DoD's $19M Honeywell contract for aircraft engine parts saw no competition, raising value concerns

Contract Overview

Contract Amount: $19,064,284 ($19.1M)

Contractor: Honeywell International Inc.

Awarding Agency: Department of Defense

Start Date: 2010-06-30

End Date: 2019-02-06

Contract Duration: 3,143 days

Daily Burn Rate: $6.1K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: TECH, ENG&LOG SERVICE AND MATERIAL SPT

Place of Performance

Location: TEMPE, MARICOPA County, ARIZONA, 85284

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $19.1 million to HONEYWELL INTERNATIONAL INC. for work described as: TECH, ENG&LOG SERVICE AND MATERIAL SPT Key points: 1. The contract's lack of competition suggests potential overpayment and limited price discovery. 2. Sole-source awards can indicate unique capabilities but also pose risks of inflated costs. 3. Performance duration of over 8 years warrants scrutiny of ongoing value and necessity. 4. The firm-fixed-price structure shifts risk to the contractor, but without competition, its effectiveness is diminished. 5. This contract falls within the Aircraft Engine and Engine Parts Manufacturing sector, a critical area for defense readiness.

Value Assessment

Rating: questionable

Benchmarking the value of this $19 million contract is challenging due to the sole-source nature. Without competitive bids, it's difficult to ascertain if Honeywell International Inc. provided the best possible price for aircraft engine parts. The extended performance period of over eight years further complicates a direct value assessment. Compared to similar sole-source awards in specialized defense manufacturing, the pricing might be within an acceptable range, but the absence of competition inherently limits the government's ability to secure optimal value.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one bidder, Honeywell International Inc., was considered. This approach is typically used when a unique product or service is required, and only one source can provide it. The lack of competition means there was no opportunity for other manufacturers to bid, potentially leading to higher prices than if multiple bids had been solicited. This limits the government's ability to leverage market forces for cost savings.

Taxpayer Impact: Taxpayers may have paid a premium for these aircraft engine parts due to the absence of competitive bidding. Without competing offers, the government had less leverage to negotiate a lower price, potentially resulting in a less efficient use of public funds.

Public Impact

The Department of the Army benefits from the continued supply of critical aircraft engine parts, ensuring the operational readiness of its fleet. This contract supports the maintenance and sustainment of military aircraft, directly impacting national defense capabilities. The primary beneficiaries are the military personnel who rely on well-maintained aircraft for their missions. Workforce implications include continued employment for specialized manufacturing roles at Honeywell, particularly in Arizona.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to higher costs for taxpayers.
Sole-source awards can reduce transparency and accountability in pricing.
Long contract duration without re-competition could mask inefficiencies.
Dependence on a single supplier can create supply chain risks.

Positive Signals

Firm-fixed-price contract shifts cost overrun risk to the contractor.
Award to an established contractor like Honeywell suggests a degree of reliability.
Ensures continued availability of critical aircraft engine parts for military operations.

Sector Analysis

This contract falls within the Aircraft Engine and Engine Parts Manufacturing sector, a specialized and critical segment of the aerospace industry. The market is characterized by high barriers to entry due to complex technology, stringent quality requirements, and significant R&D investment. Major players like Honeywell dominate this space, often holding proprietary technologies or extensive manufacturing expertise. Comparable spending in this sector for defense applications can run into billions annually, underscoring the strategic importance of such contracts for maintaining military aviation capabilities.

Small Business Impact

This contract does not appear to have involved small business set-asides, as indicated by the 'sb': false flag. The sole-source nature further suggests that opportunities for small business subcontracting were likely limited or not a primary focus of this specific award. While large prime contractors often have subcontracting plans, the absence of competition here means there was no explicit mechanism to drive small business participation through a competitive bidding process for the prime contract itself.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Army's contracting and program management offices. As a sole-source award, the justification for this procurement method would be subject to review. Transparency is limited due to the lack of competitive bidding. Accountability would be managed through contract performance monitoring and adherence to the firm-fixed-price terms. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Aircraft Engine Maintenance and Repair
Defense Logistics and Supply Chain Management
Aerospace Manufacturing Contracts
Military Aircraft Parts Procurement

Risk Flags

Lack of Competition
Potential for Overpricing
Long-Term Sole-Source Dependency

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $19.1 million to HONEYWELL INTERNATIONAL INC.. TECH, ENG&LOG SERVICE AND MATERIAL SPT

Who is the contractor on this award?

The obligated recipient is HONEYWELL INTERNATIONAL INC..

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $19.1 million.

What is the period of performance?

Start: 2010-06-30. End: 2019-02-06.

What is the historical spending trend for aircraft engine parts by the Department of the Army?

Analyzing historical spending trends for aircraft engine parts by the Department of the Army reveals a consistent and significant investment in maintaining its aviation fleet. Over the past decade, spending in this category has fluctuated based on operational tempo, fleet modernization programs, and the lifecycle of various aircraft platforms. While specific figures vary year-to-year, the overall trend indicates a sustained need for these components, often involving sole-source or limited-competition contracts for specialized parts where original equipment manufacturers (OEMs) like Honeywell hold unique intellectual property or production capabilities. This sustained spending underscores the critical nature of engine parts for national security and the ongoing reliance on established defense contractors.

How does the firm-fixed-price (FFP) structure typically benefit the government in defense contracts?

The Firm-Fixed-Price (FFP) contract structure is generally favored by the government because it shifts the majority of the cost risk from the buyer (government) to the seller (contractor). Under an FFP agreement, the price is set and not subject to adjustment based on the contractor's cost experience. This provides budget certainty for the government, allowing for more predictable financial planning. The contractor is incentivized to manage costs efficiently and perform the work within the agreed-upon price to maximize profit. However, the benefit of FFP is most pronounced in competitive environments where the initial price reflects market pressures. In sole-source situations, while the price is fixed, the initial negotiation may not yield the most cost-effective outcome for the government.

What are the potential risks associated with sole-source defense contracts for specialized parts?

Sole-source defense contracts for specialized parts, like aircraft engine components, carry several inherent risks. The most significant is the potential for inflated pricing, as the absence of competition removes the government's primary leverage for negotiating the lowest possible cost. Contractors may face less pressure to innovate or improve efficiency if they are the only provider. Furthermore, reliance on a single supplier can create vulnerabilities in the supply chain; disruptions due to manufacturing issues, geopolitical events, or the supplier's financial instability can have severe consequences for military readiness. There's also a risk of vendor lock-in, where the government becomes dependent on a specific supplier's technology or processes, making future transitions difficult and costly.

What is Honeywell International Inc.'s track record in supplying aircraft engine parts to the DoD?

Honeywell International Inc. has a long-standing and significant track record as a major supplier of aircraft engines, components, and related systems to the Department of Defense (DoD) and other government agencies. The company is a well-established player in the aerospace and defense industry, known for its technological capabilities and extensive product portfolio, which includes engines, auxiliary power units, avionics, and various engine parts. Their history with the DoD involves numerous contracts, often of substantial value, supporting a wide range of military aircraft platforms. While specific performance metrics for individual contracts are not publicly detailed here, Honeywell's continued presence and awards in this sector suggest a generally reliable performance history and established relationships within the defense supply chain.

How does the geographic location (Arizona) influence the logistics and cost of this contract?

The contract's performance location in Arizona (ST: AZ, SN: ARIZONA) for Honeywell International Inc. can influence logistics and costs in several ways. Arizona has a significant aerospace and defense industry presence, potentially offering a skilled workforce and established supply chain networks relevant to aircraft engine parts manufacturing. Proximity to military bases within the Western United States could streamline delivery and reduce transportation costs for certain deployments. However, depending on the specific origin of raw materials or components sourced from outside the region, transportation costs could still be a factor. The state's business climate, labor costs, and any state-specific incentives or taxes would also factor into the overall cost structure for Honeywell in fulfilling this contract.

Industry Classification

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

Parent Company: Honeywell International Inc (UEI: 139691877)

Address: 1300 WEST WARNER ROAD, TEMPE, AZ, 85284

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: $19,064,284

Exercised Options: $19,064,284

Current Obligation: $19,064,284

Contract Characteristics

Commercial Item: COMMERCIAL ITEM

Cost or Pricing Data: NO

Timeline