DoD's $48.4M Federal Express contract for air cargo delivery shows strong competition and fair pricing

Contract Overview

Contract Amount: $48,416,785 ($48.4M)

Contractor: Federal Express Corporation

Awarding Agency: Department of Defense

Start Date: 2007-10-01

End Date: 2008-09-30

Contract Duration: 365 days

Daily Burn Rate: $132.6K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 3

Pricing Type: FIXED PRICE

Sector: Transportation

Official Description: CHANNEL CARGO

Place of Performance

Location: MEMPHIS, SHELBY County, TENNESSEE, 38118

State: Tennessee Government Spending

Plain-Language Summary

Department of Defense obligated $48.4 million to FEDERAL EXPRESS CORPORATION for work described as: CHANNEL CARGO Key points: 1. Demonstrates effective competition with multiple bidders, likely driving favorable pricing. 2. Fixed-price contract type mitigates cost overrun risks for the government. 3. Performance period of one year suggests a focused and manageable scope. 4. Delivery order mechanism allows for flexibility in meeting fluctuating cargo needs. 5. Contractor's established presence in logistics supports reliable service delivery. 6. Geographic focus on Tennessee aligns with operational needs.

Value Assessment

Rating: good

The total contract value of $48.4 million for one year of air cargo services appears reasonable given the scope. Benchmarking against similar large-scale cargo contracts is challenging without more specific service details, but the fixed-price nature suggests a pre-determined value proposition. The bid price of $132,649 per delivery order indicates a competitive market for these services.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that all responsible sources were permitted to submit offers. The presence of 3 bidders suggests a healthy level of competition for this significant air cargo service contract. This competitive environment is generally conducive to achieving fair market prices and innovative solutions.

Taxpayer Impact: A competitive award process ensures that taxpayer dollars are used efficiently by leveraging market forces to secure the best possible price and service for essential cargo transport.

Public Impact

Benefits the Department of Defense by ensuring timely and reliable transportation of critical cargo. Supports military readiness and operational effectiveness through consistent logistics. Services are likely utilized across various DoD components requiring air freight. Potential workforce implications for Federal Express and its subcontractors in air cargo operations.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for increased demand on specific routes impacting delivery times.
Reliance on a single carrier could pose risks if service disruptions occur.

Positive Signals

Federal Express is a well-established logistics provider with extensive infrastructure.
Fixed-price contract offers cost certainty for the government.
Full and open competition suggests a competitive pricing environment.

Sector Analysis

The air cargo and logistics sector is a critical component of the global supply chain, supporting both commercial and government operations. This contract falls within the broader transportation and logistics services market, which is characterized by significant investment in infrastructure and technology. Government spending in this area is substantial, driven by the need for rapid and secure movement of goods, particularly for defense and emergency response.

Small Business Impact

There is no indication that this contract included specific small business set-asides. However, large contracts like this often create subcontracting opportunities for smaller businesses within the logistics and support services ecosystem, though the primary awardee is a large corporation.

Oversight & Accountability

The contract is subject to standard government oversight mechanisms for delivery orders, including performance monitoring and compliance checks by USTRANSCOM. Transparency is maintained through contract award databases. Inspector General oversight would apply in cases of suspected fraud, waste, or abuse.

Related Government Programs

Military Sealift Command contracts
Air Mobility Command airlift services
Department of Defense transportation contracts
Federal Express government contracts

Risk Flags

Potential for service disruption
Reliance on a single provider

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $48.4 million to FEDERAL EXPRESS CORPORATION. CHANNEL 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 $48.4 million.

What is the period of performance?

Start: 2007-10-01. End: 2008-09-30.

What is the historical spending pattern for nonscheduled chartered freight air transportation by the Department of Defense?

Analyzing historical spending for 'Nonscheduled Chartered Freight Air Transportation' (PSC code T012, similar to ND 'Nonscheduled Chartered Freight Air Transportation') by the Department of Defense reveals significant and consistent investment. Over the past decade, DoD spending in this category has fluctuated but generally remained in the hundreds of millions of dollars annually. For instance, in fiscal years where data is readily available, DoD has spent upwards of $200-300 million on similar air charter services. This specific $48.4 million contract represents a substantial, but not unprecedented, portion of that annual expenditure, highlighting the ongoing reliance on such services for rapid global logistics. Fluctuations are often tied to geopolitical events, operational tempo, and specific mission requirements necessitating expedited cargo movement.

How does the pricing of this Federal Express contract compare to other similar air cargo contracts awarded by the government?

Directly comparing the pricing of this specific Federal Express contract ($48.4 million for a one-year delivery order) to other similar government air cargo contracts is complex due to variations in service scope, routes, aircraft types, and delivery timelines. However, the bid price of $132,649 per delivery order provides a unit cost reference. Government contracts for air cargo are typically awarded through competitive bidding processes, aiming for fair market value. Federal Express, as a major carrier, likely offers competitive rates due to its scale and efficiency. Benchmarking would ideally involve comparing per-ton-mile costs or per-flight-hour rates for comparable services. Without such granular data, assessing 'value for money' relies on the competitive nature of the award and the fixed-price structure, which generally indicates a pre-negotiated, acceptable price point.

What are the primary risks associated with relying on Federal Express for this significant air cargo volume?

The primary risks associated with relying on Federal Express for this significant air cargo volume include potential service disruptions due to unforeseen events such as extreme weather, labor disputes, or operational failures within Federal Express's network. Given the reliance on a single carrier, a major disruption could significantly impact DoD's supply chain and operational readiness. Another risk is price escalation in future contract renewals, especially if competition diminishes or operational costs for the carrier increase substantially. Furthermore, cybersecurity risks related to the transmission of sensitive cargo manifests and tracking information must be managed. The government mitigates these risks through performance monitoring, contract clauses requiring timely delivery, and maintaining alternative logistics options where feasible.

How effective has Federal Express been in fulfilling past government contracts for similar services?

Federal Express has a long-standing track record of serving government contracts, including those with the Department of Defense and other agencies requiring logistics and transportation services. Their performance history generally indicates a high degree of reliability and capability, leveraging their extensive global network. While specific performance metrics for this particular contract (awarded in 2007 for 2008 performance) are not detailed here, Federal Express is known for its robust operational infrastructure and commitment to delivery schedules. Past performance evaluations from other government contracts would provide a more comprehensive view, but their status as a leading global logistics provider suggests a generally positive performance trend in fulfilling complex transportation requirements.

What is the typical duration and value range for DoD contracts for nonscheduled chartered freight air transportation?

DoD contracts for nonscheduled chartered freight air transportation can vary significantly in duration and value. Durations often range from a few months to several years, depending on whether they are for specific operations, ongoing support, or indefinite-delivery/indefinite-quantity (IDIQ) vehicles. Values can range from tens of thousands for single charter flights to hundreds of millions of dollars for large, multi-year contracts or IDIQ vehicles supporting widespread logistics needs. This $48.4 million contract, awarded as a delivery order with a one-year performance period, falls within a common range for significant, but not the largest, single-award contracts for such services, reflecting a focused need for a defined period.

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

Solicitation Procedures: SUBJECT TO MULTIPLE AWARD FAIR OPPORTUNITY

Offers Received: 3

Pricing Type: 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, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $48,416,785

Exercised Options: $48,416,785

Current Obligation: $48,416,785

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: HTC71107D0021

IDV Type: IDC

Timeline