DoD awards $224M for CH-47F helicopter engines, citing sole-source justification

Contract Overview

Contract Amount: $224,418,469 ($224.4M)

Contractor: Honeywell International Inc.

Awarding Agency: Department of Defense

Start Date: 2013-12-23

End Date: 2017-12-31

Contract Duration: 1,469 days

Daily Burn Rate: $152.8K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: PROCUREMENT OF T55 ENGINES AND FIELDING KITS FOR CH-47F HELICOPTERS.

Place of Performance

Location: PHOENIX, MARICOPA County, ARIZONA, 85034

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $224.4 million to HONEYWELL INTERNATIONAL INC. for work described as: PROCUREMENT OF T55 ENGINES AND FIELDING KITS FOR CH-47F HELICOPTERS. Key points: 1. Contract awarded to Honeywell International Inc. for T55 engines and fielding kits. 2. Sole-source award raises questions about competition and potential cost savings. 3. Long contract duration of 1469 days suggests a significant, ongoing need. 4. Fixed-price contract type aims to control costs, but initial pricing needs scrutiny. 5. Focus on critical aircraft components highlights the importance of supply chain stability. 6. Geographic concentration in Arizona for manufacturing may have local economic impacts.

Value Assessment

Rating: fair

The contract value of $224.4 million for T55 engines and fielding kits for CH-47F helicopters appears substantial. Without direct comparable contracts for the same period and scope, a precise value-for-money assessment is challenging. However, the sole-source nature of the award necessitates a thorough review of Honeywell's pricing against historical data and industry benchmarks for similar engine components. The firm-fixed-price structure is a positive indicator for cost control, but the overall value proposition hinges on whether this price reflects competitive market rates or a premium due to limited competition.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning Honeywell International Inc. was the only bidder considered. The justification for a sole-source award typically involves factors such as unique capabilities, proprietary technology, or the absence of adequate competition. While this can ensure access to specialized parts, it limits the government's ability to leverage competitive pressures to drive down prices. The lack of multiple bidders means that price discovery through a competitive process was bypassed.

Taxpayer Impact: Sole-source awards can potentially lead to higher costs for taxpayers as the government cannot benefit from the price reductions typically achieved through competitive bidding. This necessitates robust oversight to ensure the awarded price is fair and reasonable.

Public Impact

The U.S. Army benefits directly through the continued operation and readiness of its CH-47F Chinook fleet. Essential components (T55 engines and fielding kits) are provided to maintain critical helicopter capabilities. The contract supports advanced helicopter maintenance and operational readiness for military aviation. Workforce implications may exist within Honeywell's manufacturing facilities, particularly in Arizona. Ensures the availability of specialized parts for a key military transport helicopter.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition, potentially increasing costs for taxpayers.
Lack of transparency in the sole-source justification requires careful review.
Long contract duration could mask inefficiencies if not closely monitored.
Dependence on a single supplier for critical components poses supply chain risk.

Positive Signals

Firm-fixed-price contract type helps to establish cost certainty.
Awarding to an established supplier like Honeywell ensures access to specialized knowledge.
Focus on critical aircraft parts supports military readiness and operational effectiveness.

Sector Analysis

The aerospace and defense sector is characterized by high technological complexity and significant government procurement. The manufacturing of aircraft engines and parts, classified under NAICS code 336412, is a specialized segment dominated by a few key players. Contracts for such critical components are often long-term and awarded through complex procurement processes. The market size for military aircraft engines is substantial, driven by global defense spending. This contract fits within the broader defense procurement landscape, ensuring the operational capability of a vital military asset.

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, Honeywell International Inc., is a large corporation. There is no explicit information provided regarding subcontracting plans with small businesses. Without specific subcontracting goals or reporting, the direct impact on the small business ecosystem is unclear, though large prime contracts often involve some level of subcontracting that could potentially benefit small businesses.

Oversight & Accountability

Oversight for this contract would primarily fall under the Defense Contract Management Agency (DCMA), which is responsible for ensuring contractor performance and compliance. The firm-fixed-price contract type provides a degree of cost control. Transparency regarding the sole-source justification and pricing details would be crucial for effective oversight. Further accountability measures would involve performance reviews and adherence to delivery schedules. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse.

Related Government Programs

CH-47 Chinook Helicopter Modernization Programs
Aviation Component Procurement
Defense Logistics Agency (DLA) Aviation Support
Propulsion Systems Contracts
Military Aircraft Engine Maintenance and Repair

Risk Flags

Sole-source award
Potential for cost overruns due to lack of competition
Supply chain dependency on a single manufacturer
Need for robust price reasonableness review

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $224.4 million to HONEYWELL INTERNATIONAL INC.. PROCUREMENT OF T55 ENGINES AND FIELDING KITS FOR CH-47F HELICOPTERS.

Who is the contractor on this award?

The obligated recipient is HONEYWELL INTERNATIONAL 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 $224.4 million.

What is the period of performance?

Start: 2013-12-23. End: 2017-12-31.

What is the historical spending trend for T55 engines and fielding kits for CH-47F helicopters?

Analyzing historical spending on T55 engines and fielding kits for CH-47F helicopters is crucial for understanding cost trends and identifying potential anomalies. While the provided data focuses on a single definitive contract valued at $224.4 million from 2013-2017, a comprehensive review would involve examining all prior and subsequent contracts for these specific components. This includes looking at contract types (fixed-price vs. cost-plus), competition levels (sole-source vs. full and open), and the number of bidders. Significant year-over-year increases in unit costs, especially under sole-source conditions, could indicate a need for renegotiation or a more competitive procurement strategy. Conversely, stable or decreasing costs, even with inflation, might suggest effective contract management and supplier efficiency. Without access to a broader contract history database, a detailed trend analysis is limited to the information available for this specific award.

How does the unit cost of T55 engines under this contract compare to market rates or similar military engine procurements?

Benchmarking the unit cost of T55 engines procured under this $224.4 million contract against market rates or similar military engine procurements is essential for assessing value for money. As this was a sole-source award to Honeywell International Inc., direct comparison with competitive bids is not possible. However, analysis can involve comparing the implied unit cost (total contract value divided by the number of engines, if known) to publicly available data on previous T55 engine sales, aftermarket prices, or costs of comparable turboshaft engines used in other military helicopters. Factors such as engine variant, included accessories, and warranty provisions significantly influence price. If the unit cost significantly exceeds historical averages or prices for comparable engines, it may suggest that the sole-source nature of the award resulted in a premium. A detailed breakdown of costs, including manufacturing, overhead, and profit, would be necessary for a definitive comparison.

What are the specific risks associated with a sole-source award for critical helicopter components like the T55 engine?

Sole-source awards for critical components like the T55 engine present several risks. Primarily, the lack of competition can lead to higher prices for the government, as the contractor faces less pressure to offer competitive rates. This can result in a suboptimal value for taxpayer money. Secondly, it creates a dependency on a single supplier, potentially leading to supply chain vulnerabilities. If the sole supplier experiences production issues, financial instability, or decides to discontinue the product line, the government could face significant operational disruptions and delays in acquiring necessary parts. Furthermore, without competitive benchmarking, it can be more challenging to ensure the quality and technological relevance of the components over time. Robust contract management, including detailed cost analysis and performance monitoring, is crucial to mitigate these risks.

What is Honeywell International Inc.'s track record with T55 engine contracts and overall performance in defense procurement?

Honeywell International Inc. has a long-standing relationship with the U.S. military, particularly as the manufacturer of the T55 turboshaft engine, a critical component for the CH-47 Chinook helicopter. Their track record with T55 engine contracts is extensive, involving numerous awards over several decades for production, upgrades, and support. Generally, Honeywell is considered a major, established defense contractor with significant experience in aerospace manufacturing. Performance reviews for specific contracts would vary, but their continued role as a sole-source provider for the T55 suggests a history of meeting the military's requirements, albeit within a non-competitive framework for this specific engine. Assessing overall performance would involve reviewing contract completion rates, quality metrics, and any past performance issues or disputes reported by the government.

How does the $224.4 million contract value compare to the total lifecycle cost or annual spending on CH-47F helicopter sustainment?

The $224.4 million contract value represents a significant investment specifically for T55 engines and fielding kits over the period of performance (2013-2017). To contextualize this against the total lifecycle cost or annual spending on CH-47F helicopter sustainment, a broader analysis is required. CH-47F sustainment encompasses a wide range of costs, including maintenance, repair, spare parts (beyond engines), upgrades, training, and personnel. Engine procurement and maintenance are typically a substantial portion of aviation sustainment budgets. This contract value, while large, is likely one component of the overall annual budget allocated to keeping the CH-47F fleet operational. Understanding the proportion this contract represents requires examining the total budget allocated for CH-47F sustainment during those fiscal years and comparing it to the spending on other critical systems and services for the aircraft.

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: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: W58RGZ11R0230

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Honeywell International Inc

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

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: $383,428,709

Exercised Options: $224,418,469

Current Obligation: $224,418,469

Subaward Activity

Number of Subawards: 485

Total Subaward Amount: $34,739,393

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline