DoD's $44.9M Honeywell contract for PIGA repair lacked competition, raising value concerns

Contract Overview

Contract Amount: $44,914,753 ($44.9M)

Contractor: Honeywell International Inc.

Awarding Agency: Department of Defense

Start Date: 2013-11-27

End Date: 2021-04-30

Contract Duration: 2,711 days

Daily Burn Rate: $16.6K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: IGF::CT::IGF PIGA REPAIR CONTRACT

Place of Performance

Location: CLEARWATER, PINELLAS County, FLORIDA, 33764

State: Florida Government Spending

Plain-Language Summary

Department of Defense obligated $44.9 million to HONEYWELL INTERNATIONAL INC. for work described as: IGF::CT::IGF PIGA REPAIR CONTRACT Key points: 1. The contract's sole-source nature limits price discovery and potentially inflates costs. 2. A significant duration of 2711 days suggests a long-term reliance on this specific vendor. 3. The 'Cost Plus Fixed Fee' structure may incentivize higher costs rather than efficiency. 4. Lack of competition raises questions about whether the government secured the best possible value. 5. The contract's performance period spans multiple fiscal years, indicating sustained operational need. 6. Repair services for specialized equipment like PIGA are critical for operational readiness.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to its sole-source nature and the specialized equipment involved. The 'Cost Plus Fixed Fee' (CPFF) pricing structure, while common for complex services, can lead to costs exceeding initial estimates if not closely managed. Without competitive bids, it's difficult to ascertain if the fixed fee adequately reflects the effort required or if it includes a premium due to the lack of alternatives. The total award amount of $44.9 million over its extended period suggests a substantial investment, making rigorous cost oversight crucial.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning it was not competed among multiple vendors. This approach is typically justified when only one vendor possesses the necessary technical expertise, proprietary technology, or unique capabilities to perform the required services. However, the absence of competition means that the Department of Defense did not have the opportunity to solicit and evaluate offers from a range of potential providers, which could have led to more competitive pricing and innovative solutions.

Taxpayer Impact: Sole-source awards limit the government's ability to leverage market competition to drive down prices, potentially resulting in higher costs for taxpayers. It also reduces transparency in the procurement process.

Public Impact

The primary beneficiaries are the Department of the Air Force, ensuring the operational readiness of critical aircraft systems. The contract delivers essential repair and maintenance services for PIGA (presumably a component or system). Services are likely concentrated in Florida, indicated by the 'ST' and 'SN' fields. The contract supports specialized technical roles within Honeywell, contributing to a skilled workforce in the aerospace and defense sector.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to higher prices than a competed contract.
CPFF contract type can incentivize cost overruns if not managed tightly.
Long contract duration (2711 days) could indicate a lack of market alternatives or potential for vendor lock-in.
Sole-source award limits transparency and potential for innovative solutions from other vendors.

Positive Signals

Contract addresses a critical need for specialized equipment repair, ensuring operational capability.
Honeywell International Inc. is a large, established defense contractor with significant experience.
The contract has a defined end date, providing a finite period for service delivery.

Sector Analysis

This contract falls within the broader aerospace and defense sector, specifically focusing on the maintenance, repair, and overhaul (MRO) of specialized electronic and precision equipment. The North American Industry Classification System (NAICS) code 811219 covers 'Other Electronic and Precision Equipment Repair and Maintenance.' The market for such services is often characterized by high barriers to entry due to technical expertise, certifications, and intellectual property. Spending in this area is critical for maintaining the readiness and operational effectiveness of military assets.

Small Business Impact

The data indicates this contract was not set aside for small businesses (SS: false, SB: false). As a sole-source award to a large corporation like Honeywell International Inc., there are likely limited direct subcontracting opportunities for small businesses specifically tied to this contract's core services. While Honeywell may engage small businesses in its broader supply chain, this particular award does not appear to be structured to promote small business participation.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Defense's contracting and financial management offices, potentially including the Air Force's specific oversight bodies. Given the sole-source nature and 'Cost Plus Fixed Fee' structure, rigorous monitoring of costs, performance, and adherence to the contract terms would be expected. Inspector General investigations could be initiated if allegations of fraud, waste, or abuse arise. Transparency is limited due to the lack of a competitive bidding process.

Related Government Programs

DoD Aircraft Maintenance and Repair Contracts
Defense Logistics Agency (DLA) Repair Contracts
Air Force Avionics and Electronics Repair
Specialized Equipment Maintenance Services

Risk Flags

Sole-source award limits competition.
Cost-reimbursable contract type (CPFF) can incentivize higher costs.
Long contract duration may indicate limited market alternatives.
Lack of transparency in pricing due to sole-source nature.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $44.9 million to HONEYWELL INTERNATIONAL INC.. IGF::CT::IGF PIGA REPAIR CONTRACT

Who is the contractor on this award?

The obligated recipient is HONEYWELL INTERNATIONAL INC..

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 $44.9 million.

What is the period of performance?

Start: 2013-11-27. End: 2021-04-30.

What is the specific function and importance of the PIGA system being repaired under this contract?

The provided data does not specify the exact nature of 'PIGA'. However, in the context of the Department of Defense and aerospace, 'PIGA' often refers to the 'Platform Integrated Gyro-Astro' or similar inertial navigation and guidance systems. These systems are critical for aircraft navigation, targeting, and flight stability. Their proper functioning is paramount for mission success and crew safety. Therefore, ensuring the reliable repair and maintenance of such components is a high priority for the Air Force, justifying significant investment in specialized support services.

What are the typical profit margins or fee structures for 'Cost Plus Fixed Fee' contracts in the defense repair sector?

Cost Plus Fixed Fee (CPFF) contracts involve the contractor being reimbursed for allowable costs plus a fixed fee representing profit. The fixed fee is negotiated at the outset and does not change unless the contract scope is modified. Typical profit margins or fee percentages can vary widely based on the complexity of the work, the level of risk involved, and market conditions. For defense contracts, fees might range from 5% to 15% of the estimated cost, but this is highly variable. The 'fixed' nature of the fee aims to provide the contractor with an incentive to control costs, as any savings below the estimated cost do not increase their profit, while cost overruns do not increase their fee. However, effective oversight is crucial to ensure the fee remains fair and reasonable relative to the effort and risk.

Have there been other sole-source contracts awarded to Honeywell for similar repair services, and how do their values compare?

Without access to a comprehensive database of all Honeywell contracts, a direct comparison is difficult. However, Honeywell International Inc. is a major defense contractor frequently awarded sole-source contracts for specialized systems and components due to its established expertise and proprietary technologies. To assess comparability, one would need to analyze contracts for the repair of similar avionics, navigation, or guidance systems across different military branches or agencies. Key comparison points would include the contract duration, total award value, pricing structure (e.g., CPFF, FFP), and the specific technical requirements. A pattern of sole-source awards for similar services could indicate a lack of market competition or a strategic reliance on Honeywell's capabilities.

What mechanisms are in place to ensure cost control and prevent overruns in this CPFF contract, given its sole-source nature?

In a CPFF contract, cost control relies heavily on robust government oversight. The Air Force contracting officer and their team are responsible for closely monitoring the contractor's incurred costs against the estimated costs. This involves regular audits of the contractor's accounting systems and verification of expenses. Performance metrics and milestones should be established to track progress and ensure efficient resource utilization. The 'fixed fee' component itself provides a ceiling on profit, but the government must actively manage the 'cost' reimbursement aspect. Any significant deviations from the estimated cost should trigger reviews and potentially negotiations or corrective actions to ensure the government is receiving value for its expenditure.

What is the historical spending trend for PIGA repair or similar electronic/precision equipment maintenance within the Department of the Air Force?

Analyzing historical spending trends for PIGA repair or similar specialized electronic and precision equipment maintenance within the Department of the Air Force requires access to detailed historical contract data. Generally, spending in this category tends to be consistent, driven by the operational tempo and aging of military assets. As equipment ages, the need for repairs and overhauls increases. Factors influencing spending include modernization programs (which might decrease demand for older systems) and geopolitical events (which might increase demand). Without specific data, it's reasonable to assume that the Air Force allocates substantial, consistent funding to maintain the readiness of its complex electronic systems, often relying on incumbent contractors for specialized support.

Industry Classification

NAICS: Other Services (except Public Administration) › Electronic and Precision Equipment Repair and Maintenance › Other Electronic and Precision Equipment Repair and Maintenance

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

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Honeywell International Inc

Address: 13350 US HIGHWAY 19 N, CLEARWATER, FL, 33764

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

Financial Breakdown

Contract Ceiling: $75,564,506

Exercised Options: $46,677,447

Current Obligation: $44,914,753

Actual Outlays: $196,581

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline