DoD's $336M Predator aircraft buy shows limited competition and potential value concerns

Contract Overview

Contract Amount: $336,359,462 ($336.4M)

Contractor: General Atomics Aeronautical Systems, Inc.

Awarding Agency: Department of Defense

Start Date: 2018-03-29

End Date: 2021-01-18

Contract Duration: 1,026 days

Daily Burn Rate: $327.8K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: ACAT 1C, PREDATOR, FISCAL YEAR 2017 PRODUCTION BUY OF 24 AIRCRAFT

Place of Performance

Location: POWAY, SAN DIEGO County, CALIFORNIA, 92064

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $336.4 million to GENERAL ATOMICS AERONAUTICAL SYSTEMS, INC. for work described as: ACAT 1C, PREDATOR, FISCAL YEAR 2017 PRODUCTION BUY OF 24 AIRCRAFT Key points: 1. The contract awarded to General Atomics Aeronautical Systems, Inc. for 24 Predator aircraft represents a significant investment in intelligence, surveillance, and reconnaissance (ISR) capabilities. 2. The sole-source nature of this award raises questions about price discovery and potential overpayment. 3. Benchmarking against similar contracts is crucial to assess the value for money delivered. 4. The firm fixed-price contract type offers some cost certainty but does not mitigate the risk of inflated pricing due to limited competition. 5. The duration of the contract (1026 days) suggests a substantial production and delivery timeline. 6. The absence of small business participation warrants further investigation into subcontracting opportunities.

Value Assessment

Rating: questionable

The total award of $336.4 million for 24 aircraft equates to approximately $14 million per unit. Without specific details on the configuration and capabilities of these Predator aircraft, a direct comparison to market rates is challenging. However, given the sole-source nature of the award, there is a heightened risk that the pricing may not reflect competitive market dynamics. Further analysis would require access to detailed cost breakdowns and comparisons with similar ISR platforms procured through competitive means.

Cost Per Unit: Approximately $14 million per aircraft (based on total award and quantity)

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis to General Atomics Aeronautical Systems, Inc. The data indicates it was 'NOT COMPETED'. This means that the Department of Defense did not solicit bids from multiple potential suppliers. Consequently, there was no direct price competition to drive down costs or encourage innovation. The lack of a competitive bidding process limits the government's ability to ensure it is receiving the best possible value for its investment.

Taxpayer Impact: Taxpayers may have paid a premium for these aircraft due to the absence of competitive pressure. Without a bidding process, the government lacks a strong negotiating position to secure the lowest possible price.

Public Impact

The primary beneficiaries are the Department of the Air Force, which receives advanced ISR platforms essential for intelligence gathering and operational support. The services delivered include the production and delivery of 24 Predator aircraft, enhancing the military's surveillance and reconnaissance capabilities. The geographic impact is primarily within the defense sector, supporting national security objectives. Workforce implications include employment within General Atomics Aeronautical Systems and its supply chain, particularly in California where the contractor is based.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition, potentially leading to higher costs for taxpayers.
Lack of transparency in the procurement process due to 'NOT COMPETED' status.
Absence of small business set-aside or participation noted, potentially limiting broader economic impact.
Contract duration is substantial, requiring long-term budget planning and oversight.

Positive Signals

Award to a known producer of ISR platforms suggests a focus on established capabilities.
Firm fixed-price contract provides some cost predictability for the government.
The specific model (Predator) indicates a focus on proven unmanned aerial vehicle technology.

Sector Analysis

The defense sector, specifically the manufacturing of unmanned aerial vehicles (UAVs) or drones, is a rapidly evolving market. The Predator series, produced by General Atomics, has been a cornerstone of US military ISR capabilities for decades. This contract falls within the broader aircraft manufacturing industry, with a specific focus on intelligence, surveillance, and reconnaissance platforms. Comparable spending benchmarks would involve analyzing procurements of similar UAVs or other ISR assets by various defense agencies.

Small Business Impact

This contract does not appear to have a small business set-aside, as indicated by 'sb': false. Furthermore, the 'ss' (small business subcontracting) is also false. This suggests that there may be limited or no formal requirements for the prime contractor to subcontract with small businesses on this specific award. This could mean missed opportunities for small businesses to participate in the defense supply chain and potentially limits the broader economic impact of this significant federal spending.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contracting and program management offices. The Air Force, as the procuring agency, would be responsible for monitoring performance, delivery schedules, and adherence to contract terms. Inspector General (IG) jurisdiction would apply to investigations of fraud, waste, or abuse related to the contract. Transparency is limited by the sole-source nature of the award, making public scrutiny of the pricing and justification more challenging.

Related Government Programs

MQ-9 Reaper Program
Unmanned Aerial Vehicle Procurement
Intelligence, Surveillance, and Reconnaissance (ISR) Systems
Defense Production Act Investments
Aircraft Manufacturing Contracts

Risk Flags

Sole Source Procurement
Lack of Competition
Potential for Overpricing
Limited Small Business Participation

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $336.4 million to GENERAL ATOMICS AERONAUTICAL SYSTEMS, INC.. ACAT 1C, PREDATOR, FISCAL YEAR 2017 PRODUCTION BUY OF 24 AIRCRAFT

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 $336.4 million.

What is the period of performance?

Start: 2018-03-29. End: 2021-01-18.

What is the track record of General Atomics Aeronautical Systems, Inc. with the Department of Defense, particularly concerning Predator and similar UAV programs?

General Atomics Aeronautical Systems, Inc. (GA-ASI) has a long and established history as a prime contractor for the U.S. Department of Defense, particularly in the realm of unmanned aerial systems (UAS). They are the original developer and manufacturer of the Predator series of drones, including the MQ-1 Predator and its successor, the MQ-9 Reaper. GA-ASI has consistently secured significant contracts for the production, modification, and sustainment of these platforms. Their track record includes numerous delivery orders and sole-source awards, reflecting their specialized expertise and market dominance in this niche. While this expertise is valuable, it also contributes to the frequent sole-source nature of their contracts, which can limit competitive pricing.

How does the per-unit cost of $14 million for these Predator aircraft compare to other ISR platforms or similar UAVs procured by the DoD?

The per-unit cost of approximately $14 million for these Predator aircraft is within the range for advanced ISR platforms, but direct comparisons are complex due to variations in capabilities, sensor payloads, and configurations. For instance, the MQ-9 Reaper, a more advanced variant, has historically had per-unit costs that can range from $10 million to over $30 million depending on the specific configuration and mission systems. However, the sole-source nature of this specific $336 million contract for 24 aircraft raises concerns about whether this $14 million figure represents a competitive market price. Procurements of similar capabilities through competitive processes, or for less advanced systems, might yield lower per-unit costs. Benchmarking against other ISR assets, especially those acquired through full and open competition, would be necessary for a definitive value assessment.

What are the primary risks associated with awarding a sole-source contract for a significant defense asset like the Predator aircraft?

The primary risks associated with awarding a sole-source contract for significant defense assets like the Predator aircraft include inflated pricing, reduced innovation, and a lack of accountability stemming from limited competition. Without the pressure of competing bids, the sole contractor may not be incentivized to offer the lowest possible price, potentially leading to higher costs for taxpayers. Furthermore, the absence of alternative suppliers can stifle innovation as the government has fewer options to explore new technologies or more cost-effective solutions. Accountability can also be diminished, as the government has less leverage to demand specific performance improvements or cost reductions when there are no other viable options.

What is the historical spending pattern for Predator aircraft or similar ISR platforms by the Department of Defense over the last five fiscal years?

Historical spending on Predator aircraft and similar ISR platforms by the Department of Defense has been substantial and largely concentrated with General Atomics Aeronautical Systems, Inc. Over the last five fiscal years, the DoD has consistently allocated significant funds towards the procurement, sustainment, and upgrade of unmanned aerial systems, including the Predator and Reaper families. These expenditures often occur through a combination of large, multi-year contracts and numerous individual delivery orders, many of which have been sole-sourced due to the specialized nature of the technology and GA-ASI's market position. While specific aggregate figures fluctuate annually based on strategic priorities and budget allocations, the trend indicates a sustained and significant investment in maintaining and expanding these critical ISR capabilities.

Are there any known performance issues or concerns related to the Predator aircraft that this contract might be addressing?

The Predator aircraft, while a foundational platform for U.S. ISR capabilities, has been in service for a considerable time, and subsequent variants like the MQ-9 Reaper have been developed to address evolving operational needs and technological advancements. This specific contract for 'Fiscal Year 2017 Production Buy of 24 Aircraft' likely pertains to continued production of existing Predator variants or potentially specific configurations. While the data provided does not detail performance issues, older variants might face limitations in terms of payload capacity, endurance, speed, or sensor integration compared to newer platforms. Contracts like this could be for replacing aging airframes, fulfilling specific mission requirements that older variants still meet effectively, or potentially incorporating incremental upgrades before a full transition to newer 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 COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: General Atomics (UEI: 859181984)

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: $336,359,462

Exercised Options: $336,359,462

Current Obligation: $336,359,462

Actual Outlays: $275,919

Subaward Activity

Number of Subawards: 21

Total Subaward Amount: $5,305,624

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: FA862015G4040

IDV Type: BOA

Timeline