Boeing awarded $239M Apache aircraft contract by Army, highlighting significant defense spending in aircraft manufacturing

Contract Overview

Contract Amount: $238,909,864 ($238.9M)

Contractor: THE Boeing Company

Awarding Agency: Department of Defense

Start Date: 2012-08-20

End Date: 2016-02-29

Contract Duration: 1,288 days

Daily Burn Rate: $185.5K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: FMS SAUDI ARABIA NATIONAL GUARD 12 APACHE BLOCK III AIRCRAFT AND RELATED SUPPORT.

Place of Performance

Location: MESA, MARICOPA County, ARIZONA, 85215

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $238.9 million to THE BOEING COMPANY for work described as: FMS SAUDI ARABIA NATIONAL GUARD 12 APACHE BLOCK III AIRCRAFT AND RELATED SUPPORT. Key points: 1. This contract represents a substantial investment in advanced military aviation capabilities. 2. The sole-source nature of the award warrants scrutiny regarding potential price advantages. 3. Long-term support and training are critical components, suggesting ongoing program costs. 4. The geographic location of the contractor (Arizona) may have implications for regional economic impact. 5. This acquisition aligns with broader U.S. foreign military sales objectives for key allies.

Value Assessment

Rating: fair

The contract value of $239 million for 12 Apache Block III aircraft and support is significant. Benchmarking against similar sole-source procurements of advanced military aircraft is challenging due to unique configurations and support packages. However, the absence of competition suggests a potential for higher-than-market pricing. The firm-fixed-price structure provides cost certainty for the government, but the overall value for money depends heavily on the negotiated price and the long-term sustainment costs.

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 typically occurs when a specific contractor possesses unique capabilities or when urgent needs cannot be met through competitive means. The lack of competition limits the government's ability to leverage market forces to drive down prices and may result in a higher cost than if multiple bids were solicited.

Taxpayer Impact: Taxpayers may have paid a premium due to the absence of competitive bidding. Without a competitive process, there is less assurance that the price reflects the best possible value achievable in the market.

Public Impact

The primary beneficiaries are the Saudi Arabian National Guard, receiving advanced attack helicopters. The contract delivers 12 Apache Block III aircraft, enhancing aerial combat capabilities. Associated support, training, and logistics services are also provided, ensuring operational readiness. The contract has implications for the aerospace and defense workforce, particularly at Boeing facilities.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition.
Potential for cost overruns in long-term support and training.
Dependence on a single contractor for critical aircraft and support.

Positive Signals

Firm-fixed-price contract provides cost certainty for the base aircraft.
Delivery of advanced military hardware to a key ally.
Contract includes essential support and training for operational effectiveness.

Sector Analysis

The aerospace and defense sector is characterized by high R&D costs, long product development cycles, and significant government procurement. This contract falls within the military aircraft manufacturing sub-sector, which is dominated by a few large prime contractors. The value of this contract is substantial within the context of annual defense spending on rotary-wing aircraft. Comparable spending benchmarks would involve other major military aircraft procurements, often involving sole-source or limited competition due to specialized requirements.

Small Business Impact

This contract does not appear to have a small business set-aside component, as it was awarded directly to The Boeing Company. There is no explicit information regarding subcontracting plans for small businesses within this award notice. The focus is on the prime contractor's capabilities for manufacturing and supporting advanced military aircraft, which typically involves large-scale industrial operations.

Oversight & Accountability

The Department of the Army, as the contracting agency, is responsible for oversight of this contract. The firm-fixed-price nature of the contract provides a degree of cost control. However, the sole-source award necessitates careful monitoring of performance, delivery schedules, and the reasonableness of pricing for support and training services. Transparency is limited by the non-competitive nature of the award, and specific Inspector General jurisdiction would depend on the nature of any potential issues arising.

Related Government Programs

Apache Attack Helicopter Program
Foreign Military Sales (FMS)
Department of Defense Aircraft Procurement
Rotary-Wing Aircraft Manufacturing

Risk Flags

Sole-source award
Potential for price inflation due to lack of competition
Long-term sustainment cost uncertainty

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $238.9 million to THE BOEING COMPANY. FMS SAUDI ARABIA NATIONAL GUARD 12 APACHE BLOCK III AIRCRAFT AND RELATED SUPPORT.

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 $238.9 million.

What is the period of performance?

Start: 2012-08-20. End: 2016-02-29.

What is the historical spending trend for Apache helicopters, both domestically and through foreign military sales?

Historical spending on Apache helicopters, including both U.S. Army procurement and Foreign Military Sales (FMS), has been substantial over several decades. The Apache program has undergone numerous upgrades, such as the Block III variant, each incurring significant costs. For instance, prior FMS deals for Apache helicopters have ranged from tens of millions to hundreds of millions of dollars, depending on the quantity and configuration. U.S. Army procurement also represents billions of dollars over the program's lifecycle. Analyzing specific historical FMS contracts for similar quantities and configurations would provide a more precise benchmark for the $239 million awarded in this instance, though such detailed data is often sensitive.

How does the per-unit cost of the Apache Block III aircraft in this contract compare to previous sales or domestic procurements?

Determining the precise per-unit cost for the 12 Apache Block III aircraft within this $239 million contract is difficult without a breakdown of costs for aircraft versus support and training. However, if we were to assume the entire amount was solely for the aircraft (which is unlikely), the per-unit cost would be approximately $19.9 million ($239M / 12). Previous FMS deals and domestic procurements for Apache variants have shown per-unit costs varying widely, often ranging from $15 million to over $30 million, depending on the specific block, included systems, and support packages. Sole-source awards, like this one, often lack the transparency needed for direct cost comparison, making it challenging to definitively state if this represents a favorable or unfavorable price point without further detailed cost data.

What are the key performance metrics and delivery timelines associated with this contract?

The contract specifies the delivery of 12 Apache Block III aircraft along with related support. The contract duration is from August 20, 2012, to February 29, 2016, indicating a delivery timeline of approximately 3.5 years for the entire order. Key performance metrics would likely revolve around the timely delivery of aircraft meeting all technical specifications, operational readiness of the delivered platforms, and the successful provision of associated training and logistical support. Specific performance standards and acceptance criteria would be detailed in the contract's statement of work, but are not publicly itemized in the award abstract.

What is The Boeing Company's track record in fulfilling similar sole-source defense contracts, particularly for attack helicopters?

The Boeing Company has a long and extensive track record of manufacturing and delivering advanced military aircraft, including the Apache helicopter, for both U.S. and international customers. They have historically been the prime contractor for Apache production and upgrades. While specific details on all sole-source contracts are not always public, Boeing has consistently delivered complex defense systems. Their experience with the Apache platform, including previous Block variants and international sales, suggests a high degree of capability in fulfilling such requirements. However, the success of any sole-source award also depends on the specific terms negotiated and the oversight applied.

What are the potential risks associated with relying on a sole-source provider for critical military hardware like Apache helicopters?

Relying on a sole-source provider like Boeing for Apache helicopters presents several potential risks. Firstly, the lack of competition can lead to higher prices than might be achieved through a competitive bidding process. Secondly, it creates a dependency on a single supplier for production, spare parts, maintenance, and future upgrades, potentially limiting flexibility and increasing long-term sustainment costs. Thirdly, if the sole-source contractor faces production issues, financial difficulties, or strategic shifts, it could significantly disrupt the supply chain for critical defense assets. Finally, without competitive pressure, there might be less incentive for the contractor to innovate or offer cost-saving efficiencies.

How does this contract fit into the broader context of U.S. foreign military sales strategy and Saudi Arabia's defense modernization efforts?

This contract is a clear example of the U.S. utilizing its Foreign Military Sales (FMS) program to support key allies and advance U.S. foreign policy objectives. Providing advanced military equipment like the Apache Block III enhances Saudi Arabia's defense capabilities, contributing to regional security and stability, which is often aligned with U.S. strategic interests. For Saudi Arabia, this acquisition represents a significant step in their ongoing defense modernization efforts, aiming to maintain a technological edge and bolster their military readiness. Such sales also support the U.S. defense industrial base by providing a steady stream of revenue and maintaining production lines for critical systems.

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, Manufacturer of Goods, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $366,764,917

Exercised Options: $238,909,864

Current Obligation: $238,909,864

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline