DoD awards $71M contract for MQ-9 drone components, raising questions about competition and value

Contract Overview

Contract Amount: $71,022,443 ($71.0M)

Contractor: General Atomics Aeronautical Systems, Inc.

Awarding Agency: Department of Defense

Start Date: 2018-05-24

End Date: 2025-04-30

Contract Duration: 2,533 days

Daily Burn Rate: $28.0K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: MQ-9 BLOS, BADDC, AND GPS SPLITTER RETROFIT

Place of Performance

Location: POWAY, SAN DIEGO County, CALIFORNIA, 92064

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $71.0 million to GENERAL ATOMICS AERONAUTICAL SYSTEMS, INC. for work described as: MQ-9 BLOS, BADDC, AND GPS SPLITTER RETROFIT Key points: 1. Contract awarded on a sole-source basis, limiting competitive pricing pressures. 2. Significant duration of the contract (2533 days) suggests a long-term need for these components. 3. Cost-plus-fixed-fee structure may incentivize cost increases, requiring robust oversight. 4. The specific components (BLOS, BADDC, GPS splitter) are critical for MQ-9 operational capabilities. 5. Contractor has a history of sole-source awards for MQ-9 related systems. 6. Geographic location of awardee in California may impact regional economic benefits.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to its sole-source nature and the specialized components involved. The cost-plus-fixed-fee (CPFF) pricing structure, while common for complex development, can lead to higher costs compared to fixed-price contracts if not managed tightly. Without competitive bids, it's difficult to ascertain if the $71 million represents a fair market price for the MQ-9 BLOS, BADDC, and GPS splitter retrofit. Further analysis would require access to detailed cost breakdowns and comparisons with similar sole-source procurements for comparable defense systems.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one vendor, General Atomics Aeronautical Systems, Inc., was solicited. This approach is typically used when a unique product or service is required, or when only one responsible source can provide the necessary supplies or services. The lack of competition means that taxpayers did not benefit from the price discovery that typically occurs in a competitive bidding process, potentially leading to a higher overall cost.

Taxpayer Impact: The absence of competition means taxpayers may have paid a premium for these critical MQ-9 drone components. Without multiple bids, there's less assurance that the government secured the best possible price.

Public Impact

The primary beneficiaries are the U.S. Air Force, which operates the MQ-9 Reaper drone, enhancing its intelligence, surveillance, and reconnaissance (ISR) capabilities. The contract delivers essential retrofits for MQ-9 aircraft, improving Beyond Line-of-Sight (BLOS) communication, Battle Damage Assessment and Detection Capability (BADDC), and GPS splitter functionality. The geographic impact is primarily centered around the contractor's facility in California, though the operational impact is global for MQ-9 deployments. Workforce implications include continued employment for specialized engineers and technicians at General Atomics Aeronautical Systems, Inc.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition, potentially increasing costs for taxpayers.
Cost-plus-fixed-fee contract structure can incentivize cost overruns if not closely monitored.
Lack of transparency in the sole-source justification requires scrutiny.
Long contract duration (over 6 years) necessitates ongoing performance monitoring.
Specialized nature of components makes independent cost verification difficult.

Positive Signals

Contract addresses critical operational needs for the MQ-9 Reaper, a key asset for ISR missions.
Awardee is a known and experienced provider of MQ-9 systems and components.
Contract ensures continued support and modernization of a vital defense platform.
Fixed fee component of the CPFF contract provides some cost predictability.

Sector Analysis

The defense aerospace sector is characterized by high barriers to entry, significant R&D investment, and long product lifecycles. Contracts for unmanned aerial vehicles (UAVs) like the MQ-9 Reaper represent a substantial segment of this market. General Atomics Aeronautical Systems, Inc. is a dominant player in the UAV market, particularly for the MQ-9. Spending benchmarks for similar sole-source procurements of specialized avionics and communication systems for advanced military platforms can vary widely, but typically involve multi-million dollar awards due to the complexity and criticality of the technology.

Small Business Impact

This contract was not set aside for small businesses, nor does it appear to have significant subcontracting requirements for small businesses based on the provided data. The awardee, General Atomics Aeronautical Systems, Inc., is a large defense contractor. This sole-source award does not directly benefit the small business ecosystem through set-asides or mandated subcontracting goals, although the prime contractor may engage small businesses as suppliers.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Air Force's contracting and program management offices. Given the sole-source nature and CPFF structure, rigorous oversight of costs, performance, and schedule is crucial. The Inspector General of the Department of Defense may also conduct audits or investigations into the contract's execution and value. Transparency is limited due to the sole-source justification, but contract modifications and performance reports should be subject to review.

Related Government Programs

MQ-9 Reaper Sustainment Contracts
Unmanned Aerial Vehicle (UAV) Procurement
Defense Avionics and Communication Systems
Intelligence, Surveillance, and Reconnaissance (ISR) Platforms

Risk Flags

Sole Source Award
Cost-Plus-Fixed-Fee Contract
Long Contract Duration
Lack of Competition

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $71.0 million to GENERAL ATOMICS AERONAUTICAL SYSTEMS, INC.. MQ-9 BLOS, BADDC, AND GPS SPLITTER RETROFIT

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 $71.0 million.

What is the period of performance?

Start: 2018-05-24. End: 2025-04-30.

What is the specific justification for awarding this contract on a sole-source basis?

The provided data indicates the contract was 'NOT COMPETED'. Typically, sole-source justifications for defense contracts are based on factors such as the existence of only one responsible source, urgent and compelling needs where competition is impractical, or when the services/supplies are unique and only available from a specific contractor. For the MQ-9 program, General Atomics Aeronautical Systems, Inc. is the original equipment manufacturer and primary developer, often leading to sole-source awards for specialized upgrades or sustainment parts where they possess unique technical knowledge and proprietary data essential for integration and performance.

How does the Cost Plus Fixed Fee (CPFF) pricing structure compare to other contract types for similar defense procurements?

Cost Plus Fixed Fee (CPFF) contracts are common for research and development or complex systems integration where the final costs are difficult to estimate accurately upfront. In a CPFF contract, the contractor is reimbursed for allowable costs plus a fixed fee representing profit. This contrasts with fixed-price contracts, where the price is set regardless of the final cost, offering greater cost certainty to the government but potentially higher risk for the contractor. For sustainment and upgrade contracts involving specialized, evolving technology like drone components, CPFF can be appropriate, but it places a higher burden on government oversight to control costs and ensure value, as the contractor has less incentive to minimize expenses compared to a firm-fixed-price contract.

What are the potential risks associated with the long contract duration (2533 days)?

A contract duration of 2533 days (approximately 7 years) presents several risks. Firstly, it increases the likelihood of cost escalation due to inflation and potential changes in labor or material costs over such an extended period. Secondly, it requires sustained government oversight and program management to ensure the contractor remains on track and meets evolving requirements. Thirdly, technology can rapidly advance, and a long-term contract might lock the government into using components or systems that become outdated before the contract expires. Finally, contractor performance issues or financial instability could have prolonged impacts on critical MQ-9 operations.

What is General Atomics Aeronautical Systems, Inc.'s track record with MQ-9 related contracts?

General Atomics Aeronautical Systems, Inc. (GA-ASI) is the prime contractor and developer of the MQ-9 Reaper program. Consequently, they have a long and extensive track record of securing numerous contracts, many of which are sole-source, for the production, sustainment, modification, and upgrade of MQ-9 aircraft and their associated systems. Their history includes significant awards for airframes, sensors, communication systems, and operational support, reflecting their established position as the primary provider for this platform. This deep involvement means they possess unique expertise but also raises concerns about sustained competition in the MQ-9 ecosystem.

Are there any comparable spending benchmarks for MQ-9 drone component retrofits?

Direct comparable spending benchmarks for specific MQ-9 component retrofits like the BLOS, BADDC, and GPS splitter are difficult to establish publicly, especially for sole-source awards. However, the total contract value of $71 million over approximately seven years suggests a significant investment per aircraft or per component. Industry reports and defense budget analyses indicate that upgrades to advanced UAV platforms can range from hundreds of thousands to millions of dollars per aircraft, depending on the complexity of the systems being integrated. The cost-plus-fixed-fee structure further complicates direct comparisons, as it includes variable costs plus a set profit margin.

What are the implications of this contract for the overall MQ-9 program's effectiveness?

This contract is crucial for maintaining and enhancing the operational effectiveness of the MQ-9 Reaper fleet. The Beyond Line-of-Sight (BLOS) capability is essential for extending the drone's operational range and control, allowing it to function in areas where direct line-of-sight communication is not feasible. The Battle Damage Assessment and Detection Capability (BADDC) likely improves the platform's ability to assess its own survivability and operational status post-engagement or after encountering threats. Enhanced GPS splitter functionality ensures reliable navigation and targeting. By providing these critical retrofits, the contract directly supports the MQ-9's role in intelligence, surveillance, reconnaissance, and strike missions, thereby bolstering overall mission success rates.

Industry Classification

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

Product/Service Code: COMM/DETECT/COHERENT RADIATION

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

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: $105,163,007

Exercised Options: $75,236,052

Current Obligation: $71,022,443

Actual Outlays: $1,151,675

Subaward Activity

Number of Subawards: 9

Total Subaward Amount: $14,409,200

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: FA862015G4040

IDV Type: BOA

Timeline