Boeing awarded $349M for AH-64E Apache helicopter technical insertions, with no competition

Contract Overview

Contract Amount: $349,375,767 ($349.4M)

Contractor: THE Boeing Company

Awarding Agency: Department of Defense

Start Date: 2015-04-15

End Date: 2020-05-29

Contract Duration: 1,871 days

Daily Burn Rate: $186.7K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Official Description: PROCUREMENT OF NON-RECURRING DEVELOPMENT OF TECHNICAL INSERTIONS TO COMPLETE DEVELOPMENT OF THE BASE LINE AH-64E, AND FOR THE INTEGRATION OF MODIFICATIONS.

Place of Performance

Location: MESA, MARICOPA County, ARIZONA, 85215

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $349.4 million to THE BOEING COMPANY for work described as: PROCUREMENT OF NON-RECURRING DEVELOPMENT OF TECHNICAL INSERTIONS TO COMPLETE DEVELOPMENT OF THE BASE LINE AH-64E, AND FOR THE INTEGRATION OF MODIFICATIONS. Key points: 1. Contract awarded to a single, established prime contractor for specialized aircraft modifications. 2. Significant investment in upgrading a key military rotorcraft platform. 3. Procurement method raises questions about potential price efficiencies. 4. Contract duration spans over 1.5 years, indicating a complex development effort. 5. Focus on non-recurring development suggests a one-time investment rather than ongoing services. 6. Geographic location of performance is in Arizona.

Value Assessment

Rating: fair

The contract value of $349 million for non-recurring development and integration of technical insertions for the AH-64E Apache helicopter is substantial. Without comparable sole-source procurements for similar development phases, a direct value-for-money assessment is challenging. However, the absence of competition typically leads to higher costs compared to a fully competed process. Benchmarking against industry standards for aircraft modification and development programs would be necessary for a more precise evaluation of pricing.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis to The Boeing Company. The data indicates it was not competed. This approach is often used when a specific contractor possesses unique capabilities, intellectual property, or is the sole provider of a necessary component or service. The lack of competition means that price discovery through market forces was bypassed, potentially leading to less favorable pricing for the government.

Taxpayer Impact: Sole-source awards limit the government's ability to leverage competitive pressures to secure the best possible pricing, potentially resulting in higher costs for taxpayers.

Public Impact

The primary beneficiaries are the U.S. Army, which will receive upgraded AH-64E Apache helicopters. The services delivered include the non-recurring development and integration of technical insertions, enhancing the helicopter's capabilities. The contract performance is located in Arizona, potentially impacting the local aerospace workforce and economy. This investment supports the modernization of a critical military asset, ensuring its continued operational effectiveness.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing, potentially increasing costs for taxpayers.
Lack of transparency in the sole-source justification process.
Potential for cost overruns in a cost-plus incentive fee contract without robust oversight.

Positive Signals

Focus on upgrading a critical military platform (AH-64E Apache).
Contract awarded to a prime contractor with established expertise in the platform.
Investment in technological advancement for defense capabilities.

Sector Analysis

The aerospace and defense sector is characterized by high R&D costs, long product development cycles, and significant government procurement. Contracts for aircraft manufacturing and modification, especially for advanced platforms like the AH-64E, represent a substantial portion of defense spending. The market is often dominated by a few large prime contractors like Boeing, with specialized capabilities and established relationships with the government. This contract fits within the aircraft manufacturing sub-sector, focusing on the development and integration of new technologies into existing airframes.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb: false'. Given the sole-source nature and the prime contractor being The Boeing Company, it is unlikely that significant subcontracting opportunities for small businesses were mandated or actively sought through a competitive process. The focus is on the prime contractor's capabilities for specialized development and integration.

Oversight & Accountability

The contract type is Cost Plus Incentive Fee (CPIF), which includes performance targets and fee adjustments based on achieving them. Oversight would typically be managed by the Defense Contract Management Agency (DCMA). Transparency regarding the justification for the sole-source award and ongoing cost monitoring are key oversight elements. Inspector General involvement would be triggered by specific allegations of fraud, waste, or abuse.

Related Government Programs

AH-64 Apache Program
Aviation Systems Development
Military Aircraft Modernization
Aerospace Manufacturing

Risk Flags

Sole-source award
Cost-plus contract type
Lack of public justification for sole-source

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $349.4 million to THE BOEING COMPANY. PROCUREMENT OF NON-RECURRING DEVELOPMENT OF TECHNICAL INSERTIONS TO COMPLETE DEVELOPMENT OF THE BASE LINE AH-64E, AND FOR THE INTEGRATION OF MODIFICATIONS.

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 $349.4 million.

What is the period of performance?

Start: 2015-04-15. End: 2020-05-29.

What is The Boeing Company's track record with AH-64 Apache helicopter contracts?

The Boeing Company has a long-standing and extensive track record with the AH-64 Apache program, serving as the prime contractor for its development, production, and sustainment. They have been responsible for numerous upgrades and modifications throughout the helicopter's lifecycle, including the AH-64E variant. Their deep institutional knowledge and established manufacturing capabilities make them a logical, albeit sole-source, choice for complex development tasks. Past performance on similar contracts would likely have been a factor in the decision to award this sole-source contract, though specific details of that evaluation are not publicly available.

How does the value of this contract compare to similar AH-64E development efforts?

Direct comparison of this $349 million contract to similar AH-64E development efforts is difficult without access to specific contract details and the scope of work for other development phases. However, the AH-64E program itself represents a significant modernization effort, and non-recurring development for major system integrations and technical insertions can be inherently costly. Given this was a sole-source award, it is reasonable to infer that the pricing may be higher than if it had been competitively procured. Benchmarking against industry averages for similar-scale R&D and integration projects within the defense sector would provide a broader context for assessing value.

What are the primary risks associated with this sole-source, cost-plus incentive fee contract?

The primary risks associated with this sole-source, Cost Plus Incentive Fee (CPIF) contract include potential cost overruns and a lack of competitive pressure to drive down prices. Since Boeing is the sole provider, there's less incentive to be highly cost-efficient compared to a competitive bid. The CPIF structure aims to mitigate some risk by incentivizing performance, but effective government oversight is crucial to ensure that costs remain reasonable and that the contractor is motivated to meet targets efficiently. Scope creep and schedule delays are also inherent risks in complex development programs, especially when awarded without competition.

How effective is the AH-64E Apache helicopter program in meeting its modernization goals?

The AH-64E Apache program is generally considered effective in meeting its modernization goals, aiming to enhance the helicopter's survivability, lethality, and network-centric capabilities. The 'E' variant introduced significant upgrades over previous models, including improved engines, transmissions, and rotor blades, as well as enhanced sensor and fire control systems. Contracts like this one, focused on further technical insertions, indicate a continued commitment to keeping the platform relevant against evolving threats. While specific program effectiveness metrics are often classified, the sustained investment and ongoing upgrades suggest the platform is fulfilling its intended role within the Army's aviation fleet.

What are the historical spending patterns for AH-64 Apache modifications and upgrades?

Historical spending on AH-64 Apache modifications and upgrades has been substantial, reflecting the platform's long service life and the continuous need for modernization. Over the decades, numerous contracts have been awarded for various upgrades, including avionics, weapons systems, and structural enhancements. These contracts have often been awarded to prime contractor Boeing, sometimes competitively and sometimes sole-source, depending on the nature of the upgrade and the availability of alternative providers. The total lifecycle cost of the Apache program, including development, procurement, and sustainment, runs into many billions of dollars, with significant portions allocated to upgrades and modifications to maintain operational relevance.

What is the significance of 'non-recurring development' in this contract?

Non-recurring development refers to the initial costs associated with designing, engineering, and testing a new capability or modification that will not be repeated for each unit produced. In this context, it means the $349 million is primarily for the research, design, prototyping, and testing required to develop the technical insertions for the AH-64E. Once this development phase is complete, the government would then procure the actual hardware and integration services for the fleet, which would be a separate, recurring cost. This contract focuses on the upfront investment to create the new technologies or improvements.

Industry Classification

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

Product/Service Code: AEROSPACE CRAFT AND STRUCTURAL COMPONENTS

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: W58RGZ14R0322

Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE (V)

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: $351,325,921

Exercised Options: $351,325,921

Current Obligation: $349,375,767

Subaward Activity

Number of Subawards: 10

Total Subaward Amount: $3,745,229

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline