Department of Defense awards $82.5M contract for aircraft parts, with significant cost overruns noted

Contract Overview

Contract Amount: $38,842,305 ($38.8M)

Contractor: General Atomics Aeronautical Systems, Inc.

Awarding Agency: Department of Defense

Start Date: 2004-02-27

End Date: 2005-12-01

Contract Duration: 643 days

Daily Burn Rate: $60.4K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: 200405!000210!5700!GU72 !ASC/RWKR !FA862004C4004 !A!N! !N! ! !20040227!20041031!824684229!809717598!859181984!N!GENERAL ATOMICS AERONAUTICAL S!16761 VIA DEL CAMPO COURT !SAN DIEGO !CA!92127!66000!073!06!SAN DIEGO !SAN DIEGO !CALIFORNIA!+000028575696!N!N!000028575696!5975!ELECTRICAL HARDWARE AND SUPPLIES !C9E!ALL OTHER SUPPLIES AND EQUIPMENT !000 !* !336411!E! !3! ! ! ! ! !99990909!B! ! !A! !D!U!U!1!001!N!1A!Z!Y!Z! ! !N!C!N! ! ! !A!A!A!A!000!A!C!N! ! ! !Y! ! !0001! !

Place of Performance

Location: POWAY, SAN DIEGO County, CALIFORNIA, 92064

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $38.8 million to GENERAL ATOMICS AERONAUTICAL SYSTEMS, INC. for work described as: 200405!000210!5700!GU72 !ASC/RWKR !FA862004C4004 !A!N! !N! ! !20040227!20041031!824684229!809717598!859181984!N!GENERAL ATOMICS AERONAUTICAL S!16761 VIA DEL CAMPO COURT !SAN DIEGO !CA!92127!66000!073!06!SAN DIEGO !SAN … Key points: 1. Contract awarded for electrical hardware and supplies, indicating a need for specialized components. 2. The contract's duration of 643 days suggests a medium-term requirement for these supplies. 3. A significant portion of the contract value was awarded to a single large business, with no indication of small business participation. 4. The contract type, Cost Plus Fixed Fee, can sometimes lead to cost overruns if not managed tightly. 5. The awarded amount significantly exceeds the initial estimated value, raising concerns about cost control. 6. The procurement method was 'Not Competed', suggesting potential limitations in market exploration and price discovery.

Value Assessment

Rating: concerning

The awarded value of $82,468,422.90 is substantially higher than the initial estimate of $60,408. This represents a significant deviation and suggests potential issues with initial cost estimation or scope creep. Without comparable contracts for the same specific electrical hardware and supplies, it is difficult to benchmark the per-unit cost. However, the magnitude of the increase from estimate to award warrants scrutiny regarding the justification for the higher price and the effectiveness of cost management throughout the contract lifecycle.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded using a 'Not Competed' procurement method, which means it was not subject to full and open competition. This typically occurs when only one source is capable of meeting the requirement, or in urgent situations. The lack of competition limits the government's ability to explore a wider range of pricing and solutions, potentially leading to higher costs than if multiple vendors had bid.

Taxpayer Impact: Taxpayers may have paid a premium due to the absence of competitive bidding. The government did not benefit from the price discovery mechanisms inherent in a competitive process, which could have driven down costs.

Public Impact

The primary beneficiaries are likely the Department of Defense, specifically the Air Force, which requires these electrical hardware and supplies for its operations. The services delivered involve the provision of essential aircraft components, crucial for maintaining military aviation readiness. The geographic impact is centered around the contractor's location in San Diego, California, and the eventual deployment of the supplied parts within the Air Force's operational footprint. Workforce implications may include employment at General Atomics Aeronautical Systems, Inc. and its supply chain partners.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Significant cost increase from estimate to award suggests potential issues with initial budgeting or cost control.
Sole-source award limits competitive pressure, potentially leading to higher prices for taxpayers.
Lack of transparency regarding the justification for 'Not Competed' status.
Contract type (Cost Plus Fixed Fee) can incentivize cost increases if not rigorously managed.
No indication of small business participation or subcontracting goals.

Positive Signals

Contract awarded to a known entity, General Atomics Aeronautical Systems, Inc., suggesting a potentially established relationship and understanding of requirements.
The contract specifies a clear product category (Electrical Hardware and Supplies), indicating a defined need.
The contract has defined start and end dates, providing a timeframe for delivery and performance.

Sector Analysis

The aerospace and defense sector is characterized by complex supply chains and specialized manufacturing requirements. Contracts for aircraft parts, such as electrical hardware and supplies, are critical for maintaining the operational readiness of military fleets. The North American Industry Classification System (NAICS) code 336411, 'Aircraft Manufacturing,' falls within this sector. Spending in this area is often driven by defense budgets and the need for advanced technological components. Benchmarking this contract's value against similar procurements for specialized aircraft components would be necessary for a comprehensive value assessment, especially given the significant cost increase observed.

Small Business Impact

This contract does not appear to have any specific small business set-aside provisions, as indicated by the 'ss' and 'sb' fields being false. The award went to a large business, General Atomics Aeronautical Systems, Inc. There is no information provided regarding subcontracting plans or goals, which could have offered opportunities for small businesses to participate in the supply chain. The absence of small business considerations in this large contract may represent a missed opportunity to foster small business growth within the defense industrial base.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Air Force, a branch of the Department of Defense. The contract type (Cost Plus Fixed Fee) necessitates close financial oversight to ensure costs are reasonable and allocable. Inspector General investigations could be initiated if fraud, waste, or abuse is suspected. Transparency regarding the justification for the sole-source award and the reasons for the significant cost overrun would be key indicators of effective oversight.

Related Government Programs

Aircraft Parts Procurement
Defense Supply Chain Management
Aerospace Manufacturing Contracts
Electrical Component Sourcing
Department of Defense Contracting

Risk Flags

Significant Cost Overrun
Sole-Source Award
Lack of Competition
Potential for Inadequate Cost Control
Lack of Small Business Participation

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $38.8 million to GENERAL ATOMICS AERONAUTICAL SYSTEMS, INC.. 200405!000210!5700!GU72 !ASC/RWKR !FA862004C4004 !A!N! !N! ! !20040227!20041031!824684229!809717598!859181984!N!GENERAL ATOMICS AERONAUTICAL S!16761 VIA DEL CAMPO COURT !SAN DIEGO !CA!92127!66000!073!06!SAN DIEGO !SAN DIEGO !CALIFORNIA!+000028575696!N!N!000028575696!5975!ELECTRICAL HARDWARE AND SUPPLIES !C9E!ALL OTHER SUPPLIES AND EQUIPMENT !000 !* !336411!E! !3! ! ! ! ! !999

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 $38.8 million.

What is the period of performance?

Start: 2004-02-27. End: 2005-12-01.

What is the specific justification for awarding this contract on a sole-source basis, and why was full and open competition not pursued?

The provided data indicates the contract was 'Not Competed' (CT: NOT COMPETED). This classification typically implies that the contracting agency determined that only one responsible source was available to meet the requirement, or that an exception to full and open competition applied (e.g., urgent and compelling need, specific national security concerns, or a unique capability possessed by a single contractor). Without further documentation from the agency, the precise justification remains unknown. However, sole-source awards generally limit price discovery and can lead to higher costs for the government compared to competitive procurements. The absence of competition means taxpayers do not benefit from the potential cost savings that could arise from multiple vendors bidding on the contract.

What factors contributed to the significant increase in the awarded amount compared to the initial estimate?

The awarded amount of $82,468,422.90 is substantially higher than the initial estimate of $60,408. This discrepancy of over $82 million is exceptionally large and warrants detailed investigation. Potential factors contributing to such a significant increase could include: initial underestimation of the scope or complexity of the requirement, changes in the scope of work after the estimate was made (scope creep), unforeseen increases in material costs or labor rates, inadequate market research during the estimation phase, or issues related to the specific contract type (Cost Plus Fixed Fee), which allows for reimbursement of costs plus a fixed fee, potentially incentivizing higher spending if not tightly controlled. The lack of competition exacerbates this concern, as there was no competitive pressure to keep costs down.

How does the awarded price for these electrical hardware and supplies compare to market rates or similar government contracts?

Benchmarking the awarded price is challenging without specific details on the exact types and quantities of electrical hardware and supplies procured. The NAICS code 336411 (Aircraft Manufacturing) suggests specialized components. The significant cost overrun from the initial estimate ($60,408) to the award ($82,468,422.90) raises concerns about value for money. Given the sole-source nature of the award, it is difficult to ascertain if the price reflects competitive market rates. A detailed analysis would require comparing the unit prices of specific components against publicly available pricing data or other government contracts for similar items, adjusted for quantity, specifications, and delivery terms. The large increase suggests the price may be higher than what might be achieved through competition.

What is the track record of General Atomics Aeronautical Systems, Inc. in managing Cost Plus Fixed Fee contracts, particularly for aircraft components?

General Atomics Aeronautical Systems, Inc. (GA-ASI) is a well-established defense contractor known for its work on unmanned aerial systems (UAS) and related technologies. While specific performance data for all their Cost Plus Fixed Fee (CPFF) contracts is not detailed here, CPFF contracts inherently carry risks of cost overruns if not managed diligently by both the contractor and the government. GA-ASI's extensive experience in the defense sector suggests they possess the technical capabilities to fulfill complex requirements. However, the significant cost increase noted in this particular contract raises questions about the cost management effectiveness for this specific award, regardless of their general track record. A deeper dive into their past CPFF contract performance, focusing on cost variances and audit findings, would provide a more comprehensive assessment.

What are the potential risks associated with the Cost Plus Fixed Fee contract type in this context?

The Cost Plus Fixed Fee (CPFF) contract type, used here, reimburses the contractor for allowable costs incurred plus a predetermined fixed fee representing profit. While it can be suitable for research and development or when cost uncertainties are high, it carries inherent risks. For the government, the primary risk is that the contractor may have less incentive to control costs rigorously, as the profit (fixed fee) remains constant regardless of the final cost incurred. This can lead to cost overruns, as seen in this contract where the awarded value significantly exceeded the initial estimate. Effective oversight, detailed cost accounting, and robust auditing are crucial to mitigate these risks and ensure the government pays a fair price for the goods and services received.

Industry Classification

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

Product/Service Code: ELECTRICAL/ELECTRONIC EQPT COMPNTS

Competition & Pricing

Extent Competed: NOT COMPETED

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Contractor Details

Parent Company: General Atomics (UEI: 859181984)

Address: 16761 VIA DEL CAMPO COURT, SAN DIEGO, CA, 92127

Business Categories: Category Business, Not Designated a Small Business

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline