value compare to other aircraft manufacturing contracts awarded by the DoD?

The $1.63 billion value of this contract is substantial and falls within the range of major defense procurements. However, direct comparisons are complex due to variations in contract scope, duration, and the specific types of aircraft or manufacturing services involved. For instance, contracts for new aircraft development or large-scale production runs can easily exceed this figure. Conversely, contracts focused on sustainment, upgrades, or specialized components might be smaller. Without knowing the precise nature of the 'Aircraft Manufacturing' services procured under this specific contract, it's difficult to provide a precise benchmark. However, given its scale, it represents a significant allocation of resources within the DoD's aviation portfolio.

What are the primary risks associated with a sole-source award of this magnitude and duration?

The primary risks associated with a sole-source award of this magnitude and duration include potential lack of price competition, leading to suboptimal value for money. The government relinquishes the opportunity to leverage market forces to drive down costs. Furthermore, a long contract duration (3316 days) increases the risk of cost overruns if not meticulously managed, potential scope creep, and technological obsolescence if the requirements are not regularly reviewed and updated. There's also a risk of contractor complacency due to the lack of competitive pressure. Robust oversight and performance management are critical to mitigate these risks.

How effective is the firm-fixed-price (FFP) contract type in managing costs for long-term aircraft manufacturing?

The firm-fixed-price (FFP) contract type is generally effective in providing cost certainty for the government, as the contractor assumes most of the risk for cost overruns. For long-term aircraft manufacturing, FFP can be beneficial if the scope of work and associated costs are well-defined and predictable at the outset. It incentivizes the contractor to control costs to maximize profit. However, if unforeseen technical challenges or significant changes in material costs arise during the long duration, the contractor might seek modifications or claims, potentially negating some of the cost certainty. Careful negotiation of the initial price and clear definition of deliverables are crucial for FFP effectiveness in long-term contracts.

What are the historical spending patterns for aircraft manufacturing within the Department of the Army?

Historical spending patterns for aircraft manufacturing within the Department of the Army typically reflect a consistent need for procurement, sustainment, and modernization of its aviation fleet. This includes spending on helicopters, fixed-wing aircraft, and associated components and services. Major programs often involve significant, multi-year investments. While specific annual figures fluctuate based on strategic priorities, budget allocations, and the lifecycle of various aircraft platforms, the Army consistently allocates substantial resources to maintaining and enhancing its air capabilities. Analyzing past contract awards for similar services would reveal trends in spending levels and the types of aircraft prioritized.

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

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: ROUTE 291 & STEWART AVE, RIDLEY PARK, PA, 19078

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: $1,632,290,426

Exercised Options: $1,632,290,426

Current Obligation: $1,632,290,426

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline