DoD's $7.8B C-17 airframe contract awarded to McDonnell Douglas, later Boeing, with a 5-year extension

Contract Overview

Contract Amount: $2,284,553,527 ($2.3B)

Contractor: THE Boeing Company

Awarding Agency: Department of Defense

Start Date: 2000-11-30

End Date: 2015-12-03

Contract Duration: 5,481 days

Daily Burn Rate: $416.8K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: 200106!000014!5700!GU30 !ASC/YCK !F3365701C2002 !A!N!*!N! !20001130!20050930!781650619!781650619!009256819!N!MCDONNELL DOUGLAS CORPORATION,!2401 E WARDLOW ROAD !LONG BEACH !CA!90807!43000!037!06!LONG BEACH !LOS ANGELES !CALIFORNIA!+000426450718!N!N!000000000000!1510!AIRCRAFT FIXED WING !A1A!AIRFRAMES AND SPARES !3ADG!C-17 CARGO TRANSPORT !336411!*!*!3! ! ! !*!*!*!B!*!*!A! !D !U!J!1!001!N!1G!A!Y!Z! ! !N!C!N! ! ! !A!A!A!A!000!A!B!N! ! ! ! ! ! !0001!

Place of Performance

Location: LONG BEACH, LOS ANGELES County, CALIFORNIA, 90807

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $2.28 billion to THE BOEING COMPANY for work described as: 200106!000014!5700!GU30 !ASC/YCK !F3365701C2002 !A!N!*!N! !20001130!20050930!781650619!781650619!009256819!N!MCDONNELL DOUGLAS CORPORATION,!2401 E WARDLOW ROAD !LONG BEACH !CA!90807!43000!037!06!LONG BEACH !LOS A… Key points: 1. Contract awarded for C-17 cargo transport airframes, a critical component of air mobility. 2. Significant long-term commitment to a single platform, indicating strategic importance. 3. The contract's duration and value suggest a substantial investment in national defense capabilities. 4. Awarded as a definitive contract, implying a well-defined scope and established relationship. 5. The initial award was not competed, raising questions about potential cost efficiencies. 6. The contract value represents a significant portion of the overall C-17 program spending.

Value Assessment

Rating: fair

The total value of this contract, approximately $7.8 billion, is substantial. While specific per-unit cost benchmarks are not readily available without further data, the 'not competed' nature of the award suggests a potential lack of price discovery that could impact overall value for money. Comparing this to other large-scale aircraft manufacturing contracts would be necessary for a more precise assessment of its value.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded as 'not competed,' indicating a sole-source or limited competition scenario. This approach is often used when a specific contractor possesses unique capabilities or when there's a need for continuity with an existing platform. The lack of broad competition means that the government did not benefit from a range of bids, which could potentially lead to higher prices than if multiple vendors had vied for the contract.

Taxpayer Impact: The absence of competition means taxpayers may not have received the most cost-effective pricing available in the market. This could translate to a higher overall expenditure for the C-17 program.

Public Impact

The primary beneficiaries are the U.S. Air Force and its allies, who receive critical airlift capabilities. The contract delivers essential airframes for the C-17 Globemaster III, a vital strategic airlifter. Geographic impact is national, supporting defense logistics and global reach. Workforce implications include employment at McDonnell Douglas (later Boeing) and its extensive supply chain.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may have limited price negotiation leverage.
Long-term nature of the contract could reduce flexibility in adapting to new technologies.
Sole-source awards can sometimes lead to cost overruns if not closely monitored.

Positive Signals

Ensures a stable supply of a critical defense asset.
Leverages established manufacturing expertise for a complex aircraft.
Provides long-term certainty for a key component of national security.

Sector Analysis

This contract falls within the aerospace and defense manufacturing sector, specifically focusing on large military aircraft. The C-17 Globemaster III is a significant platform in global airlift capabilities. Spending in this sub-sector is characterized by high R&D costs, long production cycles, and substantial government investment. Comparable spending benchmarks would involve other major military aircraft programs, such as bombers or fighter jets, which also represent multi-billion dollar, long-term commitments.

Small Business Impact

As a sole-source award for a major aircraft platform, this contract's direct impact on small business set-asides is likely limited. However, the prime contractor, McDonnell Douglas/Boeing, would be expected to engage small businesses within its supply chain for components and services. The subcontracting opportunities generated would be substantial, but not specifically earmarked as set-asides under this prime contract.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Defense's contract management agencies, such as the Defense Contract Management Agency (DCMA). Accountability measures would include performance reviews, quality inspections, and financial audits. Transparency is generally maintained through contract award databases, though detailed pricing and performance metrics may be considered sensitive. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

C-17 Globemaster III Production
Air Mobility Command Procurement
Major Weapon System Acquisition
Aerospace Manufacturing Contracts
Defense Production Act Investments

Risk Flags

Sole-source award lacks competitive pricing.
Long contract duration may not adapt to technological advancements.
Potential for cost overruns without competitive pressure.
Concentration risk due to acquisition of contractor.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $2.28 billion to THE BOEING COMPANY. 200106!000014!5700!GU30 !ASC/YCK !F3365701C2002 !A!N!*!N! !20001130!20050930!781650619!781650619!009256819!N!MCDONNELL DOUGLAS CORPORATION,!2401 E WARDLOW ROAD !LONG BEACH !CA!90807!43000!037!06!LONG BEACH !LOS ANGELES !CALIFORNIA!+000426450718!N!N!000000000000!1510!AIRCRAFT FIXED WING !A1A!AIRFRAMES AND SPARES !3ADG!C-17 CARGO TRANSPORT !336411!*!*!3! ! ! !*!*!*!B!*!*!A!

Who is the contractor on this award?

The obligated recipient is THE BOEING COMPANY.

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Contract Management Agency).

What is the total obligated amount?

The obligated amount is $2.28 billion.

What is the period of performance?

Start: 2000-11-30. End: 2015-12-03.

What was the initial justification for awarding this contract on a sole-source basis?

Sole-source awards are typically justified when only one responsible source is available or capable of meeting the government's needs. For a complex platform like the C-17, this could stem from proprietary technology, unique manufacturing capabilities, or the need for continuity with an existing production line to avoid significant duplication of cost or effort. The specific justification would be documented in the contract's Justification and Approval (J&A) for Other Than Full and Open Competition. Without access to that specific documentation, we can infer that the government likely determined that McDonnell Douglas possessed the exclusive ability to produce the C-17 airframes efficiently and effectively at that time.

How does the total contract value compare to the overall life-cycle cost of the C-17 program?

The total value of this contract, approximately $7.8 billion, represents the cost for the acquisition of the airframes themselves. The overall life-cycle cost of the C-17 program is significantly higher, encompassing research and development, production, sustainment (maintenance, repair, and overhaul), operations (fuel, personnel), and eventual disposal. The $7.8 billion for airframes is a substantial component, but it's crucial to understand it as a part of the larger, multi-decade investment required to field and operate the entire C-17 fleet. Detailed life-cycle cost analyses are complex and depend on numerous variables, including operational tempo and sustainment strategies.

What are the potential risks associated with a long-duration, sole-source contract for major defense equipment?

Long-duration, sole-source contracts for major defense equipment carry several inherent risks. Firstly, there's the risk of 'cost-plus' creep, where the absence of competitive pressure can lead to less stringent cost control, potentially inflating prices over time. Secondly, technological obsolescence is a concern; a long contract might lock the government into a platform that becomes outdated before the contract concludes, limiting flexibility to adopt newer, more advanced technologies. Thirdly, contractor complacency can set in, potentially impacting innovation or responsiveness. Finally, dependence on a single supplier creates supply chain vulnerability; any disruption at the prime contractor level can have significant national security implications.

Were there any subsequent contract modifications or extensions that significantly altered the original scope or value?

Yes, the provided data indicates the contract had an initial end date of 2005-09-30 and a final end date of 2015-12-03, with a duration of 5481 days (approximately 15 years). This suggests multiple modifications, options, or extensions were exercised over the contract's life. The initial award value was $7,816,506,190, and the data also shows a 'base and all options' value of $7,816,506,190. This implies that the total obligated amount remained consistent with the initial estimate, but the contract was extended significantly in duration. Further analysis would be needed to detail the specific modifications and their impact on scope and pricing.

How did the acquisition of McDonnell Douglas by Boeing in 1997 affect this contract?

The acquisition of McDonnell Douglas Corporation by The Boeing Company in 1997 would have transferred the rights and responsibilities of this contract to Boeing. Therefore, subsequent performance, modifications, and final delivery under this contract would have been managed by Boeing. This consolidation in the aerospace industry is a common trend, often leading to efficiencies but also raising concerns about market concentration. For this specific contract, the transition likely involved integrating McDonnell Douglas's C-17 production facilities and workforce into Boeing's broader defense operations, ensuring continuity for the U.S. Air Force.

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

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Contractor Details

Address: 2401 E WARDLOW ROAD, LONG BEACH, CA, 90807

Business Categories: Category Business, Not Designated a Small Business

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline