DoD awards $107M sole-source contract for CH-47 Chinook helicopter engine components to Honeywell

Contract Overview

Contract Amount: $107,028,561 ($107.0M)

Contractor: Honeywell International Inc.

Awarding Agency: Department of Defense

Start Date: 2023-12-20

End Date: 2031-05-31

Contract Duration: 2,719 days

Daily Burn Rate: $39.4K/day

Competition Type: NOT COMPETED

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: CH47 714A ENGINES, ECUS AND INSTALL KITS IN SUPPORT OF GERMANY AND SPAIN.

Place of Performance

Location: PHOENIX, MARICOPA County, ARIZONA, 85034

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $107.0 million to HONEYWELL INTERNATIONAL INC. for work described as: CH47 714A ENGINES, ECUS AND INSTALL KITS IN SUPPORT OF GERMANY AND SPAIN. Key points: 1. Contract awarded on a sole-source basis, raising questions about price competition. 2. Significant contract duration of over 6 years suggests long-term support needs. 3. Focus on critical engine components (ECUs and kits) highlights operational importance. 4. Geographic scope includes Germany and Spain, indicating international military support. 5. The contract's value is substantial within the aircraft engine parts manufacturing sector. 6. Fixed-price contract type aims to control costs, but sole-sourcing limits negotiation leverage.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to its sole-source nature and specific component focus. Without competitive bids, it's difficult to ascertain if the $107 million represents optimal value for money. However, the fixed-price contract type provides some cost certainty for the government. Comparison to similar sole-source procurements for specialized aviation parts would be necessary for a more robust assessment.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded using a sole-source justification, meaning only one bidder, Honeywell International Inc., was solicited. This approach is typically used when a specific product or service is only available from a single source, or in cases of urgent need where competition is not feasible. The lack of competition limits the government's ability to leverage market forces to achieve the lowest possible price.

Taxpayer Impact: The absence of competition means taxpayers may not benefit from the cost savings that could arise from a more open bidding process. The government relies on Honeywell's pricing without the pressure of competing offers.

Public Impact

The U.S. Department of the Army benefits from the continued operational readiness of its CH-47 Chinook fleet. Services delivered include the provision of critical engine components (ECUs and installation kits). The contract supports U.S. military operations and readiness in Germany and Spain. Workforce implications are primarily within Honeywell's manufacturing and support operations.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing opportunities.
Long contract duration could lead to price increases if market conditions change significantly.
Reliance on a single supplier for critical components poses a supply chain risk.

Positive Signals

Fixed-price contract type provides cost predictability.
Honeywell is an established supplier with a track record in aviation components.
Contract supports critical military aviation assets, ensuring operational readiness.

Sector Analysis

This contract falls within the Aircraft Engine and Engine Parts Manufacturing sector, a specialized segment of the aerospace industry. The market is characterized by high barriers to entry due to complex technology, stringent quality requirements, and significant R&D investment. Major players like Honeywell dominate, often acting as sole suppliers for specific components due to proprietary technology or long-standing relationships with aircraft manufacturers and military branches. Spending in this niche is driven by defense procurement cycles and the need for sustainment of existing fleets.

Small Business Impact

This contract was not set aside for small businesses, nor does it appear to involve significant subcontracting opportunities for small businesses based on the provided data. The primary contractor, Honeywell, is a large corporation. The nature of specialized aviation components often requires proprietary technology and manufacturing capabilities typically found in larger firms, limiting direct small business participation in the prime contract.

Oversight & Accountability

Oversight for this contract will be managed by the Department of the Army, likely through contracting officers and program managers responsible for aviation sustainment. Accountability measures are embedded in the fixed-price contract terms, requiring delivery of specified components. Transparency is limited due to the sole-source nature of the award, with details of the negotiation and pricing justification not publicly available. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

CH-47 Chinook Helicopter Support
Aviation Component Procurement
Defense Logistics Agency (DLA) Aviation
Foreign Military Sales (FMS) Support

Risk Flags

Sole-source procurement
Long-term contract duration
Critical component supply chain

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $107.0 million to HONEYWELL INTERNATIONAL INC.. CH47 714A ENGINES, ECUS AND INSTALL KITS IN SUPPORT OF GERMANY AND SPAIN.

Who is the contractor on this award?

The obligated recipient is HONEYWELL INTERNATIONAL INC..

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $107.0 million.

What is the period of performance?

Start: 2023-12-20. End: 2031-05-31.

What is Honeywell's track record with the CH-47 program and similar sole-source contracts?

Honeywell International Inc. has a long-standing relationship with the CH-47 Chinook program, supplying various components and systems. As a major aerospace manufacturer, Honeywell frequently engages in sole-source or limited-competition contracts for specialized parts where they hold proprietary technology or are the incumbent supplier. Their track record typically involves meeting stringent military specifications and delivery schedules. However, the specifics of their performance on past sole-source awards for similar engine components would require a deeper dive into contract performance reports and historical data to assess consistency in quality, delivery, and pricing adherence.

How does the $107 million contract value compare to historical spending on CH-47 engine components?

Direct comparison of the $107 million contract value to historical spending on CH-47 engine components is difficult without specific historical data for the same set of ECUs and installation kits. However, considering the contract duration of over six years (ending May 2031), the annual average spending would be approximately $15-16 million. This figure needs to be contextualized against the overall sustainment costs of the CH-47 fleet and the specific technological advancements or obsolescence issues related to these engine components. Sole-source awards can sometimes result in higher unit costs compared to competitive procurements, making historical benchmarks from competitive contracts less relevant.

What are the primary risks associated with this sole-source award for engine components?

The primary risks associated with this sole-source award include potential overpricing due to the lack of competition, limiting the government's ability to secure the best possible value. There's also a risk of supply chain disruption if Honeywell faces production issues, as there are no immediate alternative suppliers. Furthermore, long-term reliance on a single source can reduce negotiating leverage for future contracts or modifications. The fixed-price nature mitigates some cost overrun risk for the government, but the initial price negotiation is critical.

How does the geographic scope (Germany and Spain) impact the contract's execution and cost?

The inclusion of Germany and Spain in the contract's scope indicates support for U.S. Army aviation assets stationed or operating in these European locations. This geographic spread necessitates robust logistics and potentially higher shipping costs for the engine components. It also implies a need for responsive support to ensure operational readiness across different theaters. The contract likely accounts for these logistical complexities, which could influence the overall pricing. Coordination with host nation agreements and local military commands would also be a factor in execution.

What is the significance of 'ECUs and install kits' in the context of helicopter engine maintenance?

Electronic Control Units (ECUs) are critical components that manage and optimize engine performance, fuel delivery, and operational parameters. Installation kits typically include all necessary hardware, wiring, and fasteners required to integrate new ECUs or other major engine components into the aircraft. The procurement of these specific items suggests either routine replacement due to scheduled maintenance, upgrades to newer ECU technology for improved performance or efficiency, or replacement of components that have reached their end-of-life or failed. Their criticality means that availability directly impacts the operational status of the CH-47 helicopters.

What are the potential implications of the contract's long duration (over 6 years)?

The contract's duration, spanning from December 2023 to May 2031 (over 6 years), suggests a long-term sustainment requirement for the CH-47 fleet's engines. This extended period provides stability for both the government and the contractor. For the government, it ensures a consistent supply of critical parts. For Honeywell, it offers predictable revenue. However, a long duration also increases exposure to market volatility, potential technological obsolescence, and the risk that initial pricing assumptions may become unfavorable over time, especially if inflation or material costs rise significantly.

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

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Resideo Technologies, 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: $107,028,561

Exercised Options: $107,028,561

Current Obligation: $107,028,561

Subaward Activity

Number of Subawards: 19

Total Subaward Amount: $19,501,033

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: W58RGZ21D0027

IDV Type: IDC

Timeline