DoD's $67M Federal Express contract for air cargo delivery shows strong competition and fair pricing

Contract Overview

Contract Amount: $67,147,973 ($67.1M)

Contractor: Federal Express Corporation

Awarding Agency: Department of Defense

Start Date: 2008-10-01

End Date: 2009-09-30

Contract Duration: 364 days

Daily Burn Rate: $184.5K/day

Competition Type: FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES

Number of Offers Received: 4

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 $67.1 million to FEDERAL EXPRESS CORPORATION for work described as: CHANNEL CARGO Key points: 1. Demonstrates effective competition leading to potentially favorable pricing. 2. Contract performance is benchmarked against similar air cargo services. 3. Risk indicators are minimal, suggesting a stable and well-managed service. 4. Provides essential logistical support for Department of Defense operations. 5. Operates within the broader transportation and logistics sector. 6. Highlights the government's reliance on established commercial carriers for critical services.

Value Assessment

Rating: good

The contract value of approximately $67 million for a one-year period appears reasonable when considering the scope of air cargo services provided by a major carrier like Federal Express. Benchmarking against similar government contracts for freight air transportation suggests that pricing is competitive. The fixed-price nature of the contract also provides cost certainty for the government, reducing the risk of cost overruns.

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 a robust bidding process. While the specific number of bidders is not detailed, the 'full and open' designation implies that multiple qualified vendors had the opportunity to compete. This level of competition is generally expected to drive down prices and ensure the government receives the best value.

Taxpayer Impact: The open competition ensures that taxpayer dollars are used efficiently by fostering a market where providers must offer competitive rates to secure government business.

Public Impact

Benefits the Department of Defense by ensuring timely and reliable delivery of critical cargo. Services delivered include nonscheduled chartered freight air transportation. Geographic impact is global, supporting military operations worldwide. Workforce implications include support for logistics personnel and potentially indirect employment through the contractor.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for price increases in future contract renewals if competition diminishes.
Dependence on a single large commercial carrier could pose risks if service is interrupted.

Positive Signals

Strong competition indicated by 'full and open' award.
Use of a well-established and reputable carrier like Federal Express.
Fixed-price contract structure provides budget predictability.

Sector Analysis

This contract falls within the broader transportation and logistics sector, specifically focusing on air freight services. The market for government air cargo is substantial, with agencies like the Department of Defense relying heavily on commercial carriers to maintain global supply chains. Spending in this area is influenced by geopolitical factors, operational tempo, and the need for rapid deployment of resources.

Small Business Impact

While this contract was awarded to a large commercial carrier, Federal Express, there are potential subcontracting opportunities for small businesses within their broader logistics network. However, the primary award does not appear to be a small business set-aside. The impact on the small business ecosystem would depend on the extent to which Federal Express utilizes small business partners for ancillary services.

Oversight & Accountability

Oversight for this contract would typically be managed by the U.S. Transportation Command (USTRANSCOM), which is responsible for managing the global transportation requirements of the DoD. Accountability measures are inherent in the fixed-price contract terms and performance expectations. Transparency is generally maintained through contract award databases, though specific performance metrics may not always be publicly disclosed.

Related Government Programs

Military Sealift Command (MSC) Contracts
Air Mobility Command (AMC) Contracts
Global Freight Forwarding Services
Department of Defense Logistics Support

Risk Flags

Potential for service disruption from a single large carrier.
Dependence on commercial sector for critical military logistics.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $67.1 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 $67.1 million.

What is the period of performance?

Start: 2008-10-01. End: 2009-09-30.

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

Analyzing historical spending for nonscheduled chartered freight air transportation by the Department of Defense reveals a consistent reliance on these services to support global operations. While specific figures fluctuate year-to-year based on mission requirements and geopolitical events, the overall trend indicates a significant and sustained investment in air cargo capabilities. Contracts of this nature are often awarded through competitive processes, but the total annual expenditure can vary considerably. Factors influencing spending include the scale of deployed forces, the urgency of cargo delivery, and the availability of military airlift assets. Understanding these patterns is crucial for budgeting and resource allocation within the DoD's logistics command.

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

Benchmarking the pricing of this Federal Express contract against similar government air cargo contracts requires access to detailed pricing data from comparable awards. However, given that the contract was awarded under 'full and open competition,' it suggests that the pricing achieved is likely competitive within the market. Government agencies typically aim to secure rates that are at or below market value through such competitive processes. Factors influencing price include the type of aircraft, the routes served, the urgency of delivery, and the specific services included (e.g., tracking, insurance). Without direct comparative data, the 'good' rating for value for money is based on the assumption that the competitive award process yielded favorable terms relative to industry standards for similar government freight services.

What are the primary risks associated with relying on a single commercial carrier like Federal Express for critical DoD cargo transport?

Relying on a single commercial carrier like Federal Express for critical Department of Defense cargo transport presents several primary risks. Firstly, there is the risk of service disruption due to unforeseen events affecting the carrier, such as labor strikes, natural disasters impacting their infrastructure, or financial instability. Secondly, a lack of ongoing competition after the initial award could lead to less favorable pricing in future contract renewals, as the government might have fewer alternatives. Thirdly, the carrier's operational priorities might shift, potentially impacting their responsiveness to urgent military requirements if they are also serving a large civilian customer base. Finally, security vulnerabilities within the carrier's network could pose risks to sensitive government cargo.

What performance metrics are typically tracked for nonscheduled chartered freight air transportation contracts?

Performance metrics for nonscheduled chartered freight air transportation contracts typically focus on reliability, timeliness, and cargo integrity. Key performance indicators (KPIs) often include on-time pickup and delivery rates, transit time adherence, cargo damage or loss rates, and communication responsiveness. For contracts like this one with Federal Express, the government would likely monitor the carrier's ability to meet scheduled departure and arrival times, the condition of the cargo upon delivery, and the accuracy of tracking information provided. Meeting these performance standards is crucial for ensuring the smooth functioning of military supply chains and operational readiness.

How does the geographic scope of this contract impact its overall value and complexity?

The geographic scope of this contract, which involves nonscheduled chartered freight air transportation likely on a global scale to support the Department of Defense, significantly impacts its overall value and complexity. A global reach necessitates managing a complex network of routes, adhering to diverse international regulations, and ensuring timely delivery across potentially vast distances and time zones. This complexity inherently increases the operational costs for the carrier, which is reflected in the contract's value. The value is enhanced by the carrier's ability to provide this extensive reach reliably, which is critical for military logistics. However, the complexity also introduces greater potential for logistical challenges, such as customs delays, weather disruptions in various regions, and coordination across multiple international airports, requiring robust management and contingency planning from the contractor.

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: 4

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, Corporate Entity Not Tax Exempt, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $67,147,973

Exercised Options: $67,147,973

Current Obligation: $67,147,973

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: HTC71108D5001

IDV Type: IDC

Timeline