DHS awards $273M for HH-65 Helicopter Re-engine Project, impacting aeronautical instrument manufacturing

Contract Overview

Contract Amount: $273,013,502 ($273.0M)

Contractor: Integrated Coast Guard Systems LLC

Awarding Agency: Department of Homeland Security

Start Date: 2004-03-12

End Date: 2007-09-30

Contract Duration: 1,297 days

Daily Burn Rate: $210.5K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Official Description: HH-65 HELICOPTER RE-ENGINE PROJECT

Place of Performance

Location: ELIZABETH CITY, PASQUOTANK County, NORTH CAROLINA, 27906

State: North Carolina Government Spending

Plain-Language Summary

Department of Homeland Security obligated $273.0 million to INTEGRATED COAST GUARD SYSTEMS LLC for work described as: HH-65 HELICOPTER RE-ENGINE PROJECT Key points: 1. The contract value of $273 million represents a significant investment in aviation modernization. 2. Competition dynamics for this project are crucial for ensuring cost-effectiveness in specialized manufacturing. 3. Performance risks may include integration challenges and adherence to stringent aerospace standards. 4. This project falls within the broader context of national security and maritime domain awareness. 5. The sector positioning is within the specialized aerospace and defense manufacturing industry.

Value Assessment

Rating: fair

Benchmarking the value of this contract is challenging without specific cost breakdowns for the re-engine components and labor. The Cost Plus Incentive Fee (CPIF) contract type suggests that cost savings and performance targets were intended to be shared, but the final realized value depends heavily on the contractor's efficiency and the achievement of incentive goals. Comparing it to similar large-scale helicopter modernization programs would provide a better understanding of its cost-effectiveness, but such data is not readily available.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that multiple vendors had the opportunity to bid. The presence of two bidders suggests a moderate level of competition for this specialized project. While full and open competition is generally favorable for price discovery, the specific nature of helicopter re-engineering might limit the pool of qualified and competitive bidders.

Taxpayer Impact: Taxpayers benefit from the competitive process, which aims to secure the best possible price and value for the U.S. Coast Guard's critical aviation assets.

Public Impact

The U.S. Coast Guard benefits directly through the modernization of its HH-65 helicopter fleet, enhancing operational capabilities. Services delivered include the re-engining of helicopters, likely improving performance, reliability, and fuel efficiency. The geographic impact is primarily national, supporting Coast Guard operations across various regions. Workforce implications may include specialized engineering, manufacturing, and maintenance jobs within the aerospace sector.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost overruns inherent in CPIF contracts if incentives are not structured effectively.
Risk of schedule delays impacting operational readiness of the HH-65 fleet.
Dependency on a single contractor for specialized re-engine components could pose supply chain risks.

Positive Signals

Full and open competition suggests a robust bidding process to achieve value.
The CPIF contract structure incentivizes contractor efficiency and cost control.
Modernizing the HH-65 fleet enhances the Coast Guard's critical search and rescue and law enforcement missions.

Sector Analysis

The aerospace and defense manufacturing sector is characterized by high barriers to entry, stringent regulatory requirements, and long product development cycles. This contract fits within the segment focused on aircraft component manufacturing and modification. Comparable spending benchmarks for helicopter modernization programs can vary widely based on the aircraft type, scope of work, and technological upgrades involved. The total contract value of $273 million places it as a significant, but not exceptionally large, program within this specialized industry.

Small Business Impact

There is no explicit indication of small business set-asides for this contract. Given the specialized nature of helicopter re-engineering, it is likely that the prime contractor is a large aerospace firm. Subcontracting opportunities for small businesses may exist within the supply chain for specific components or services, but the primary award does not appear to be structured to directly benefit small businesses.

Oversight & Accountability

Oversight for this contract would typically be managed by the U.S. Coast Guard's contracting and program management offices. Accountability measures are embedded within the CPIF contract structure, linking contractor performance and cost control to financial incentives. Transparency is generally maintained through contract award databases and reporting requirements, though detailed cost performance data may be proprietary. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse.

Related Government Programs

U.S. Coast Guard Aviation Modernization Programs
Helicopter Component Manufacturing Contracts
Aerospace Systems Integration Projects
Department of Homeland Security Procurement

Risk Flags

Potential for cost overruns due to CPIF contract type.
Schedule delays impacting operational readiness.
Technical integration challenges with new engine technology.
Dependency on specific supplier for critical components.

Frequently Asked Questions

What is this federal contract paying for?

Department of Homeland Security awarded $273.0 million to INTEGRATED COAST GUARD SYSTEMS LLC. HH-65 HELICOPTER RE-ENGINE PROJECT

Who is the contractor on this award?

The obligated recipient is INTEGRATED COAST GUARD SYSTEMS LLC.

Which agency awarded this contract?

Awarding agency: Department of Homeland Security (U.S. Coast Guard).

What is the total obligated amount?

The obligated amount is $273.0 million.

What is the period of performance?

Start: 2004-03-12. End: 2007-09-30.

What is the historical spending pattern for HH-65 helicopter sustainment and modernization by the U.S. Coast Guard?

Historical spending on HH-65 helicopter sustainment and modernization by the U.S. Coast Guard has been consistent, reflecting the long service life of these aircraft and the ongoing need for upgrades to maintain operational effectiveness. Prior to this re-engine project, significant investments were made in maintenance, component replacements, and avionics upgrades. The total expenditure over the life cycle of the HH-65 fleet would likely run into hundreds of millions, if not billions, of dollars when accounting for all sustainment activities, including parts, labor, and periodic overhauls. This specific $273 million re-engine project represents a major capital investment focused on a critical upgrade, distinct from routine sustainment costs but contributing to the overall long-term value and operational readiness of the fleet.

How does the Cost Plus Incentive Fee (CPIF) structure for this contract typically influence contractor behavior and final costs?

A Cost Plus Incentive Fee (CPIF) contract is designed to encourage efficiency and cost control by sharing the risks and rewards between the government and the contractor. In this structure, the final fee paid to the contractor is adjusted based on whether the final costs are above or below a target cost, and whether performance objectives are met. For the HH-65 re-engine project, this means the contractor is incentivized to complete the work within the target cost and to achieve specific performance metrics (e.g., engine efficiency, reliability). If the contractor performs better than the target (lower cost, better performance), they earn a higher fee. Conversely, if they exceed the target cost or fail to meet performance goals, their fee is reduced. This mechanism aims to align the contractor's profit motive with the government's objective of obtaining the best value, potentially leading to lower overall costs compared to other contract types if managed effectively.

What are the key performance indicators (KPIs) likely being tracked for the HH-65 helicopter re-engine project?

Key performance indicators (KPIs) for the HH-65 helicopter re-engine project would likely focus on technical performance, schedule adherence, and cost management. Technical KPIs could include engine reliability rates (e.g., Mean Time Between Failures - MTBF), fuel efficiency improvements, power output consistency, and compliance with stringent aerospace safety and performance standards. Schedule KPIs would involve meeting critical milestones for design, manufacturing, testing, and installation of the new engines, ensuring minimal disruption to the Coast Guard's operational fleet. Cost KPIs would relate to managing expenditures within the target cost, as defined by the CPIF contract, and achieving cost-saving targets to earn incentive fees. Successful achievement of these KPIs is crucial for both the contractor's profit and the Coast Guard's operational readiness.

What is the track record of Integrated Coast Guard Systems LLC in delivering complex aviation modification projects?

Information regarding the specific track record of 'INTEGRATED COAST GUARD SYSTEMS LLC' in delivering complex aviation modification projects, particularly helicopter re-engining, is not readily available in public databases for this specific entity. The name suggests a potential joint venture or a specialized entity formed for specific government contracts. Without more detailed contract history or performance reviews associated with this specific company name for similar projects, it is difficult to assess their track record. However, the U.S. Coast Guard's rigorous procurement process implies that the selected contractor would have met certain qualifications and demonstrated capability, either directly or through its parent companies or partners, to undertake such a critical and complex aviation program.

How does the $273 million contract value compare to the overall budget for U.S. Coast Guard aviation assets?

The $273 million contract value for the HH-65 helicopter re-engine project represents a substantial, but not overwhelming, portion of the U.S. Coast Guard's aviation budget. The Coast Guard operates a diverse fleet of aircraft, including fixed-wing planes and various helicopter types, each with its own sustainment, maintenance, and modernization costs. Annual aviation budgets for the Coast Guard typically range in the hundreds of millions to over a billion dollars, depending on the year and specific acquisition or upgrade initiatives. Therefore, this single re-engine contract, while significant for the HH-65 fleet, is one component within a larger, multi-faceted aviation program. Its impact on the overall budget is considerable for the duration of the contract but is managed within the broader context of fleet-wide operational and modernization requirements.

What are the potential risks associated with integrating new engine technology into an existing helicopter airframe like the HH-65?

Integrating new engine technology into an existing airframe like the HH-65 presents several potential risks. These include ensuring compatibility between the new engines and the helicopter's existing systems (e.g., avionics, fuel systems, rotor dynamics), which can require significant redesign or modification. There's also the risk of unforeseen structural stresses or aerodynamic changes resulting from the new engine installation. Performance validation is critical; the new engines must meet or exceed specified power, efficiency, and reliability targets under various operating conditions. Furthermore, the integration process itself can be complex, leading to potential schedule delays and cost overruns if unexpected technical challenges arise during testing and certification. Ensuring the airworthiness of the modified aircraft requires rigorous testing and validation by regulatory bodies, adding another layer of complexity and potential risk.

Industry Classification

NAICS: Manufacturing › Navigational, Measuring, Electromedical, and Control Instruments Manufacturing › Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing

Product/Service Code: MAINT, REPAIR, REBUILD EQUIPMENT › MAINT, REPAIR, REBUILD OF EQUIPMENT

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Offers Received: 2

Pricing Type: COST PLUS INCENTIVE FEE (V)

Evaluated Preference: NONE

Contractor Details

Address: 300 M ST SE STE 685, WASHINGTON, DC, 20003

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $311,082,575

Exercised Options: $273,371,401

Current Obligation: $273,013,502

Contract Characteristics

Commercial Item: COMMERCIAL ITEM

Parent Contract

Parent Award PIID: DTCG2302C2DW001

IDV Type: IDC

Timeline