DoD spent over $527M on Rolls-Royce turboshaft engines, a sole-source award with limited competition

Contract Overview

Contract Amount: $526,956,210 ($527.0M)

Contractor: Rolls-Royce Corporation

Awarding Agency: Department of Defense

Start Date: 2012-03-30

End Date: 2017-11-30

Contract Duration: 2,071 days

Daily Burn Rate: $254.4K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: AE1107C TURBOSHAFT ENGINES (INSTALLS)

Place of Performance

Location: INDIANAPOLIS, MARION County, INDIANA, 46241

State: Indiana Government Spending

Plain-Language Summary

Department of Defense obligated $527.0 million to ROLLS-ROYCE CORPORATION for work described as: AE1107C TURBOSHAFT ENGINES (INSTALLS) Key points: 1. The contract represents a significant investment in aircraft propulsion systems for the Navy. 2. Sole-source award indicates a lack of competitive bidding, potentially impacting price. 3. Long contract duration suggests a sustained need for these specific engine components. 4. The firm fixed-price structure shifts cost risk to the contractor. 5. The absence of small business set-asides warrants further investigation into subcontracting opportunities. 6. The contract's value is substantial within the aircraft engine manufacturing sector.

Value Assessment

Rating: fair

The total award of over $526 million for AE1107C turboshaft engines is a substantial sum. Without direct comparable contract data for this specific engine model and its installation, a precise value-for-money assessment is challenging. However, the sole-source nature of the award raises concerns about whether the government secured the most competitive pricing. The firm fixed-price contract type, while beneficial for cost control, requires careful monitoring to ensure the contractor is not over-recovering costs given the lack of competition.

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 indicates a lack of competition, likely due to proprietary technology, unique capabilities, or specific integration requirements for the AE1107C turboshaft engines. The absence of multiple bidders means the government did not benefit from price discovery through a competitive bidding process.

Taxpayer Impact: The sole-source nature of this award means taxpayers may have paid a premium compared to what could have been achieved in a competitive environment. Without competing offers, there is less pressure on the contractor to offer the lowest possible price.

Public Impact

The primary beneficiaries are the Department of the Navy, which receives critical aircraft engine components for its fleet. The contract ensures the continued operation and maintenance of aircraft utilizing AE1107C turboshaft engines. The geographic impact is primarily within Indiana, where Rolls-Royce Corporation is located, potentially supporting local jobs and the regional economy. Workforce implications include skilled labor in manufacturing, engineering, and maintenance within the aerospace sector.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to higher costs for taxpayers.
Sole-source awards can reduce transparency in pricing.
Dependence on a single supplier for critical components poses a long-term risk.
The contract's duration and value could indicate a lack of viable alternatives or market shifts.

Positive Signals

Firm fixed-price contract shifts cost overrun risk to the contractor.
Rolls-Royce is a known entity with established expertise in turboshaft engines.
The contract ensures the availability of essential components for naval aviation readiness.

Sector Analysis

The aircraft engine and engine parts manufacturing sector (NAICS 336412) is a highly specialized and capital-intensive industry. This contract falls within the defense sub-sector, focusing on turboshaft engines crucial for various military aircraft. The total spending of over $526 million reflects the high cost of advanced aerospace technology. Comparable spending benchmarks would typically involve other large military engine procurements, which are often characterized by long development cycles and significant R&D investments.

Small Business Impact

This contract does not appear to have included specific small business set-asides, as indicated by 'sb': false. The large value and specialized nature of turboshaft engine manufacturing suggest that prime contracting opportunities for small businesses may be limited. However, Rolls-Royce Corporation may engage small businesses as subcontractors for parts, services, or specialized manufacturing processes. Further analysis of subcontracting plans would be necessary to determine the extent of small business participation.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense and the Department of the Navy. Given it's a definitive contract, standard procurement regulations and oversight mechanisms would apply. Transparency is limited by the sole-source nature. Accountability rests with the contracting officers and program managers to ensure performance and adherence to contract terms. The Inspector General's office for the Department of Defense would have jurisdiction for audits and investigations if any issues arise.

Related Government Programs

Department of Defense Aircraft Procurement
Naval Aviation Support Programs
Aerospace Manufacturing Contracts
Turbine Engine Maintenance and Repair

Risk Flags

Sole-source award
Lack of competition
High contract value
Long contract duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $527.0 million to ROLLS-ROYCE CORPORATION. AE1107C TURBOSHAFT ENGINES (INSTALLS)

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 Navy).

What is the total obligated amount?

The obligated amount is $527.0 million.

What is the period of performance?

Start: 2012-03-30. End: 2017-11-30.

What is the track record of Rolls-Royce Corporation with the Department of Defense for similar engine contracts?

Rolls-Royce Corporation has a long-standing history as a major supplier of engines to military and civilian aviation sectors, including significant contracts with the Department of Defense. They are known for producing a range of turbofan, turboprop, and turboshaft engines. For the Department of the Navy, Rolls-Royce has supplied engines for various platforms. While this specific contract for AE1107C turboshaft engines (installs) is substantial, Rolls-Royce's overall track record with the DoD suggests a capacity to deliver complex aerospace components. However, the performance on individual contracts, including delivery schedules, quality, and cost adherence, would require a detailed review of past performance metrics and any associated contract disputes or modifications.

How does the $526 million expenditure compare to historical spending on turboshaft engines by the DoD?

The $526 million expenditure on AE1107C turboshaft engines represents a significant investment within a single contract award. To benchmark this against historical spending, one would need to analyze aggregate DoD expenditures on turboshaft engines over several fiscal years, broken down by engine model, platform, and contractor. Such an analysis would reveal trends in pricing, volume, and the prevalence of sole-source versus competitive awards. Without access to comprehensive historical spending databases specifically for turboshaft engines, it's difficult to provide a precise comparative figure. However, given the specialized nature and high cost of military-grade turboshaft engines, this amount is likely substantial and reflects a critical capability acquisition for naval aviation.

What are the primary risks associated with a sole-source award for critical aircraft engine components?

The primary risks associated with a sole-source award for critical aircraft engine components like the AE1107C turboshaft engines are multifaceted. Firstly, there is a significant risk of paying a premium due to the lack of competitive pressure, potentially leading to higher costs for taxpayers. Secondly, sole-source contracts can reduce transparency in pricing and cost justification. Thirdly, there's an increased dependency on a single supplier, which can create vulnerabilities in the supply chain, especially if the contractor faces production issues, financial instability, or decides to discontinue a product line. This dependence also limits the government's leverage in future negotiations or modifications. Finally, it can stifle innovation by discouraging potential competitors from entering the market.

What is the expected program effectiveness or outcome of procuring these turboshaft engines?

The expected program effectiveness of procuring these AE1107C turboshaft engines is centered on ensuring the operational readiness and capability of naval aircraft that rely on this specific propulsion system. These engines are critical for powering helicopters or other aircraft, enabling them to perform their missions, whether they involve troop transport, cargo delivery, search and rescue, or combat support. By securing these engines, the Department of the Navy aims to maintain its fleet's airworthiness, extend the service life of existing aircraft, and potentially support upgrades or modifications. The effectiveness is measured by the reliability, performance, and availability of the engines in meeting mission requirements, thereby contributing to overall naval aviation superiority and mission success.

Are there any indications of potential cost overruns or performance issues given the contract's duration and value?

The provided data does not explicitly indicate cost overruns or performance issues for this specific contract. However, the contract's duration (from March 2012 to November 2017, totaling 2071 days or approximately 5.6 years) and substantial value ($526 million) inherently carry risks. Firm fixed-price contracts are designed to place cost risk on the contractor, but unforeseen technical challenges, material cost increases, or scope changes could still lead to contractor requests for equitable adjustments or contract modifications. Without access to contract performance reports, modification history, or audit findings, it is impossible to definitively assess the presence of cost overruns or performance issues. The sole-source nature also means that any potential issues might be harder to resolve through competitive pressure.

Industry Classification

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

Product/Service Code: ENGINES AND TURBINES AND COMPONENT

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Rolls-Royce Holdings PLC (UEI: 217127290)

Address: 2355 S TIBBS AVE, INDIANAPOLIS, IN, 46241

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

Financial Breakdown

Contract Ceiling: $622,917,861

Exercised Options: $526,956,210

Current Obligation: $526,956,210

Subaward Activity

Number of Subawards: 54

Total Subaward Amount: $133,519,997

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline