Boeing awarded $50.5M for Apache engine integration, a sole-source contract with a 6-year performance period

Contract Overview

Contract Amount: $50,512,000 ($50.5M)

Contractor: THE Boeing Company

Awarding Agency: Department of Defense

Start Date: 2021-12-23

End Date: 2027-06-30

Contract Duration: 2,015 days

Daily Burn Rate: $25.1K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: INTEGRATION OF IMPROVED TURBINE ENGINE - APACHE PHASE II

Place of Performance

Location: MESA, MARICOPA County, ARIZONA, 85215

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $50.5 million to THE BOEING COMPANY for work described as: INTEGRATION OF IMPROVED TURBINE ENGINE - APACHE PHASE II Key points: 1. Contract awarded on a sole-source basis, limiting competitive price discovery. 2. Significant investment in advanced turbine engine technology for the Apache helicopter. 3. Long contract duration suggests a need for sustained engineering support. 4. Performance period extends through mid-2027, indicating a phased development or integration. 5. Contract type (Cost Plus Fixed Fee) may lead to cost overruns if not managed closely. 6. Focus on engineering services for a critical defense platform.

Value Assessment

Rating: fair

The contract value of $50.5 million for engineering services related to Apache engine integration appears reasonable given the complexity of defense systems. However, without comparable sole-source contracts for similar engine integration projects, a precise value-for-money assessment is challenging. The Cost Plus Fixed Fee structure necessitates careful oversight to ensure costs remain within projected bounds and that the fixed fee remains appropriate for the effort expended. Benchmarking against industry standards for advanced aerospace engineering services would provide further context.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning the Department of the Army did not solicit bids from multiple potential contractors. This approach is typically used when only one source is capable of meeting the requirement, often due to proprietary technology, unique expertise, or urgent needs. The lack of competition means that pricing was not subjected to market forces, potentially leading to a higher cost than if multiple bids had been received. The justification for sole-source procurement should be thoroughly documented.

Taxpayer Impact: Taxpayers may not be receiving the best possible price due to the absence of competitive bidding. This highlights the importance of rigorous justification for sole-source awards to ensure funds are used efficiently.

Public Impact

The U.S. Army benefits from enhanced capabilities for its Apache helicopter fleet. Services delivered include advanced engineering and integration of new turbine engines. Geographic impact is primarily within Arizona, where the contractor is located. Workforce implications include specialized engineering and technical roles at Boeing. The program supports the modernization of a key military asset, ensuring operational readiness.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure on pricing.
Cost Plus Fixed Fee contract type can incentivize cost escalation if not managed.
Long performance period requires sustained oversight to ensure milestones are met.
Lack of public detail on technical specifications makes independent assessment difficult.

Positive Signals

Focus on critical defense technology modernization.
Contract awarded to a known and experienced defense contractor (Boeing).
Clear performance period and end date provide a defined scope.
Engineering services are essential for maintaining and improving military hardware.

Sector Analysis

This contract falls within the Aerospace and Defense sector, specifically focusing on aircraft systems and engineering services. The market for advanced turbine engine integration is highly specialized, dominated by a few major defense contractors with extensive R&D capabilities and established relationships with military branches. Spending in this area is driven by the need for technological superiority and platform modernization. Comparable spending benchmarks would typically involve other major aircraft upgrade programs or new platform development contracts within the DoD.

Small Business Impact

There is no indication that this contract includes a small business set-aside. Given the specialized nature of advanced turbine engine integration for military aircraft, it is unlikely that small businesses would be the primary awardees for the prime contract. However, Boeing may engage small businesses as subcontractors for specific components or services, though this is not explicitly detailed in the provided data.

Oversight & Accountability

Oversight for this contract would primarily reside with the Department of the Army contracting and program management offices. Accountability measures would be tied to the Cost Plus Fixed Fee contract terms, requiring detailed reporting on costs incurred and progress towards milestones. Transparency is limited due to the sole-source nature and the proprietary aspects of defense technology. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Apache Attack Helicopter Program
DoD Turbine Engine Research and Development
Aerospace Engineering Services Contracts
Defense Contract Management Agency (DCMA) Oversight

Risk Flags

Sole-source award
Cost Plus Fixed Fee contract type
Potential for cost overruns
Limited public technical details

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $50.5 million to THE BOEING COMPANY. INTEGRATION OF IMPROVED TURBINE ENGINE - APACHE PHASE II

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 $50.5 million.

What is the period of performance?

Start: 2021-12-23. End: 2027-06-30.

What is Boeing's track record with similar sole-source defense contracts, particularly those involving complex system integration?

Boeing has a long history of securing sole-source contracts for critical defense programs, often due to its established role as a prime contractor and its proprietary technologies. For instance, Boeing has historically received sole-source awards for upgrades and sustainment of platforms like the Apache, Chinook, and Starlifter. These contracts often involve complex system integration, requiring deep knowledge of the platform and its subsystems. While such awards are common in the defense sector due to specialized requirements, they necessitate robust oversight from the government to ensure fair pricing and effective execution. Boeing's performance on these contracts is generally viewed as meeting technical requirements, but cost control and schedule adherence can vary, as is typical for large, complex defense projects.

How does the Cost Plus Fixed Fee (CPFF) contract type typically perform in terms of cost control compared to other contract types for R&D-intensive projects?

Cost Plus Fixed Fee (CPFF) contracts are often used for research and development or complex engineering projects where the scope of work is not fully defined at the outset, making firm-fixed-price contracts impractical. In a CPFF contract, the contractor is reimbursed for allowable costs plus a fixed fee representing profit. While the fixed fee provides some incentive for the contractor to control costs (as it doesn't increase with higher costs), the primary risk of cost overrun lies with the government. If costs exceed estimates, the government pays the actual costs. This contrasts with firm-fixed-price contracts where the contractor bears the risk of cost overruns. For R&D-intensive projects, CPFF can facilitate innovation by allowing flexibility, but it requires stringent government oversight of costs and progress to prevent excessive spending and ensure the fixed fee remains appropriate for the effort.

What are the potential risks associated with integrating new turbine engines into an existing platform like the Apache helicopter?

Integrating new turbine engines into an existing platform like the Apache helicopter presents several significant risks. These include technical integration challenges, such as ensuring compatibility with the airframe, transmission, and control systems. Performance risks involve potential issues with power output, fuel efficiency, vibration, and heat management. There are also risks related to reliability and maintainability of the new engines in operational environments. Furthermore, schedule risks can arise from unforeseen technical difficulties during development and testing, potentially delaying deployment. Finally, cost risks are inherent, as unexpected engineering problems or the need for extensive modifications can drive up expenses beyond initial estimates. Successful integration requires rigorous testing, validation, and close collaboration between the engine manufacturer and the airframe manufacturer.

What is the historical spending trend for Apache helicopter upgrades and modifications by the Department of the Army?

The Department of the Army has consistently invested in the Apache attack helicopter platform throughout its lifecycle, reflecting its critical role in combat aviation. Historical spending trends for Apache upgrades and modifications show a pattern of continuous modernization efforts aimed at enhancing survivability, lethality, and operational effectiveness. This includes upgrades to sensors, targeting systems, engines, and weapons integration. Spending often fluctuates based on specific modernization phases, technological advancements, and evolving threat assessments. Major upgrade programs, such as the AH-64E Apache Guardian, represent significant investments over several years. The total spending on Apache sustainment and upgrades likely runs into billions of dollars over the platform's decades of service, with specific contract awards like this one representing components of larger, ongoing modernization strategies.

How does the geographic location of the contractor (Arizona) impact the contract's execution and oversight?

The geographic location of the contractor, The Boeing Company, in Arizona, has implications for contract execution and oversight. While Boeing is a global company, having a significant portion of the work performed in Arizona means that government oversight personnel, potentially from the Defense Contract Management Agency (DCMA), may be co-located or regularly visit the facility. This proximity can facilitate communication, site inspections, and progress monitoring. However, it also means that oversight resources are concentrated in that specific region. For a sole-source contract of this magnitude and duration, the government would likely assign dedicated contract officers and technical representatives to manage the relationship and ensure compliance with contract terms, regardless of the contractor's specific location within the U.S.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Architectural, Engineering, and Related Services › Engineering Services

Product/Service Code: ENGINES AND TURBINES AND COMPONENT

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: W58RGZ20R0140

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: $81,626,037

Exercised Options: $50,512,000

Current Obligation: $50,512,000

Subaward Activity

Number of Subawards: 20

Total Subaward Amount: $4,575,065

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline