Boeing awarded $42M for Apache turbine engine integration, with a long performance period extending into 2025

Contract Overview

Contract Amount: $42,080,520 ($42.1M)

Contractor: THE Boeing Company

Awarding Agency: Department of Defense

Start Date: 2019-08-28

End Date: 2025-09-30

Contract Duration: 2,225 days

Daily Burn Rate: $18.9K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: DESIGN PHASE OF THE APACHE IMPROVED TURBINE ENGINE INTEGRATION EFFORT - ITE PHASE 1

Place of Performance

Location: MESA, MARICOPA County, ARIZONA, 85215

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $42.1 million to THE BOEING COMPANY for work described as: DESIGN PHASE OF THE APACHE IMPROVED TURBINE ENGINE INTEGRATION EFFORT - ITE PHASE 1 Key points: 1. Contract awarded to a single, established prime contractor, raising questions about competitive pricing. 2. The contract type (Cost Plus Fixed Fee) can lead to cost overruns if not closely managed. 3. Long performance period suggests a complex, multi-year effort requiring sustained oversight. 4. Focus on design and integration indicates a critical early-stage development phase for a key defense platform. 5. Geographic concentration in Arizona for this significant defense contract.

Value Assessment

Rating: fair

The contract's value of $42 million for a design phase is substantial, but without comparable contract data for similar integration efforts, a precise value-for-money assessment is difficult. The Cost Plus Fixed Fee (CPFF) structure, while common for R&D, carries inherent risks of cost escalation. Benchmarking against industry standards for turbine engine integration design services would be necessary for a more definitive value assessment. The fixed fee component provides some cost certainty, but the overall cost is variable.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning there was no open competition. This approach is typically justified when a specific contractor possesses unique capabilities or intellectual property essential for the project. However, the lack of competition limits price discovery and may result in higher costs for the government compared to a competed procurement. The justification for sole-source award needs careful scrutiny to ensure it truly reflects the only viable option.

Taxpayer Impact: Sole-source awards mean taxpayers do not benefit from the cost savings typically achieved through competitive bidding, potentially leading to a higher overall expenditure for this critical defense system.

Public Impact

The U.S. Army benefits from the advancement of its Apache helicopter platform through improved engine technology. Services delivered include design, integration, and testing for a new turbine engine system. Geographic impact is concentrated in Arizona, where the contractor's facilities are located. Workforce implications include specialized engineering and technical roles within the aerospace and defense sector.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure on pricing.
Cost Plus Fixed Fee contract type carries risk of cost overruns.
Long duration of the contract requires sustained oversight to manage performance and costs.
Potential for scope creep in a complex design and integration effort.

Positive Signals

Award to a prime contractor with extensive experience in aircraft manufacturing and defense systems.
Focus on a critical upgrade for a key military asset (Apache helicopter).
Fixed fee component provides some level of cost predictability for the contractor's effort.
Clear definition of the design phase aims to de-risk subsequent development stages.

Sector Analysis

The aerospace and defense sector is characterized by high R&D investment, long product development cycles, and significant government procurement. Contracts for aircraft component development and integration, like this one for the Apache turbine engine, are common. The market is dominated by a few large prime contractors. Spending benchmarks for similar integration efforts are highly variable, depending on the complexity of the technology and the platform. This contract fits within the broader category of aircraft manufacturing and modernization programs.

Small Business Impact

This contract does not appear to involve a small business set-aside. As a sole-source award to a large prime contractor, there are limited direct opportunities for small businesses unless they are subcontractors. The prime contractor's subcontracting plan, if applicable, will determine the extent of small business participation. Without specific subcontracting data, the direct impact on the small business ecosystem is likely minimal, though indirect benefits could arise from the overall program's success.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Army's contracting and program management offices. Given the Cost Plus Fixed Fee structure and long duration, rigorous oversight of costs, schedule, and performance is crucial. Transparency may be limited due to the sole-source nature and defense classification. The Inspector General's office could investigate allegations of fraud, waste, or abuse if warranted, but day-to-day oversight rests with the contracting officer and program team.

Related Government Programs

Apache Attack Helicopter Program
Advanced Turbine Engine Program (ATEP)
Aircraft Component Manufacturing
Defense Systems Integration
Aerospace Research and Development

Risk Flags

Sole-source award
Cost-plus contract type
Long contract duration
Potential for cost overruns
Lack of competitive pricing pressure

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $42.1 million to THE BOEING COMPANY. DESIGN PHASE OF THE APACHE IMPROVED TURBINE ENGINE INTEGRATION EFFORT - ITE PHASE 1

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 $42.1 million.

What is the period of performance?

Start: 2019-08-28. End: 2025-09-30.

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

The provided data indicates the contract was 'NOT COMPETED,' implying a sole-source award. Justifications for sole-source procurements typically include factors such as unique capabilities, proprietary technology, urgent need, or lack of adequate competition. For this specific contract, the justification would likely stem from Boeing's established role as the prime contractor for the Apache platform and potentially their unique expertise or intellectual property related to the integration of new turbine engines into the existing airframe. Without access to the official justification document (e.g., a Justification and Approval - J&A), the precise reasons remain speculative but are generally rooted in ensuring program continuity and leveraging existing contractor knowledge for complex integration tasks.

How does the Cost Plus Fixed Fee (CPFF) contract type compare to other contract types for similar R&D efforts in terms of risk and cost control?

Cost Plus Fixed Fee (CPFF) contracts are common for research and development efforts where the scope of work is not fully defined or is subject to change. In a CPFF contract, the contractor is reimbursed for allowable costs incurred, plus a predetermined fixed fee representing profit. This structure shifts some cost risk to the government, as the total cost can exceed initial estimates if actual costs are higher than anticipated. However, the fixed fee provides the contractor with an incentive to control costs, as their profit is capped. Compared to Firm-Fixed-Price (FFP) contracts, CPFF offers more flexibility but less cost certainty for the government. Compared to Cost Plus Incentive Fee (CPIF) contracts, CPFF lacks the explicit cost-sharing incentives for the contractor to reduce costs below target, potentially making it less cost-effective if not managed diligently. Effective oversight is critical to manage costs and prevent scope creep under a CPFF arrangement.

What are the potential risks associated with the long performance period (2019-2025) for this design phase contract?

A long performance period, such as the 2225 days (approximately 6 years) for this contract, presents several risks. Firstly, the risk of scope creep increases significantly; requirements or design parameters may evolve over such an extended period, potentially leading to cost overruns and schedule delays if not managed through formal contract modifications. Secondly, technological obsolescence is a concern; the technology being designed for may be outdated by the time the design phase is complete, requiring further modifications. Thirdly, contractor performance and key personnel retention can be challenging over long durations. Finally, sustained government oversight is required to ensure continued alignment with program objectives and to prevent complacency. The extended period necessitates robust program management and continuous monitoring to mitigate these inherent risks.

What is the significance of the NAICS code 336411 (Aircraft Manufacturing) in the context of this contract?

The North American Industry Classification System (NAICS) code 336411, 'Aircraft Manufacturing,' signifies the primary industry sector to which this contract belongs. This code indicates that the work involves the manufacturing of aircraft and parts. In the context of the Apache Improved Turbine Engine Integration Effort, this code is highly relevant as the contract focuses on the design and integration of a new engine system into an existing aircraft platform. This implies activities related to the modification and enhancement of aircraft structures, systems, and components, falling squarely within the domain of aircraft manufacturing and modification. It helps categorize the contract for statistical purposes and identifies the relevant industry standards and market dynamics.

How does the contract's value of $42 million compare to typical spending on aircraft engine integration design phases?

Determining a precise benchmark for 'typical' spending on aircraft engine integration design phases is challenging due to the wide variability in project scope, complexity, platform type, and technological advancement. However, $42 million for a design phase of a major military aircraft like the Apache, especially involving new engine technology, is a substantial investment. This figure suggests a complex undertaking requiring significant engineering resources, simulation, prototyping, and testing. Comparable programs in the defense sector for engine upgrades or new platform development often involve design phases costing tens to hundreds of millions of dollars. The value reflects the critical nature of the upgrade and the specialized expertise required from a prime contractor like Boeing.

Industry Classification

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

Product/Service Code: AEROSPACE CRAFT COMPONENTS AND ACCESSORIES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: W58RGZ19R0073

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: $42,080,520

Exercised Options: $42,080,520

Current Obligation: $42,080,520

Actual Outlays: $1,161,376

Subaward Activity

Number of Subawards: 1

Total Subaward Amount: $232,000

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline