DoD's $363M MQ-9 Aircraft Production contract awarded to General Atomics shows limited competition

Contract Overview

Contract Amount: $362,836,480 ($362.8M)

Contractor: General Atomics Aeronautical Systems, Inc.

Awarding Agency: Department of Defense

Start Date: 2015-02-04

End Date: 2017-12-31

Contract Duration: 1,061 days

Daily Burn Rate: $342.0K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIXED PRICE INCENTIVE

Sector: Defense

Official Description: ACAT 1C, MQ-9 FY14 AIRCRAFT PRODUCTION

Place of Performance

Location: POWAY, SAN DIEGO County, CALIFORNIA, 92064

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $362.8 million to GENERAL ATOMICS AERONAUTICAL SYSTEMS, INC. for work described as: ACAT 1C, MQ-9 FY14 AIRCRAFT PRODUCTION Key points: 1. Contract awarded as 'NOT COMPETED', raising concerns about price discovery and potential overpayment. 2. The fixed-price incentive contract type suggests an attempt to balance cost control with performance incentives. 3. A single award indicates a lack of broader market engagement for this critical defense asset. 4. The contract duration of 1061 days spans over two fiscal years, indicating a significant production run. 5. The primary contractor, General Atomics, is a known entity in unmanned aerial vehicle production. 6. The contract's value, while substantial, needs benchmarking against similar production runs for fair assessment.

Value Assessment

Rating: fair

The contract value of approximately $363 million for MQ-9 aircraft production requires careful benchmarking. Without comparative data on similar production runs or detailed cost breakdowns, assessing the value for money is challenging. The fixed-price incentive (FPI) structure aims to incentivize efficiency, but the lack of competition limits the ability to definitively state if the pricing is optimal. Further analysis of the contractor's historical performance and profit margins on similar contracts would be necessary for a more robust valuation.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded as 'NOT COMPETED', indicating a sole-source procurement. This means that only one vendor, General Atomics Aeronautical Systems, Inc., was solicited for this requirement. The absence of a competitive bidding process limits the government's ability to explore alternative solutions or negotiate the most favorable terms. While sole-source awards can be justified in specific circumstances (e.g., unique capabilities), they generally lead to higher prices and reduced innovation compared to full and open competition.

Taxpayer Impact: The lack of competition means taxpayers may not be receiving the best possible price for these aircraft, as there was no market pressure to drive down costs. This could result in a less efficient use of public funds.

Public Impact

The primary beneficiaries are the Department of Defense, specifically the Air Force, which will receive MQ-9 aircraft for intelligence, surveillance, and reconnaissance (ISR) missions. The services delivered include the production and delivery of MQ-9 Reaper aircraft, a key asset for modern warfare. The geographic impact is primarily within the United States, where the aircraft will be manufactured, but the operational impact is global. Workforce implications include employment at General Atomics and its subcontractors, supporting skilled labor in the aerospace and defense sector.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to higher costs for taxpayers.
Sole-source awards can stifle innovation by not encouraging new market entrants.
Reliance on a single supplier can create supply chain risks.
Fixed-price incentive contracts can still result in cost overruns if not managed effectively.

Positive Signals

General Atomics is an established provider of MQ-9 aircraft, suggesting a degree of reliability.
The fixed-price incentive contract type attempts to align contractor and government interests for cost efficiency.
The contract supports a critical defense capability for the U.S. Air Force.

Sector Analysis

The Unmanned Aerial Vehicle (UAV) market, particularly for military applications, is a significant segment of the aerospace and defense industry. This contract for MQ-9 aircraft production falls within the broader Aircraft Manufacturing sector. The market is characterized by high barriers to entry due to technological complexity, stringent regulatory requirements, and substantial R&D investment. Major players like General Atomics dominate the high-end military UAV space, with competition often focused on technological advancements and platform capabilities rather than price alone in sole-source scenarios.

Small Business Impact

The data indicates that this contract was not set aside for small businesses (ss: false, sb: false). As a sole-source award to a large prime contractor, there is a potential for subcontracting opportunities with small businesses. However, the extent to which small businesses will benefit depends on the prime contractor's subcontracting plan and the specific components or services required for MQ-9 production. Without explicit set-aside requirements or detailed subcontracting data, the direct impact on the small business ecosystem is uncertain.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contracting and program management offices, likely within the Department of the Air Force. Accountability measures are embedded in the contract terms, particularly the fixed-price incentive structure which links profit to performance and cost targets. Transparency is generally limited in sole-source procurements compared to competed contracts. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

MQ-9 Reaper Program
Unmanned Aerial Vehicle Production
Air Force Aircraft Procurement
Defense Intelligence, Surveillance, and Reconnaissance (ISR) Systems

Risk Flags

Lack of Competition
Sole-Source Award
Potential for Cost Overruns (inherent in FPI if not managed)
Supply Chain Dependency

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $362.8 million to GENERAL ATOMICS AERONAUTICAL SYSTEMS, INC.. ACAT 1C, MQ-9 FY14 AIRCRAFT PRODUCTION

Who is the contractor on this award?

The obligated recipient is GENERAL ATOMICS AERONAUTICAL SYSTEMS, INC..

Which agency awarded this contract?

Awarding agency: Department of Defense (Department of the Air Force).

What is the total obligated amount?

The obligated amount is $362.8 million.

What is the period of performance?

Start: 2015-02-04. End: 2017-12-31.

What is the track record of General Atomics Aeronautical Systems, Inc. with DoD contracts, particularly for MQ-9 production?

General Atomics Aeronautical Systems, Inc. (GA-ASI) has a long and established history as the prime contractor for the MQ-9 Reaper program. They are widely recognized for their expertise in designing, developing, and producing unmanned aerial systems. DoD contracts with GA-ASI for the MQ-9 have spanned many years and multiple aircraft variants, encompassing production, upgrades, and sustainment. Their track record includes successful delivery of numerous aircraft, contributing significantly to the Air Force's ISR capabilities. However, as with many sole-source or limited-competition contracts for specialized defense systems, assessing the 'value' or 'performance' requires detailed analysis of specific contract terms, delivery schedules, and cost performance metrics over time, which are not fully detailed in the provided summary data.

How does the $363 million contract value compare to previous or subsequent MQ-9 production contracts?

The provided data indicates a contract value of approximately $362.8 million for MQ-9 aircraft production awarded in February 2015, with an end date in December 2017. To assess its comparability, one would need to examine historical spending data for MQ-9 production across different fiscal years and contract awards. For instance, comparing this to earlier production lots or later contracts for upgraded variants would reveal trends in unit costs and overall program expenditure. Without access to a broader dataset of MQ-9 contracts, it's difficult to definitively benchmark this specific award. However, the substantial value suggests a significant number of aircraft were procured under this delivery order.

What are the primary risks associated with a 'NOT COMPETED' award for aircraft production?

The primary risks associated with a 'NOT COMPETED' award for aircraft production are multifaceted. Firstly, the lack of competition means the government foregoes the potential for better pricing that could be achieved through a competitive bidding process. This can lead to higher costs for taxpayers. Secondly, it limits the government's ability to explore alternative technologies or innovative solutions that might be offered by other potential suppliers. Thirdly, it can foster complacency in the incumbent contractor, potentially reducing incentives for efficiency and cost control. Finally, it can create a dependency on a single supplier, posing supply chain risks and potentially limiting future flexibility if the contractor's performance or business viability changes.

What is the significance of the 'FIXED PRICE INCENTIVE' (FPI) contract type in this context?

The 'FIXED PRICE INCENTIVE' (FPI) contract type is significant because it attempts to balance the cost certainty of fixed-price contracts with the flexibility needed for complex, evolving projects like aircraft production. In an FPI contract, there is a target cost, a target profit, and a price ceiling. If the final cost is below the target cost, both the government and the contractor share in the savings according to a pre-negotiated formula. Conversely, if the final cost exceeds the target cost but remains below the ceiling, the contractor's profit is reduced, and the government pays a higher price. If the cost exceeds the ceiling, the contractor bears a disproportionate share of the overrun. This structure incentivizes the contractor to control costs while still allowing for adjustments based on performance and unforeseen circumstances, though the 'NOT COMPETED' nature limits the initial price negotiation.

What are the potential implications for future MQ-9 procurements given this sole-source award?

This sole-source award for MQ-9 aircraft production could have several implications for future procurements. It reinforces General Atomics Aeronautical Systems, Inc.'s position as the sole provider for this specific platform, potentially making it harder for competitors to enter the market for future variants or upgrades. If the DoD intends to procure more MQ-9s or similar systems, future solicitations might continue to be sole-source unless a deliberate effort is made to foster competition, perhaps through developing new requirements or encouraging alternative system development. This could also influence pricing strategies for future contracts, as the incumbent may have less pressure to offer aggressive pricing. However, the DoD could also leverage this contract's performance data to negotiate better terms on future sole-source awards or to build a stronger case for competition if feasible.

How does the contract duration (1061 days) relate to the overall MQ-9 program lifecycle?

The contract duration of 1061 days (approximately 2.9 years) for MQ-9 aircraft production indicates a significant, multi-year production run under this specific delivery order. This timeframe suggests a substantial quantity of aircraft were planned for delivery, aligning with the ongoing operational needs of the Air Force for intelligence, surveillance, and reconnaissance (ISR) capabilities. The MQ-9 program itself has a lifecycle extending beyond initial production, encompassing upgrades, sustainment, and eventual replacement. A duration of this length for production implies a stable requirement and a commitment to maintaining and expanding the MQ-9 fleet during that period, fitting within the broader context of the platform's service life.

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

Offers Received: 1

Pricing Type: FIXED PRICE INCENTIVE (L)

Evaluated Preference: NONE

Contractor Details

Parent Company: General Atomics

Address: 14200 KIRKHAM WAY, POWAY, CA, 92064

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: $362,836,480

Exercised Options: $362,836,480

Current Obligation: $362,836,480

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: FA862010G3038

IDV Type: BOA

Timeline