DoD's $10B Boeing Contract: Long-Term Aircraft Manufacturing with Fixed Price Adjustments
Contract Overview
Contract Amount: $10,006,765,405 ($10.0B)
Contractor: THE Boeing Company
Awarding Agency: Department of Defense
Start Date: 2002-08-15
End Date: 2020-12-11
Contract Duration: 6,693 days
Daily Burn Rate: $1.5M/day
Competition Type: NOT COMPETED
Number of Offers Received: 1
Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT
Sector: Defense
Place of Performance
Location: LONG BEACH, LOS ANGELES County, CALIFORNIA, 90807
Plain-Language Summary
Department of Defense obligated $10.01 billion to THE BOEING COMPANY for work described as: Key points: 1. Significant long-term commitment to a single large contractor. 2. Potential for price escalation due to economic price adjustment clause. 3. Lack of competition raises questions about optimal pricing. 4. Focus on aircraft manufacturing, a critical defense sector.
Value Assessment
Rating: questionable
The contract's large value and long duration, coupled with a fixed-price with economic price adjustment structure, suggest potential for cost overruns. Benchmarking against similar long-term aircraft manufacturing contracts would be necessary for a definitive assessment.
Cost Per Unit: N/A
Competition Analysis
Competition Level: sole-source
The contract was not competed, indicating a sole-source award. This limits price discovery and may result in higher costs for taxpayers compared to a competitive procurement.
Taxpayer Impact: The lack of competition for a contract of this magnitude likely results in a higher cost to taxpayers than if it had been competitively bid.
Public Impact
Taxpayers may be paying a premium due to the absence of competition. The long contract duration ties significant resources to one provider. Economic price adjustments could lead to unpredictable spending. Reliance on a single supplier for critical aircraft manufacturing.
Waste & Efficiency Indicators
Waste Risk Score: 50 / 10
Warning Flags
- Sole-source award
- Economic price adjustment clause
- Long contract duration
- Lack of transparency in pricing
Positive Signals
- Ensures supply of critical aircraft
- Long-term relationship with a major defense contractor
Sector Analysis
This contract falls within the aircraft manufacturing sector, a key component of national defense spending. Benchmarks for similar long-term, sole-source aircraft manufacturing contracts are difficult to establish due to their unique nature, but the scale suggests significant investment.
Small Business Impact
This contract appears to be awarded to a large prime contractor, with no explicit indication of small business participation or subcontracting goals. Further analysis would be needed to determine the extent of small business involvement.
Oversight & Accountability
The sole-source nature of this large, long-term contract warrants close oversight to ensure fair pricing and effective performance. Regular reviews of the economic price adjustment mechanism are crucial for accountability.
Related Government Programs
- Aircraft Manufacturing
- Department of Defense Contracting
- Department of the Air Force Programs
Risk Flags
- Potential for cost overruns due to EPA
- Lack of competitive pricing pressure
- Long-term reliance on a single supplier
- Limited transparency on pricing justification
- Significant taxpayer investment without competition
Tags
aircraft-manufacturing, department-of-defense, ca, definitive-contract, billion-dollar
Frequently Asked Questions
What is this federal contract paying for?
Department of Defense awarded $10.01 billion to THE BOEING COMPANY. See the official description on USAspending.
Who is the contractor on this award?
The obligated recipient is THE BOEING COMPANY.
Which agency awarded this contract?
Awarding agency: Department of Defense (Department of the Air Force).
What is the total obligated amount?
The obligated amount is $10.01 billion.
What is the period of performance?
Start: 2002-08-15. End: 2020-12-11.
What was the justification for awarding this contract sole-source instead of competing it?
The justification for a sole-source award typically involves unique capabilities, urgent needs, or a lack of viable alternatives. Without specific documentation, it's difficult to ascertain the precise rationale. However, for a contract of this scale and duration, a thorough justification process should have been followed to ensure it was truly the only viable option.
How have the economic price adjustments impacted the total contract cost over its lifespan?
The economic price adjustment (EPA) clause allows for changes in contract price based on fluctuations in economic factors like labor and material costs. Over the contract's 18-year duration, these adjustments could significantly increase the final cost beyond the initial estimate. Analyzing the specific EPA formula and historical economic data would be necessary to quantify the total impact.
What is the current operational status and effectiveness of the aircraft produced under this contract?
Assessing the operational status and effectiveness requires data beyond the contract details, such as fleet readiness rates, performance metrics, and maintenance records. While the contract ensures the manufacturing of aircraft, its long duration and sole-source nature do not inherently guarantee optimal performance or value for money without ongoing evaluation of the end product's utility and cost-effectiveness.
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
Offers Received: 1
Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT (K)
Evaluated Preference: NONE
Contractor Details
Address: 2401 E WARDLOW RD, LONG BEACH, CA, 90807
Business Categories: Category Business, Not Designated a Small Business
Financial Breakdown
Contract Ceiling: $2,310,116
Exercised Options: $2,310,116
Current Obligation: $10,006,765,405
Contract Characteristics
Multi-Year Contract: Yes
Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED
Cost or Pricing Data: NOT OBTAINED - WAIVED
Timeline
Start Date: 2002-08-15
Current End Date: 2020-12-11
Potential End Date: 2020-12-11 00:00:00
Last Modified: 2019-08-07
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