DoD's $42.4M Northrop Grumman contract for aircraft software sustainment awarded without competition

Contract Overview

Contract Amount: $42,388,487 ($42.4M)

Contractor: Northrop Grumman Systems Corp

Awarding Agency: Department of Defense

Start Date: 2020-01-01

End Date: 2020-12-31

Contract Duration: 365 days

Daily Burn Rate: $116.1K/day

Competition Type: NOT COMPETED

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: B-2 SOFTWARE SUSTAINMENT (SWS)

Place of Performance

Location: PALMDALE, LOS ANGELES County, CALIFORNIA, 93550

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $42.4 million to NORTHROP GRUMMAN SYSTEMS CORP for work described as: B-2 SOFTWARE SUSTAINMENT (SWS) Key points: 1. The contract's value of $42.4M represents a significant investment in maintaining critical aircraft software. 2. Awarded to a single, large defense contractor, raising questions about potential competition limitations. 3. The 'cost plus fixed fee' pricing structure may incentivize cost overruns. 4. Sustainment contracts are crucial for ensuring the longevity and operational readiness of complex defense systems. 5. The absence of competition suggests a potential reliance on a specific vendor's proprietary knowledge or capabilities. 6. The contract duration of one year indicates a need for ongoing, potentially recurring, sustainment services.

Value Assessment

Rating: questionable

Benchmarking the value of this specific sustainment contract is challenging without detailed cost breakdowns and comparisons to similar sole-source agreements. The 'cost plus fixed fee' (CPFF) structure, while common for complex R&D or sustainment, can lead to higher final costs compared to fixed-price contracts if not managed rigorously. The lack of competition prevents a direct price comparison against alternative providers, making it difficult to ascertain if the government received optimal value for the funds expended.

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 among multiple vendors. This approach is typically justified when only one vendor possesses the necessary technical expertise, proprietary data, or existing infrastructure to perform the required services. The lack of competition limits the government's ability to leverage market forces to drive down prices and potentially explore innovative solutions from a broader range of suppliers.

Taxpayer Impact: Sole-source awards mean taxpayers may not benefit from the cost savings typically achieved through competitive bidding, potentially leading to higher overall expenditure for the same services.

Public Impact

The primary beneficiaries are the Department of Defense and specifically the Air Force, ensuring the continued operational capability of aircraft. The services delivered include sustainment of critical software for aircraft, vital for mission readiness. The geographic impact is likely concentrated where the supported aircraft are based or maintained, primarily within the United States. This contract supports specialized technical roles within Northrop Grumman, contributing to the aerospace and defense workforce.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price discovery and potential cost savings for taxpayers.
Cost-plus-fixed-fee contract type can incentivize higher costs if not closely monitored.
Lack of competition may indicate a lack of market research or reliance on incumbent.
Proprietary nature of software sustainment can create vendor lock-in.

Positive Signals

Sustainment ensures continued operational readiness of critical defense assets.
Northrop Grumman is a major defense contractor with established expertise.
Fixed fee component provides some cost certainty compared to pure cost-plus.

Sector Analysis

This contract falls within the aerospace and defense sector, specifically focusing on software sustainment for aircraft. The market for defense software sustainment is characterized by high barriers to entry due to specialized knowledge, security requirements, and existing system integration. Spending in this area is substantial, as maintaining the software for complex military platforms is critical for their operational effectiveness and longevity. Comparable spending benchmarks would involve other sustainment contracts for major defense platforms, often awarded to large, established prime contractors.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. Given the sole-source nature and the likely complexity of aircraft software sustainment, it is improbable that significant subcontracting opportunities would be directed towards small businesses unless specifically mandated or if specialized components are required. The primary focus is on the large prime contractor's capabilities.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Defense's contracting and program management offices. The 'cost plus fixed fee' structure necessitates rigorous financial oversight to ensure costs are reasonable and allocable. Inspector General investigations could be initiated if fraud, waste, or abuse is suspected. Transparency is often limited in sole-source defense contracts, but reporting requirements on expenditures and performance are standard.

Related Government Programs

Aircraft Maintenance and Repair
Defense Software Development
Avionics Systems
Military Aircraft Logistics Support
Information Technology Services for Defense

Risk Flags

Sole-source award
Cost-plus-fixed-fee contract type
Potential for vendor lock-in
Lack of direct price competition

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $42.4 million to NORTHROP GRUMMAN SYSTEMS CORP. B-2 SOFTWARE SUSTAINMENT (SWS)

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 $42.4 million.

What is the period of performance?

Start: 2020-01-01. End: 2020-12-31.

What is the historical spending trend for aircraft software sustainment within the Air Force?

Analyzing historical spending trends for aircraft software sustainment within the Air Force requires access to detailed procurement data over multiple fiscal years. Generally, sustainment costs represent a significant portion of a platform's total lifecycle cost, often exceeding initial acquisition expenses. Factors influencing these trends include the age of the aircraft fleet, the complexity of the software systems, the frequency of upgrades and modifications, and the chosen contracting strategies (e.g., competitive vs. sole-source). Without specific data for this contract's category, it's difficult to provide precise figures, but it's common for sustainment spending to remain relatively stable or increase gradually, especially for aging platforms requiring continuous updates and security patches.

How does the 'cost plus fixed fee' (CPFF) pricing structure compare to other contract types for sustainment services?

The 'cost plus fixed fee' (CPFF) structure is often used for complex projects where the scope is not fully defined or involves significant uncertainty, such as research and development or sustainment of evolving systems. Under CPFF, the contractor is reimbursed for allowable costs plus a predetermined fixed fee representing profit. This contrasts with fixed-price contracts, where the price is set upfront, offering greater cost certainty to the buyer but potentially higher risk for the contractor. CPFF can incentivize contractors to control costs to maximize their fee relative to the effort expended, but it also requires robust government oversight to ensure costs are reasonable and necessary. For sustainment, if the scope is well-defined, a firm-fixed-price contract might offer better value, but CPFF is chosen when flexibility and adaptation are paramount.

What are the risks associated with sole-source awards for critical defense software sustainment?

Sole-source awards for critical defense software sustainment carry several risks. Primarily, the absence of competition can lead to higher prices than might be achieved in a competitive environment, as the government lacks leverage to negotiate the best possible deal. There's also a risk of vendor lock-in, where the reliance on a single provider for proprietary software or unique expertise makes it difficult and costly to switch vendors in the future. This can stifle innovation, as the incumbent may have less incentive to improve services or offer cost-saving solutions. Furthermore, a sole-source award can reduce transparency and make it harder to independently assess the fairness of the pricing and the necessity of the services provided.

What is Northrop Grumman's track record with similar aircraft software sustainment contracts?

Northrop Grumman is a major defense contractor with extensive experience in aerospace and defense systems, including software development and sustainment. They hold numerous contracts across various military branches for a wide range of platforms. Assessing their specific track record for aircraft software sustainment would involve reviewing past performance evaluations, contract modifications, and any reported issues on similar programs. Generally, large contractors like Northrop Grumman are expected to possess the technical capabilities and infrastructure required for such complex tasks. However, performance can vary significantly between contracts, influenced by factors such as program management, technical challenges, and government oversight.

How does the $42.4M contract value compare to the overall Air Force budget for aircraft sustainment?

The $42.4 million contract value for this specific software sustainment task, while substantial in absolute terms, represents a small fraction of the overall Air Force budget for aircraft sustainment. The Air Force's total aircraft sustainment budget encompasses a vast array of activities, including depot maintenance, component repair, spare parts, modifications, and software updates for hundreds of aircraft types. This single contract likely addresses a specific software suite or platform for a defined period. Therefore, while significant for the task it covers, it is a relatively minor component within the broader context of the Air Force's multi-billion dollar annual sustainment expenditures.

Industry Classification

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

Product/Service Code: MAINT, REPAIR, REBUILD EQUIPMENT › MAINT, REPAIR, REBUILD OF EQUIPMENT

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Pricing Type: COST PLUS FIXED FEE (U)

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: $56,766,399

Exercised Options: $56,766,399

Current Obligation: $42,388,487

Actual Outlays: $9,767,500

Subaward Activity

Number of Subawards: 76

Total Subaward Amount: $180,598,446

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