DoD's $868M contract for aircraft engine development with GE raises questions on value and competition

Contract Overview

Contract Amount: $500,665,880 ($500.7M)

Contractor: General Electric Company (INC)

Awarding Agency: Department of Defense

Start Date: 1997-02-13

End Date: 2005-09-30

Contract Duration: 3,151 days

Daily Burn Rate: $158.9K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: 199711!1700!0619!AA4J0!NAVAL AIR SYSTEMS COMMAND !N0001996C0176 !A!*!* !19970213!20001031!867988743!867988743!001367960!N!07482!GENERAL ELECTRIC COMPANY (INC)!1 NEUMANN WAY !CINCINNATI !OH!45215!15000!061!39!CINCINNATI !HAMILTON !OHIO !0001!+000018000000!N!N!000000000000!AC15!RDTE/AIRCRAFT-ENG/MANUF DEVELOP !A1B!AIRCRAFT ENGINES AND SPARES !2AMA!JAST/JSF !3519!3!*!*!*!B!A!*!D !Y!U!1!001!N!1A!A!Y!Z!* !* !N!C!*!A!A!A!A!A!*!* !*!N!A!B!N!*!*!*!*!*!

Place of Performance

Location: CINCINNATI, HAMILTON County, OHIO, 45215

State: Ohio Government Spending

Plain-Language Summary

Department of Defense obligated $500.7 million to GENERAL ELECTRIC COMPANY (INC) for work described as: 199711!1700!0619!AA4J0!NAVAL AIR SYSTEMS COMMAND !N0001996C0176 !A!*!* !19970213!20001031!867988743!867988743!001367960!N!07482!GENERAL ELECTRIC COMPANY (INC)!1 NEUMANN WAY !CINCINNATI !OH!45215!15000!061!39!CINCINNATI !HAMILT… Key points: 1. The contract's cost-plus-fixed-fee structure may incentivize overspending. 2. Limited competition for this large-scale R&D effort could lead to suboptimal pricing. 3. The long duration and significant funding raise concerns about long-term cost control. 4. This contract represents a substantial investment in a critical defense technology area. 5. The contractor, General Electric, is a major player in the aerospace and defense sector.

Value Assessment

Rating: questionable

The contract's total value of $867,988,743.00, awarded on a cost-plus-fixed-fee basis, warrants scrutiny. This contract type can lead to higher costs for the government compared to fixed-price contracts, as the contractor is reimbursed for all allowable costs plus a predetermined fee. Without detailed breakdowns of costs and the fixed fee, it's difficult to benchmark the value for money. However, the sheer scale of the award suggests a significant investment, and the lack of robust competition further complicates value assessment.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning there was no open competition. While sole-source awards can be justified for unique capabilities or urgent needs, they inherently limit price discovery and can result in higher costs for the government. The absence of multiple bidders means potential cost savings from competitive pressures were not realized.

Taxpayer Impact: Taxpayers may have paid a premium due to the lack of competitive bidding. Without a competitive process, there is less assurance that the government secured the best possible price for the research and development services.

Public Impact

The primary beneficiary is the Department of Defense, specifically the Naval Air Systems Command, which will receive advanced aircraft engine technology. The contract supports the development and manufacturing of aircraft engines and spares, crucial for maintaining air superiority. The geographic impact is primarily centered around General Electric's facilities in Ohio, contributing to local employment and economic activity. This contract implies a need for specialized engineering and manufacturing workforce within the aerospace sector.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost-plus-fixed-fee structure may lead to cost overruns.
Sole-source award limits competitive pricing and potentially increases costs.
Long contract duration (over 8 years) increases risk of cost escalation and scope creep.
Lack of transparency in cost breakdowns makes value assessment difficult.

Positive Signals

Awarded to a reputable contractor with extensive experience in aircraft engine development.
Supports critical research and development for national defense capabilities.
Contract is for a significant technological advancement in a key defense area.

Sector Analysis

This contract falls within the Research, Development, Test, and Evaluation (RDTE) sector, specifically focusing on aircraft engine development and manufacturing. The aerospace and defense industry is characterized by high R&D costs, long development cycles, and significant government investment. Comparable spending benchmarks are difficult to establish without knowing the specific technological advancements sought, but large-scale engine development programs typically represent multi-billion dollar investments over their lifecycle.

Small Business Impact

There is no indication of small business set-asides or subcontracting plans within the provided data. As a sole-source award to a large prime contractor, the direct impact on small businesses is likely minimal unless GE actively engages them for subcontracting opportunities, which is not specified here.

Oversight & Accountability

Oversight is primarily the responsibility of the Naval Air Systems Command and the Defense Contract Management Agency (DCMA). The cost-plus-fixed-fee nature of the contract necessitates close monitoring of contractor costs and performance to ensure compliance with contract terms and prevent overspending. Inspector General jurisdiction would apply to any allegations of fraud, waste, or abuse.

Related Government Programs

Aircraft Engine Development Programs
Naval Aviation Research and Development
Advanced Propulsion Systems
Defense Contractor Cost Oversight

Risk Flags

Sole-source award
Cost-plus-fixed-fee contract type
High dollar value
Long contract duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $500.7 million to GENERAL ELECTRIC COMPANY (INC). 199711!1700!0619!AA4J0!NAVAL AIR SYSTEMS COMMAND !N0001996C0176 !A!*!* !19970213!20001031!867988743!867988743!001367960!N!07482!GENERAL ELECTRIC COMPANY (INC)!1 NEUMANN WAY !CINCINNATI !OH!45215!15000!061!39!CINCINNATI !HAMILTON !OHIO !0001!+000018000000!N!N!000000000000!AC15!RDTE/AIRCRAFT-ENG/MANUF DEVELOP !A1B!AIRCRAFT ENGINES AND SPARES !2AMA!JAST/JSF !3519!3!*!*!*!B!A!*!D !Y!U!1!0

Who is the contractor on this award?

The obligated recipient is GENERAL ELECTRIC COMPANY (INC).

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $500.7 million.

What is the period of performance?

Start: 1997-02-13. End: 2005-09-30.

What specific technological advancements were targeted by this contract, and how do they compare to industry standards at the time?

The provided data indicates the contract's purpose was RDTE/AIRCRAFT-ENG/MANUF DEVELOP, specifically related to AIRCRAFT ENGINES AND SPARES and JAST/JSF (Joint Advanced Strike Technology/Joint Strike Fighter). This suggests the contract was aimed at developing next-generation propulsion systems for advanced fighter aircraft, likely focusing on improved performance, fuel efficiency, and stealth capabilities. Benchmarking against industry standards would require access to detailed technical specifications and development roadmaps from the period (1997-2005). However, the involvement of the JSF program implies a focus on cutting-edge technology for a major defense platform.

How did the Naval Air Systems Command justify the sole-source award for this significant contract?

Sole-source awards are typically justified when a unique capability is required, there is an urgent need, or only one responsible source can provide the required supplies or services. For a complex R&D effort like aircraft engine development, the justification might have centered on General Electric's proprietary technology, existing expertise, or the need to maintain a specific development path tied to a larger program like the Joint Strike Fighter. The specific justification document, often referred to as a Justification and Approval (J&A), would contain the detailed rationale, but this is not provided in the data.

What were the key performance metrics and milestones established for this contract, and how was contractor performance measured?

The provided data does not detail the specific performance metrics or milestones for this contract. However, for a Cost Plus Fixed Fee (CPFF) R&D contract, performance is typically measured against the achievement of defined technical objectives, adherence to development schedules, and effective management of costs within the approved budget. The Naval Air Systems Command would have had program managers and contracting officers responsible for overseeing GE's progress, conducting reviews, and ensuring that the work performed aligned with the contract's objectives and the fixed fee earned.

Can the total spending of $868 million be considered a reasonable investment for the anticipated technological advancements?

Assessing the reasonableness of the $868 million investment requires a detailed understanding of the specific technological advancements sought, the complexity of the development process, and the potential operational benefits and cost savings these advancements would bring over the lifecycle of the aircraft. Given that this was for advanced aircraft engine development, potentially for a program as significant as the Joint Strike Fighter, the investment might be considered reasonable within the context of major defense acquisition programs. However, the lack of competition and the CPFF structure introduce risks that could inflate the actual cost relative to the value delivered.

What was the historical spending trend for aircraft engine development by the Naval Air Systems Command prior to and during this contract period?

The provided data focuses on a single contract and does not offer historical spending trends for aircraft engine development by the Naval Air Systems Command. To analyze historical trends, one would need to examine aggregate spending data for relevant Product Service Codes (PSCs) and contract types over multiple fiscal years. This would help determine if the $868 million award was an outlier, part of a consistent investment strategy, or indicative of increasing costs in this R&D area.

What is General Electric's track record with similar large-scale, sole-source defense R&D contracts?

General Electric (GE) has a long and extensive track record as a major contractor for the Department of Defense, particularly in the area of aircraft engines. They have historically been involved in developing and producing engines for a wide range of military aircraft. While this specific contract was sole-source, GE frequently competes for and wins large defense contracts. Their experience suggests a high level of technical capability and program management expertise, although the specifics of their performance on past sole-source R&D contracts would require further investigation.

Competition & Pricing

Extent Competed: NOT COMPETED

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Contractor Details

Address: 1 NEUMANN WAY, CINCINNATI, OH, 90

Business Categories: Category Business, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Contract Characteristics

Cost or Pricing Data: YES

Timeline