Air Force's $337.9M T108 Propulsion System contract awarded to Rolls-Royce Corporation for engine flying hours

Contract Overview

Contract Amount: $337,972,169 ($338.0M)

Contractor: Rolls-Royce Corporation

Awarding Agency: Department of Defense

Start Date: 2024-12-01

End Date: 2025-11-30

Contract Duration: 364 days

Daily Burn Rate: $928.5K/day

Competition Type: NOT COMPETED

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: T108 PROPULSION SUSTAINMENT SYSTEM- (ENGINE, NACELLE, AND PROPELLER) PRICE PER ENGINE FLYING HOUR.

Place of Performance

Location: INDIANAPOLIS, MARION County, INDIANA, 46225

State: Indiana Government Spending

Plain-Language Summary

Department of Defense obligated $338.0 million to ROLLS-ROYCE CORPORATION for work described as: T108 PROPULSION SUSTAINMENT SYSTEM- (ENGINE, NACELLE, AND PROPELLER) PRICE PER ENGINE FLYING HOUR. Key points: 1. Value for money assessed through engine flying hour rates, aiming for cost-efficiency in sustainment. 2. Sole-source award limits competitive dynamics, potentially impacting price discovery. 3. Risk indicators include reliance on a single provider for critical engine components. 4. Performance context is tied to ensuring aircraft readiness through sustained engine operation. 5. Sector positioning within aircraft engine manufacturing and sustainment services. 6. Contract duration of one year with potential for follow-on orders.

Value Assessment

Rating: fair

The contract's value is primarily driven by the price per engine flying hour. Benchmarking this specific rate against historical data or similar contracts for comparable aircraft engines would be crucial for a comprehensive value assessment. Without direct comparisons, it's difficult to definitively state if this rate represents excellent or questionable value. The firm-fixed-price nature provides cost certainty for the government, but the absence of competition could lead to less favorable pricing than a competed contract.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one bidder, Rolls-Royce Corporation, was solicited. This approach is typically used when a specific product or service is available only from a single source, often due to proprietary technology or unique capabilities. The lack of competition means there was no opportunity for multiple companies to bid, which can limit price negotiation and potentially lead to higher costs for the government compared to a fully competed procurement.

Taxpayer Impact: Sole-source awards mean taxpayers may not benefit from the cost savings that typically arise from competitive bidding processes. This can result in a higher overall expenditure for the sustainment of these propulsion systems.

Public Impact

The primary beneficiaries are the U.S. Air Force units operating aircraft equipped with the T108 propulsion system. Services delivered include sustainment for engines, nacelles, and propellers, ensuring operational readiness. Geographic impact is national, supporting Air Force operations across various bases. Workforce implications include the need for skilled technicians to maintain and repair these complex engine systems.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure on pricing.
Potential for cost overruns if the price per flying hour is not effectively managed against actual usage.
Dependence on a single contractor for critical engine sustainment.

Positive Signals

Firm-fixed-price contract provides cost certainty for the government.
Rolls-Royce is a known entity with established expertise in this engine type.
Contract aims to ensure operational readiness of critical Air Force assets.

Sector Analysis

The aircraft engine and engine parts manufacturing sector is a highly specialized and capital-intensive industry dominated by a few major global players. Rolls-Royce Corporation is a significant entity within this sector, particularly for military and commercial aviation engines. This contract represents ongoing sustainment spending within this niche, focusing on maintaining the operational capability of existing Air Force fleets rather than the acquisition of new platforms. Comparable spending benchmarks would involve looking at other sustainment contracts for similar engine types across different military branches or allied nations.

Small Business Impact

This contract does not appear to have a small business set-aside. Given the specialized nature of aircraft engine sustainment and the sole-source award to a large prime contractor like Rolls-Royce Corporation, the direct impact on small businesses is likely limited to potential subcontracting opportunities. The prime contractor may engage small businesses for specific parts, services, or logistics, but the primary contract vehicle itself does not prioritize small business participation.

Oversight & Accountability

Oversight for this contract will likely be managed by the Department of the Air Force contracting and program management offices. Accountability measures are embedded in the firm-fixed-price structure, which obligates the contractor to deliver services at an agreed-upon rate. Transparency is generally maintained through contract awards databases, though detailed performance metrics and financial breakdowns may be internal. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Aircraft Engine Maintenance
Propulsion System Support
Air Force Logistics Command
Defense Contract Management Agency
Aerospace Manufacturing and Repair

Risk Flags

Sole-source award
Potential for price escalation
Dependence on single supplier

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $338.0 million to ROLLS-ROYCE CORPORATION. T108 PROPULSION SUSTAINMENT SYSTEM- (ENGINE, NACELLE, AND PROPELLER) PRICE PER ENGINE FLYING HOUR.

Who is the contractor on this award?

The obligated recipient is ROLLS-ROYCE CORPORATION.

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 $338.0 million.

What is the period of performance?

Start: 2024-12-01. End: 2025-11-30.

What is the historical spending trend for the T108 Propulsion Sustainment System with Rolls-Royce Corporation?

Analyzing historical spending for the T108 Propulsion Sustainment System requires access to past contract data. Typically, sustainment contracts for complex systems like aircraft engines involve recurring costs over multiple years. If this is a continuation of a previous contract, examining the total obligated amounts, contract modifications, and price per engine flying hour over prior periods would reveal trends. A consistent increase in spending could indicate rising maintenance costs, increased operational tempo, or expansion of the supported fleet. Conversely, stable or decreasing spending might suggest improved efficiency, more robust engine reliability, or a reduction in flight hours. Without specific historical data points for this contract vehicle, a precise trend analysis is not possible, but sustainment spending for major defense platforms often represents a significant portion of the total lifecycle cost.

How does the price per engine flying hour for the T108 compare to similar military aircraft engine sustainment contracts?

Benchmarking the price per engine flying hour ($337,972,168.56 is the total value, not per hour) against similar military aircraft engine sustainment contracts is essential for assessing value for money. This comparison should ideally involve engines of comparable size, complexity, and operational demands, used by the Air Force or other branches. Factors such as the age of the engine, the number of flight hours accumulated, the scope of included maintenance (e.g., scheduled vs. unscheduled, depot-level repairs), and the specific terms of the contract (firm-fixed-price vs. cost-reimbursable) significantly influence these rates. A higher rate than comparable contracts, especially without clear justification (like unique technological requirements or significantly higher operational tempo), could indicate a less favorable pricing arrangement for the government. Conversely, a rate at or below benchmarks suggests competitive or efficient pricing.

What are the key performance indicators (KPIs) and service level agreements (SLAs) associated with this contract?

Key Performance Indicators (KPIs) and Service Level Agreements (SLAs) are critical for measuring the effectiveness and efficiency of this propulsion sustainment contract. While specific details are not provided in the summary data, typical KPIs for such contracts would likely include metrics related to aircraft availability, engine Mean Time Between Failures (MTBF), Mean Time To Repair (MTTR), turnaround time for engine maintenance, and adherence to scheduled maintenance requirements. SLAs would define the acceptable thresholds for these KPIs, potentially including penalties for non-performance or incentives for exceeding targets. The Air Force would monitor these metrics to ensure Rolls-Royce Corporation is meeting its obligations, maintaining the operational readiness of the T108 engines, and providing value for the funds expended. Effective oversight of these KPIs and SLAs is crucial for managing risks and ensuring mission success.

What is the potential risk associated with the sole-source nature of this award for long-term sustainment costs?

The sole-source nature of this award to Rolls-Royce Corporation presents a significant risk for long-term sustainment costs. Without competition, the government has limited leverage to negotiate prices downwards over the life of the contract. Rolls-Royce, as the sole provider, may have less incentive to offer cost reductions or efficiency improvements if there are no alternative suppliers. This can lead to escalating costs for spare parts, labor, and technical support, potentially exceeding what might be achieved in a competitive market. Furthermore, dependence on a single supplier can create vulnerabilities in the supply chain and increase the risk of price gouging, especially if the T108 propulsion system is critical and widely deployed. Mitigating this risk often involves robust contract management, continuous market research for potential future competition, and exploring options for technology insertion or alternative sustainment strategies.

What is the track record of Rolls-Royce Corporation in fulfilling similar defense sustainment contracts?

Rolls-Royce Corporation has a long-standing and extensive track record in fulfilling defense sustainment contracts for a wide range of military aircraft engines globally. They are a major Original Equipment Manufacturer (OEM) and sustainment provider for numerous air forces, including the U.S. Air Force, supporting various engine types across different platforms. Their experience typically encompasses providing spare parts, maintenance, repair, and overhaul (MRO) services, as well as technical support and training. While specific performance details for individual contracts are often proprietary or subject to government reporting, Rolls-Royce is generally recognized as a capable and experienced provider in this highly specialized sector. However, like any large contractor, past performance reviews and contract audits would provide a more granular assessment of their reliability, responsiveness, and cost-effectiveness on specific programs.

Industry Classification

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

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

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Rolls-Royce Holdings PLC

Address: 450 S MERIDIAN ST, INDIANAPOLIS, IN, 46225

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Foreign Owned, Foreign-Owned and U.S.-Incorporated Business, Manufacturer of Goods, Not Designated a Small Business, Special Designations

Financial Breakdown

Contract Ceiling: $337,972,169

Exercised Options: $337,972,169

Current Obligation: $337,972,169

Subaward Activity

Number of Subawards: 2

Total Subaward Amount: $11,786,091

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: FA812423D0002

IDV Type: IDC

Timeline