DoD's $1B Helicopter Contract with McDonnell Douglas: A 12-Year Deal with Questionable Value

Contract Overview

Contract Amount: $1,020,370,952 ($1.0B)

Contractor: Mcdonnell Douglas Helicopter Company

Awarding Agency: Department of Defense

Start Date: 2005-06-28

End Date: 2017-07-31

Contract Duration: 4,416 days

Daily Burn Rate: $231.1K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Place of Performance

Location: MESA, MARICOPA County, ARIZONA, 85215

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $1.02 billion to MCDONNELL DOUGLAS HELICOPTER COMPANY for work described as: Key points: 1. Significant long-term commitment of over $1 billion for aircraft manufacturing. 2. Sole-source award raises concerns about price discovery and potential overspending. 3. Extended contract duration (12 years) suggests potential for cost escalation. 4. Focus on a specific sector (Aircraft Manufacturing) with limited competitive landscape.

Value Assessment

Rating: questionable

The contract's value is difficult to assess without competitive benchmarks. A Cost Plus Fixed Fee structure can incentivize cost overruns, especially over a long duration. The lack of competition further clouds the assessment of whether the government received fair pricing.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

The contract was awarded on a sole-source basis, indicating a lack of competition. This method limits the government's ability to leverage market forces for better pricing and may result in higher costs than a competitively bid contract.

Taxpayer Impact: The sole-source nature of this large contract likely results in a higher cost to taxpayers due to the absence of competitive pressure to reduce prices.

Public Impact

Taxpayers may have overpaid for aircraft due to the lack of competition. The long duration of the contract ties up significant federal funds. Potential for reduced innovation as there was no competitive pressure. Dependence on a single contractor for critical defense assets.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award
Long contract duration
Cost-plus contract type
Lack of transparency in pricing

Positive Signals

Ensured supply of critical aircraft
Long-term relationship with a known manufacturer

Sector Analysis

This contract falls within the Aircraft Manufacturing sector, a critical component of national defense. Spending in this sector is often characterized by high R&D costs, long production cycles, and significant government oversight due to national security implications.

Small Business Impact

The data does not indicate any specific provisions or benefits for small businesses within this contract. Large sole-source contracts often bypass small business participation unless specifically mandated.

Oversight & Accountability

The contract's long duration and sole-source nature warrant close oversight to ensure cost control and performance. The Defense Contract Management Agency's role is crucial in monitoring expenditures and contractor performance throughout the contract's life.

Related Government Programs

Aircraft Manufacturing
Department of Defense Contracting
Defense Contract Management Agency Programs

Risk Flags

Potential for cost overruns due to Cost Plus Fixed Fee structure.
Lack of competitive bidding may have led to inflated prices.
Extended contract duration increases risk of obsolescence and changing requirements.
Limited transparency regarding the justification for sole-source award.
Potential for contractor complacency due to lack of competition.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $1.02 billion to MCDONNELL DOUGLAS HELICOPTER COMPANY. See the official description on USAspending.

Who is the contractor on this award?

The obligated recipient is MCDONNELL DOUGLAS HELICOPTER COMPANY.

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Contract Management Agency).

What is the total obligated amount?

The obligated amount is $1.02 billion.

What is the period of performance?

Start: 2005-06-28. End: 2017-07-31.

What specific justifications were provided for the sole-source award, and were alternatives thoroughly explored?

Sole-source awards typically require extensive justification, such as unique capabilities or urgent needs. Without access to the specific documentation, it's impossible to verify if alternatives were adequately explored. This lack of transparency raises concerns about whether the government truly exhausted all competitive options before committing to a single provider.

How did the Cost Plus Fixed Fee structure impact the final cost compared to a fixed-price contract?

Cost Plus Fixed Fee contracts allow the contractor to recover all allowable costs plus a predetermined fee. While providing flexibility, this structure can incentivize higher spending as the contractor is guaranteed their costs are covered. A fixed-price contract would have placed more cost risk on the contractor, potentially leading to a lower overall price for the government.

What mechanisms were in place to ensure the contractor maintained efficiency and innovation over the 12-year period?

Given the sole-source nature and long duration, specific performance metrics and incentive clauses would be crucial. However, without detailed contract terms, it's difficult to ascertain the effectiveness of these mechanisms. The absence of competition inherently reduces the pressure for continuous innovation and efficiency improvements.

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: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: THE Boeing Company

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

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline