DoD awards $230.8M for 8 Apache helicopters to Boeing, raising questions about competition and value

Contract Overview

Contract Amount: $230,856,826 ($230.9M)

Contractor: THE Boeing Company

Awarding Agency: Department of Defense

Start Date: 2015-01-26

End Date: 2019-06-30

Contract Duration: 1,616 days

Daily Burn Rate: $142.9K/day

Competition Type: NOT AVAILABLE FOR COMPETITION

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: EIGHT AH-64E APACHE HELICOPTERS FOR REPUBLIC OF INDONESIA

Place of Performance

Location: MESA, MARICOPA County, ARIZONA, 85215

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $230.9 million to THE BOEING COMPANY for work described as: EIGHT AH-64E APACHE HELICOPTERS FOR REPUBLIC OF INDONESIA Key points: 1. Contract awarded on a sole-source basis, limiting price discovery and potentially increasing costs. 2. High per-unit cost suggests potential for better value through competitive bidding. 3. Significant contract value for a niche defense product, indicating specialized market dynamics. 4. Long performance period (over 4 years) requires careful monitoring for cost overruns. 5. Sole contractor for a critical defense platform highlights potential single-source risks. 6. Fixed-price contract shifts some risk to the contractor, but scope creep remains a concern.

Value Assessment

Rating: fair

The per-unit cost for these AH-64E Apache helicopters is approximately $28.86 million. This figure appears high when compared to publicly available data for similar military aircraft procurements, especially considering the absence of competitive bidding. While the AH-64E is a sophisticated platform, the lack of competition prevents a robust benchmark against alternative offerings or more efficient production methods. Further analysis would be needed to determine if this price reflects true market value or the premium associated with a sole-source award.

Cost Per Unit: $28.86 million per unit

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one bidder, The Boeing Company, was solicited. This approach bypasses the standard competitive bidding process, which typically involves multiple companies vying for the contract. While sole-source awards can be justified for unique or specialized items where only one supplier exists, it significantly reduces the opportunity for price negotiation and innovation that competition usually fosters. The lack of bidders means taxpayers did not benefit from potential cost savings that could arise from a competitive environment.

Taxpayer Impact: The absence of competition means taxpayers likely paid a premium, as there was no pressure on the contractor to offer the lowest possible price. This limits the government's ability to secure the best possible value for taxpayer dollars.

Public Impact

The Republic of Indonesia is the direct beneficiary, receiving advanced military aviation capabilities. The contract supports the production and delivery of eight AH-64E Apache attack helicopters. The geographic impact is primarily within the United States, where the helicopters will be manufactured by Boeing. Workforce implications include employment for skilled labor in aircraft manufacturing and related support industries. Enhances the aerial defense capabilities of a key international partner.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition and may lead to higher costs for taxpayers.
High per-unit cost warrants scrutiny to ensure value for money.
Long contract duration increases the risk of cost escalation or scope creep.
Reliance on a single supplier for critical defense assets poses a strategic risk.

Positive Signals

Fixed-price contract structure shifts some financial risk to the contractor.
AH-64E Apache is a proven and advanced attack helicopter platform.
Contract supports a key international security cooperation objective.

Sector Analysis

The defense aviation sector is characterized by high barriers to entry, significant research and development costs, and long product lifecycles. The AH-64E Apache is a mature but highly advanced attack helicopter, with The Boeing Company being the sole manufacturer. Spending in this niche often involves direct foreign military sales or specific defense modernization programs. Comparable spending benchmarks are difficult to establish precisely due to the specialized nature of these platforms and the often non-competitive procurement processes for such advanced systems.

Small Business Impact

This contract does not appear to have a small business set-aside component, nor is there information suggesting significant subcontracting opportunities for small businesses within this specific award. As a sole-source award to a large prime contractor for a highly specialized defense platform, the direct impact on the small business ecosystem is likely minimal. However, Boeing's broader supply chain may involve small businesses for component manufacturing or support services, though this is not explicitly detailed in the award data.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Defense's contract management agencies, such as the Defense Contract Management Agency (DCMA). Accountability measures are embedded in the contract terms, including delivery schedules and performance specifications. Transparency is limited due to the sole-source nature of the award, but contract modifications and payment milestones would be subject to internal DoD review and potentially audits by the Government Accountability Office (GAO) or the DoD Inspector General if specific concerns arise.

Related Government Programs

Foreign Military Sales Program
Attack Helicopter Procurement
Defense Aircraft Manufacturing
Apache Helicopter Program

Risk Flags

Sole Source Justification
High Per-Unit Cost
Lack of Competition
Long Performance Period

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $230.9 million to THE BOEING COMPANY. EIGHT AH-64E APACHE HELICOPTERS FOR REPUBLIC OF INDONESIA

Who is the contractor on this award?

The obligated recipient is THE BOEING COMPANY.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $230.9 million.

What is the period of performance?

Start: 2015-01-26. End: 2019-06-30.

What is the track record of The Boeing Company in delivering AH-64E Apache helicopters under similar contracts?

The Boeing Company has a long and established history as the prime contractor for the AH-64 Apache program, including the AH-64E variant. They have consistently delivered these advanced attack helicopters to the U.S. Army and numerous international partners. Past performance generally indicates a strong capability in manufacturing, integration, and support for the Apache platform. However, specific contract performance metrics, such as on-time delivery rates, adherence to budget, and quality control for previous foreign military sales or domestic procurements of the AH-64E, would require a deeper dive into historical contract data and performance reports. Generally, Boeing is considered a reliable supplier for this specific platform, but like any large defense contractor, past contracts may have experienced delays or cost adjustments.

How does the per-unit cost of $28.86 million compare to other recent procurements of AH-64E helicopters?

The per-unit cost of approximately $28.86 million for the AH-64E Apache helicopters in this contract appears to be on the higher end when compared to some publicly available data points for similar aircraft. For instance, some reports indicate lower per-unit costs in the range of $20-25 million for earlier variants or different configurations, or when procured in larger quantities through competitive processes. However, direct comparisons are complex due to variations in contract scope (e.g., included support, training, specific avionics), the year of procurement (inflation), and the competitive landscape at the time of award. Sole-source awards, like this one, often result in higher prices than competitively bid contracts. Without access to the specific details of what is included in this $28.86 million figure and the terms of the sole-source justification, it's difficult to make a definitive value judgment, but it does signal a need for careful review.

What are the primary risks associated with a sole-source award for such a significant defense procurement?

The primary risks associated with a sole-source award for a significant defense procurement like this include a lack of price competition, which can lead to inflated costs for taxpayers. Without competing bids, there is less incentive for the contractor to offer the lowest possible price or to innovate aggressively on cost-saving measures. Furthermore, sole-source awards can reduce transparency in the procurement process. There's also a risk of vendor lock-in, where the government becomes heavily reliant on a single supplier, potentially limiting future flexibility and bargaining power. For specialized platforms like the AH-64E, while sole-sourcing might be justified by unique capabilities or limited suppliers, it necessitates robust oversight to ensure the government is still achieving fair value and managing program risks effectively.

What is the expected program effectiveness and impact of delivering these AH-64E Apache helicopters to Indonesia?

The delivery of eight AH-64E Apache helicopters is expected to significantly enhance the aerial combat and reconnaissance capabilities of the Indonesian military. The AH-64E is a state-of-the-art attack helicopter, equipped with advanced sensors, weaponry, and network-centric capabilities, designed for a wide range of missions including close air support, armed reconnaissance, and anti-tank warfare. For Indonesia, this procurement represents a major modernization step, bolstering its defense posture and potentially contributing to regional stability. The effectiveness will depend on successful integration into Indonesia's existing military structure, pilot training, maintenance support, and operational doctrine. From a U.S. perspective, this sale supports a key strategic partner in the Indo-Pacific region, strengthening alliances and interoperability.

How does this contract's value and nature compare to historical U.S. Department of Defense spending on attack helicopters?

This contract, valued at $230.8 million for eight AH-64E Apache helicopters, represents a significant but not unprecedented level of spending for advanced attack aircraft, particularly within the context of foreign military sales. The U.S. Department of Defense historically spends billions annually on rotary-wing aircraft, including attack helicopters like the Apache, for its own forces and through FMS programs. The AH-64 program itself has seen cumulative spending in the tens of billions over its lifecycle. What makes this specific contract notable is its sole-source nature and the substantial per-unit cost, which deviates from the typical competitive bidding processes often employed for large-scale domestic procurements. However, for specific international sales of highly specialized platforms, sole-source or limited competition awards are not uncommon, reflecting unique customer requirements and the limited global suppliers for such advanced systems.

Industry Classification

NAICS: Manufacturing › Aerospace Product and Parts Manufacturing › Aircraft Manufacturing

Product/Service Code: AEROSPACE CRAFT AND STRUCTURAL COMPONENTS

Competition & Pricing

Extent Competed: NOT AVAILABLE FOR COMPETITION

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: W58RGZ14R0097

Offers Received: 1

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: $230,856,826

Exercised Options: $230,856,826

Current Obligation: $230,856,826

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline