Boeing's Apache PBL contract awarded $304.8M for engineering services, a sole-source award

Contract Overview

Contract Amount: $304,767,880 ($304.8M)

Contractor: THE Boeing Company

Awarding Agency: Department of Defense

Start Date: 2010-10-31

End Date: 2017-12-31

Contract Duration: 2,618 days

Daily Burn Rate: $116.4K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: AWARD FOLLOW-ON APACHE D UNIQUE PERFORMANCE BASED LOGISTICS (PBL)

Place of Performance

Location: HUNTSVILLE, MADISON County, ALABAMA, 35898

State: Alabama Government Spending

Plain-Language Summary

Department of Defense obligated $304.8 million to THE BOEING COMPANY for work described as: AWARD FOLLOW-ON APACHE D UNIQUE PERFORMANCE BASED LOGISTICS (PBL) Key points: 1. The contract's value of $304.8M over its period of performance suggests significant investment in sustaining Apache helicopter readiness. 2. As a sole-source award, the absence of competition raises questions about potential price inflation and the optimal use of taxpayer funds. 3. Performance-based logistics (PBL) contracts aim to incentivize contractor performance and availability, but require robust oversight to ensure value. 4. The duration of the contract (2618 days) indicates a long-term commitment to supporting a critical defense asset. 5. The 'Engineering Services' NAICS code suggests a focus on technical support, maintenance planning, and potentially system upgrades. 6. The contract's geographic location in Alabama (AL) may indicate a concentration of maintenance or support operations in that state.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging without specific performance metrics or comparable PBL contracts for similar aircraft. The $304.8M award over approximately seven years averages to roughly $43.5M annually. While this may seem substantial, it must be evaluated against the operational tempo and maintenance needs of the Apache fleet. The lack of competition, however, inherently limits the ability to assess if the pricing represents a fair market value or if efficiencies could have been achieved through a competitive bidding process. Without detailed breakdowns of services rendered and their associated costs, a definitive value-for-money assessment is difficult.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning the Department of the Army did not solicit bids from multiple potential contractors. This approach is typically justified when only one contractor possesses the necessary capabilities, proprietary knowledge, or when urgent needs preclude a competitive process. The lack of competition means that price discovery through market forces was bypassed, potentially leading to higher costs for the government compared to a fully competed contract. The rationale for this sole-source award would need to be thoroughly documented by the agency to ensure it was justified.

Taxpayer Impact: Taxpayers may have paid a premium due to the absence of competitive pressure. Without competing offers, there is less assurance that the negotiated price reflects the lowest possible cost for the required services.

Public Impact

The primary beneficiaries are the U.S. Army aviation units that rely on the Apache helicopter for combat and support missions. The contract delivers essential logistics, maintenance, and engineering support services to ensure the operational readiness of the Apache fleet. The geographic impact is concentrated in Alabama, where the contractor's operations are located, potentially supporting local jobs and the regional economy. Workforce implications include the employment of engineers, technicians, and support staff necessary to fulfill the contract's requirements.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition and may result in higher costs.
Performance-based logistics requires diligent oversight to ensure contractor meets availability and performance targets.
Long contract duration could lead to complacency or reduced incentive for innovation if not managed effectively.
Lack of transparency in sole-source justification can obscure potential inefficiencies.

Positive Signals

Performance-based logistics (PBL) structure incentivizes contractor to focus on outcomes (e.g., aircraft availability) rather than just effort.
Sustaining a critical asset like the Apache helicopter ensures national security readiness.
The contract is with a known, experienced defense contractor (Boeing), potentially reducing execution risk.
The award is for engineering services, which are crucial for maintaining complex weapon systems.

Sector Analysis

The aerospace and defense sector is characterized by high barriers to entry, complex supply chains, and significant government investment. Contracts for weapon system sustainment, like this one for the Apache helicopter, are critical for maintaining military readiness. The market for such services is often dominated by a few large prime contractors who have deep relationships with the government and possess specialized knowledge. This contract fits within the broader category of defense logistics and support services, a substantial segment of federal spending. Comparable spending benchmarks would involve looking at other PBL contracts for major weapon systems.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. Furthermore, the prime contractor, The Boeing Company, is a large aerospace firm. While large prime contractors are often required to subcontract a portion of their work to small businesses, the specific subcontracting plan for this contract is not detailed here. The absence of a direct small business set-aside means that opportunities for small businesses to compete directly for this work are limited, though they may participate as subcontractors.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Army's contracting and program management offices. As a performance-based logistics contract, oversight would focus on monitoring the contractor's achievement of defined performance metrics and availability targets. Transparency is limited by the sole-source nature of the award. Inspector General jurisdiction would apply to investigations of fraud, waste, or abuse related to the contract.

Related Government Programs

Apache Helicopter Program
Army Aviation Sustainment
Defense Logistics Agency (DLA) Support Contracts
Weapon System Performance-Based Logistics
Aerospace Engineering Services Contracts

Risk Flags

Sole Source Justification
Lack of Competition
Potential for Cost Overruns
Performance Metric Transparency

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $304.8 million to THE BOEING COMPANY. AWARD FOLLOW-ON APACHE D UNIQUE PERFORMANCE BASED LOGISTICS (PBL)

Who is the contractor on this award?

The obligated recipient is THE BOEING COMPANY.

Which agency awarded this contract?

Awarding agency: Department of Defense (Department of the Army).

What is the total obligated amount?

The obligated amount is $304.8 million.

What is the period of performance?

Start: 2010-10-31. End: 2017-12-31.

What specific performance metrics were established for this Performance-Based Logistics (PBL) contract, and how was Boeing's performance measured against them?

The provided data does not detail the specific performance metrics (e.g., aircraft availability rates, mean time between failures, supply response times) established for this PBL contract. PBL contracts are designed to incentivize contractor performance by linking payment to achieving predefined outcomes. To assess Boeing's performance, one would need access to the contract's Performance Work Statement (PWS) and subsequent performance reports. These reports would typically track metrics such as the number of flight hours supported, the turnaround time for repairs, and the availability of spare parts. Without this information, it is impossible to definitively evaluate whether the contractor met its obligations and delivered the expected value for the $304.8 million investment.

What was the justification for awarding this significant contract on a sole-source basis, and were alternative competitive strategies considered?

The justification for a sole-source award typically stems from circumstances where only one responsible source can satisfy the agency's needs. For a complex system like the Apache helicopter, this could be due to proprietary technical data, unique manufacturing capabilities, or specialized knowledge held exclusively by the incumbent contractor, Boeing. The Department of the Army would have been required to document this justification, often through a Justification and Approval (J&A) document, detailing why full and open competition was not feasible or not in the government's best interest. Alternative competitive strategies, such as phased competitions or sole-source awards with limited negotiation, might have been considered but ultimately deemed unsuitable. The absence of competition, however, inherently raises concerns about potential overpricing and reduced innovation.

How does the annual average cost of this contract ($43.5M) compare to historical spending on Apache helicopter sustainment or similar PBL contracts for other aircraft?

Comparing the annual average cost of $43.5 million for this Apache PBL contract requires context from historical spending patterns and similar contracts. Without access to detailed historical budgets for Apache sustainment or data on comparable PBL contracts for other platforms (e.g., Black Hawk, Chinook, F-16), a direct benchmark is difficult. Factors influencing cost include the number of aircraft supported, their operational tempo, the scope of services (maintenance, repair, overhaul, supply chain management), and the specific terms of the PBL. If historical data shows significantly lower annual spending for similar levels of support, or if comparable PBL contracts for other platforms are priced lower on an annual basis, it could indicate that this contract's cost is high. Conversely, if the Apache fleet is particularly demanding or if the scope of services is broader, the cost might be justified.

What are the potential risks associated with a long-duration (2618 days) sole-source contract for weapon system sustainment?

Long-duration, sole-source contracts for weapon system sustainment carry several potential risks. Firstly, the lack of competition over an extended period can lead to complacency by the contractor, potentially reducing incentives for efficiency improvements or innovation. Secondly, pricing may not reflect evolving market conditions or technological advancements, leading to the government paying above fair market value. Thirdly, the government's negotiating leverage diminishes over time, especially if switching contractors would be disruptive or costly. Lastly, a prolonged sole-source arrangement can create vendor lock-in, making it difficult and expensive to transition to a different support model or contractor in the future. Robust contract management and periodic reviews are essential to mitigate these risks.

What is the track record of The Boeing Company in managing similar Performance-Based Logistics contracts for military aircraft?

The Boeing Company has a significant track record in managing Performance-Based Logistics (PBL) contracts for various military aircraft platforms. They have been involved in PBL initiatives for aircraft such as the C-17 Globemaster III, F/A-18 Super Hornet, and AH-64 Apache itself, among others. Boeing's experience in this area suggests a deep understanding of the PBL model and the complexities of military aviation sustainment. However, the success of any PBL contract, including those managed by Boeing, depends heavily on the specific contract terms, the government's oversight capabilities, and the evolving operational environment. While their extensive experience is a positive signal, each contract must be evaluated on its own merits regarding performance and value.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Architectural, Engineering, and Related Services › Engineering Services

Product/Service Code: SUPPORT SVCS (PROF, ADMIN, MGMT) › MANAGEMENT SUPPORT SERVICES

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

Address: 5000 EAST MCDOWELL ROAD, MESA, AZ, 85215

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

Financial Breakdown

Contract Ceiling: $304,767,880

Exercised Options: $304,767,880

Current Obligation: $304,767,880

Subaward Activity

Number of Subawards: 112

Total Subaward Amount: $10,989,523

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline