DoD's $75M software development contract awarded to General Atomics Aeronautical Systems, Inc. lacked competition

Contract Overview

Contract Amount: $74,976,738 ($75.0M)

Contractor: General Atomics Aeronautical Systems, Inc.

Awarding Agency: Department of Defense

Start Date: 2013-09-25

End Date: 2017-03-31

Contract Duration: 1,283 days

Daily Burn Rate: $58.4K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Official Description: SOFTWARE DEVELOPMENT

Place of Performance

Location: POWAY, SAN DIEGO County, CALIFORNIA, 92064

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $75.0 million to GENERAL ATOMICS AERONAUTICAL SYSTEMS, INC. for work described as: SOFTWARE DEVELOPMENT Key points: 1. The contract's value, exceeding $75 million, was awarded without competitive bidding, raising questions about potential overspending. 2. A sole-source award suggests limited market exploration and potentially missed opportunities for cost savings through competition. 3. The contract's duration of over three years indicates a significant, long-term commitment of taxpayer funds. 4. The 'Aircraft Manufacturing' NAICS code for a software development contract warrants further investigation into the scope and nature of services. 5. The cost-plus incentive fee (CPIF) contract type can incentivize cost control but also carries inherent risks if not closely managed. 6. The absence of small business involvement raises concerns about equitable distribution of federal contracting opportunities.

Value Assessment

Rating: questionable

Benchmarking the value of this $75 million software development contract is challenging due to its sole-source nature and unusual NAICS code assignment. Without competitive bids, it's difficult to ascertain if the price reflects fair market value. The cost-plus incentive fee structure, while designed to manage costs, requires rigorous oversight to ensure efficiency. Compared to typical software development contracts, the lack of competition suggests a potential for inflated costs.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning it was not competed. This indicates that only one contractor, General Atomics Aeronautical Systems, Inc., was considered for this work. The lack of competition limits the government's ability to explore different solutions and pricing structures offered by the market, potentially leading to higher costs and reduced innovation.

Taxpayer Impact: Taxpayers may have paid a premium for this software development work due to the absence of competitive pressure. Without multiple bids, there is less incentive for the contractor to offer the most cost-effective solution.

Public Impact

The primary beneficiary of this contract is General Atomics Aeronautical Systems, Inc., receiving significant federal funding. The contract is intended to deliver software development services, though the specific application and impact are not detailed. The contract's geographic impact is centered in California, where the contractor is located. The workforce implications involve specialized software development roles, potentially within the aerospace or defense sector.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price discovery and potentially increases costs for taxpayers.
Unusual NAICS code ('Aircraft Manufacturing') for a software development contract raises questions about the service scope and potential misclassification.
Cost-plus incentive fee contracts require robust oversight to prevent cost overruns.
Lack of small business participation may indicate missed opportunities for economic inclusion.
Long contract duration (over 3 years) increases exposure to potential performance issues or changing requirements.

Positive Signals

General Atomics Aeronautical Systems, Inc. is a known entity in the defense sector, suggesting potential for specialized expertise.
The contract type (CPIF) aims to incentivize performance and cost efficiency, if managed effectively.
The contract was awarded by the Department of the Army, a major federal agency with established procurement processes.

Sector Analysis

The software development sector within the defense industry is highly specialized and often involves complex, mission-critical systems. Contracts in this area can range from millions to billions of dollars. General Atomics Aeronautical Systems, Inc. typically operates within the aerospace and defense manufacturing domain. Awarding a software development contract under the 'Aircraft Manufacturing' NAICS code is atypical and suggests the software may be intrinsically linked to aircraft systems or that there was a classification error. Comparable spending benchmarks for large-scale, sole-source software development in defense are difficult to establish without more specific details on the project's scope.

Small Business Impact

This contract was not set aside for small businesses, and the data indicates no small business participation (SB=false). This suggests that opportunities for small businesses to subcontract or participate in this significant federal spending were not pursued or mandated. The lack of small business involvement could limit the broader economic impact of this contract and bypass potential innovation from smaller, agile firms within the software development ecosystem.

Oversight & Accountability

Oversight mechanisms for this contract would typically fall under the Department of the Army's contracting and program management offices. As a sole-source award, scrutiny might be heightened to ensure fair pricing and necessity. Transparency is limited by the lack of competitive bidding information. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected during the contract's lifecycle.

Related Government Programs

Aircraft Manufacturing
Software Development Services
Department of Defense Contracts
Cost-Plus Contracts
Sole-Source Procurements

Risk Flags

Sole-source award
Unusual NAICS code for stated service
Lack of competition
Cost-plus contract type requires oversight

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $75.0 million to GENERAL ATOMICS AERONAUTICAL SYSTEMS, INC.. SOFTWARE DEVELOPMENT

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 $75.0 million.

What is the period of performance?

Start: 2013-09-25. End: 2017-03-31.

What specific software development services were procured under this contract, and why was the 'Aircraft Manufacturing' NAICS code used?

The provided data indicates the NAICS code as '336411 - Aircraft Manufacturing,' which is highly unusual for a contract explicitly labeled as 'SOFTWARE DEVELOPMENT.' This discrepancy warrants further investigation. It's possible the software is integral to aircraft systems, such as flight control software, avionics, or simulation systems, leading to its classification under manufacturing. Alternatively, it could represent a misclassification during the procurement process. Without detailed contract line item numbers (CLINs) or a Statement of Work (SOW), the precise nature of the software development services remains unclear. Understanding the specific application and the rationale behind the NAICS code is crucial for assessing the contract's appropriateness and value.

What is the justification for awarding this $75 million contract on a sole-source basis?

Sole-source awards are typically justified when only one responsible source can provide the required supplies or services. Common justifications include unique capabilities, urgent and compelling needs, or specific follow-on work where competition is not feasible. For this $75 million software development contract awarded to General Atomics Aeronautical Systems, Inc., the justification for a sole-source award needs to be thoroughly documented and publicly accessible. Without this justification, it raises concerns about whether the government adequately explored competitive options, potentially leading to a higher cost for taxpayers and limiting the benefits of market competition.

How does the Cost Plus Incentive Fee (CPIF) structure compare to other contract types for similar software development projects, and what are the associated risks?

Cost Plus Incentive Fee (CPIF) contracts are used when the government needs flexibility in scope and wants to incentivize contractor performance beyond just cost control. In CPIF contracts, the final profit is adjusted based on the contractor's ability to meet or exceed certain targets (e.g., cost, schedule, performance). For software development, CPIF can be beneficial if the requirements are not fully defined upfront, allowing for adaptation. However, it carries risks: if targets are poorly set or oversight is weak, costs can escalate significantly. Compared to Firm-Fixed-Price (FFP) contracts, CPIF offers less cost certainty for the government. Compared to Cost Plus Fixed Fee (CPFF), CPIF adds the incentive element but requires more complex target setting and monitoring. Robust government oversight is critical to ensure the incentive structure effectively drives desired outcomes without excessive cost.

What is the track record of General Atomics Aeronautical Systems, Inc. in delivering large-scale software development projects, particularly those not directly tied to aircraft manufacturing?

General Atomics Aeronautical Systems, Inc. (GA-ASI) is primarily known for its expertise in unmanned aircraft systems (UAS) and related technologies, including airborne sensors and data links. While software development is undoubtedly a core competency for such complex systems, their public profile and historical contract data often emphasize hardware and integrated systems rather than standalone, large-scale software development projects. Assessing their track record specifically for software development, especially outside the direct context of aircraft manufacturing, requires a deeper dive into their project portfolio and performance history. It's important to determine if their software development capabilities align with the specific needs of this $75 million contract and if they have a proven history of successful, independently managed software initiatives of this magnitude.

How does the $75 million spending on this contract compare to historical spending on similar software development initiatives within the Department of Defense or Army?

The $75 million figure for this software development contract is substantial, placing it in the mid-to-large tier for individual federal IT or software procurements. To contextualize this spending, it would be necessary to compare it against historical data for similar contracts within the Department of Defense (DoD) and specifically the Department of the Army. Benchmarking against average contract values, the number of bidders on comparable sole-source vs. competed contracts, and the duration of similar projects would provide insight. Without this comparative analysis, it's difficult to definitively state whether $75 million represents an outlier, a reasonable investment, or a potential overpayment for the services rendered. Historical spending patterns can reveal trends in procurement strategies and cost efficiencies over time.

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

Solicitation ID: W58RGZ12R0037

Offers Received: 1

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: $74,976,738

Exercised Options: $74,976,738

Current Obligation: $74,976,738

Subaward Activity

Number of Subawards: 1

Total Subaward Amount: $94,676

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline