Army awards $366M for one CH-47F helicopter to Boeing, citing sole-source justification

Contract Overview

Contract Amount: $366,245,199 ($366.2M)

Contractor: THE Boeing Company

Awarding Agency: Department of Defense

Start Date: 2011-12-28

End Date: 2016-12-30

Contract Duration: 1,829 days

Daily Burn Rate: $200.2K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: ONE CH-47F NEW BUILD AIRCRAFT

Place of Performance

Location: RIDLEY PARK, DELAWARE County, PENNSYLVANIA, 19078

State: Pennsylvania Government Spending

Plain-Language Summary

Department of Defense obligated $366.2 million to THE BOEING COMPANY for work described as: ONE CH-47F NEW BUILD AIRCRAFT Key points: 1. Contract awarded to a single, established manufacturer, limiting potential cost savings from competition. 2. High value contract for a single aircraft suggests significant per-unit cost, requiring careful benchmarking. 3. Sole-source award raises questions about price reasonableness and the availability of alternative solutions. 4. Long contract duration of 1829 days indicates a substantial commitment and potential for cost overruns. 5. Firm-fixed-price contract shifts most risk to the government, but requires diligent oversight of performance. 6. Aircraft manufacturing sector is highly specialized, with limited suppliers for complex military platforms.

Value Assessment

Rating: questionable

The per-unit cost for this CH-47F helicopter is exceptionally high, exceeding benchmarks for similar new aircraft procurements. While the CH-47F is a complex and specialized platform, the lack of competitive bidding makes it difficult to ascertain if the price reflects fair market value. The government's commitment to a single supplier for such a significant investment warrants scrutiny to ensure optimal use of taxpayer funds. Further analysis of the contractor's cost breakdown and profit margins would be beneficial.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning the Department of the Army did not solicit bids from multiple potential suppliers. This approach is typically justified when only one responsible source is available or when a compelling justification exists for excluding competition. The absence of competition means that price discovery through market forces was bypassed, potentially leading to higher costs for the government. The specific justification for this sole-source award needs to be thoroughly reviewed.

Taxpayer Impact: Sole-source awards can result in higher prices for taxpayers as the government lacks the leverage that competition provides. This means taxpayer money may not be stretched as far as it could be with a competitive process.

Public Impact

The primary beneficiary is the Department of the Army, which receives a critical aviation asset for troop transport and logistical support. The service delivered is one advanced CH-47F Chinook helicopter, a vital component for military operations. The geographic impact is primarily within the operational theaters where the Army deploys its forces. Workforce implications include support for specialized manufacturing jobs within The Boeing Company and its supply chain.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competition, potentially increasing costs.
High per-unit cost requires rigorous justification and oversight.
Long contract duration increases exposure to potential cost escalations or performance issues.
Firm-fixed-price contract places significant risk on the government if contractor performance falters without adequate recourse.

Positive Signals

Award to a single, established manufacturer ensures access to specialized expertise and production capabilities.
Firm-fixed-price contract provides cost certainty if performance is met.
The CH-47F is a proven and critical asset for military operations.

Sector Analysis

The CH-47F Chinook is a heavy-lift tandem rotor helicopter manufactured by The Boeing Company. This contract falls within the broader aerospace and defense manufacturing sector, which is characterized by high barriers to entry, significant R&D investment, and long production cycles. The market for such specialized military aircraft is limited to a few prime contractors capable of meeting stringent government requirements. Comparable spending benchmarks would involve analyzing other large-scale rotorcraft procurements or major defense platform acquisitions.

Small Business Impact

This contract does not appear to include a small business set-aside. Given the sole-source nature and the prime contractor being a large aerospace company, the likelihood of significant subcontracting opportunities for small businesses is dependent on Boeing's internal policies and supply chain management. Further investigation into Boeing's small business subcontracting plan for this specific award would be necessary to assess its impact on the small business ecosystem.

Oversight & Accountability

Oversight for this contract would primarily reside with the Department of the Army's contracting and program management offices. Accountability measures would be tied to the firm-fixed-price terms and performance milestones. Transparency is limited due to the sole-source nature, but contract award data is publicly available. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

CH-47 Chinook Helicopter Program
Army Aviation Modernization Programs
Heavy-Lift Helicopter Procurement
Defense Aircraft Manufacturing Contracts

Risk Flags

Sole-source award
High per-unit cost
Long contract duration for a single item

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $366.2 million to THE BOEING COMPANY. ONE CH-47F NEW BUILD AIRCRAFT

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 $366.2 million.

What is the period of performance?

Start: 2011-12-28. End: 2016-12-30.

What is the specific justification provided by the Department of the Army for awarding this contract on a sole-source basis to The Boeing Company?

The provided data does not detail the specific justification for the sole-source award. Typically, sole-source procurements are justified under circumstances such as only one responsible source being available, or when a public exigency requires immediate delivery and other sources are not available. For complex military platforms like the CH-47F, justifications often cite unique capabilities, proprietary technology, or the need for commonality with existing fleets. A thorough review of the official Justification and Approval (J&A) document would be required to understand the precise rationale and assess its validity. Without this, it is difficult to determine if competition was genuinely precluded or if alternative sourcing options were adequately explored.

How does the $366 million cost for a single CH-47F helicopter compare to historical or benchmark pricing for this aircraft type?

The $366 million cost for a single CH-47F helicopter represents an exceptionally high per-unit price. Historical data and industry benchmarks for new CH-47F builds, especially when procured in larger quantities or through competitive processes, typically show significantly lower per-unit costs. For instance, previous awards for multiple aircraft have averaged well below $100 million per unit. This sole-source award for a single aircraft at such a high price point warrants detailed cost analysis, including examination of the contractor's cost breakdown, profit margins, and any unique modifications or support included. It is crucial to understand if this price reflects specific program requirements, inflation, or a lack of competitive pressure.

What are the primary risks associated with a sole-source, firm-fixed-price contract for a major defense asset like the CH-47F?

A sole-source, firm-fixed-price contract for a major defense asset like the CH-47F presents several key risks. Firstly, the lack of competition means the government may pay a premium, as price discovery through market forces is absent. Secondly, while the firm-fixed-price structure aims to cap costs, it shifts significant performance and cost overrun risk to the government if the contractor fails to deliver as specified or if unforeseen issues arise that are not clearly excluded by the contract terms. The government bears the risk of the contractor's inefficiencies. Furthermore, sole-source awards can stifle innovation and discourage potential new entrants into the market for future procurements. Robust government oversight is critical to mitigate these risks.

What is the expected performance and operational impact of acquiring a single CH-47F helicopter under this contract?

The acquisition of a single CH-47F helicopter under this contract is intended to enhance the Army's heavy-lift aviation capabilities. The CH-47F is a versatile platform capable of transporting troops, artillery, ammunition, fuel, and other battlefield supplies. Its tandem rotor design provides stability and lift capacity crucial for various missions, including troop deployment, resupply, medical evacuation, and disaster relief. While a single aircraft contributes to the overall fleet, its individual impact on operational capacity might be limited unless it is intended to replace a specific retiring asset or fill a critical gap. The primary operational impact is the addition of one highly capable, modern heavy-lift helicopter to the Army's inventory.

How does the contract duration of 1829 days (approximately 5 years) influence the overall value and risk assessment for this procurement?

The contract duration of 1829 days (approximately 5 years) for a single aircraft procurement is unusually long and significantly influences the value and risk assessment. Such an extended period for a single unit suggests potential complexities in manufacturing, delivery schedules, or integration requirements. From a value perspective, a longer duration for a single item can sometimes indicate a higher per-unit cost due to extended overhead and management. From a risk perspective, a longer timeline increases exposure to potential changes in requirements, technological obsolescence, economic fluctuations (inflation), and contractor performance degradation over time. It also requires sustained government oversight throughout the contract's life cycle to ensure milestones are met and costs remain controlled.

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: $366,245,199

Exercised Options: $366,245,199

Current Obligation: $366,245,199

Subaward Activity

Number of Subawards: 528

Total Subaward Amount: $106,509,266

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline