Boeing receives $2.38B contract for rotary wing aircraft manufacturing, awarded non-competitively

Contract Overview

Contract Amount: $2,383,995,727 ($2.4B)

Contractor: THE Boeing Company

Awarding Agency: Department of Defense

Start Date: 2006-03-31

End Date: 2016-12-31

Contract Duration: 3,928 days

Daily Burn Rate: $606.9K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: 200607!002414!2100!W58RGZ!USA AVIATION AND MISSILE COMMAND!W58RGZ06C0093 !A!N! !N! ! !20060331!20061031!047800297!006265946!009256819!N!MCDONNELL DOUGLAS HELICOPTER C!5000 E MCDOWELL RD !MESA !AZ!85215!46000!013!04!MESA !MARICOPA !ARIZONA !+000038687459!N!N!000000000000!1520!AIRCRAFT ROTARY WING !S1 !SERVICES !000 !NOT DISCERNABLE !336411!E! !3! ! ! ! ! !99990909!B! ! !N!Z!A!N!J!2!002!N!1G!A!Y!Z! ! !N!C!N! ! ! !A!A!A!A!000!A!A!N! ! ! ! ! ! !0001! !

Place of Performance

Location: MESA, MARICOPA County, ARIZONA, 85215

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $2.38 billion to THE BOEING COMPANY for work described as: 200607!002414!2100!W58RGZ!USA AVIATION AND MISSILE COMMAND!W58RGZ06C0093 !A!N! !N! ! !20060331!20061031!047800297!006265946!009256819!N!MCDONNELL DOUGLAS HELICOPTER C!5000 E MCDOWELL RD !MESA !AZ!85215!46000!013!04!MESA !MARI… Key points: 1. Contract awarded to a single, large business prime contractor. 2. Significant portion of contract value allocated to manufacturing. 3. Long contract duration suggests a sustained need for these aircraft. 4. Geographic concentration of contractor operations in Arizona. 5. No indication of small business subcontracting goals. 6. Contract type is firm fixed price, indicating price certainty.

Value Assessment

Rating: fair

The contract value of $2.38 billion is substantial, reflecting the complexity and scale of aircraft manufacturing. Without specific benchmarks for comparable rotary wing aircraft manufacturing contracts, a precise value-for-money assessment is challenging. However, the firm fixed-price nature suggests that the government has locked in a price, which can be advantageous if costs are controlled by the contractor. The absence of competition, however, raises questions about whether this price represents the best possible value achievable in a competitive market.

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 potential bidders. This typically occurs when only one source is capable of meeting the government's requirements, or in specific circumstances where full and open competition is not feasible. The lack of competition limits the government's ability to leverage market forces to drive down prices and ensure the most innovative solutions are considered.

Taxpayer Impact: Sole-source awards can potentially lead to higher costs for taxpayers as there is no competitive pressure to achieve the lowest possible price. It also reduces transparency in the procurement process.

Public Impact

The primary beneficiaries are the U.S. military branches requiring rotary wing aircraft for various operational missions. The contract supports the production and delivery of essential aircraft, contributing to national defense capabilities. The contract's impact is geographically concentrated in Mesa, Arizona, where the contractor's manufacturing facilities are located. This contract likely supports a significant number of jobs within the aerospace manufacturing sector, particularly at the contractor's facility.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition and potential value for taxpayers.
Lack of transparency regarding the justification for sole-source procurement.
No explicit small business subcontracting goals mentioned, potentially limiting opportunities for smaller firms.

Positive Signals

Firm fixed-price contract provides cost certainty for the government.
Award to a major defense contractor suggests access to established manufacturing capabilities and expertise.
Long contract duration indicates a stable, long-term need for the product.

Sector Analysis

This contract falls within the aerospace and defense manufacturing sector, specifically focusing on rotary wing aircraft. This is a highly specialized and capital-intensive industry dominated by a few large prime contractors. The market is characterized by significant government procurement, long product development cycles, and stringent quality and performance requirements. Benchmarking this contract's value would require comparison to other large-scale military aircraft manufacturing procurements, which are often awarded non-competitively due to unique capabilities or existing platforms.

Small Business Impact

The data indicates this contract was not set aside for small businesses, and there is no explicit mention of subcontracting requirements. As a sole-source award to a large prime contractor, the opportunities for small businesses to participate as direct subcontractors may be limited or determined solely by the prime's discretion. This could represent a missed opportunity to foster small business participation in critical defense manufacturing supply chains.

Oversight & Accountability

Oversight for this contract would primarily be managed by the Defense Contract Management Agency (DCMA), which is responsible for ensuring contractor compliance with contract terms and quality standards. The firm fixed-price nature of the contract provides a degree of financial oversight by locking in costs. However, the sole-source nature of the award means that the initial price negotiation and justification would be critical areas for oversight to ensure fair and reasonable pricing for the government.

Related Government Programs

Military Aircraft Manufacturing
Rotary Wing Aircraft Procurement
Defense Industrial Base
Aerospace Manufacturing Contracts

Risk Flags

Sole-source award lacks competitive pricing pressure.
Potential for cost overruns borne by contractor under FFP, but initial price negotiation is critical.
Lack of explicit small business subcontracting goals.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $2.38 billion to THE BOEING COMPANY. 200607!002414!2100!W58RGZ!USA AVIATION AND MISSILE COMMAND!W58RGZ06C0093 !A!N! !N! ! !20060331!20061031!047800297!006265946!009256819!N!MCDONNELL DOUGLAS HELICOPTER C!5000 E MCDOWELL RD !MESA !AZ!85215!46000!013!04!MESA !MARICOPA !ARIZONA !+000038687459!N!N!000000000000!1520!AIRCRAFT ROTARY WING !S1 !SERVICES !000 !NOT DISCERNABLE !336411!E! !3! ! ! ! ! !999

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 Contract Management Agency).

What is the total obligated amount?

The obligated amount is $2.38 billion.

What is the period of performance?

Start: 2006-03-31. End: 2016-12-31.

What is the historical spending pattern for rotary wing aircraft manufacturing by the Department of Defense?

Historical spending on rotary wing aircraft manufacturing by the Department of Defense has been substantial, reflecting the critical role these platforms play in military operations. Over the years, the DoD has awarded numerous contracts for the development, production, and sustainment of various helicopter types. This spending is often concentrated among a few major aerospace contractors due to the high barriers to entry, specialized expertise, and significant capital investment required. Analyzing historical data reveals trends in contract types (e.g., fixed-price vs. cost-plus), competition levels (often leaning towards sole-source for specific platforms or upgrades), and overall budget allocations for aviation assets. Fluctuations in spending can be tied to modernization programs, operational tempo, and evolving threat landscapes. For instance, periods of active conflict often see increased demand for new aircraft and sustainment services, driving higher contract values.

How does the firm fixed-price (FFP) structure impact risk allocation in this contract?

The Firm Fixed-Price (FFP) contract structure significantly shifts the risk of cost overruns to the contractor, The Boeing Company, in this case. Under an FFP agreement, the agreed-upon price is fixed regardless of the contractor's actual costs incurred. This provides the government with cost certainty and predictability, making budgeting easier. However, it places a substantial burden on the contractor to accurately estimate all costs associated with manufacturing the rotary wing aircraft, including labor, materials, overhead, and potential unforeseen issues. If Boeing's costs exceed the fixed price, their profit margin will be reduced, or they may incur a loss. Conversely, if they manage costs effectively and complete the contract below the fixed price, their profit will be higher. This structure incentivizes the contractor to control costs and improve efficiency to maximize profitability.

What are the potential risks associated with a sole-source award for aircraft manufacturing?

Sole-source awards for complex procurements like aircraft manufacturing carry several potential risks. Firstly, the absence of competition can lead to higher prices than might be achieved in a competitive bidding process, as the government lacks the leverage of multiple offers. Secondly, it can limit innovation, as the government is reliant on the single source's proposed solution without exploring alternatives from other potential suppliers. Thirdly, there's a risk of contractor complacency; without the pressure of competition, the sole-source provider might be less motivated to optimize performance or reduce costs over the contract's lifecycle. Finally, sole-source awards can raise concerns about transparency and fairness in the procurement process, potentially leading to public or congressional scrutiny if the justification for the award is not robust.

What is the typical profit margin for large defense contractors on firm fixed-price contracts?

Profit margins for large defense contractors on Firm Fixed-Price (FFP) contracts can vary significantly based on factors such as contract complexity, risk, market conditions, and the specific contractor's efficiency and negotiation leverage. Generally, FFP contracts aim to provide a reasonable profit for the contractor while ensuring value for the government. Historical data and industry analyses suggest that profit margins on FFP defense contracts often fall within a range of 7% to 15% of the contract value. However, this is a broad generalization. Highly competitive bids might result in lower margins, while sole-source or sole-responsibility contracts, especially those involving significant technical risk or unique capabilities, might command higher margins. The contractor's ability to manage costs effectively is crucial, as any savings below the fixed price directly increase their profit, while cost overruns reduce it.

How does the geographic location of the contractor (Mesa, AZ) impact contract performance and oversight?

The geographic location of the contractor, The Boeing Company, in Mesa, Arizona, has several implications for contract performance and oversight. Proximity can facilitate easier communication and collaboration between government representatives (like DCMA personnel) and the contractor's facility, potentially streamlining oversight activities and issue resolution. However, it also means that a significant portion of the contract's economic impact is concentrated in one region. For oversight, having the primary manufacturing site in one location can simplify site visits and inspections. Conversely, if the supply chain is geographically dispersed, oversight of subcontractors might require additional resources or coordination. The specific location might also influence labor costs and availability, which are factored into the contract's pricing. Overall, while Mesa provides a central point for oversight, the broader implications relate to regional economic impact and the potential risks associated with geographic concentration.

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: 5000 E MCDOWELL RD, MESA, AZ, 85215

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Not Designated a Small Business

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline