DoD's $52.3M MQ-9 Reaper SATCOM upgrade awarded to L3 Technologies, Inc. without competition

Contract Overview

Contract Amount: $52,334,582 ($52.3M)

Contractor: L3 Technologies, Inc.

Awarding Agency: Department of Defense

Start Date: 2023-03-31

End Date: 2026-03-30

Contract Duration: 1,095 days

Daily Burn Rate: $47.8K/day

Competition Type: NOT COMPETED

Pricing Type: FIXED PRICE INCENTIVE

Sector: Defense

Official Description: MQ-9 REAPER: COMMMUNICATION REAPER INTEGRATED UPGRADE SOLUTIONS - SATELLITE COMMUNICATION (SATCOM) DIMINISHED MANUFACTURING SOURCE UPGRADES

Place of Performance

Location: SALT LAKE CITY, SALT LAKE County, UTAH, 84116

State: Utah Government Spending

Plain-Language Summary

Department of Defense obligated $52.3 million to L3 TECHNOLOGIES, INC. for work described as: MQ-9 REAPER: COMMMUNICATION REAPER INTEGRATED UPGRADE SOLUTIONS - SATELLITE COMMUNICATION (SATCOM) DIMINISHED MANUFACTURING SOURCE UPGRADES Key points: 1. Contract addresses critical communication system upgrades for MQ-9 Reaper drones. 2. Focus on mitigating risks associated with diminished manufacturing sources for SATCOM components. 3. Sole-source award raises questions about price reasonableness and potential for cost overruns. 4. Performance period spans three years, indicating a medium-term investment in drone capabilities. 5. The contract falls within the broader Defense sector, specifically supporting aircraft manufacturing. 6. Lack of competition limits opportunities for innovation and cost savings from alternative solutions.

Value Assessment

Rating: questionable

The contract value of $52.3 million for communication system upgrades on MQ-9 Reaper drones appears substantial, especially given the sole-source nature of the award. Without competitive bidding, it is difficult to benchmark the pricing against market rates or similar contracts. The fixed-price incentive contract type suggests an attempt to control costs, but the absence of competition inherently increases the risk of paying a premium. Further analysis would be needed to determine if the proposed solution represents good value for the investment, particularly concerning the 'diminished manufacturing source' aspect.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one vendor, L3 Technologies, Inc., was considered. This approach is typically justified when a unique capability is required, or when there are no other responsible sources capable of meeting the government's needs. The lack of competition means that the government did not benefit from a range of proposals or price negotiations that could have driven down costs. This raises concerns about whether the government secured the best possible price and solution.

Taxpayer Impact: Taxpayers may be paying a higher price due to the absence of competitive pressure. The government's ability to negotiate favorable terms is diminished when only one provider is available.

Public Impact

The primary beneficiaries are the U.S. Air Force and other MQ-9 Reaper operators, who will receive enhanced communication capabilities. The services delivered involve upgrading satellite communication systems to ensure reliable operation despite component obsolescence. The geographic impact is national, supporting the operational readiness of a key intelligence, surveillance, and reconnaissance (ISR) asset. Workforce implications may include specialized technical roles for installation, testing, and maintenance of the upgraded systems.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price discovery and potentially increases costs for taxpayers.
Reliance on a single contractor for critical upgrades could pose supply chain risks if L3 Technologies faces production issues.
Lack of competition may stifle innovation by not exploring alternative technological solutions from other vendors.

Positive Signals

Addresses a critical need to maintain MQ-9 Reaper operational effectiveness by resolving diminished manufacturing sources.
The fixed-price incentive contract type aims to align contractor incentives with government cost objectives.
L3 Technologies likely possesses specialized knowledge and experience with the MQ-9 platform's communication systems.

Sector Analysis

The defense sector, particularly the aircraft manufacturing sub-sector, is characterized by high-value, complex systems requiring specialized expertise. Contracts for upgrades and sustainment are common as platforms age and technology evolves. The MQ-9 Reaper is a significant asset in the U.S. military's ISR capabilities, and ensuring its communication systems remain functional and advanced is crucial. Spending in this area often involves addressing obsolescence and integrating new technologies, with contracts frequently being sole-source due to the proprietary nature of existing systems or the limited number of qualified suppliers.

Small Business Impact

This contract does not appear to involve a small business set-aside, as indicated by 'sb': false. Furthermore, the 'st': 'UT' and 'sn': 'UTAH' suggest the primary place of performance is Utah, but it does not specify small business subcontracting goals. Given the sole-source nature and the specialized technical requirements, it is less likely that significant subcontracting opportunities for small businesses would be mandated, though L3 Technologies may engage them for specific components or services.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Air Force's contracting and program management offices. The fixed-price incentive contract type includes mechanisms for monitoring performance and costs, with incentives tied to achieving specific targets. Transparency may be limited due to the sole-source nature, but contract modifications and performance reports would be subject to internal review and potentially Inspector General oversight if performance issues or fraud are suspected. The contract's duration and value warrant diligent oversight to ensure taxpayer funds are used effectively.

Related Government Programs

MQ-9 Reaper Sustainment Programs
Unmanned Aerial Vehicle (UAV) Communication Systems
Defense Satellite Communication Systems
Aircraft Component Obsolescence Management
Department of Defense ISR Modernization

Risk Flags

Sole-source award
Potential for cost overruns
Lack of competitive benchmarking
Dependency on a single supplier

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $52.3 million to L3 TECHNOLOGIES, INC.. MQ-9 REAPER: COMMMUNICATION REAPER INTEGRATED UPGRADE SOLUTIONS - SATELLITE COMMUNICATION (SATCOM) DIMINISHED MANUFACTURING SOURCE UPGRADES

Who is the contractor on this award?

The obligated recipient is L3 TECHNOLOGIES, 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 $52.3 million.

What is the period of performance?

Start: 2023-03-31. End: 2026-03-30.

What is the specific nature of the 'diminished manufacturing source' issue for the MQ-9 Reaper's SATCOM system, and what are the technical implications?

The 'diminished manufacturing source' (DMS) issue refers to the obsolescence or unavailability of critical components or manufacturing processes required for the MQ-9 Reaper's satellite communication (SATCOM) system. This can occur when original manufacturers cease production, go out of business, or when the technology itself becomes outdated and unsupported. The technical implications are significant: a DMS problem can lead to unreliable communication links, reduced data throughput, increased susceptibility to interference or jamming, and ultimately, a degradation of the MQ-9's intelligence, surveillance, and reconnaissance (ISR) capabilities. Upgrades are necessary to replace obsolete parts with modern, available alternatives, often requiring redesigns of subsystems to ensure compatibility and maintain operational effectiveness. This contract aims to resolve such issues by providing 'integrated upgrade solutions'.

How does the 'Fixed Price Incentive' (FPI) contract type aim to manage costs for this sole-source award?

A Fixed Price Incentive (FPI) contract is designed to share the risks and rewards between the government and the contractor. In an FPI contract, there is a target cost, a target profit, and a price ceiling. The government agrees to pay the final negotiated price, which is the sum of the final negotiated total cost and the final negotiated profit, but not to exceed the price ceiling. If the final total cost is lower than the target cost, the profit increases for the contractor, up to a negotiated maximum. Conversely, if the final total cost exceeds the target cost, the profit decreases. If the final total cost reaches the price ceiling, the contractor absorbs all costs above the ceiling. For this sole-source award, the FPI structure attempts to incentivize L3 Technologies to control costs by linking their profit directly to their ability to meet or beat the target cost, while providing a ceiling to protect the government from unlimited cost growth.

What are the potential risks associated with awarding a contract of this magnitude ($52.3M) on a sole-source basis?

Awarding a contract of $52.3 million on a sole-source basis carries several significant risks. Firstly, the absence of competition means the government cannot be certain it is receiving the best possible price; L3 Technologies, Inc. may not have been compelled to offer their most competitive rates. This lack of price discovery can lead to overpayment. Secondly, it limits the government's exposure to alternative technical solutions or innovations that other qualified vendors might offer. The chosen solution might not be the most advanced or cost-effective available in the market. Thirdly, sole-source awards can create a perception of favoritism or a lack of due diligence, even if justified. Finally, it can reduce the incentive for the contractor to perform exceptionally well if they perceive less risk of losing future business to competitors due to the established relationship or unique capability.

How does this contract fit into the broader strategy for maintaining and modernizing the MQ-9 Reaper fleet?

This contract is a crucial component of the broader strategy to maintain and modernize the MQ-9 Reaper fleet, particularly by addressing sustainment challenges related to aging platforms and evolving threats. The MQ-9 is a vital asset for intelligence, surveillance, and reconnaissance (ISR) missions, and its operational effectiveness hinges on reliable communication systems. By upgrading SATCOM capabilities to overcome diminished manufacturing sources, the Air Force ensures the Reaper can continue to operate effectively in contested environments and transmit critical data. This upgrade is part of a lifecycle management approach, ensuring the platform remains relevant and capable against current and future operational requirements, complementing other modernization efforts focused on sensors, weapons, and command and control systems.

What is the historical spending pattern for MQ-9 Reaper communication system upgrades, and how does this award compare?

Historical spending on MQ-9 Reaper communication systems likely involves a mix of sustainment, minor upgrades, and potentially larger modernization efforts over the platform's service life. Specific data on past communication system upgrade contracts is not provided here, but it's common for such systems to require periodic updates due to technological advancements and component obsolescence, especially for a platform like the MQ-9 that has been in service for many years. A $52.3 million award for integrated upgrade solutions addressing DMS issues represents a significant investment, suggesting a substantial overhaul rather than routine maintenance. Without comparative data on previous upgrade contracts (e.g., scope, technology, competition level), it's difficult to definitively state how this award compares in terms of cost-effectiveness or scope, though its sole-source nature distinguishes it from potentially more competitively bid earlier efforts.

Industry Classification

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

Product/Service Code: IT AND TELECOM - NETWORK

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Pricing Type: FIXED PRICE INCENTIVE (L)

Evaluated Preference: NONE

Contractor Details

Address: 640 N 2200 W, SALT LAKE CITY, UT, 84116

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: $52,334,582

Exercised Options: $52,334,582

Current Obligation: $52,334,582

Subaward Activity

Number of Subawards: 69

Total Subaward Amount: $17,593,541

Contract Characteristics

Multi-Year Contract: Yes

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: FA868923D2012

IDV Type: IDC

Timeline