Boeing's AH-6I Aircraft Integration contract awarded $83M for non-recurring costs

Contract Overview

Contract Amount: $83,090,792 ($83.1M)

Contractor: THE Boeing Company

Awarding Agency: Department of Defense

Start Date: 2012-09-28

End Date: 2018-08-31

Contract Duration: 2,163 days

Daily Burn Rate: $38.4K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: AH-6I AIRCRAFT INTEGRATION - NONRECURRING COST

Place of Performance

Location: MESA, MARICOPA County, ARIZONA, 85215

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $83.1 million to THE BOEING COMPANY for work described as: AH-6I AIRCRAFT INTEGRATION - NONRECURRING COST Key points: 1. Contract focused on non-recurring costs for aircraft integration, indicating a one-time investment in development or modification. 2. Awarded to a single, large prime contractor, suggesting a need for specialized capabilities or established relationships. 3. The contract duration of over 2000 days points to a complex and lengthy integration process. 4. Performance was structured as Cost Plus Fixed Fee, which can incentivize contractor efficiency but carries inherent cost risks. 5. The absence of small business set-asides suggests the scope or nature of the work may not have been conducive to smaller firm participation. 6. This contract falls within the Aircraft Manufacturing sector, a high-value, technology-intensive industry.

Value Assessment

Rating: fair

The contract's value of $83 million for non-recurring integration costs is substantial. Benchmarking this against similar aircraft integration projects is challenging without more specific details on the scope of work. The Cost Plus Fixed Fee (CPFF) structure, while common for complex development, can lead to cost overruns if not managed tightly. The fixed fee component provides some predictability for the contractor's profit, but the overall cost is subject to actual expenses incurred.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that multiple bidders were likely solicited. The specific number of bidders is not provided, but this approach generally fosters a competitive environment, potentially leading to better pricing and terms for the government. The use of full and open competition is the government's preferred method for ensuring the widest possible access to qualified contractors.

Taxpayer Impact: Full and open competition is intended to maximize taxpayer value by encouraging a broad range of offers and driving down prices through market forces.

Public Impact

The primary beneficiaries are the Department of Defense, which receives the integrated AH-6I aircraft capabilities. The services delivered involve the complex integration of systems and components onto the AH-6I platform. The geographic impact is primarily within Arizona, where the contract was administered. Workforce implications include specialized engineering, manufacturing, and program management roles within the contractor's organization.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost Plus Fixed Fee contracts can lead to higher final costs if not meticulously managed.
The long duration of the contract increases the risk of scope creep or evolving requirements.
Lack of specific details on competition level (number of bidders) makes it hard to fully assess price discovery.

Positive Signals

Awarded under full and open competition, suggesting a robust bidding process.
The contract is with a major defense contractor (The Boeing Company), implying established expertise.
Non-recurring cost focus suggests investment in foundational capabilities rather than ongoing operational expenses.

Sector Analysis

The AH-6I aircraft integration falls within the broader aerospace and defense manufacturing sector. This sector is characterized by high R&D investment, complex supply chains, and significant government procurement. The market size for military aircraft manufacturing is substantial, driven by national security needs and technological advancements. This contract represents a specific investment in a particular aircraft platform's development or modification, fitting within the larger ecosystem of defense aviation programs.

Small Business Impact

This contract does not appear to have included small business set-asides, as indicated by the 'sb' field being false. The prime contractor, Boeing, is a large corporation. While large prime contracts can sometimes include subcontracting opportunities for small businesses, the absence of a specific set-aside suggests that the primary award was not directed towards small business participation. Further analysis of subcontracting plans would be needed to determine the extent of small business involvement.

Oversight & Accountability

Oversight for this contract would typically be managed by the Defense Contract Management Agency (DCMA), given its role in contract administration for the Department of Defense. Accountability measures are inherent in the Cost Plus Fixed Fee structure, requiring detailed reporting of costs and progress against the fixed fee. Transparency is generally maintained through contract reporting mechanisms, though specific details of performance and cost breakdowns may be sensitive.

Related Government Programs

Light Attack Aircraft Programs
Special Operations Forces Aviation Support
Aircraft Systems Integration
Defense Procurement Contracts

Risk Flags

Cost Overrun Risk (CPFF)
Schedule Slippage Risk (Long Duration)
Scope Creep Potential

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $83.1 million to THE BOEING COMPANY. AH-6I AIRCRAFT INTEGRATION - NONRECURRING COST

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 $83.1 million.

What is the period of performance?

Start: 2012-09-28. End: 2018-08-31.

What was the specific scope of the AH-6I aircraft integration for which non-recurring costs were incurred?

The provided data indicates the contract was for 'AH-6I AIRCRAFT INTEGRATION - NONRECURRING COST'. Non-recurring costs typically encompass expenses related to the initial design, development, testing, and tooling required to bring a product or system into production or operational use. For the AH-6I, this likely involved integrating specific mission systems, avionics, weapons platforms, or other modifications onto the base airframe to meet unique operational requirements, possibly for special operations or light attack roles. The exact nature of these integrations would be detailed in the contract's Statement of Work (SOW), which is not provided here but would specify the technical objectives and deliverables.

How does the $83 million non-recurring cost compare to similar aircraft integration projects?

Directly comparing the $83 million non-recurring cost for AH-6I integration to similar projects is challenging without detailed information on the scope, complexity, and specific technologies involved in other integrations. Aircraft integration projects can vary widely in cost depending on factors such as the size and type of aircraft, the sophistication of the systems being integrated (e.g., advanced sensors, new weapon systems, complex communication suites), the extent of airframe modifications required, and the maturity of the base platform. Generally, integrating new capabilities onto existing or newly developed platforms can range from tens of millions to hundreds of millions of dollars. The $83 million figure suggests a significant but not unprecedented investment for a specialized aircraft integration effort.

What are the primary risks associated with a Cost Plus Fixed Fee (CPFF) contract structure for this type of integration?

The primary risks associated with a Cost Plus Fixed Fee (CPFF) contract for aircraft integration involve cost control and potential for contractor inefficiency. While the fixed fee provides the contractor with a defined profit margin, the 'cost plus' portion means the government bears the risk of actual incurred costs. If the contractor's costs exceed initial estimates, the government pays more. There's also a risk that the contractor may have less incentive to control costs aggressively compared to fixed-price contracts, as their profit is fixed regardless of the final cost. Effective government oversight, detailed cost tracking, and robust negotiation of the fixed fee are crucial to mitigate these risks.

What does the duration of 2163 days (approximately 6 years) imply about the complexity and execution of this contract?

A contract duration of approximately six years for aircraft integration strongly suggests a highly complex undertaking. Such lengthy timelines are typical for projects involving significant research and development, extensive testing phases, multiple iterations of design and modification, integration of novel technologies, or meeting stringent certification and qualification requirements. It implies that the project was not a simple modification but likely involved substantial engineering challenges, potential redesigns based on test results, and a phased approach to development and validation. This extended period also increases the risk of requirement changes, technological obsolescence, and the need for sustained program management and oversight.

Given the 'full and open competition' award, what can be inferred about the competitive landscape for AH-6I integration services?

The award under 'full and open competition' indicates that the government solicited proposals from all responsible sources capable of meeting the requirements. While the exact number of bidders isn't specified, this method is designed to maximize competition. It suggests that multiple companies likely possessed the necessary technical expertise, manufacturing capabilities, and security clearances to undertake the AH-6I integration. The fact that Boeing was ultimately awarded the contract implies they offered the best value proposition among the competitors, considering factors like technical approach, past performance, and price. This competitive process is intended to ensure the government secures the most advantageous terms.

What is the significance of the contract being for 'non-recurring cost' versus recurring costs?

The distinction between non-recurring and recurring costs is fundamental. Non-recurring costs, like those for this AH-6I integration, are one-time expenses associated with initial development, setup, or modification. They represent an investment to establish a capability. Recurring costs, on the other hand, are ongoing expenses necessary for the continued operation, maintenance, or production of a system (e.g., spare parts, labor for assembly line, fuel). Focusing on non-recurring costs for integration implies the government was investing in the foundational work to adapt or enhance the AH-6I platform, rather than funding its ongoing operation or mass production. This often relates to initial fielding or specific mission capability enhancements.

Industry Classification

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

Product/Service Code: AEROSPACE CRAFT AND STRUCTURAL COMPONENTS

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: W58RGZ12R0266

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

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: $83,090,792

Exercised Options: $83,090,792

Current Obligation: $83,090,792

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline