DoD's $864M B-2 DMS-M EMD contract awarded to Northrop Grumman, a sole-source aircraft manufacturing deal

Contract Overview

Contract Amount: $863,696,882 ($863.7M)

Contractor: Northrop Grumman Systems Corp

Awarding Agency: Department of Defense

Start Date: 2016-02-02

End Date: 2022-12-16

Contract Duration: 2,509 days

Daily Burn Rate: $344.2K/day

Competition Type: NOT COMPETED

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Official Description: ACAT 1D B-2 DMS-M EMD

Place of Performance

Location: PALMDALE, LOS ANGELES County, CALIFORNIA, 93550

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $863.7 million to NORTHROP GRUMMAN SYSTEMS CORP for work described as: ACAT 1D B-2 DMS-M EMD Key points: 1. The contract's value of over $863 million for the B-2 DMS-M EMD program represents a significant investment in advanced aircraft manufacturing. 2. Awarded as a sole-source contract, it bypasses standard competitive processes, raising questions about potential price efficiencies. 3. The cost-plus-incentive-fee (CPIF) pricing structure suggests a focus on performance incentives but can lead to cost overruns if not managed tightly. 4. The duration of the contract, spanning from February 2016 to December 2022, indicates a long-term development and manufacturing effort. 5. The absence of small business set-asides means opportunities for smaller firms in the supply chain may be limited. 6. The contract falls under the 'Aircraft Manufacturing' sector, a high-value, technologically intensive industry dominated by a few major players.

Value Assessment

Rating: questionable

Benchmarking the value of this specific contract is challenging due to its sole-source nature and focus on unique, advanced development (EMD phase). However, the substantial cost-plus-incentive-fee structure warrants scrutiny. Without competitive bids, it's difficult to ascertain if the pricing reflects true market value or if efficiencies were forgone. The total award amount of over $863 million for the B-2 DMS-M EMD program suggests a high per-unit cost, typical for specialized defense systems, but the lack of transparency inherent in sole-source awards makes a definitive value-for-money assessment difficult.

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 typically occurs when a single contractor possesses unique capabilities or intellectual property essential for the project, as is often the case with highly specialized defense systems like the B-2 bomber modifications. The lack of competition means there were no multiple bidders to drive down prices through a bidding war, potentially leading to higher costs for the government compared to a fully competed contract.

Taxpayer Impact: For taxpayers, a sole-source award means the government did not benefit from the price discovery mechanisms inherent in a competitive bidding process. This can result in higher overall expenditure for the defense program.

Public Impact

The primary beneficiaries are the Department of Defense and the United States Air Force, receiving upgrades and enhancements to the B-2 bomber fleet. The services delivered include engineering and manufacturing development (EMD) for the Defensive Management System (DMS-M) on the B-2 aircraft. The geographic impact is primarily within California, where Northrop Grumman Systems Corp. is located, and at various Air Force bases where the B-2 fleet operates. The contract supports a highly skilled workforce in aerospace engineering, manufacturing, and defense systems integration.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition and potential taxpayer savings.
Cost-plus-incentive-fee contracts can incentivize cost growth if not rigorously managed.
Lack of small business participation may limit broader economic impact and innovation.
High value of contract indicates significant financial commitment and potential for cost overruns.
Specific details on performance metrics and incentive triggers are not publicly detailed, hindering full assessment.

Positive Signals

Award to a prime contractor with established expertise on the B-2 platform ensures continuity and specialized knowledge.
Focus on EMD phase suggests development of critical, advanced capabilities for a strategic asset.
CPIF structure aims to align contractor and government interests towards achieving performance goals.
Long contract duration allows for sustained development and integration efforts.
Contract supports a key national security asset, contributing to defense readiness.

Sector Analysis

The Aircraft Manufacturing sector is characterized by high barriers to entry, significant capital investment, and long product development cycles. It is dominated by a few large, established players like Northrop Grumman, Boeing, and Lockheed Martin. This contract, focusing on the Engineering and Manufacturing Development (EMD) phase for a specific system on the B-2 bomber, fits within the specialized defense segment of this sector. Comparable spending benchmarks are difficult to establish due to the unique nature of strategic defense platforms, but investments in advanced avionics and system upgrades for existing fleets often run into hundreds of millions or billions of dollars.

Small Business Impact

This contract does not appear to include specific small business set-asides, as indicated by the 'sb': false field. Given the sole-source nature and the specialized EMD work for a complex defense system, it's likely that the prime contractor, Northrop Grumman, will manage subcontracting opportunities. While large prime contractors often engage small businesses for specific components or services, the absence of a direct set-aside means there's no mandated allocation for small businesses. The impact on the small business ecosystem depends heavily on Northrop Grumman's subcontracting strategy for this particular program.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contracting and program management offices, likely involving the Air Force. As a Cost Plus Incentive Fee (CPIF) contract, performance metrics and cost controls are critical oversight areas. Transparency is limited due to the sole-source nature. Inspector General (IG) jurisdiction would apply to investigations of fraud, waste, or abuse. Specific details on internal oversight mechanisms, reporting requirements, and accountability measures are not publicly available but are standard components of DoD contract management.

Related Government Programs

B-2 Spirit Bomber Program
Air Force Materiel Command Contracts
Defense Advanced Avionics Systems
Aerospace Engineering and Manufacturing
Northrop Grumman Defense Contracts

Risk Flags

Sole-source award
Cost-plus contract type
Lack of competitive bidding
High contract value

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $863.7 million to NORTHROP GRUMMAN SYSTEMS CORP. ACAT 1D B-2 DMS-M EMD

Who is the contractor on this award?

The obligated recipient is NORTHROP GRUMMAN SYSTEMS CORP.

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 $863.7 million.

What is the period of performance?

Start: 2016-02-02. End: 2022-12-16.

What is the specific nature of the 'DMS-M' system being developed for the B-2 bomber?

The 'DMS-M' likely refers to the Defensive Management System - Modernization for the B-2 Spirit bomber. The B-2 is a strategic stealth bomber, and its defensive systems are crucial for survivability, especially in contested airspace. Modernization efforts typically involve upgrading electronic warfare capabilities, radar warning receivers, countermeasures, and potentially integrating new threat detection technologies. The Engineering and Manufacturing Development (EMD) phase indicates that this contract is for the design, prototyping, testing, and refinement of these advanced defensive systems before they are fielded. The specific details of the DMS-M system's capabilities are likely classified due to the sensitive nature of stealth technology and electronic warfare.

How does the Cost Plus Incentive Fee (CPIF) structure typically work, and what are its implications for this contract?

A Cost Plus Incentive Fee (CPIF) contract is a type of cost-reimbursement contract where the contractor is reimbursed for allowable costs and also receives a fee that is adjusted based on the achievement of predetermined performance objectives. In this case, Northrop Grumman would be reimbursed for its expenses related to the B-2 DMS-M EMD. The 'incentive fee' part means the final fee paid to Northrop Grumman is tied to meeting specific targets, such as performance, schedule, or cost savings, beyond the basic requirements. If the contractor exceeds these targets, they earn a higher fee; if they fall short, the fee is reduced. This structure aims to motivate the contractor to perform efficiently and effectively. However, CPIF contracts require careful negotiation of targets and can still lead to cost increases if the targets are not well-defined or if unforeseen technical challenges arise, necessitating additional resources.

What is the significance of the 'ACAT 1D B-2 DMS-M EMD' designation?

The designation 'ACAT 1D B-2 DMS-M EMD' provides critical context about the program's importance and nature. 'ACAT' stands for 'Acquisition Category,' and '1D' signifies a major defense acquisition program with a high estimated cost, requiring the highest level of oversight from the Department of Defense (DoD). 'B-2' clearly identifies the platform – the B-2 Spirit stealth bomber. 'DMS-M' refers to the specific system being developed, likely the Defensive Management System - Modernization. 'EMD' stands for Engineering and Manufacturing Development, which is a crucial phase in the acquisition lifecycle focused on finalizing the system's design, building prototypes, and preparing for production. Therefore, ACAT 1D B-2 DMS-M EMD indicates a top-priority, high-cost defense program focused on developing and manufacturing advanced defensive capabilities for the B-2 bomber.

Given the sole-source nature, what are the potential risks regarding contractor performance and innovation?

Sole-source contracts, while sometimes necessary for unique capabilities, carry inherent risks regarding contractor performance and innovation. Without the pressure of competition, a contractor might have less incentive to aggressively pursue cost efficiencies or to innovate beyond the minimum requirements specified in the contract. There's a potential for complacency or 'gold plating' where the contractor may over-engineer solutions or use more expensive methods, knowing that alternatives are not being actively explored by competitors. Furthermore, the government's leverage to demand significant improvements or novel approaches might be diminished. To mitigate these risks, the government must implement robust contract management, including detailed performance metrics, regular reviews, and strong negotiation tactics to ensure the contractor remains focused on delivering optimal value and exploring innovative solutions within the contract's framework.

What does the 'Aircraft Manufacturing' NAICS code (336411) imply about the contractor and the work performed?

The North American Industry Classification System (NAICS) code 336411, 'Aircraft Manufacturing,' indicates that the primary business activity of the contractor, Northrop Grumman Systems Corp., in relation to this contract, is the manufacturing of aircraft. This code encompasses establishments primarily engaged in manufacturing complete aircraft and aircraft parts. For this specific contract, it signifies that the work involves the complex processes of designing, engineering, and potentially assembling or integrating components for the B-2 bomber's defensive management system. This industry is highly specialized, requiring advanced technological capabilities, significant capital investment, stringent quality control, and adherence to rigorous safety and defense standards. It confirms that the work is centered on the physical production and development of aerospace hardware and associated systems.

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: COST PLUS INCENTIVE FEE (V)

Evaluated Preference: NONE

Contractor Details

Parent Company: Northrop Grumman Corporation

Address: 3520 E AVE M, PALMDALE, CA, 93550

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $1,208,230,562

Exercised Options: $1,208,230,562

Current Obligation: $863,696,882

Subaward Activity

Number of Subawards: 103

Total Subaward Amount: $304,052,574

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: FA861614D6060

IDV Type: IDC

Timeline