Boeing awarded $184.9M for advance procurement of Lot 7 long lead items

Contract Overview

Contract Amount: $7,404,066,078 ($7.4B)

Contractor: THE Boeing Company

Awarding Agency: Department of Defense

Start Date: 2016-03-21

End Date: 2028-03-31

Contract Duration: 4,393 days

Daily Burn Rate: $1.7M/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: W58RGZ-16-C-0023 IS FOR THE AWARD OF ADVANCE PROCUREMENT IN THE AMOUNT OF $184,930,000.00 TO SUPPORT LOT 7 FULL RATE PRODUCTION LONG LEAD ITEMS.

Place of Performance

Location: MESA, MARICOPA County, ARIZONA, 85215

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $7.40 billion to THE BOEING COMPANY for work described as: W58RGZ-16-C-0023 IS FOR THE AWARD OF ADVANCE PROCUREMENT IN THE AMOUNT OF $184,930,000.00 TO SUPPORT LOT 7 FULL RATE PRODUCTION LONG LEAD ITEMS. Key points: 1. Contract supports full rate production for Lot 7, indicating a mature program phase. 2. Advance procurement of long lead items suggests a need to secure components ahead of final assembly. 3. The contract's value is significant, reflecting the scale of aircraft manufacturing. 4. Long-term duration (through 2028) implies ongoing production and support requirements. 5. Firm Fixed Price contract type shifts cost risk to the contractor. 6. Sole-source award raises questions about potential cost efficiencies and market alternatives.

Value Assessment

Rating: fair

The $184.9 million advance procurement award is a component of a larger, multi-billion dollar contract (totaling over $7.4 billion). Benchmarking this specific advance procurement amount against similar contracts is challenging without more detailed cost breakdowns. However, the overall contract value suggests a substantial investment. The firm-fixed-price nature of the contract aims to control costs, but the lack of competition for this specific award warrants scrutiny to ensure fair pricing.

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 approach is often used when a specific contractor possesses unique capabilities or when it's deemed most efficient to continue with an existing supplier for established programs. However, the absence of competition limits the government's ability to leverage market forces to potentially achieve lower prices or explore innovative solutions from other providers.

Taxpayer Impact: Sole-source awards can potentially lead to higher costs for taxpayers if competitive pressures are not present to drive down prices. It also limits opportunities for other businesses to compete for this segment of work.

Public Impact

The U.S. Army benefits from the timely procurement of critical components for aircraft production. This contract ensures the continued manufacturing of aircraft, supporting national defense capabilities. The award impacts the aerospace manufacturing sector, particularly in Arizona where Boeing has operations. It supports jobs within Boeing and its supply chain involved in aircraft production.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition for this advance procurement could lead to suboptimal pricing.
Sole-source awards may reduce transparency in cost justification.
Long contract duration could mask potential cost overruns if not closely monitored.

Positive Signals

Firm Fixed Price contract type provides cost certainty for the government.
Advance procurement ensures timely availability of long-lead components, mitigating production delays.
Boeing's established role in this program suggests a level of proven performance.

Sector Analysis

This contract falls within the Aircraft Manufacturing sector (NAICS 336411), a critical component of the broader aerospace and defense industry. The U.S. defense budget heavily invests in aircraft procurement and sustainment, with major players like Boeing and Lockheed Martin dominating the market. Spending in this sector is characterized by large, complex contracts, often involving advanced technologies and long production cycles. The total contract value of over $7.4 billion places this within the upper echelon of defense procurements.

Small Business Impact

The data indicates that small business participation (sb) is false for this specific contract award. This suggests that the prime contract was not set aside for small businesses, nor does it appear to have explicit subcontracting requirements detailed in this summary. Consequently, the direct impact on the small business ecosystem for this particular award is likely minimal, though Boeing's broader supply chain may involve small businesses.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Defense's contracting and program management structures, potentially involving the Defense Contract Management Agency (DCMA). Inspector General (IG) reports and audits are standard mechanisms for ensuring accountability and identifying potential waste or fraud in large defense contracts. Transparency is often managed through contract reporting systems, though specific details of sole-source justifications may have limited public disclosure.

Related Government Programs

F-15EX Eagle II Program
Advanced Fighter Aircraft Procurement
Long Lead Time Material Contracts
Defense Production Act Title III Investments

Risk Flags

Sole-source award
Lack of competition
Potential for non-competitive pricing

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $7.40 billion to THE BOEING COMPANY. W58RGZ-16-C-0023 IS FOR THE AWARD OF ADVANCE PROCUREMENT IN THE AMOUNT OF $184,930,000.00 TO SUPPORT LOT 7 FULL RATE PRODUCTION LONG LEAD ITEMS.

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 $7.40 billion.

What is the period of performance?

Start: 2016-03-21. End: 2028-03-31.

What is the historical spending pattern for this specific contract vehicle (W58RGZ-16-C-0023) and related procurements for Lot 7 aircraft?

The provided data indicates W58RGZ-16-C-0023 is an advance procurement award of $184.9 million for Lot 7 long lead items, with a total contract value exceeding $7.4 billion and an end date of March 31, 2028. Historical spending patterns for this specific contract vehicle would involve analyzing the cumulative amounts awarded and disbursed against the total contract value over its lifecycle. Related procurements for Lot 7 aircraft would encompass all other contract actions associated with this production lot, including final assembly, testing, and delivery. Without access to the full contract history and all associated modifications and task orders, a detailed historical spending analysis is not possible. However, the significant total contract value suggests substantial and consistent spending over the contract's duration, reflecting the ongoing production of advanced aircraft.

How does the $184.9 million advance procurement cost compare to industry benchmarks for similar aircraft programs?

Benchmarking the $184.9 million advance procurement cost requires comparing it to the total value of Lot 7 production and the typical proportion of advance procurement in large aircraft manufacturing contracts. Advance procurement typically covers long-lead-time components (e.g., specialized engines, avionics, airframes) that must be ordered well in advance of final assembly. This amount represents approximately 2.5% of the total contract value ($184.9M / $7.4B). Industry norms for advance procurement can vary significantly based on program complexity, supply chain maturity, and specific component lead times. For major defense platforms, advance procurement can range from a few percent to over 10% of the total contract value. Without knowing the specific components being procured and the overall production schedule for Lot 7, a precise benchmark is difficult. However, as a percentage of the total contract, this figure appears within a plausible range for securing critical long-lead items in a large-scale aircraft program.

What are the specific risks associated with a sole-source award for advance procurement of long-lead items?

The primary risk associated with a sole-source award for advance procurement is the potential for inflated pricing due to the lack of competitive pressure. When only one supplier is considered, the government may not benefit from the cost reductions that competition typically drives. This can lead to taxpayers paying more than necessary for these critical components. Another risk is reduced transparency; sole-source justifications, while necessary in certain situations, can sometimes obscure the detailed cost breakdown and negotiation process. Furthermore, reliance on a single source can create supply chain vulnerabilities if that source encounters production issues or financial instability. While the firm-fixed-price nature of this contract shifts some financial risk to the contractor, the government still bears the risk of paying a non-competitive price.

What is Boeing's track record with the Department of Defense regarding similar large-scale aircraft production contracts?

Boeing has a long and extensive track record with the Department of Defense (DoD) for producing large-scale aircraft, including fighter jets, bombers, and transport aircraft. Historically, Boeing has been a primary contractor for numerous critical military aviation programs. While generally considered a reliable supplier, Boeing has also faced scrutiny and challenges on various large DoD contracts related to cost overruns, production delays, and technical issues on programs like the KC-46 tanker and the T-7 Red Hawk trainer. However, for established production lines like those implied by Lot 7 full-rate production, Boeing typically demonstrates significant manufacturing expertise and capability. The DoD's continued awarding of substantial contracts to Boeing suggests a confidence in their ability to deliver complex aircraft, despite past program challenges.

How does the $184.9 million advance procurement fit into the overall lifecycle cost of the aircraft program?

The $184.9 million advance procurement award is an early-stage investment within the broader lifecycle cost of the aircraft program. Lifecycle cost encompasses research and development, procurement (including advance procurement and final assembly), sustainment (operations, maintenance, upgrades), and eventual disposal. Advance procurement is crucial because it front-loads the acquisition of components with the longest lead times, enabling the program to stay on schedule for production. While this amount is significant, it represents only a fraction of the total program cost, which will include the cost of all aircraft produced in Lot 7, as well as ongoing sustainment costs over the operational life of the fleet, potentially spanning decades. Effective management of this advance procurement is vital to controlling the overall procurement cost and ensuring the program's long-term affordability.

Industry Classification

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

Product/Service Code: HARDWARE AND ABRASIVES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: W58RGZ14R0237

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: $10,122,291,917

Exercised Options: $7,404,066,078

Current Obligation: $7,404,066,078

Subaward Activity

Number of Subawards: 2339

Total Subaward Amount: $1,786,470,298

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline