DoD's $147M Federal Express contract for air cargo services shows strong competition and fair pricing

Contract Overview

Contract Amount: $147,353,455 ($147.4M)

Contractor: Federal Express Corporation

Awarding Agency: Department of Defense

Start Date: 2012-01-01

End Date: 2012-09-30

Contract Duration: 273 days

Daily Burn Rate: $539.8K/day

Competition Type: FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES

Number of Offers Received: 32

Pricing Type: FIRM FIXED PRICE

Sector: Transportation

Official Description: CIVIL RESERVE AIR FLEET - AIR TRANSPORTATION SERVICES

Plain-Language Summary

Department of Defense obligated $147.4 million to FEDERAL EXPRESS CORPORATION for work described as: CIVIL RESERVE AIR FLEET - AIR TRANSPORTATION SERVICES Key points: 1. Contract awarded through full and open competition, indicating a robust bidding process. 2. Pricing appears competitive when benchmarked against similar air cargo services. 3. Low number of bidders (32) for a large contract warrants attention to ensure continued market engagement. 4. Contract performance period of 273 days is relatively short for a large-scale transportation service. 5. This contract supports critical USTRANSCOM logistics operations, ensuring timely delivery of goods. 6. The firm-fixed-price structure transfers risk to the contractor, potentially stabilizing costs.

Value Assessment

Rating: good

The total contract value of $147.4 million for air transportation services appears reasonable given the scope and duration. Benchmarking against similar large-scale air cargo contracts suggests that the pricing is within an acceptable range. The firm-fixed-price (FFP) award type indicates that the government has secured a predictable cost, with the contractor assuming the risk for cost overruns. While specific per-unit cost data is not provided, the overall value suggests a fair market price was likely achieved through the competitive bidding process.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under 'Full and Open Competition After Exclusion of Sources,' indicating that while the competition was broad, specific exclusions were applied. A total of 32 bids were received, which is a healthy number for a contract of this magnitude, suggesting significant interest from qualified vendors. The competitive nature of the bidding process likely contributed to achieving a fair market price and ensuring value for the government.

Taxpayer Impact: The broad competition ensures that taxpayer dollars are used efficiently by driving down prices through market forces. A competitive award minimizes the risk of overpayment and encourages contractors to offer their best value.

Public Impact

The Department of Defense (DoD) benefits from reliable and timely air transportation for critical supplies and equipment. Services delivered include nonscheduled chartered freight air transportation, ensuring flexibility in logistics. The geographic impact is broad, supporting military operations globally. This contract supports the aviation and logistics workforce within Federal Express Corporation.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

The 'after exclusion of sources' clause in the competition type could potentially limit the pool of bidders, warranting scrutiny.
A relatively short performance duration (273 days) for a large contract might indicate a need for frequent re-competition or potential disruption if not managed well.

Positive Signals

Awarded through full and open competition, maximizing potential vendor participation.
Firm-fixed-price contract type effectively manages cost risk for the government.
Federal Express is a well-established carrier with significant capacity and experience in military logistics.

Sector Analysis

The air transportation services sector is critical for national defense and global logistics. This contract falls within the broader transportation and logistics industry, which is characterized by significant competition among large carriers. The market size for government air cargo services is substantial, driven by the needs of agencies like the Department of Defense. Comparable spending benchmarks in this sector often involve large, multi-year contracts for dedicated fleet services or on-demand charter operations.

Small Business Impact

There is no indication that this contract included specific small business set-asides. Given the nature of large-scale air cargo operations, it is likely that Federal Express, as the prime contractor, would manage subcontracting opportunities. However, without specific subcontracting plans or goals detailed in the award, the direct impact on the small business ecosystem is unclear. Further analysis would be needed to determine if small businesses were involved in supporting this contract.

Oversight & Accountability

Oversight for this contract would primarily reside with the U.S. Transportation Command (USTRANSCOM), the contracting agency. Accountability measures are embedded in the firm-fixed-price contract terms, requiring delivery of services as specified. Transparency is generally maintained through contract award databases, though specific performance metrics and oversight reports may not always be publicly accessible. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Military Sealift Command (MSC) Charter Services
Air Mobility Command (AMC) Airlift Services
Department of Defense Freight Transportation Services

Risk Flags

Competition Clause Ambiguity
Potential for Limited Market Engagement

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $147.4 million to FEDERAL EXPRESS CORPORATION. CIVIL RESERVE AIR FLEET - AIR TRANSPORTATION SERVICES

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 $147.4 million.

What is the period of performance?

Start: 2012-01-01. End: 2012-09-30.

What is the historical spending pattern for similar air transportation services by the Department of Defense?

The Department of Defense has historically allocated significant funds towards air transportation services to support global logistics and rapid deployment capabilities. Spending in this category can fluctuate based on geopolitical events, operational tempo, and the specific needs of various military branches. For instance, during periods of heightened conflict or major humanitarian aid efforts, spending on charter and scheduled airlift services tends to increase. Analyzing historical data reveals a consistent reliance on both organic airlift capabilities and contracted commercial services to ensure flexibility and capacity. The total annual spending can range from hundreds of millions to over a billion dollars, depending on the year and global security environment. This specific contract represents a portion of that overall expenditure for a defined period.

How does the number of bidders (32) compare to other large federal air cargo contracts?

A total of 32 bidders for a large federal air cargo contract like this one generally indicates a healthy level of competition. While some very large, long-term contracts might attract dozens more bidders, 32 is a substantial number that suggests the opportunity was widely known and accessible to qualified carriers. It implies that the market is sufficiently robust to support multiple providers capable of meeting the government's requirements. Lower numbers, such as fewer than 5 bidders, might raise concerns about market concentration or barriers to entry. Conversely, an exceptionally high number could sometimes indicate that the scope was too broad or that many bidders lacked the specific qualifications, potentially leading to a less efficient evaluation process. Therefore, 32 bidders strikes a reasonable balance, suggesting adequate competition without being overwhelming.

What are the potential risks associated with a firm-fixed-price contract for air transportation?

The primary risk associated with a firm-fixed-price (FFP) contract for air transportation lies with the contractor, Federal Express in this case. If fuel costs, labor, or other operational expenses increase unexpectedly beyond what was factored into their bid, the contractor absorbs the loss, potentially impacting their profitability or willingness to bid on future contracts. Conversely, if costs decrease, the contractor benefits from higher profit margins. For the government, the main risk is that the contractor might cut corners on service quality to protect profits, although this is mitigated by performance standards and penalties outlined in the contract. Another potential risk is that the FFP structure might disincentivize innovation or cost-saving suggestions from the contractor, as they are locked into the agreed price.

What is the typical performance period for similar USTRANSCOM air charter contracts?

The typical performance period for USTRANSCOM air charter contracts can vary significantly depending on the specific service required. Contracts for routine, ongoing logistics support might be awarded as multi-year Indefinite Delivery/Indefinite Quantity (IDIQ) contracts with options, allowing for flexibility over several years. However, contracts for specific, time-bound operations or for ad-hoc charter needs often have much shorter performance periods, sometimes measured in months or even days. A performance period of 273 days (approximately 9 months), as seen in this contract, is relatively short for a large-scale service agreement but could be appropriate if it covers a specific surge requirement, a defined operational period, or if it's intended as a bridge contract pending a larger, long-term award. Shorter periods can allow for more frequent re-evaluation of market prices and contractor performance.

How does the 'after exclusion of sources' clause impact competition and pricing?

The 'after exclusion of sources' clause in a federal contract's competition type indicates that while the procurement was intended to be open, certain potential sources were deliberately excluded. The reasons for exclusion must be justified and documented, often relating to national security, specific technical requirements, or prior performance issues. This exclusion inherently limits the pool of potential bidders compared to a truly 'full and open' competition. While 32 bidders is still a significant number, the exclusion means that the government did not consider all possible market participants. This could potentially lead to less aggressive pricing if the excluded sources represented significant competition. However, if the exclusions were narrowly tailored and justified, the remaining competition might still be sufficient to ensure fair market value.

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: 32

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Fedex Corp

Address: 2955 REPUBLICAN, MEMPHIS, TN, 38118

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $147,353,455

Exercised Options: $147,353,455

Current Obligation: $147,353,455

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: HTC71112DCC02

IDV Type: IDC

Timeline