DoD spent $84.5M on air cargo with FedEx, highlighting reliance on established carriers for critical logistics

Contract Overview

Contract Amount: $84,478,967 ($84.5M)

Contractor: Federal Express Corporation

Awarding Agency: Department of Defense

Start Date: 2009-10-01

End Date: 2014-09-29

Contract Duration: 1,824 days

Daily Burn Rate: $46.3K/day

Competition Type: FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES

Number of Offers Received: 30

Pricing Type: FIRM FIXED PRICE

Sector: Transportation

Official Description: AIR TRANSPORTATION SERVICES - CARGO

Plain-Language Summary

Department of Defense obligated $84.5 million to FEDERAL EXPRESS CORPORATION for work described as: AIR TRANSPORTATION SERVICES - CARGO Key points: 1. Contract value represents significant investment in expedited air cargo capabilities. 2. Sole-source nature of subsequent awards warrants scrutiny of competition dynamics. 3. Long contract duration suggests sustained need for these services. 4. Performance context is critical given the essential nature of cargo delivery. 5. Sector positioning shows reliance on major carriers for global reach. 6. Potential for cost savings through competitive bidding on future awards.

Value Assessment

Rating: fair

The total award amount of $84.5 million over approximately five years for air cargo services appears substantial. Benchmarking against similar contracts for expedited freight delivery is challenging without more specific service level agreements and geographic scope. However, the consistent use of a single provider, Federal Express, suggests a potential lack of aggressive price negotiation or exploration of alternative carriers that might offer better value.

Cost Per Unit: N/A

Competition Analysis

Competition Level: limited

The contract was initially awarded under 'FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES,' which implies that while competition was sought, certain sources were excluded, potentially limiting the pool of bidders. Subsequent delivery orders under this contract may have had less robust competition, especially if the initial award structure favored a specific provider. The limited competition could lead to less favorable pricing for the government.

Taxpayer Impact: The limited competition means taxpayers may not be benefiting from the most cost-effective pricing available in the air cargo market. This structure could allow the incumbent contractor to maintain higher profit margins than if a broader range of carriers had been actively solicited.

Public Impact

Department of Defense (DoD) units requiring rapid deployment of personnel, equipment, and supplies benefit from these services. Critical logistical support for military operations, humanitarian aid, and disaster relief efforts. Geographic impact is global, enabling transport to various operational theaters. Workforce implications include support for logistics personnel and indirect employment within the air cargo industry.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Limited competition may result in higher costs for taxpayers.
Lack of transparency in the exclusion of sources could mask potential inefficiencies.
Dependence on a single carrier for critical logistics poses a risk if service is disrupted.

Positive Signals

Federal Express is a well-established and reliable provider of air cargo services.
The contract ensures timely delivery of essential goods for national security.
Long-term relationship may foster operational efficiencies and understanding of DoD needs.

Sector Analysis

The air transportation services sector is vital for global commerce and military logistics. This contract falls within the broader logistics and transportation industry, which is characterized by major players like FedEx and UPS. Spending in this category is often driven by the need for speed and reliability, particularly for time-sensitive government shipments. Benchmarks for similar government contracts would typically focus on cost per ton-mile or cost per shipment, adjusted for urgency and destination.

Small Business Impact

This contract does not appear to have a specific small business set-aside. Given the nature of large-scale air cargo operations, it is likely that Federal Express utilizes its own extensive infrastructure rather than relying heavily on small business subcontractors for the core transportation services. The impact on the small business ecosystem is likely minimal, as the primary contract is with a large corporation.

Oversight & Accountability

Oversight for this contract would typically fall under USTRANSCOM's contracting and program management offices. Accountability measures would include performance metrics, on-time delivery rates, and adherence to service level agreements. Transparency is facilitated through contract databases like FPDS, though the specifics of the 'exclusion of sources' may limit full public understanding of the initial competition.

Related Government Programs

Military Sealift Command (MSC) Contracts
Expedited Freight Services
Global Logistics Support
Department of Defense Transportation Contracts

Risk Flags

Limited Competition
Potential for Cost Overruns
Single Point of Failure Risk

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $84.5 million to FEDERAL EXPRESS CORPORATION. AIR TRANSPORTATION SERVICES - CARGO

Who is the contractor on this award?

The obligated recipient is FEDERAL EXPRESS CORPORATION.

Which agency awarded this contract?

Awarding agency: Department of Defense (USTRANSCOM).

What is the total obligated amount?

The obligated amount is $84.5 million.

What is the period of performance?

Start: 2009-10-01. End: 2014-09-29.

What specific criteria were used to exclude other potential sources during the initial competition for this contract?

The provided data indicates the contract was awarded under 'FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES.' This designation suggests that while the initial solicitation was intended to be open, specific criteria were applied that led to the exclusion of certain potential bidders. Without access to the detailed justification documents or the solicitation itself, it is impossible to determine the exact criteria. Common reasons for excluding sources can include specialized capabilities, security requirements, past performance issues, or specific technical standards that only a limited number of vendors could meet. This exclusion mechanism, while sometimes necessary, can limit competition and potentially increase costs for the government.

How does the per-pound or per-mile cost of this contract compare to commercial rates for similar expedited air cargo services?

Directly comparing the per-pound or per-mile cost of this $84.5 million contract to standard commercial rates is difficult without detailed breakdowns of the services provided, including specific routes, delivery times (e.g., overnight, 2-day), and any special handling requirements. Government contracts often include service level agreements and performance metrics that may differ from commercial offerings. However, given the scale and duration, it is plausible that the government negotiated volume discounts. Conversely, the limited competition and potential for specific DoD requirements could lead to costs exceeding standard commercial benchmarks. A detailed analysis would require access to the contract's pricing structure and a comparison with anonymized commercial data for equivalent service levels.

What is Federal Express's track record with the Department of Defense on similar large-scale air cargo contracts?

Federal Express (FedEx) has a long-standing relationship with the Department of Defense (DoD) and other government agencies for transportation and logistics services. They are a primary carrier for expedited shipping needs, often handling critical and time-sensitive shipments globally. Their track record generally includes reliable performance, extensive network capabilities, and experience navigating the complexities of government contracting, including security protocols and customs. While specific performance metrics for this particular $84.5 million contract are not detailed here, FedEx's consistent selection for such vital services suggests a generally positive performance history with the DoD, meeting requirements for speed, reliability, and reach.

What are the primary risks associated with relying on a single carrier, Federal Express, for such a significant portion of DoD's air cargo needs?

The primary risks associated with relying on a single carrier like Federal Express for a substantial portion of DoD's air cargo needs include service disruptions, price escalation, and reduced flexibility. A major disruption to FedEx's operations (e.g., labor strikes, natural disasters affecting hubs, cyberattacks) could severely impact the DoD's ability to transport critical supplies and equipment, potentially jeopardizing missions. Over time, with limited competition, FedEx might have less incentive to offer competitive pricing, leading to increased costs for taxpayers. Furthermore, reliance on one provider can limit the DoD's ability to leverage specialized services or explore innovative solutions offered by other carriers.

How has DoD spending on air cargo services, specifically with major carriers like FedEx, trended over the past decade?

DoD spending on air cargo services, including with major carriers like FedEx, has generally remained substantial due to the ongoing need for rapid global logistics support for military operations, exercises, and contingency responses. While specific figures fluctuate based on global events and strategic priorities, the overall trend indicates a consistent reliance on established air cargo providers. Factors influencing spending include the volume and urgency of shipments, fuel costs, and the competitive landscape. The government often utilizes a mix of contract types, including large indefinite-delivery/indefinite-quantity (IDIQ) contracts and specific delivery orders, to manage these needs. Analyzing historical data would reveal periods of increased spending tied to specific conflicts or humanitarian efforts.

Industry Classification

NAICS: Transportation and Warehousing › Nonscheduled Air Transportation › Nonscheduled Chartered Freight Air Transportation

Product/Service Code: TRANSPORT, TRAVEL, RELOCATION › TRANSPORTATION OF THINGS

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES

Solicitation Procedures: SUBJECT TO MULTIPLE AWARD FAIR OPPORTUNITY

Offers Received: 30

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Fedex Corp

Address: 3131 DEMOCRAT RD BLDG D, MEMPHIS, TN, 38118

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $84,478,967

Exercised Options: $84,478,967

Current Obligation: $84,478,967

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: HTC71109D5005

IDV Type: IDC

Timeline