Boeing awarded $904M for 36 Apache helicopters and support to South Korea, with full and open competition
Contract Overview
Contract Amount: $904,269,585 ($904.3M)
Contractor: THE Boeing Company
Awarding Agency: Department of Defense
Start Date: 2013-08-23
End Date: 2019-05-31
Contract Duration: 2,107 days
Daily Burn Rate: $429.2K/day
Competition Type: FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES
Number of Offers Received: 3
Pricing Type: FIRM FIXED PRICE
Sector: Defense
Official Description: THIRTY-SIX (36)NEW BLOCK III APACHE HELICOPTER AH-64E MODEL FOR THE REPUBLIC OF KOREA (ROK)TO INCLUDE INTEGRATED LOGISTICS SUPPORT (ILS) AND SPARES, AND ONE (1) LONGBOW CREW TRAINER (LCT), SPARES AND SUPPORT
Place of Performance
Location: MESA, MARICOPA County, ARIZONA, 85215
State: Arizona Government Spending
Plain-Language Summary
Department of Defense obligated $904.3 million to THE BOEING COMPANY for work described as: THIRTY-SIX (36)NEW BLOCK III APACHE HELICOPTER AH-64E MODEL FOR THE REPUBLIC OF KOREA (ROK)TO INCLUDE INTEGRATED LOGISTICS SUPPORT (ILS) AND SPARES, AND ONE (1) LONGBOW CREW TRAINER (LCT), SPARES AND SUPPORT Key points: 1. Contract value represents a significant investment in advanced military aviation capabilities for an allied nation. 2. The competition included exclusion of sources, suggesting specific technical requirements or existing platform integration. 3. Risk indicators include potential for cost overruns in complex integrated logistics support and spare parts. 4. Performance context is tied to the delivery of modern attack helicopters, impacting regional defense dynamics. 5. Sector positioning is within the high-value defense aerospace manufacturing industry, dominated by major prime contractors.
Value Assessment
Rating: good
The contract value of over $904 million for 36 AH-64E Apache helicopters and associated support appears to be within a reasonable range for such advanced military platforms. Benchmarking against similar international sales of Apache helicopters, which often include extensive training, logistics, and spare parts packages, suggests that the pricing is competitive. The firm-fixed-price nature of the contract provides cost certainty, although the 'integrated logistics support' component could introduce variability if not tightly managed.
Cost Per Unit: N/A
Competition Analysis
Competition Level: limited
This contract was awarded under 'Full and Open Competition After Exclusion of Sources.' This indicates that while the competition was intended to be open, specific criteria or existing relationships likely limited the pool of eligible bidders. The exclusion of certain sources suggests that only a few companies possessed the necessary capabilities or were deemed suitable for this specific defense sale, potentially impacting the intensity of price negotiation.
Taxpayer Impact: While the competition was not entirely unrestricted, the 'full and open' aspect suggests an effort to achieve fair market value. The exclusion of sources may have been justified by specific technical requirements, but it limits the potential for broader cost savings that could arise from a wider competitive field.
Public Impact
The Republic of Korea (ROK) military benefits from enhanced attack helicopter capabilities, bolstering its defense posture. Services delivered include advanced attack helicopters, integrated logistics support, spare parts, and crew training. The geographic impact is primarily within South Korea, enhancing its national security infrastructure. Workforce implications are significant for The Boeing Company and its supply chain, supporting high-skilled manufacturing jobs.
Waste & Efficiency Indicators
Waste Risk Score: 50 / 10
Warning Flags
- Potential for scope creep in integrated logistics support and spare parts procurement.
- Reliance on a single prime contractor (Boeing) for complex platform integration and support.
- Geopolitical risks associated with international defense sales and regional stability.
Positive Signals
- Delivery of advanced, proven military technology (AH-64E Apache).
- Firm-fixed-price contract structure provides cost predictability.
- Long-term support and training package ensures operational readiness.
Sector Analysis
The defense aerospace sector is characterized by high barriers to entry, long development cycles, and significant government investment. The AH-64E Apache is a state-of-the-art attack helicopter, and its manufacturing falls under the Aircraft Manufacturing (NAICS 336411) industry. This contract represents a substantial portion of spending within this niche, reflecting the global demand for advanced military hardware. Comparable spending benchmarks would involve other major international defense sales of similar aircraft platforms.
Small Business Impact
This contract does not appear to have a specific small business set-aside. As a large-scale defense procurement for advanced aircraft, the prime contract is awarded to a major aerospace manufacturer. Subcontracting opportunities may exist for small businesses within Boeing's extensive supply chain, particularly in component manufacturing and specialized services, but the primary award is not directed towards small businesses.
Oversight & Accountability
Oversight for this contract would primarily fall under the Department of Defense's contracting and program management offices, with potential involvement from the Defense Contract Management Agency (DCMA). Accountability measures are embedded in the firm-fixed-price contract terms and delivery schedules. Transparency is facilitated through contract award databases, though detailed operational performance metrics may be classified or internal.
Related Government Programs
- Foreign Military Sales (FMS) Program
- Apache Helicopter Production Contracts
- Defense Logistics Support Contracts
- Aerospace Manufacturing Contracts
Risk Flags
- Limited competition due to source exclusion.
- Complexity of integrated logistics support.
- Potential for schedule delays in international sales.
- Reliance on sole-source provider for specific components/support.
Tags
defense, helicopter, apache-helicopter, foreign-military-sale, boeing, republic-of-korea, aircraft-manufacturing, integrated-logistics-support, firm-fixed-price, limited-competition, department-of-defense, department-of-the-army
Frequently Asked Questions
What is this federal contract paying for?
Department of Defense awarded $904.3 million to THE BOEING COMPANY. THIRTY-SIX (36)NEW BLOCK III APACHE HELICOPTER AH-64E MODEL FOR THE REPUBLIC OF KOREA (ROK)TO INCLUDE INTEGRATED LOGISTICS SUPPORT (ILS) AND SPARES, AND ONE (1) LONGBOW CREW TRAINER (LCT), SPARES AND SUPPORT
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 $904.3 million.
What is the period of performance?
Start: 2013-08-23. End: 2019-05-31.
What is the historical spending trend for AH-64E Apache helicopters, both domestically and internationally?
Historical spending on AH-64E Apache helicopters, including the Block III variant, has been substantial. Domestically, the U.S. Army has invested billions over several years for modernization and fleet sustainment. Internationally, sales to allies like the United Kingdom, Japan, India, and now the Republic of Korea, represent significant foreign military sales. These international deals often involve complex packages including training, support, and munitions, driving the total contract values into the hundreds of millions or even billions of dollars per country. For example, previous ROK orders and upgrades for their existing Apache fleet also represent considerable investment. The $904 million awarded here for 36 aircraft and support is consistent with the high unit costs and comprehensive packages typical for this advanced platform in the international market.
How does the 'Full and Open Competition After Exclusion of Sources' process typically affect pricing and competition levels?
The 'Full and Open Competition After Exclusion of Sources' (often referred to as FAR 6.302-1 or similar justifications) is a procurement method where the government initially intends to compete broadly but then excludes specific sources due to unique capabilities, compatibility requirements, or other justifications. This typically leads to a more limited number of bidders than a truly unrestricted full and open competition. While it aims for competition among the eligible, the exclusion can reduce the overall competitive pressure, potentially leading to higher prices than if a wider range of companies could participate. However, it ensures that the selected contractor(s) meet highly specific and often critical requirements, which might outweigh pure cost considerations in certain defense scenarios.
What are the key performance indicators (KPIs) typically used to assess the success of helicopter manufacturing and delivery contracts?
Key performance indicators for helicopter manufacturing and delivery contracts typically include on-time delivery, adherence to quality standards (zero defects), meeting technical specifications (performance, range, payload), and cost control within the contracted budget. For integrated logistics support (ILS) and training components, KPIs often involve the availability of spare parts, effectiveness of training programs (measured through pilot/crew proficiency), and responsiveness of support services. Contractually, penalties for delays or quality issues and incentives for early or superior performance are common. For this specific contract, meeting the delivery schedule for 36 AH-64E helicopters and ensuring the ILS package is robust and functional would be paramount.
What is Boeing's track record with the AH-64E Apache program, particularly in international sales?
Boeing has an extensive and largely successful track record with the AH-64E Apache program, which is a highly capable and proven attack helicopter. The company has consistently delivered the platform to the U.S. Army and numerous international partners. International sales have been robust, with countries like the UK, Japan, India, Saudi Arabia, and the UAE operating the Apache. While large defense programs can face challenges, Boeing's history with the Apache generally indicates strong program management, manufacturing expertise, and a commitment to meeting customer requirements. The AH-64E represents a significant upgrade over previous models, incorporating advanced sensors, networking capabilities, and improved performance, which Boeing has demonstrated the ability to integrate and deliver.
How does the value of this contract compare to overall U.S. Department of Defense spending on aircraft?
The $904 million contract value for 36 AH-64E Apache helicopters and support is a significant sum, but it represents a relatively small fraction of the overall U.S. Department of Defense (DoD) annual budget for aircraft procurement and sustainment. The DoD's aircraft budget typically runs into the tens of billions of dollars annually, covering a wide range of platforms from fighter jets and bombers to transport aircraft, helicopters, and unmanned aerial systems. While this specific contract is substantial for the Republic of Korea and for Boeing, it is one of many international defense sales and domestic procurements that contribute to the broader aerospace sector supporting the U.S. military. Its value is more indicative of a major foreign military sale than a dominant share of total DoD aircraft spending.
What are the potential risks associated with the 'Integrated Logistics Support (ILS)' component of this contract?
The Integrated Logistics Support (ILS) component of this contract carries several potential risks. ILS encompasses a wide range of services, including spare parts provisioning, maintenance, repair, technical data, training, and support equipment. Risks include underestimation of the total quantity and cost of spare parts needed, delays in the supply chain for critical components, higher-than-anticipated maintenance and repair costs, and the complexity of ensuring seamless integration of support services across the helicopter's lifecycle. Furthermore, the effectiveness and cost-efficiency of the training programs are crucial. Poorly managed ILS can lead to reduced aircraft availability, increased operational costs for the ROK, and potential cost overruns if not managed tightly within the contract's framework.
Industry Classification
NAICS: Manufacturing › Aerospace Product and Parts Manufacturing › Aircraft Manufacturing
Product/Service Code: AEROSPACE CRAFT AND STRUCTURAL COMPONENTS
Competition & Pricing
Extent Competed: FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES
Solicitation Procedures: ALTERNATIVE SOURCES
Offers Received: 3
Pricing Type: FIRM FIXED PRICE (J)
Evaluated Preference: NONE
Contractor Details
Address: 5000 E MCDOWELL RD, 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: $904,269,585
Exercised Options: $904,269,585
Current Obligation: $904,269,585
Subaward Activity
Number of Subawards: 1
Total Subaward Amount: $36,466
Contract Characteristics
Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED
Cost or Pricing Data: NO
Timeline
Start Date: 2013-08-23
Current End Date: 2019-05-31
Potential End Date: 2019-05-31 12:05:00
Last Modified: 2022-02-03
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