DoD's $148.6M ERMP Block 1 Production Readiness Test Asset contract awarded to General Atomics

Contract Overview

Contract Amount: $148,596,601 ($148.6M)

Contractor: General Atomics Aeronautical Systems, Inc.

Awarding Agency: Department of Defense

Start Date: 2009-04-28

End Date: 2016-06-30

Contract Duration: 2,620 days

Daily Burn Rate: $56.7K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Official Description: PRODUCTION READINESS TEST ASSET FOR ERMP BLOCK 1

Place of Performance

Location: POWAY, SAN DIEGO County, CALIFORNIA, 92064

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $148.6 million to GENERAL ATOMICS AERONAUTICAL SYSTEMS, INC. for work described as: PRODUCTION READINESS TEST ASSET FOR ERMP BLOCK 1 Key points: 1. Value for money appears fair given the long duration and specialized nature of the asset. 2. Full and open competition was utilized, suggesting a competitive bidding process. 3. Risk indicators are moderate, with a cost-plus incentive fee contract type. 4. Performance context is within aircraft manufacturing for defense readiness. 5. Sector positioning is within the defense industrial base, specifically for unmanned aerial systems. 6. The contract duration of over 7 years indicates a significant, long-term commitment.

Value Assessment

Rating: fair

The contract's total value of approximately $148.6 million over more than 7 years suggests a substantial investment in a specialized defense asset. Benchmarking this against similar complex aerospace development and production readiness contracts is challenging due to the unique nature of 'ERMP Block 1'. However, the cost-plus incentive fee structure implies that cost controls were a consideration, with potential for savings if targets were met. The final cost relative to initial estimates would provide a clearer picture of value.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that multiple bidders had the opportunity to submit proposals. The presence of two bidders suggests a degree of competition, though the specific number of proposals received and the evaluation process would offer more insight into the intensity of this competition. A competitive environment generally aids in price discovery and can lead to more favorable terms for the government.

Taxpayer Impact: The use of full and open competition is beneficial for taxpayers as it aims to secure the best possible pricing and technical solutions by allowing a wide range of qualified contractors to participate.

Public Impact

The primary beneficiary is the Department of Defense, specifically the Department of the Army, which gains a critical asset for production readiness testing. The service delivered is the development and testing of a production-ready asset for the ERMP Block 1 program, likely related to unmanned aerial systems. The geographic impact is primarily within California, where General Atomics Aeronautical Systems, Inc. is located, and potentially at military testing sites. Workforce implications include employment for engineers, technicians, and manufacturing personnel at the contractor's facility and potentially at government sites involved in testing.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost-plus incentive fee contracts can sometimes lead to cost overruns if not managed tightly.
The long contract duration increases the risk of scope creep or evolving requirements.
Reliance on a single contractor for a critical asset may pose supply chain risks.

Positive Signals

Awarded under full and open competition, suggesting a robust selection process.
The contractor, General Atomics Aeronautical Systems, Inc., is a well-established player in the defense aerospace sector.
The contract aims to ensure production readiness, a crucial step for program success.

Sector Analysis

The defense aerospace sector is characterized by high barriers to entry, significant R&D investment, and long product development cycles. Contracts like this, for specialized assets like those likely used in unmanned aerial systems (UAS) programs, represent a substantial portion of defense spending. The market is dominated by a few large prime contractors, with General Atomics being a prominent one in the UAS domain. Spending benchmarks for similar complex system development and production readiness efforts can range widely, but values in the tens to hundreds of millions are common for major defense programs.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. The primary awardee is a large defense contractor. While the contract itself is not set aside for small businesses, there may be opportunities for small businesses to participate as subcontractors to General Atomics. The extent of subcontracting to small businesses would depend on the prime contractor's strategy and the specific needs of the program.

Oversight & Accountability

Oversight for this contract would typically be managed by the Department of the Army contracting and program management offices. The cost-plus incentive fee structure necessitates close monitoring of costs and performance against established targets. Transparency is generally maintained through contract reporting requirements. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse.

Related Government Programs

Unmanned Aerial Vehicle (UAV) Production
Defense Readiness Programs
Aerospace Manufacturing Contracts
Aircraft System Development

Risk Flags

Cost Overrun Potential (CPIF)
Long Contract Duration Risk
Supply Chain Dependency
Technological Obsolescence

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $148.6 million to GENERAL ATOMICS AERONAUTICAL SYSTEMS, INC.. PRODUCTION READINESS TEST ASSET FOR ERMP BLOCK 1

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 $148.6 million.

What is the period of performance?

Start: 2009-04-28. End: 2016-06-30.

What is the specific nature of the 'ERMP Block 1' program and the 'Production Readiness Test Asset'?

The 'ERMP Block 1' likely refers to the "Enhanced Reaper Mission Planning" Block 1 program, or a similar initiative focused on improving the capabilities and readiness of unmanned aerial systems (UAS), potentially the MQ-9 Reaper. A 'Production Readiness Test Asset' is a prototype or early production unit used to validate manufacturing processes, supply chains, and quality control measures before full-scale production begins. Its purpose is to identify and resolve any issues in the manufacturing pipeline, ensuring that the system can be produced reliably, efficiently, and to specification at scale. This asset is crucial for de-risking the transition from development to sustained operational deployment.

How does the cost-plus incentive fee (CPIF) structure impact cost control and contractor performance?

A Cost-Plus Incentive Fee (CPIF) contract is designed to encourage cost savings and performance improvements by sharing the financial risks and rewards between the government and the contractor. The government agrees to pay the contractor's allowable costs plus a predetermined fee. However, this fee is adjusted based on whether the final costs are below or above a target cost, and performance targets (like schedule or technical objectives) are also often included. For this $148.6 million contract, the CPIF structure means General Atomics has an incentive to manage costs efficiently to earn a higher fee, up to a certain ceiling. Conversely, if costs exceed targets significantly, the fee is reduced, and the contractor may bear a portion of the overrun. This requires robust government oversight to ensure costs are reasonable and allocable, and that performance metrics are objectively measured.

What is General Atomics Aeronautical Systems, Inc.'s track record with similar defense contracts?

General Atomics Aeronautical Systems, Inc. (GA-ASI) has a long and extensive track record in developing and producing unmanned aerial systems (UAS) for the U.S. Department of Defense and international allies. They are renowned for programs like the Predator and Reaper series, which are foundational to modern UAS operations. Their experience spans research, development, testing, and production of complex aerospace systems, often involving advanced sensor integration, communication systems, and weaponization. GA-ASI has consistently secured large-value contracts from agencies like the Air Force, Navy, and Army, demonstrating their capability to manage large, complex programs and deliver sophisticated defense technologies. Their history suggests a strong technical expertise and program management capacity relevant to the ERMP Block 1 contract.

How does the $148.6 million spending compare to other aircraft manufacturing contracts within the DoD?

The $148.6 million awarded to General Atomics for the ERMP Block 1 Production Readiness Test Asset falls within a moderate range for specialized defense aerospace development and testing contracts. Major aircraft development programs, such as new fighter jets or bombers, can easily run into billions or tens of billions of dollars. However, contracts focused on specific subsystems, upgrades, or readiness testing for existing platforms, particularly unmanned systems, often fall into the tens to hundreds of millions. For instance, contracts for advanced sensor packages, specialized mission equipment, or initial production runs of new UAS variants can be in this financial bracket. Therefore, while substantial, this figure is not exceptionally high when compared to the full spectrum of aircraft-related spending within the DoD, especially considering the long duration and specialized nature of production readiness for a complex system.

What are the potential risks associated with the 'Aircraft Manufacturing' (NAICS 336411) sector for a contract of this nature?

The 'Aircraft Manufacturing' sector, particularly for defense applications, carries inherent risks. These include long and complex supply chains, where disruptions can significantly impact production schedules. Technological obsolescence is another concern, as defense systems require continuous upgrades to maintain a competitive edge, potentially leading to scope changes or the need for new development. Furthermore, the highly specialized nature of defense aircraft manufacturing means that reliance on a limited number of skilled engineers and technicians can create workforce vulnerabilities. Regulatory hurdles, stringent quality control requirements, and the potential for cost overruns due to the complexity of integrating advanced systems are also significant risks. For a production readiness asset, ensuring the manufacturability and reliability of the design is paramount, and failures in this stage can be costly to rectify.

What does the contract type 'DEFINITIVE CONTRACT' imply about its structure and duration?

A 'Definitive Contract' is a standard, legally binding agreement that clearly outlines the rights and obligations of both parties. In the context of federal procurement, it typically signifies a finalized agreement with specific terms, conditions, price, and delivery schedules, as opposed to a letter contract or other preliminary agreement. For a contract valued at $148.6 million and spanning from April 2009 to June 2016 (over 7 years), designating it as a 'Definitive Contract' indicates that all major terms were settled and agreed upon at the outset. This structure provides stability and predictability for both the government and the contractor, allowing for long-term planning and execution of complex projects like the production readiness testing of a significant defense asset.

Industry Classification

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

Product/Service Code: AEROSPACE CRAFT AND STRUCTURAL COMPONENTS

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: W58RGZ09R0341

Offers Received: 2

Pricing Type: COST PLUS INCENTIVE FEE (V)

Evaluated Preference: NONE

Contractor Details

Parent Company: General Atomics (UEI: 859181984)

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: $148,596,601

Exercised Options: $148,596,601

Current Obligation: $148,596,601

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline