DoD's $203M MQ-9 Reaper Production Order Awarded to General Atomics, Raising Competition Concerns

Contract Overview

Contract Amount: $202,886,969 ($202.9M)

Contractor: General Atomics Aeronautical Systems, Inc.

Awarding Agency: Department of Defense

Start Date: 2020-09-20

End Date: 2024-09-30

Contract Duration: 1,471 days

Daily Burn Rate: $137.9K/day

Competition Type: NOT COMPETED

Pricing Type: FIXED PRICE INCENTIVE

Sector: Defense

Official Description: MQ-9 REAPER FY20 PRODUCTION ORDER

Place of Performance

Location: POWAY, SAN DIEGO County, CALIFORNIA, 92064

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $202.9 million to GENERAL ATOMICS AERONAUTICAL SYSTEMS, INC. for work described as: MQ-9 REAPER FY20 PRODUCTION ORDER Key points: 1. Significant investment in drone technology, highlighting the MQ-9 Reaper's strategic importance. 2. Sole-source award to General Atomics raises questions about competitive pricing and innovation. 3. Potential for cost overruns exists due to the fixed-price incentive contract structure. 4. The defense sector continues to heavily invest in unmanned aerial systems.

Value Assessment

Rating: questionable

The $203 million contract for MQ-9 Reaper production is a substantial investment. Without competitive bidding, it's difficult to assess if the pricing reflects fair market value compared to similar advanced drone systems or previous production runs.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning General Atomics was the only provider considered. This lack of competition limits price discovery and potentially leads to higher costs for taxpayers.

Taxpayer Impact: The absence of competition in this large defense contract may result in taxpayers paying a premium for the MQ-9 Reaper production.

Public Impact

Taxpayers fund a significant sole-source contract for advanced military drone production. The MQ-9 Reaper plays a critical role in intelligence, surveillance, and reconnaissance missions. Future defense spending may continue to favor established sole-source providers for critical systems.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competition.
Fixed-price incentive contract carries cost overrun risk.
Lack of small business participation noted.

Positive Signals

Acquisition of critical defense technology.
Supports ongoing military operations and national security.

Sector Analysis

The defense sector's spending on unmanned aerial systems (UAS) like the MQ-9 Reaper is substantial and growing. This contract aligns with broader trends of increasing investment in advanced surveillance and strike capabilities.

Small Business Impact

The data indicates no specific set-aside for small businesses in this contract. This sole-source award to a large prime contractor may limit opportunities for smaller companies within the aerospace supply chain.

Oversight & Accountability

The sole-source nature of this award warrants scrutiny from oversight bodies to ensure the government is receiving the best value. Transparency in the justification for sole-sourcing is crucial for accountability.

Related Government Programs

Aircraft Manufacturing
Department of Defense Contracting
Department of the Air Force Programs

Risk Flags

Sole-source award
Lack of competition
Potential for inflated pricing
Fixed-price incentive contract risks
No small business participation noted

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $202.9 million to GENERAL ATOMICS AERONAUTICAL SYSTEMS, INC.. MQ-9 REAPER FY20 PRODUCTION ORDER

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 $202.9 million.

What is the period of performance?

Start: 2020-09-20. End: 2024-09-30.

What is the justification for awarding this contract on a sole-source basis, and what steps are being taken to ensure fair pricing?

The justification for a sole-source award typically involves unique capabilities or the lack of viable alternatives. Oversight bodies should rigorously examine the documentation supporting this decision. To ensure fair pricing, the government might employ independent cost estimates, benchmark against similar systems, or negotiate specific incentive clauses within the fixed-price incentive contract to mitigate excessive costs.

What are the long-term risks associated with relying on a single supplier for critical defense platforms like the MQ-9 Reaper?

Long-term reliance on a single supplier creates significant strategic risks. It can lead to vendor lock-in, reduced bargaining power, and potential supply chain disruptions if the sole provider faces financial or operational issues. Furthermore, it can stifle innovation by discouraging competition and the development of alternative technologies that might offer better performance or lower costs in the future.

How does the fixed-price incentive contract structure balance cost control with the need for flexibility in production?

A fixed-price incentive (FPI) contract aims to balance cost control and flexibility by establishing a target cost, target profit, and a price ceiling. The contractor is incentivized to keep costs below the target, sharing in any savings with the government. However, if costs exceed the target, both parties share the overrun up to the ceiling. This structure provides some cost certainty while allowing for adjustments due to unforeseen production challenges.

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

Pricing Type: FIXED PRICE INCENTIVE (L)

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: $202,886,969

Exercised Options: $202,886,969

Current Obligation: $202,886,969

Subaward Activity

Number of Subawards: 75

Total Subaward Amount: $42,796,871

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: FA868920D2020

IDV Type: IDC

Timeline