DoD Awards $1.1B Undefinitized Contract for MQ-1C Gray Eagle Logistics Support

Contract Overview

Contract Amount: $1,100,819,924 ($1.1B)

Contractor: General Atomics Aeronautical Systems, Inc.

Awarding Agency: Department of Defense

Start Date: 2012-05-08

End Date: 2019-07-31

Contract Duration: 2,640 days

Daily Burn Rate: $417.0K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Official Description: AWARD OF UNDEFINITIZED CONTRACT ACTION (UCA) FOR FY 12 MQ-1C GRAY EAGLE PROGRAM OF RECORD AND QUICK REACTION CAPABILITY PERFORMANCE-BASED LOGISTICS PRODUCT SUPPORT.

Place of Performance

Location: POWAY, SAN DIEGO County, CALIFORNIA, 92064

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $1.10 billion to GENERAL ATOMICS AERONAUTICAL SYSTEMS, INC. for work described as: AWARD OF UNDEFINITIZED CONTRACT ACTION (UCA) FOR FY 12 MQ-1C GRAY EAGLE PROGRAM OF RECORD AND QUICK REACTION CAPABILITY PERFORMANCE-BASED LOGISTICS PRODUCT SUPPORT. Key points: 1. Significant award for long-term logistics and product support of the MQ-1C Gray Eagle program. 2. Sole-source award to General Atomics Aeronautical Systems, Inc., raising questions about competition. 3. Performance-based logistics contract structure aims to ensure readiness and efficiency. 4. Long contract duration (2012-2019) suggests a substantial, ongoing need for support.

Value Assessment

Rating: questionable

The contract value of $1.1 billion is substantial. Without comparable contracts or detailed cost breakdowns, assessing its pricing against similar services is difficult. The 'cost plus incentive fee' structure suggests potential for cost overruns if not managed tightly.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was not competed, indicating a sole-source award. This limits price discovery and potentially leads to higher costs for taxpayers compared to a competitive process. Justification for sole-source is critical.

Taxpayer Impact: The lack of competition for a contract of this magnitude means taxpayers may not be receiving the best possible price for these essential logistics services.

Public Impact

Ensures continued operational readiness of the MQ-1C Gray Eagle drone fleet, vital for intelligence, surveillance, and reconnaissance missions. Supports critical military capabilities, impacting national security operations. Long-term commitment of significant federal funds for sustainment rather than new acquisition.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competition and price discovery.
Undefinitized Contract Action (UCA) requires careful monitoring and definitization.
Cost-plus contract type can incentivize higher spending.
Long duration may indicate a lack of strategic planning for competition.

Positive Signals

Performance-based logistics aims for efficiency and readiness.
Supports a key intelligence and surveillance platform.
Addresses a clear need for product support.

Sector Analysis

This award falls under Other Support Activities for Air Transportation within the defense sector. Spending benchmarks for similar long-term, sole-source logistics contracts for unmanned aerial systems are difficult to establish without more data, but $1.1 billion is a significant investment.

Small Business Impact

The contract was awarded to General Atomics Aeronautical Systems, Inc., a large business. There is no indication of small business participation in this specific award, which is common for sole-source, high-value defense contracts.

Oversight & Accountability

The use of an Undefinitized Contract Action (UCA) requires robust oversight to ensure timely definitization and prevent uncontrolled cost growth. The Army must ensure stringent monitoring of performance and costs throughout the contract's life.

Related Government Programs

Other Support Activities for Air Transportation
Department of Defense Contracting
Department of the Army Programs

Risk Flags

Sole-source award.
Undefinitized Contract Action (UCA).
Cost-plus incentive fee structure.
Long contract duration without clear competition.
Lack of transparency on justification for sole-source.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $1.10 billion to GENERAL ATOMICS AERONAUTICAL SYSTEMS, INC.. AWARD OF UNDEFINITIZED CONTRACT ACTION (UCA) FOR FY 12 MQ-1C GRAY EAGLE PROGRAM OF RECORD AND QUICK REACTION CAPABILITY PERFORMANCE-BASED LOGISTICS PRODUCT SUPPORT.

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 Army).

What is the total obligated amount?

The obligated amount is $1.10 billion.

What is the period of performance?

Start: 2012-05-08. End: 2019-07-31.

What was the justification for awarding this contract on a sole-source basis, and what steps were taken to explore competitive alternatives?

The justification for a sole-source award is crucial for understanding the necessity of bypassing the competitive bidding process. Agencies must provide detailed documentation explaining why only one source could fulfill the requirement, such as unique capabilities or urgent needs. Without this justification, it's difficult to assess if taxpayers received fair value or if opportunities for cost savings through competition were missed.

How were the performance metrics and incentive structures defined in this performance-based logistics contract to ensure optimal value and contractor accountability?

Performance-based logistics (PBL) contracts aim to achieve specific outcomes rather than just delivering goods or services. The effectiveness of this contract hinges on well-defined metrics tied to system readiness, response times, and cost efficiency. The incentive fee structure should reward the contractor for exceeding performance targets while penalizing failures, ensuring alignment with government objectives and taxpayer interests.

What is the projected total cost of ownership for the MQ-1C Gray Eagle program, including sustainment and logistics, and how does this contract contribute to that?

Understanding the total cost of ownership provides a comprehensive view of the program's financial commitment. This $1.1 billion contract represents a significant portion of the sustainment costs for the MQ-1C. Analyzing this alongside acquisition costs and future modernization plans is essential for long-term budget planning and assessing the overall affordability and effectiveness of the Gray Eagle platform.

Industry Classification

NAICS: Transportation and Warehousing › Support Activities for Air Transportation › Other Support Activities for Air Transportation

Product/Service Code: AEROSPACE CRAFT AND STRUCTURAL COMPONENTS

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: W58RGZ11R0276

Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE (V)

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: $2,351,377,238

Exercised Options: $2,066,352,003

Current Obligation: $1,100,819,924

Subaward Activity

Number of Subawards: 25

Total Subaward Amount: $45,393,854

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline