Army awards $2.68 billion for Longbow Apache aircraft, with McDonnell Douglas Helicopter Company as sole source

Contract Overview

Contract Amount: $2,681,736,678 ($2.7B)

Contractor: Mcdonnell Douglas Helicopter Company

Awarding Agency: Department of Defense

Start Date: 2000-03-20

End Date: 2009-09-28

Contract Duration: 3,479 days

Daily Burn Rate: $770.8K/day

Competition Type: NOT COMPETED

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: 200006!2100!000717!AH23 !USA AVIATION AND MISSILE COMMAND!DAAH2300C0001 !A!*!* !20000320!20001031!047800297!006265946!009256819!N!8V613!MCDONNELL DOUGLAS HELICOPTER C!5000 E. MCDOWELL ROAD !MESA !AZ!85215!46000!013!04!MESA !MARICOPA !ARIZONA !0001!+000015000000!N!N!000000000000!1520!AIRCRAFT ROTARY WING !A1A!AIRFRAMES AND SPARES !1AIG!LONGBOW APACHE !3721!3!*!*!*!B!A!*!D !N!J!1!001!N!1A!Z!N!F!* !* !N!C!*!A!A!A!A!A!A!* !*!N!A!C!N!*!*!*!*!*!

Place of Performance

Location: MESA, MARICOPA County, ARIZONA, 85215

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $2.68 billion to MCDONNELL DOUGLAS HELICOPTER COMPANY for work described as: 200006!2100!000717!AH23 !USA AVIATION AND MISSILE COMMAND!DAAH2300C0001 !A!*!* !20000320!20001031!047800297!006265946!009256819!N!8V613!MCDONNELL DOUGLAS HELICOPTER C!5000 E. MCDOWELL ROAD !MESA !AZ!85215!46000!013!04!MESA !MAR… Key points: 1. Contract awarded on a sole-source basis, raising questions about price competition. 2. Significant portion of the contract value allocated to aircraft airframes and spares. 3. Long duration of the contract (over 7 years) suggests a long-term need for these assets. 4. The contract's value represents a substantial investment in rotary-wing aircraft capabilities. 5. Geographic concentration of the contractor in Arizona may have local economic implications.

Value Assessment

Rating: questionable

The total contract value of $2.68 billion for rotary-wing aircraft manufacturing is substantial. However, without competitive bidding, it is difficult to benchmark the value for money. The firm-fixed-price nature of the contract shifts some risk to the contractor, but the lack of competition prevents a clear assessment of whether the government received the best possible price. Further analysis would require comparison to similar sole-source procurements or independent cost estimates.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one bidder was solicited. This approach is typically used when only one responsible source can provide the required supplies or services. The lack of competition means there was no opportunity for price discovery through a bidding process, potentially leading to higher costs for the government compared to a fully competed contract.

Taxpayer Impact: Taxpayers may have paid a premium due to the absence of competitive pressure to lower prices. The government's ability to negotiate the best possible terms is limited in a sole-source scenario.

Public Impact

The primary beneficiaries are the U.S. Army, which receives critical rotary-wing aircraft and associated spares. The contract supports the production of Longbow Apache aircraft, enhancing military aviation capabilities. The geographic impact is concentrated in Mesa, Arizona, where the contractor is located, potentially supporting local jobs and the regional economy. The contract implies a sustained need for specialized aviation manufacturing workforce skills.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition and potentially increases costs for taxpayers.
Lack of transparency in the sole-source justification requires careful scrutiny.
Long contract duration could lead to cost overruns if not managed effectively.

Positive Signals

Firm-fixed-price contract structure provides cost certainty for the government.
Contractor's established role in Apache production suggests technical expertise.
Award supports critical military aviation assets.

Sector Analysis

This contract falls within the Aircraft Manufacturing sector, specifically focusing on rotary-wing aircraft. The U.S. defense industry for aerospace and defense products is a significant market, with major players often involved in long-term, high-value contracts for military platforms. The value of this contract, at $2.68 billion, is substantial and reflects the complexity and cost associated with advanced military aircraft production. Comparable spending benchmarks would typically involve other large-scale military aircraft procurement programs.

Small Business Impact

There is no indication of a small business set-aside for this contract. Given the sole-source nature and the specialized requirements of manufacturing advanced military aircraft, it is unlikely that subcontracting opportunities for small businesses were a primary consideration in the initial award. However, the prime contractor may engage small businesses for specific components or services as part of its supply chain.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Army and the Department of Defense. Given its sole-source nature, there may be heightened scrutiny from oversight bodies like the Government Accountability Office (GAO) or the Inspector General to ensure the justification for sole-source procurement is sound and that the pricing is fair and reasonable. Transparency may be limited due to the non-competitive award, but contract modifications and performance reports would be subject to review.

Related Government Programs

Apache Attack Helicopter Program
U.S. Army Aviation Modernization Programs
Defense Production Act Investments
Rotary-Wing Aircraft Procurement

Risk Flags

Sole-source award lacks competitive pricing.
Potential for higher costs due to lack of competition.
Limited transparency in procurement process.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $2.68 billion to MCDONNELL DOUGLAS HELICOPTER COMPANY. 200006!2100!000717!AH23 !USA AVIATION AND MISSILE COMMAND!DAAH2300C0001 !A!*!* !20000320!20001031!047800297!006265946!009256819!N!8V613!MCDONNELL DOUGLAS HELICOPTER C!5000 E. MCDOWELL ROAD !MESA !AZ!85215!46000!013!04!MESA !MARICOPA !ARIZONA !0001!+000015000000!N!N!000000000000!1520!AIRCRAFT ROTARY WING !A1A!AIRFRAMES AND SPARES !1AIG!LONGBOW APACHE !3721!3!*!*!*!B!A!*!D !N!J!

Who is the contractor on this award?

The obligated recipient is MCDONNELL DOUGLAS HELICOPTER COMPANY.

Which agency awarded this contract?

Awarding agency: Department of Defense (Department of the Army).

What is the total obligated amount?

The obligated amount is $2.68 billion.

What is the period of performance?

Start: 2000-03-20. End: 2009-09-28.

What is the historical spending pattern for Longbow Apache aircraft procurement by the U.S. Army?

Historical spending on Longbow Apache aircraft procurement by the U.S. Army has been substantial over several decades, reflecting the platform's critical role in combat operations. While this specific contract for $2.68 billion covers a defined period and scope, it is part of a larger, ongoing investment in the Apache fleet. Previous contracts have varied in value based on the number of aircraft, upgrades, and support services procured. Analyzing past contract awards, including their competition levels and total values, would provide context for the current sole-source award. For instance, earlier procurements might have been competed, offering a benchmark for pricing and efficiency that is now absent. Understanding the lifecycle costs, including sustainment and upgrades, is crucial for a comprehensive view of Army aviation spending.

What specific justification was provided for awarding this contract on a sole-source basis?

The justification for awarding this contract on a sole-source basis would typically stem from specific criteria outlined in federal acquisition regulations (FAR). Common reasons include that only one responsible source can satisfy the agency's needs, or that a critical national defense capability is involved that cannot be replicated or obtained through competitive means within a reasonable timeframe. For advanced military platforms like the Longbow Apache, this could relate to unique technological capabilities, proprietary manufacturing processes, or the need for seamless integration with existing systems. The U.S. Army would have had to formally document and justify why competition was not feasible or advantageous, often requiring approval from higher authorities within the Department of Defense. This justification is crucial for ensuring accountability and preventing potential misuse of sole-source authority.

How does the firm-fixed-price (FFP) contract type impact risk and cost for this aircraft procurement?

A firm-fixed-price (FFP) contract type, as indicated for this award, places the primary responsibility for cost control and performance risk on the contractor, McDonnell Douglas Helicopter Company. This means the contractor agrees to a total price, and is obligated to complete the work for that amount, regardless of their actual costs. For the government, this offers significant cost certainty, as the final price is established upfront and is not subject to increases due to contractor cost overruns. However, the benefit of FFP is maximized when the scope of work is well-defined and the contractor has a clear understanding of the costs involved. In a sole-source scenario, the government relies heavily on its negotiation skills and pre-award cost estimates to ensure the FFP is fair and reasonable, as there is no competitive pressure to drive the price down.

What is the contractor's track record with the U.S. Army and similar defense contracts?

McDonnell Douglas Helicopter Company, now part of Boeing, has a long and established track record with the U.S. Army, particularly concerning the Apache attack helicopter program. They were a primary developer and manufacturer of the Apache, including its Longbow variants. This history suggests a deep understanding of the platform's technical requirements, manufacturing processes, and performance characteristics. Their experience with previous Apache contracts, including production, upgrades, and sustainment, provides a strong basis for the Army's confidence in their ability to fulfill this sole-source award. However, a comprehensive assessment would also consider their performance on other major defense contracts, including any past issues related to cost, schedule, or quality, and how effectively those were resolved.

What are the potential implications of this contract on the broader aerospace and defense market?

This $2.68 billion sole-source contract for Longbow Apache aircraft has several implications for the broader aerospace and defense market. Firstly, it reinforces the dominance of established prime contractors in major defense programs, potentially limiting opportunities for new entrants or smaller firms seeking to compete on large platforms. Secondly, it signifies continued investment in traditional rotary-wing attack platforms, which may influence R&D priorities and resource allocation within the sector. Thirdly, the sole-source nature highlights the challenges and complexities of sole-source procurements within the defense industrial base, potentially sparking discussions about competition policy and industrial base resilience. Finally, it underscores the significant financial commitment the U.S. Army has to maintaining and modernizing its aviation fleet, impacting suppliers and subcontractors within the defense ecosystem.

Industry Classification

NAICS: Manufacturing › Aerospace Product and Parts Manufacturing › Aircraft Manufacturing

Product/Service Code: AEROSPACE CRAFT AND STRUCTURAL COMPONENTS

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: THE Boeing Company (UEI: 009256819)

Address: 5000 E MCDOWELL RD, MESA, AZ, 04

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

Financial Breakdown

Contract Ceiling: $2,719,010,664

Exercised Options: $2,719,010,664

Current Obligation: $2,681,736,678

Contract Characteristics

Multi-Year Contract: Yes

Cost or Pricing Data: NO

Timeline