DoD's $105.8M air cargo contract with FedEx shows strong competition and fair pricing

Contract Overview

Contract Amount: $105,784,150 ($105.8M)

Contractor: Federal Express Corporation

Awarding Agency: Department of Defense

Start Date: 2011-01-01

End Date: 2011-12-31

Contract Duration: 364 days

Daily Burn Rate: $290.6K/day

Competition Type: FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES

Number of Offers Received: 29

Pricing Type: FIRM FIXED PRICE

Sector: Transportation

Official Description: CIVIL RESERVE AIR FLEET - AIR TRANSPORTATION SERVICES

Place of Performance

Location: MEMPHIS, SHELBY County, TENNESSEE, 38118

State: Tennessee Government Spending

Plain-Language Summary

Department of Defense obligated $105.8 million to FEDERAL EXPRESS CORPORATION for work described as: CIVIL RESERVE AIR FLEET - AIR TRANSPORTATION SERVICES Key points: 1. The contract leverages a large, established carrier, suggesting efficient delivery capabilities. 2. A high number of bids indicates a competitive market for these services. 3. The firm-fixed-price structure transfers risk to the contractor. 4. This contract supports critical logistical needs for the Department of Defense. 5. The services are essential for maintaining global reach and rapid deployment capabilities. 6. The geographic scope of operations is broad, covering worldwide air transportation.

Value Assessment

Rating: good

The contract's value of approximately $105.8 million over one year appears reasonable given the scale of services provided. Benchmarking against similar large-scale air transportation contracts for government agencies suggests that the pricing is competitive, especially considering the global reach and rapid response requirements. The firm-fixed-price nature of the contract further supports value by ensuring cost certainty for the government.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under 'full and open competition after exclusion of sources,' indicating a robust bidding process. With 29 bids received, the level of competition was high, suggesting that multiple qualified vendors were interested and capable of performing the required services. This broad competition is a positive sign for price discovery and ensures the government receives competitive offers.

Taxpayer Impact: A high number of bidders means taxpayers benefit from potentially lower prices due to market forces driving down costs. It also signifies that government funds are being used efficiently by selecting the most cost-effective solution.

Public Impact

The Department of Defense benefits through reliable and timely air transportation for cargo and personnel. Essential services include global air cargo delivery, supporting military operations and readiness. The geographic impact is worldwide, enabling logistical support across various theaters of operation. Workforce implications include support for pilots, ground crew, and logistics personnel within FedEx.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for price increases in future contract renewals if competition wanes.
Dependence on a single large contractor could pose risks if service disruptions occur.

Positive Signals

Strong competition indicates a healthy market and potential for sustained value.
Firm-fixed-price contract shifts cost overrun risks to the contractor.
Established contractor with significant infrastructure likely ensures reliable service delivery.

Sector Analysis

The air transportation sector is critical for global logistics and supply chain management. This contract falls within the broader transportation and logistics industry, which is characterized by significant infrastructure investment and operational complexity. Government spending in this area is essential for national security and emergency response, often requiring specialized capabilities and global reach that only a few large carriers can provide.

Small Business Impact

This contract was awarded to a large corporation, Federal Express, and there is no indication of small business set-asides or significant subcontracting opportunities for small businesses in the provided data. The nature of large-scale, global air cargo services typically favors established, large-capacity providers. Future analysis could explore if any portion of this contract's value is subcontracted to smaller entities within the logistics ecosystem.

Oversight & Accountability

The contract is subject to standard federal procurement oversight. The firm-fixed-price structure provides a degree of financial oversight by setting a ceiling on costs. Accountability is managed through performance metrics and delivery requirements outlined in the contract. Transparency is facilitated by the public nature of federal contract awards, allowing for general oversight.

Related Government Programs

Military Sealift Command (MSC) Charter Services
Air Mobility Command (AMC) Airlift Services
Logistics and Supply Chain Management Services

Risk Flags

High contract value
Reliance on a single large contractor
Potential for service disruption
Global operational scope

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $105.8 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 $105.8 million.

What is the period of performance?

Start: 2011-01-01. End: 2011-12-31.

What is the historical spending trend for similar air transportation services by USTRANSCOM?

Historical spending data for USTRANSCOM's air transportation services reveals a consistent reliance on contracted air carriers to meet global logistical demands. While specific figures fluctuate year-to-year based on operational tempo and global events, the overall expenditure in this category has remained substantial. For instance, prior to this contract, similar solicitations often attracted a high number of bidders, indicating a stable market. The agency typically utilizes a mix of contract types, including firm-fixed-price for predictable routes and cost-plus for more dynamic or uncertain missions. Analyzing spending patterns over the last decade shows a steady investment in maintaining airlift capabilities, with significant portions allocated to both scheduled and on-demand charter services, reflecting the dynamic nature of military deployment and sustainment needs.

How does the number of bidders (29) compare to other large federal air cargo contracts?

A total of 29 bids for this contract is a strong indicator of robust competition within the federal air cargo market. Generally, for large-scale, high-value contracts like this, receiving more than 10 bids is considered competitive. Twenty-nine bids suggest that the market is healthy and that multiple large carriers possess the capability and interest to compete for significant government business. This number is considerably higher than what is often seen for more specialized or niche transportation services. For example, contracts requiring unique aircraft types or operating in highly restricted regions might see fewer than five bidders. The high number here implies that the requirements were broadly applicable and that the terms offered were attractive enough to draw significant interest from major players in the air cargo industry.

What are the primary risks associated with relying on Federal Express for these services?

The primary risks associated with relying on Federal Express (FedEx) for these critical air transportation services are multifaceted. Firstly, there's the risk of service disruption due to unforeseen events affecting FedEx's operations, such as labor disputes, major weather events impacting their hubs, or significant mechanical issues with their fleet. Secondly, a high degree of dependence on a single large contractor could lead to reduced leverage in future negotiations, potentially resulting in price increases if competition diminishes or if FedEx faces increased operational costs. Thirdly, while FedEx is a commercial entity, its integration into military logistics chains could be strained during periods of extreme global demand, potentially impacting priority delivery timelines. Finally, cybersecurity risks associated with data sharing and integration between military systems and FedEx's commercial platforms are also a consideration.

What performance metrics are likely used to evaluate FedEx's service delivery under this contract?

Under this firm-fixed-price contract for air transportation services, performance metrics likely focus on timeliness, reliability, and cargo integrity. Key performance indicators (KPIs) would probably include on-time pickup and delivery rates, adherence to flight schedules, and successful transit of cargo without damage or loss. Metrics related to communication and reporting, such as timely provision of flight status updates and delivery confirmations, would also be crucial. Furthermore, compliance with safety regulations and specific handling procedures for sensitive military equipment or supplies would be rigorously monitored. Failure to meet these performance standards could result in contractual penalties or impact future contract awards, ensuring accountability for Federal Express.

How does this contract align with USTRANSCOM's overall mission and strategic objectives?

This contract directly aligns with USTRANSCOM's core mission of providing full-spectrum global mobility solutions and enabling joint force readiness. By securing reliable air transportation services from a major carrier like FedEx, USTRANSCOM ensures the timely and efficient movement of personnel, equipment, and supplies across the globe. This capability is fundamental to supporting military operations, humanitarian assistance, and disaster relief efforts. The contract's focus on worldwide reach and rapid response capabilities directly supports strategic objectives related to power projection and maintaining a forward presence. It allows the Department of Defense to operate effectively in diverse geographic locations, underscoring the critical role of strategic partnerships with commercial transportation providers in achieving national security goals.

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: 29

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, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $105,784,150

Exercised Options: $105,784,150

Current Obligation: $105,784,150

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: HTC71111DC002

IDV Type: IDC

Timeline