Boeing awarded $2.35B for AH-6I aircraft production, impacting Arizona's aerospace manufacturing sector

Contract Overview

Contract Amount: $234,969,062 ($235.0M)

Contractor: THE Boeing Company

Awarding Agency: Department of Defense

Start Date: 2014-08-29

End Date: 2022-08-28

Contract Duration: 2,921 days

Daily Burn Rate: $80.4K/day

Competition Type: NOT AVAILABLE FOR COMPETITION

Number of Offers Received: 1

Pricing Type: COST NO FEE

Sector: Defense

Official Description: AH 6I PRODUCTION OF 24 AIRCRAFT IN SUPPORT OF SANG

Place of Performance

Location: MESA, MARICOPA County, ARIZONA, 85215

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $235.0 million to THE BOEING COMPANY for work described as: AH 6I PRODUCTION OF 24 AIRCRAFT IN SUPPORT OF SANG Key points: 1. Contract value represents a significant investment in specialized military aircraft. 2. Sole-source award raises questions about potential cost efficiencies and market alternatives. 3. Long contract duration suggests a sustained need for these aircraft. 4. Production location in Arizona highlights regional economic impact and specialized workforce. 5. The 'Cost No Fee' contract type shifts cost risk to the government. 6. This award is part of broader Department of Defense aviation procurement strategies.

Value Assessment

Rating: fair

The contract's 'Cost No Fee' structure means the government bears all costs without a fixed profit margin, which can lead to higher overall spending if not managed tightly. Benchmarking the per-unit cost is difficult without knowing the exact specifications and support included, but the total value suggests a substantial investment per aircraft. Comparing this to similar sole-source, cost-plus contracts for specialized aircraft would be necessary for a comprehensive value assessment.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning competition was not sought. This approach is typically used when only one responsible source can fulfill the requirement, often due to unique capabilities, proprietary technology, or urgent needs. The lack of competition limits price discovery and may result in higher costs for the government compared to a fully competed contract.

Taxpayer Impact: Taxpayers may face higher costs due to the absence of competitive bidding, as the government did not benefit from price reductions that typically arise from multiple offers.

Public Impact

The primary beneficiaries are the U.S. Army and potentially allied nations requiring light attack and reconnaissance aircraft. The contract delivers 24 AH-6I aircraft, crucial for close air support and intelligence, surveillance, and reconnaissance missions. Production in Arizona supports local jobs in advanced manufacturing and aerospace engineering. This contract sustains a critical capability within the U.S. military's aviation fleet.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure on pricing.
Cost-plus contract type places cost risk on the government.
Lack of detailed performance metrics in provided data makes effectiveness assessment challenging.

Positive Signals

Addresses a specific, potentially unique, military capability requirement.
Long-term contract provides stability for production and support.
Production in Arizona supports a key defense manufacturing hub.

Sector Analysis

The AH-6I production falls within the aerospace and defense manufacturing sector, specifically focusing on military aircraft. This sector is characterized by high R&D costs, long production cycles, and significant government procurement. The market is dominated by a few large prime contractors, with specialized components often sourced from a complex supply chain. The total value of this contract is substantial within the niche of light attack/reconnaissance aircraft.

Small Business Impact

The provided data does not indicate any small business set-aside provisions for this contract. As a sole-source award to a large prime contractor, it is unlikely to directly benefit small businesses through set-asides. However, Boeing may engage small businesses as subcontractors for components or services, contributing indirectly to the small business ecosystem within the aerospace supply chain.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of the Army's contracting and program management offices. The 'Cost No Fee' structure necessitates rigorous financial oversight to ensure costs are reasonable and allocable. Inspector General investigations could be initiated if fraud, waste, or abuse is suspected. Transparency is limited by the sole-source nature and the proprietary aspects of defense contracting.

Related Government Programs

Light Attack Aircraft Programs
Special Operations Forces Aviation Support
Military Helicopter Production
Aerospace Manufacturing Contracts
Department of Defense Aircraft Procurement

Risk Flags

Sole-source award
Cost-plus contract type
Potential for cost overruns
Limited price competition

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $235.0 million to THE BOEING COMPANY. AH 6I PRODUCTION OF 24 AIRCRAFT IN SUPPORT OF SANG

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 $235.0 million.

What is the period of performance?

Start: 2014-08-29. End: 2022-08-28.

What is the historical spending trend for AH-6I aircraft production or similar platforms by the Department of the Army?

Historical spending data for AH-6I production specifically is limited as this appears to be a distinct production run. However, the U.S. Army has consistently invested billions annually in aviation procurement and sustainment. For similar light attack and reconnaissance platforms, spending can fluctuate based on strategic priorities, operational tempo, and modernization efforts. For instance, programs like the Apache or Black Hawk helicopters represent larger, ongoing investments. Analyzing past sole-source awards for specialized aircraft can provide context, but direct comparisons are challenging due to unique platform requirements and evolving threat landscapes. The $2.35 billion for 24 aircraft suggests a significant per-unit cost, necessitating a review of prior investments in comparable capabilities to ensure value.

How does the per-unit cost of the AH-6I aircraft in this contract compare to market rates or similar platforms?

Determining an exact per-unit cost for the AH-6I under this 'Cost No Fee' contract is complex, as the total price includes production, support, and potentially other associated costs, and the government bears the actual cost incurred by the contractor. However, with a total award of $2.35 billion for 24 aircraft, the implied cost per unit is approximately $97.9 million. This figure needs careful consideration as it's not a fixed price. Benchmarking this against other light attack/reconnaissance platforms is difficult due to varying configurations, mission sets, and support packages. For example, the price of a new AH-64 Apache attack helicopter can range significantly, often exceeding $30 million per unit, but it is a much larger and more heavily armed platform. The AH-6i is designed for a different role. Without detailed specifications and a clear understanding of what is included in the $2.35 billion, a precise market comparison is challenging, but the figure suggests a high investment for a light aircraft.

What are the specific risks associated with a 'Cost No Fee' contract type for this acquisition?

The 'Cost No Fee' (CNF) contract type, while sometimes used for urgent or R&D-heavy projects, places significant cost risk on the government. In this scenario, the contractor is reimbursed for all allowable costs incurred, but receives no fee or profit. The primary risk is that the government may end up paying a higher total amount than anticipated if the contractor's costs are not well-managed or if unforeseen issues drive up expenses significantly. There is less incentive for the contractor to control costs aggressively compared to fixed-price contracts, as their profit is not directly tied to cost savings. Effective government oversight of contractor expenditures is crucial to mitigate this risk and ensure costs remain reasonable and allocable to the contract objectives. Without a fee, the contractor's motivation might shift towards ensuring contract completion rather than cost efficiency.

What is the track record of The Boeing Company in delivering complex military aircraft on schedule and within budget?

The Boeing Company has a long and extensive track record in delivering complex military aircraft, including numerous successful programs for the U.S. military and international partners. They are a major defense contractor with deep expertise in aerospace engineering, manufacturing, and program management. However, like many large defense programs, Boeing has also faced challenges with cost overruns and schedule delays on certain high-profile projects, such as the KC-46 tanker or the T-7A Red Hawk trainer. The success of any specific contract depends heavily on the program's complexity, the contract type, and the specific management applied. For the AH-6I production, the 'Cost No Fee' structure and sole-source award mean that Boeing's primary obligation is delivery, with cost and schedule oversight being critical government functions.

How does the sole-source nature of this award impact the government's ability to ensure fair and reasonable pricing?

A sole-source award inherently limits the government's ability to ensure fair and reasonable pricing because it bypasses the competitive process that typically drives down costs. Without competing offers, there is no direct market pressure on the contractor to offer the lowest possible price. The government must rely on other methods to establish price reasonableness, such as historical pricing data, should-cost analyses, or comparisons to similar, albeit not identical, procurements. However, these methods are often less effective than direct competition. In this case, the Department of the Army would need to conduct thorough price analysis and potentially negotiate aggressively with Boeing to justify the awarded amount, given the absence of competitive bids. This increases the importance of robust government cost estimating and negotiation capabilities.

Industry Classification

NAICS: Manufacturing › Aerospace Product and Parts Manufacturing › Other Aircraft Parts and Auxiliary Equipment Manufacturing

Product/Service Code: AEROSPACE CRAFT AND STRUCTURAL COMPONENTS

Competition & Pricing

Extent Competed: NOT AVAILABLE FOR COMPETITION

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: W58RGZ14R0044

Offers Received: 1

Pricing Type: COST NO FEE (S)

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: $234,969,062

Exercised Options: $234,969,062

Current Obligation: $234,969,062

Subaward Activity

Number of Subawards: 53

Total Subaward Amount: $57,239,450

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline