Department of the Navy awards $166.9M contract for aircraft engine support to Rolls-Royce Corporation

Contract Overview

Contract Amount: $166,892,834 ($166.9M)

Contractor: Rolls-Royce Corporation

Awarding Agency: Department of Defense

Start Date: 2019-12-01

End Date: 2021-02-28

Contract Duration: 455 days

Daily Burn Rate: $366.8K/day

Competition Type: NOT COMPETED

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: PROCURE SITE SUPPORT, ENGINE FLIGHT HOURS, AND REPAIR OF LOW POWER REMOVALS

Place of Performance

Location: INDIANAPOLIS, MARION County, INDIANA, 46225

State: Indiana Government Spending

Plain-Language Summary

Department of Defense obligated $166.9 million to ROLLS-ROYCE CORPORATION for work described as: PROCURE SITE SUPPORT, ENGINE FLIGHT HOURS, AND REPAIR OF LOW POWER REMOVALS Key points: 1. Contract awarded for essential aircraft engine support and repair services. 2. Sole-source award raises questions about potential price efficiencies and market alternatives. 3. Contract duration of 455 days indicates a need for ongoing, specialized maintenance. 4. The firm-fixed-price structure aims to control costs, but requires careful monitoring of scope. 5. This award falls within the Aircraft Engine and Engine Parts Manufacturing sector. 6. No small business set-aside was utilized, suggesting a focus on specialized capabilities.

Value Assessment

Rating: fair

The contract value of $166.9 million for 455 days of engine support and repair is substantial. Benchmarking this against similar sole-source contracts for specialized aerospace components is challenging due to unique technical requirements. However, the absence of competition suggests a potential for higher costs than if multiple vendors were involved. The firm-fixed-price nature provides some cost certainty, but the overall value proposition hinges on the necessity of this specific provider and the efficiency of their service delivery.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one vendor, Rolls-Royce Corporation, was solicited. This approach is typically used when a specific capability or proprietary technology is required, and no other vendor can meet the need. The lack of competition means there was no opportunity for price discovery through a bidding process, which can sometimes lead to less favorable pricing for the government.

Taxpayer Impact: Taxpayers may be paying a premium due to the absence of competitive bidding. Without multiple offers, the government has less leverage to negotiate the lowest possible price for these critical engine support services.

Public Impact

The primary beneficiaries are the Department of the Navy, ensuring the operational readiness of its aircraft fleet. Services include the procurement of engine flight hours and repair of low power removals, critical for aircraft maintenance. The geographic impact is primarily within Indiana, where the contractor is located, but the ultimate impact is on naval aviation readiness globally. This contract supports specialized technical jobs within the aerospace manufacturing and maintenance sector.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure, potentially impacting cost-effectiveness.
Lack of transparency in the sole-source justification process.
Dependence on a single supplier for critical engine components and services.

Positive Signals

Firm-fixed-price contract provides cost certainty for the government.
Rolls-Royce is a recognized leader in aerospace engine manufacturing and support.
Contract addresses essential operational needs for naval aviation.

Sector Analysis

The aerospace industry, particularly the segment focused on aircraft engine manufacturing and maintenance, is characterized by high barriers to entry, significant R&D investment, and stringent regulatory requirements. Rolls-Royce Corporation is a major global player in this sector. This contract represents spending within the niche of specialized engine support and repair for military aviation, a critical but often consolidated market. Comparable spending benchmarks are difficult to establish precisely due to the proprietary nature of engine technology and specific service agreements.

Small Business Impact

This contract was not set aside for small businesses, nor does it appear to involve significant subcontracting opportunities for small businesses based on the provided data. The nature of specialized aircraft engine repair and support often requires unique certifications, proprietary technology, and extensive infrastructure typically held by larger, established aerospace firms. This suggests that the primary focus was on securing the specialized capabilities of the prime contractor rather than promoting small business participation.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of the Navy's contracting and program management offices. Accountability measures are inherent in the firm-fixed-price structure, which obligates the contractor to deliver specified services within the agreed-upon price. Transparency is limited due to the sole-source nature of the award. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse.

Related Government Programs

Aircraft Engine Maintenance
Aerospace Manufacturing
Naval Aviation Support
Defense Procurement
Engine Parts Manufacturing

Risk Flags

Sole-source award may limit price competition.
Potential for cost overruns if scope is not tightly managed.
Dependence on a single supplier for critical components and services.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $166.9 million to ROLLS-ROYCE CORPORATION. PROCURE SITE SUPPORT, ENGINE FLIGHT HOURS, AND REPAIR OF LOW POWER REMOVALS

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 $166.9 million.

What is the period of performance?

Start: 2019-12-01. End: 2021-02-28.

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

Rolls-Royce Corporation has a long-standing relationship with various branches of the U.S. military, including the Department of the Navy, for the provision of engines and support services. Historical data indicates numerous contracts for engine maintenance, repair, and overhaul, as well as spare parts. While specific details of past performance on similar sole-source contracts are not publicly detailed in this summary, Rolls-Royce is a primary original equipment manufacturer (OEM) for many naval aircraft engines. Their extensive experience and established infrastructure suggest a deep understanding of the technical requirements and operational demands of supporting these complex systems. However, the nature of sole-source awards means that direct comparisons of value and efficiency against competitive bids are not readily available from past Navy engagements.

How does the pricing of this contract compare to market rates for similar engine support services?

Directly comparing the pricing of this $166.9 million contract for 455 days of service to 'market rates' is challenging due to several factors. Firstly, this is a sole-source award, meaning competitive market forces were not applied during the procurement process. Secondly, the services involve specialized engine flight hours and repairs for specific aircraft, which are highly technical and often proprietary. Rolls-Royce, as the original equipment manufacturer (OEM), likely possesses unique knowledge and access to parts that other entities may not. While firm-fixed-price contracts aim for cost control, the absence of competition means there's no direct benchmark from other bidders. To assess value, the Navy would likely rely on internal cost models, historical pricing for similar (though not identical) services, and potentially comparisons to commercial aviation engine support contracts, adjusting for military-specific requirements and overhead.

What are the primary risks associated with this sole-source contract for aircraft engine support?

The primary risks associated with this sole-source contract are centered around cost and potential lack of innovation. Without competition, there is a reduced incentive for the contractor to offer the most competitive pricing, potentially leading to higher costs for the government than if multiple bids were solicited. There's also a risk of vendor lock-in, where the Department of the Navy becomes heavily reliant on Rolls-Royce for critical support, making it difficult and costly to switch providers in the future. Furthermore, the absence of competitive pressure might slow down the adoption of new technologies or more efficient service methods. Ensuring robust oversight and performance metrics is crucial to mitigate these risks and ensure the government receives adequate value for its investment.

How effective is the firm-fixed-price (FFP) contract type in ensuring value for money in this context?

The firm-fixed-price (FFP) contract type is generally considered effective in controlling costs for the government, especially for services with well-defined requirements like engine support and repair. Under an FFP contract, the contractor assumes most of the risk for cost overruns, as they are obligated to complete the work for the agreed-upon price. This incentivizes the contractor to be efficient and manage their costs effectively. For the Department of the Navy, this means greater budget certainty. However, the effectiveness in ensuring 'value for money' is also dependent on the initial negotiation of the price and the clarity of the contract's scope. In a sole-source situation, the initial price negotiation is critical, as there isn't a competitive baseline. If the initial price is too high, the FFP structure still locks the government into that potentially inflated cost.

What are the historical spending patterns for aircraft engine support within the Department of the Navy?

Historical spending patterns for aircraft engine support within the Department of the Navy are substantial and ongoing, reflecting the critical nature of maintaining a large and complex aviation fleet. The Navy procures a wide range of engines for its various aircraft platforms, from fighter jets to helicopters and maritime patrol aircraft. Spending typically encompasses new engine purchases, spare parts, depot-level maintenance, field support, and engine upgrades. Contracts for these services are often awarded to original equipment manufacturers (OEMs) like Rolls-Royce, General Electric, and Pratt & Whitney, frequently on sole-source or limited-competition bases due to the specialized nature of the technology. Annual spending can fluctuate based on fleet readiness requirements, modernization programs, and the lifecycle of different aircraft types, often running into billions of dollars across the entire naval aviation enterprise.

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

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: $166,892,834

Exercised Options: $166,892,834

Current Obligation: $166,892,834

Actual Outlays: $53,839,793

Subaward Activity

Number of Subawards: 22

Total Subaward Amount: $8,138,669

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: N0001920D0004

IDV Type: IDC

Timeline