DoD's $602M Global Hawk support contract awarded to Northrop Grumman without competition

Contract Overview

Contract Amount: $602,694,993 ($602.7M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2018-07-01

End Date: 2021-06-30

Contract Duration: 1,095 days

Daily Burn Rate: $550.4K/day

Competition Type: NOT COMPETED

Pricing Type: COST NO FEE

Sector: Defense

Official Description: GLOBAL HAWK CONTRACTOR LOGISTICS SUPPORT AND SERVICES (CLS S) V

Place of Performance

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

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $602.7 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: GLOBAL HAWK CONTRACTOR LOGISTICS SUPPORT AND SERVICES (CLS S) V Key points: 1. Contract awarded on a cost-plus-fixed-fee basis, which can incentivize contractor overspending. 2. Lack of competition raises concerns about potential overpayment and suboptimal pricing. 3. The contract duration of three years (1095 days) is substantial for logistics support. 4. This contract represents a significant portion of spending within the Aircraft Manufacturing NAICS code. 5. The absence of small business set-asides suggests limited opportunities for smaller firms in this specific contract. 6. Performance context is crucial given the high dollar value and sole-source nature.

Value Assessment

Rating: questionable

The contract's cost-plus-fixed-fee (CPFF) structure, while common for complex systems, offers less incentive for cost control compared to fixed-price contracts. Benchmarking the value is difficult without detailed cost breakdowns and comparisons to similar sole-source logistics support contracts for high-value aerospace platforms. The total award amount of over $600 million over three years warrants scrutiny to ensure fair and reasonable pricing, especially given the lack of competitive pressure.

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 used when only one vendor possesses the necessary capabilities, proprietary knowledge, or when urgency dictates. The lack of competition limits the government's ability to leverage market forces to achieve the best possible price and terms.

Taxpayer Impact: Taxpayers may be exposed to higher costs due to the absence of competitive bidding, potentially leading to less efficient use of public funds.

Public Impact

The primary beneficiaries are the Department of Defense (Air Force) and Northrop Grumman. Services delivered include contractor logistics support and services for the Global Hawk unmanned aerial system. Geographic impact is likely concentrated around operational bases for the Global Hawk. Workforce implications include employment for personnel supporting the Global Hawk program at Northrop Grumman and potentially within the Air Force.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price discovery and potential savings.
Cost-plus-fixed-fee structure may reduce contractor incentive for cost efficiency.
Lack of transparency in cost elements for a sole-source contract.
Potential for scope creep without robust oversight in a sole-source environment.
Limited visibility into alternative solutions or innovative approaches from other vendors.

Positive Signals

Northrop Grumman is an established prime contractor with extensive experience on the Global Hawk program.
Contracting for logistics support is essential for maintaining operational readiness of critical defense assets.
The contract aims to ensure continued availability and sustainment of the Global Hawk fleet.
Fixed fee component provides some level of cost predictability for the government.

Sector Analysis

This contract falls within the aerospace and defense sector, specifically focusing on unmanned aerial systems (UAS) and their sustainment. The market for UAS logistics support is specialized, often dominated by original equipment manufacturers or highly experienced defense contractors due to the complexity and security requirements. Spending benchmarks for similar large-scale UAS sustainment contracts can vary significantly based on platform size, mission profile, and service life.

Small Business Impact

The data indicates this contract was not set aside for small businesses (sb: false). As a sole-source award to a large prime contractor, it is unlikely to involve significant subcontracting opportunities for small businesses unless explicitly mandated or pursued by the prime. This contract does not appear to directly contribute to the small business ecosystem through set-asides.

Oversight & Accountability

Oversight mechanisms would typically involve program management reviews, technical inspections, and financial audits conducted by the Department of Defense. Accountability measures are tied to contract performance clauses and reporting requirements. Transparency may be limited due to the sole-source nature and proprietary cost information, although contract award details are publicly available. Inspector General jurisdiction would apply to investigations of fraud, waste, or abuse.

Related Government Programs

Global Hawk Unmanned Aircraft System
Defense Logistics Agency Support Contracts
Unmanned Aerial Vehicle (UAV) Procurement and Sustainment
Department of Defense Aircraft Maintenance and Repair

Risk Flags

Sole-source award
Cost-plus-fixed-fee pricing
High contract value
Lack of small business participation

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $602.7 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. GLOBAL HAWK CONTRACTOR LOGISTICS SUPPORT AND SERVICES (CLS S) V

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 (Department of the Air Force).

What is the total obligated amount?

The obligated amount is $602.7 million.

What is the period of performance?

Start: 2018-07-01. End: 2021-06-30.

What is Northrop Grumman's track record with the Global Hawk program?

Northrop Grumman is the prime contractor and developer of the Global Hawk unmanned aerial system. They have a long-standing relationship with the Department of Defense for the development, production, and sustainment of this platform. Their track record includes delivering the aircraft, integrating various payloads, and providing ongoing logistics, maintenance, and upgrade services. This extensive history suggests deep institutional knowledge and technical expertise regarding the Global Hawk's complex systems and operational requirements. However, the sole-source nature of this specific contract means that performance metrics and any past issues related to cost or schedule on previous Global Hawk contracts would be critical for a comprehensive assessment of their performance in this instance.

How does the pricing of this contract compare to similar sole-source logistics support contracts for large unmanned aerial systems?

Direct comparison of pricing for sole-source contracts is inherently challenging due to the lack of competitive benchmarking and the proprietary nature of cost data. However, the cost-plus-fixed-fee (CPFF) structure, with a total award value exceeding $600 million over three years for logistics support of a high-value asset like the Global Hawk, suggests a significant investment. CPFF contracts generally allow for the recovery of all allowable costs plus a negotiated fixed fee, which can be higher in sole-source situations to account for perceived risk. To assess value, one would need to compare the 'fixed fee' component against industry standards for similar services and analyze the 'cost' component against detailed cost breakdowns, if available, and benchmark against the total cost of ownership for comparable platforms, considering factors like operational tempo and system complexity.

What are the primary risks associated with a sole-source, cost-plus-fixed-fee contract for critical defense logistics?

The primary risks associated with this contract type are related to cost control and efficiency. A sole-source award eliminates competitive pressure, potentially leading to higher prices than might be achieved through bidding. The cost-plus-fixed-fee structure, while providing cost recovery, can reduce the contractor's incentive to minimize expenses, as profits are fixed regardless of the final cost. This can increase the risk of cost overruns if not managed diligently. Furthermore, without competition, there's a risk that the government might not be exposed to the most innovative or cost-effective solutions available in the market. Robust government oversight, detailed cost analysis, and clear performance metrics are essential to mitigate these risks.

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

Historical spending data for Global Hawk contractor logistics support (CLS) is crucial for understanding trends and identifying potential anomalies. While this specific contract covers 2018-2021, previous CLS contracts for the Global Hawk program would provide context. Analyzing past spending would reveal the average annual expenditure, the evolution of costs over the system's lifecycle, and whether spending has been consistent or subject to significant fluctuations. It would also help determine if previous contracts were also sole-source or if competition has decreased over time. Understanding these patterns is vital for assessing the reasonableness of the current $602 million award and forecasting future sustainment costs for the Global Hawk fleet.

How does the duration of this contract impact its overall value and risk?

A three-year duration (1095 days) for a contract of this magnitude ($602 million) is substantial and implies a long-term need for the services. Longer contract durations can offer stability and predictability for both the government and the contractor, potentially leading to better planning and resource allocation. For the contractor, it provides a consistent revenue stream. However, a longer term also increases the government's exposure to potential cost increases or performance issues over the entire period. It also means that the government is locked into a specific provider for an extended time, potentially missing out on opportunities to renegotiate terms or switch providers if better options emerge. Mitigating this risk requires strong contract management and performance monitoring throughout the duration.

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: FA852817R0074

Pricing Type: COST NO FEE (S)

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: $698,489,805

Exercised Options: $698,489,805

Current Obligation: $602,694,993

Actual Outlays: $48,525,597

Subaward Activity

Number of Subawards: 436

Total Subaward Amount: $1,295,886,005

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