DoD spent over $934M on aircraft engines and parts, with Honeywell as a key contractor

Contract Overview

Contract Amount: $934,203,463 ($934.2M)

Contractor: Honeywell International Inc.

Awarding Agency: Department of Defense

Start Date: 2004-01-20

End Date: 2014-02-28

Contract Duration: 3,692 days

Daily Burn Rate: $253.0K/day

Competition Type: FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES

Number of Offers Received: 2

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: AIRCRAFT ENGINES/ENGINE PARTS

Place of Performance

Location: PHOENIX, MARICOPA County, ARIZONA, 85034

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $934.2 million to HONEYWELL INTERNATIONAL INC. for work described as: AIRCRAFT ENGINES/ENGINE PARTS Key points: 1. Analysis indicates a significant investment in critical aircraft engine components. 2. The contract utilized full and open competition, suggesting a robust bidding process. 3. Long contract duration may present opportunities for cost efficiencies or risks of obsolescence. 4. The fixed-price nature of the contract shifts cost overrun risk to the contractor. 5. This spending falls within the broader manufacturing sector for aerospace components.

Value Assessment

Rating: good

The total award value of over $934 million for aircraft engines and parts represents a substantial commitment by the Department of Defense. While specific per-unit cost benchmarks are not provided, the use of full and open competition suggests that pricing was likely subject to market forces and multiple bids. The firm fixed-price contract type further indicates an expectation of predictable costs. Benchmarking against similar large-scale engine procurements would be necessary for a more precise value assessment, but the scale of the award implies a significant need and likely competitive pricing.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under 'Full and Open Competition After Exclusion of Sources,' indicating that while the competition was broad, specific sources may have been excluded for defined reasons. The presence of multiple bidders (2 indicated) suggests a competitive environment, which generally benefits price discovery and can lead to more favorable terms for the government. The exclusion of certain sources, if justified, would need further review to ensure it did not unduly limit competition.

Taxpayer Impact: The competitive nature of this award, despite potential source exclusions, likely resulted in a more efficient use of taxpayer funds by encouraging multiple vendors to offer their best pricing and terms.

Public Impact

The primary beneficiaries are the Department of Defense and its aviation units, ensuring operational readiness. Services delivered include the provision of aircraft engines and essential replacement parts. The contract's geographic impact is national, supporting military operations across various theaters. Workforce implications include support for manufacturing jobs in the aerospace and defense sector.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Long contract duration (over 10 years) could lead to technology obsolescence or maintenance challenges.
Potential for price increases over the life of a long-term contract if not adequately managed.
Reliance on a single primary contractor (Honeywell) for a significant portion of spending warrants monitoring.

Positive Signals

Firm fixed-price contract type limits the government's exposure to cost overruns.
Full and open competition generally leads to better pricing and value.
The substantial award amount suggests a critical need being met for defense readiness.

Sector Analysis

This contract falls within the aerospace and defense manufacturing sector, specifically focusing on aircraft propulsion systems. The market for aircraft engines and parts is highly specialized, dominated by a few major players. Spending benchmarks in this sector are often in the hundreds of millions or billions due to the high cost of research, development, and manufacturing. This contract represents a significant portion of spending within this niche, underscoring its importance to military aviation capabilities.

Small Business Impact

The provided data indicates that small business participation was not a primary focus, as the 'ss' (small business set-aside) field is false. There is no explicit information on subcontracting plans for small businesses within this data snippet. Therefore, the direct impact on the small business ecosystem appears limited for this specific contract, though the prime contractor may engage small businesses in their supply chain.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Defense's contracting and financial management systems. Accountability measures are inherent in the firm fixed-price contract type, which holds the contractor responsible for cost control. Transparency is generally maintained through contract award databases, though specific performance metrics and detailed spending breakdowns may require further inquiry. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Military Aircraft Procurement
Aviation Maintenance and Repair
Defense Industrial Base Manufacturing
Aerospace Component Supply

Risk Flags

Long contract duration
Potential for technology obsolescence
Sole-source dependency risk (if applicable beyond this award)
Complexity of aerospace supply chain

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $934.2 million to HONEYWELL INTERNATIONAL INC.. AIRCRAFT ENGINES/ENGINE PARTS

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 Army).

What is the total obligated amount?

The obligated amount is $934.2 million.

What is the period of performance?

Start: 2004-01-20. End: 2014-02-28.

What is Honeywell International Inc.'s track record with the Department of Defense for aircraft engine contracts?

Honeywell International Inc. has a long-standing and significant relationship with the Department of Defense, frequently securing contracts for aircraft engines, engine parts, and related systems across various military branches. Their track record includes supplying components for a wide range of aircraft, from tactical fighters to transport planes and helicopters. The company is known for its technological capabilities in engine manufacturing and maintenance. Historical data often shows Honeywell as a primary or sole-source provider for specific engine types due to proprietary technology or established support infrastructure. While this specific contract award of over $934 million is substantial, it aligns with Honeywell's established role as a major defense contractor in the aerospace sector. Assessing their performance on past contracts, including on-time delivery, quality adherence, and cost management, would provide further context to their reliability and value proposition for this award.

How does the $934 million award compare to historical spending on aircraft engines by the DoD?

The $934 million award to Honeywell International Inc. for aircraft engines and parts is a significant sum, but it must be viewed within the broader context of the Department of Defense's annual budget for aviation systems. The DoD consistently spends billions of dollars annually on aircraft procurement, sustainment, and component manufacturing. This specific contract, awarded between 2004 and 2014, represents a substantial investment over its duration. To benchmark its value effectively, it should be compared against similar large-scale engine procurements or sustainment contracts awarded during the same period or in subsequent years. Factors such as the specific engine models, quantities, and the inclusion of long-term support services would influence comparability. Without more granular data on the types of engines and parts procured, a precise comparison is challenging, but the amount indicates a critical need for propulsion systems supporting a significant portion of the DoD's aviation fleet.

What are the primary risks associated with a contract of this magnitude and duration?

Contracts of this magnitude and duration (over 10 years) carry several inherent risks. Firstly, technological obsolescence is a significant concern; aircraft engine technology evolves rapidly, and a decade-long contract might result in the government acquiring components based on older technology. Secondly, price escalation over such a long period, even with a fixed-price contract, can occur through contract modifications or unforeseen economic factors, potentially eroding value. Thirdly, contractor performance risk exists; a single large contractor like Honeywell, while experienced, could face production issues, supply chain disruptions, or quality control problems that impact delivery schedules and operational readiness. Finally, the long-term commitment might limit the DoD's flexibility to adopt newer, potentially more cost-effective solutions that emerge during the contract's life. Robust oversight and contingency planning are crucial to mitigate these risks.

How does the 'Full and Open Competition After Exclusion of Sources' classification impact price discovery and value?

The 'Full and Open Competition After Exclusion of Sources' classification presents a nuanced scenario for price discovery and value. 'Full and Open Competition' implies that all responsible sources were permitted to submit a bid, which is generally conducive to competitive pricing. However, the 'Exclusion of Sources' clause indicates that specific potential bidders were intentionally excluded, presumably for documented reasons such as national security, proprietary technology, or prior performance issues. While competition still occurred among the remaining eligible sources, the exclusion could potentially limit the number of bidders and the breadth of innovation. If the excluded sources were significant competitors, their absence might have slightly reduced the downward pressure on prices. Therefore, while competition likely occurred, the degree to which it maximized price discovery and ensured the absolute best value for taxpayers depends heavily on the justification and impact of the source exclusions.

What are the implications of the 'Firm Fixed Price' contract type for the government and the contractor?

The 'Firm Fixed Price' (FFP) contract type is generally favored by the government for its predictability in cost. Under an FFP agreement, the contractor, Honeywell International Inc. in this case, assumes the primary responsibility for all costs incurred to complete the work. This means that if Honeywell's costs exceed the agreed-upon price, their profit margin decreases, or they incur a loss. Conversely, if their costs are lower than anticipated, their profit increases. For the government, this structure provides cost certainty, making budgeting more straightforward and protecting against cost overruns. The main implication for the government is that they pay the agreed-upon price regardless of the contractor's actual costs. For the contractor, it necessitates rigorous cost management and efficiency to ensure profitability, while also bearing the risk of unforeseen cost increases.

What is the typical market size and competitive landscape for aircraft engines and parts manufacturing?

The market for aircraft engines and parts is a highly specialized and capital-intensive segment of the aerospace industry. It is characterized by significant barriers to entry, including high research and development costs, stringent regulatory requirements, and the need for extensive testing and certification. Globally, the market is dominated by a few major players, such as General Electric, Rolls-Royce, and Pratt & Whitney, alongside companies like Honeywell which specialize in specific engine types or components. The total market size is substantial, measured in tens of billions of dollars annually, driven by commercial aviation, defense procurement, and general aviation. Competition is intense among these established firms, often revolving around technological innovation, fuel efficiency, reliability, and lifecycle support services. For defense applications, specific engine requirements and long-term sustainment contracts often lead to less dynamic competition compared to the commercial sector, with contracts frequently awarded based on established capabilities and existing platforms.

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: FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Offers Received: 2

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Honeywell International Inc (UEI: 139691877)

Address: 111 S 34TH ST, PHOENIX, AZ, 85034

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

Financial Breakdown

Contract Ceiling: $934,203,463

Exercised Options: $934,203,463

Current Obligation: $934,203,463

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline