DoD's $340M Aircraft Engine Contract with Rolls-Royce: A Fixed Price Incentive Deal with Limited Competition

Contract Overview

Contract Amount: $340,633,109 ($340.6M)

Contractor: Rolls-Royce Corporation

Awarding Agency: Department of Defense

Start Date: 2000-06-05

End Date: 2008-03-31

Contract Duration: 2,856 days

Daily Burn Rate: $119.3K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIXED PRICE INCENTIVE

Sector: Defense

Place of Performance

Location: INDIANAPOLIS, MARION County, INDIANA, 46225

State: Indiana Government Spending

Plain-Language Summary

Department of Defense obligated $340.6 million to ROLLS-ROYCE CORPORATION for work described as: Key points: 1. The contract awarded to Rolls-Royce Corporation for aircraft engines and parts represents a significant investment by the Department of Defense. 2. The 'NOT COMPETED' status indicates a lack of competitive bidding, potentially impacting price discovery and value for money. 3. The fixed-price incentive (FPI) contract type aims to balance cost control with performance incentives, but requires careful monitoring. 4. The sector is Aircraft Engine and Engine Parts Manufacturing, a critical component of defense readiness.

Value Assessment

Rating: questionable

The contract's value of $340.6 million over its period of performance is substantial. Without competitive bids, it's difficult to benchmark against similar contracts to assess if the pricing is optimal. The fixed-price incentive structure suggests an expectation of cost efficiencies, but the lack of competition raises concerns about the initial price negotiation.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was not competed, indicating a sole-source award. This method bypasses the competitive process, which typically drives down prices and fosters innovation. The absence of competition means the government relied on negotiation with a single provider, potentially leading to higher costs than if multiple vendors had vied for the contract.

Taxpayer Impact: The lack of competition may result in taxpayers paying a premium for these aircraft engines and parts, as the usual price pressures of a competitive market were absent.

Public Impact

Taxpayers may be overpaying due to the absence of competitive bidding for critical defense components. The long duration of the contract (2000-2008) means potential inefficiencies could have persisted over many years. Dependence on a single supplier for essential aircraft engine parts can create supply chain vulnerabilities. The fixed-price incentive structure requires diligent oversight to ensure cost targets are met and incentives are effective.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition
Potential for overpayment
Long contract duration
Sole-source award

Positive Signals

Fixed-price incentive structure aims for cost control
Awarded to a known entity (Rolls-Royce)

Sector Analysis

The Aircraft Engine and Engine Parts Manufacturing sector is highly specialized and capital-intensive. Defense contracts in this area often involve long lead times and complex technological requirements. Benchmarks are difficult without competitive data, but significant R&D and manufacturing capabilities are typically required, justifying substantial investments.

Small Business Impact

The contract was awarded to Rolls-Royce Corporation, a large prime contractor. There is no indication that small businesses were involved as subcontractors or prime contractors in this specific award. The sole-source nature of the contract further limits opportunities for small business participation.

Oversight & Accountability

The 'IN' status for 'st' (Status) and 'sn' (State) suggests the contract is in 'In Effect' status within Indiana. Oversight would focus on contract performance, adherence to incentive targets, and financial management. The lack of competition necessitates robust oversight to ensure fair pricing and value.

Related Government Programs

Aircraft Engine and Engine Parts Manufacturing
Department of Defense Contracting
Defense Contract Management Agency Programs

Risk Flags

Lack of competitive bidding raises concerns about price fairness.
Sole-source award limits potential cost savings and innovation.
Long contract duration may obscure inefficiencies.
Absence of performance metrics makes effectiveness assessment difficult.
Potential for contractor lock-in due to specialized nature of aircraft engines.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $340.6 million to ROLLS-ROYCE CORPORATION. See the official description on USAspending.

Who is the contractor on this award?

The obligated recipient is ROLLS-ROYCE CORPORATION.

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Contract Management Agency).

What is the total obligated amount?

The obligated amount is $340.6 million.

What is the period of performance?

Start: 2000-06-05. End: 2008-03-31.

What was the justification for not competing this contract, and how was the initial price determined to ensure fair value?

The justification for not competing this contract is not provided in the data. Typically, sole-source awards are made when only one responsible source can provide the required supplies or services. The initial price determination would have involved negotiation between the Department of Defense and Rolls-Royce, likely based on historical data, cost proposals, and market research, but without competitive benchmarks, assessing its fairness is challenging.

Given the fixed-price incentive structure, what were the key performance metrics and cost targets, and how effectively were they managed over the contract's lifespan?

The specific key performance metrics and cost targets for this fixed-price incentive contract are not detailed in the provided data. Effective management would involve the Defense Contract Management Agency closely monitoring Rolls-Royce's progress against these targets, ensuring that cost savings were shared and that performance met or exceeded expectations. Without performance data, the effectiveness of this aspect remains unknown.

What was the total cost variance from the target price, and how did the incentive structure impact the final expenditure for the government?

The provided data does not include the target price or the final actual cost, making it impossible to calculate the cost variance or the impact of the incentive structure on the final expenditure. A fixed-price incentive contract aims to share cost savings or overruns between the contractor and the government based on pre-defined targets and sharing ratios.

Industry Classification

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

Product/Service Code: AEROSPACE CRAFT COMPONENTS AND ACCESSORIES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: FIXED PRICE INCENTIVE (L)

Contractor Details

Parent Company: Rolls-Royce Holdings PLC

Address: 2001 S TIBBS AVE, INDIANAPOLIS, IN, 46241

Business Categories: Category Business, Not Designated a Small Business

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline