DoD's $326M Global Hawk CLS IV contract awarded to Northrop Grumman without competition

Contract Overview

Contract Amount: $326,658,653 ($326.7M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2017-07-01

End Date: 2023-04-14

Contract Duration: 2,113 days

Daily Burn Rate: $154.6K/day

Competition Type: NOT COMPETED

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: IGF::OT::IGF GLOBAL HAWK CONTRACTOR LOGISTICS SUPPORT AND SERVICES (CLS) IV

Place of Performance

Location: SAN DIEGO, SAN DIEGO County, CALIFORNIA, 92127

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $326.7 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: IGF::OT::IGF GLOBAL HAWK CONTRACTOR LOGISTICS SUPPORT AND SERVICES (CLS) IV Key points: 1. Contract awarded on a sole-source basis, limiting price discovery and potentially increasing costs. 2. Significant duration of over 5 years suggests a long-term reliance on this specific contractor. 3. The contract type (Cost Plus Fixed Fee) can incentivize cost overruns. 4. Lack of competition raises concerns about value for money and potential for inflated pricing. 5. The contract supports critical intelligence, surveillance, and reconnaissance (ISR) capabilities for the DoD. 6. Performance context is crucial given the high dollar value and sole-source nature.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to its sole-source nature and the specialized services provided. Without competitive bids, it's difficult to ascertain if the pricing reflects fair market value. The Cost Plus Fixed Fee (CPFF) contract type, while allowing for flexibility, can lead to higher costs compared to fixed-price contracts if not managed rigorously. The extensive duration and high value suggest a significant investment, making rigorous oversight essential to ensure value.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning there was no open competition. This typically occurs when a single contractor possesses unique capabilities or when circumstances prevent a competitive process. The absence of multiple bidders means that price discovery through market forces was not utilized, potentially leading to less favorable pricing for the government.

Taxpayer Impact: The lack of competition means taxpayers did not benefit from the cost savings that can arise from a competitive bidding process. This could translate to higher overall expenditure for the same level of service.

Public Impact

The primary beneficiaries are the Department of Defense, which receives critical ISR capabilities. Services delivered include logistics support and maintenance for the Global Hawk unmanned aerial system. Geographic impact is global, supporting DoD operations worldwide. Workforce implications include the need for specialized technical personnel to maintain and operate the Global Hawk fleet.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure on pricing.
Cost-plus contract type may incentivize higher spending.
Long contract duration could lead to complacency or reduced innovation.
Lack of transparency in pricing due to no competition.
Potential for vendor lock-in with specialized systems.

Positive Signals

Supports critical national security ISR missions.
Northrop Grumman is an established provider of Global Hawk systems.
Contract ensures continued operational readiness of a key asset.
Potential for economies of scale in long-term support.

Sector Analysis

The Global Hawk program falls within the aerospace and defense sector, specifically focusing on unmanned aerial systems (UAS) for intelligence, surveillance, and reconnaissance (ISR). This sector is characterized by high technological complexity, significant R&D investment, and long procurement cycles. The market for UAS support services is substantial, with major defense contractors playing a key role. This contract represents a significant portion of spending for the sustainment of a high-value ISR platform.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. There is no explicit information regarding subcontracting plans for small businesses. The large scale and specialized nature of the services may limit opportunities for small business participation, though specific subcontracting requirements could be detailed elsewhere in the contract documentation.

Oversight & Accountability

Oversight for this contract is managed by the Defense Contract Management Agency (DCMA). Accountability measures would typically involve performance reviews, milestone tracking, and financial audits, especially given the CPFF structure. Transparency is limited due to the sole-source nature, but contract modifications and performance reports should be available through official channels. The Inspector General's office would have jurisdiction for investigating fraud, waste, and abuse.

Related Government Programs

Global Hawk Unmanned Aircraft System
Intelligence, Surveillance, and Reconnaissance (ISR) Platforms
Defense Logistics and Sustainment Contracts
Unmanned Aerial Vehicle (UAV) Support Services

Risk Flags

Sole-source award
Cost-plus contract type
Lack of competition
High dollar value

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $326.7 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. IGF::OT::IGF GLOBAL HAWK CONTRACTOR LOGISTICS SUPPORT AND SERVICES (CLS) IV

Who is the contractor on this award?

The obligated recipient is NORTHROP GRUMMAN SYSTEMS CORPORATION.

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Contract Management Agency).

What is the total obligated amount?

The obligated amount is $326.7 million.

What is the period of performance?

Start: 2017-07-01. End: 2023-04-14.

What is Northrop Grumman's track record with the Global Hawk program and similar defense contracts?

Northrop Grumman has a long-standing history with the Global Hawk program, having been the prime contractor for its development and production. They have extensive experience in providing logistics, sustainment, and upgrade services for various military platforms. Their track record includes managing complex, high-value defense contracts, often involving advanced technologies. However, like many large defense contractors, they have faced scrutiny regarding contract costs and performance on specific programs. For the Global Hawk CLS IV contract, their established role as the original equipment manufacturer provides a unique position, but also necessitates careful oversight to ensure competitive-level performance and pricing despite the sole-source award.

How does the pricing structure (Cost Plus Fixed Fee) compare to other ISR platform sustainment contracts?

The Cost Plus Fixed Fee (CPFF) structure is common for complex defense contracts where the scope of work may evolve or is difficult to define precisely upfront, such as sustainment and logistics for advanced platforms like the Global Hawk. This structure involves reimbursing the contractor for allowable costs plus a fixed fee representing profit. Compared to fixed-price contracts, CPFF can offer more flexibility but carries a higher risk of cost overruns if not managed diligently. Other ISR platform sustainment contracts might utilize different pricing models, including Firm-Fixed-Price (FFP) for well-defined services or Cost Plus Incentive Fee (CPIF) to incentivize performance. The choice of CPFF here suggests the DoD prioritized flexibility and contractor expertise over strict cost certainty, making robust cost monitoring by the DCMA critical.

What are the primary risks associated with a sole-source award for long-term sustainment of critical assets like the Global Hawk?

The primary risks associated with a sole-source award for long-term sustainment of critical assets like the Global Hawk include a lack of competitive pressure, which can lead to inflated pricing and reduced incentives for efficiency and innovation. This 'vendor lock-in' can make it difficult and costly to switch providers in the future, even if performance or pricing becomes unsatisfactory. There's also a risk that the contractor may prioritize their own business interests over the government's, knowing there are no immediate alternatives. Furthermore, without the transparency of a competitive bidding process, it's harder for the government to benchmark costs and ensure it's receiving fair market value. This necessitates strong government oversight, detailed performance metrics, and potentially regular re-evaluations of the sole-source justification.

What is the historical spending trend for Global Hawk contractor logistics support?

Historical spending on Global Hawk Contractor Logistics Support (CLS) has been substantial, reflecting the complexity and operational demands of the unmanned aerial system. The CLS IV contract, valued at over $326 million, represents a significant investment in sustainment. Previous CLS phases (I, II, III) also involved multi-year, high-dollar awards to support the Global Hawk fleet. While specific figures for earlier phases are not detailed here, the consistent awarding of large CLS contracts indicates a sustained need and expenditure for maintaining the Global Hawk's operational readiness. This trend suggests a long-term commitment by the DoD to the Global Hawk platform and its associated support infrastructure, with significant budget allocations dedicated to its sustainment over its lifecycle.

How does the contract's duration (over 2000 days) impact performance and cost management?

The contract's duration of over 2100 days (approximately 5.8 years) provides stability and predictability for both the contractor and the DoD, which is beneficial for long-term planning of ISR operations. This extended period allows the contractor, Northrop Grumman, to invest in specialized personnel and infrastructure for sustainment, potentially leading to efficiencies. However, such a long duration, especially combined with a sole-source award and CPFF structure, increases the risk of cost escalation over time if not actively managed. It can also reduce the government's agility to adapt to changing technological landscapes or alternative solutions. Effective performance management, regular reviews, and clear contract milestones are crucial to mitigate risks and ensure value throughout the contract's life.

Industry Classification

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

Product/Service Code: SUPPORT SVCS (PROF, ADMIN, MGMT) › PROFESSIONAL SERVICES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: FA852816R0652

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Northrop Grumman Corporation

Address: 17066 GOLDENTOP RD, SAN DIEGO, CA, 92127

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

Financial Breakdown

Contract Ceiling: $354,207,722

Exercised Options: $354,207,722

Current Obligation: $326,658,653

Actual Outlays: $-60

Subaward Activity

Number of Subawards: 137

Total Subaward Amount: $470,377,470

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: FA862015D3009

IDV Type: IDC

Timeline