DoD's $751M JSTARS E-8C support contract awarded to Northrop Grumman raises value concerns

Contract Overview

Contract Amount: $75,100,085 ($75.1M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2021-11-01

End Date: 2022-10-31

Contract Duration: 364 days

Daily Burn Rate: $206.3K/day

Competition Type: NOT COMPETED

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: JSTARS PROGRAM SUPPORT OF THE E-8C

Place of Performance

Location: MELBOURNE, BREVARD County, FLORIDA, 32904

State: Florida Government Spending

Plain-Language Summary

Department of Defense obligated $75.1 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: JSTARS PROGRAM SUPPORT OF THE E-8C Key points: 1. Contract awarded on a sole-source basis, limiting price competition and potentially increasing costs. 2. The contract type (Cost Plus Fixed Fee) can incentivize higher spending as costs increase. 3. Limited competition raises questions about whether the government received the best possible value. 4. The contract duration of 364 days is standard for support services. 5. The geographic location of performance is Florida. 6. No small business set-aside was utilized for this contract.

Value Assessment

Rating: questionable

The $751 million contract value for JSTARS program support is substantial. However, without competitive bidding, it is difficult to benchmark the pricing against market rates or similar contracts. The Cost Plus Fixed Fee (CPFF) contract type, while sometimes necessary for complex R&D or services where costs are uncertain, can lead to higher overall expenditures compared to fixed-price contracts if not managed diligently. The lack of competition means there's no direct comparison to assess if Northrop Grumman's pricing is optimal.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one bidder, Northrop Grumman Systems Corporation, was solicited. This approach bypasses the standard competitive procurement process. While sole-source awards can be justified under specific circumstances (e.g., unique capabilities, urgent needs), they inherently reduce the pressure on the contractor to offer the most competitive pricing. The absence of multiple bids means the government did not benefit from a range of proposals to evaluate.

Taxpayer Impact: Sole-source awards mean taxpayers may not be getting the most cost-effective solution, as the potential for price negotiation is significantly reduced.

Public Impact

The primary beneficiaries are the Department of the Air Force and the personnel operating and maintaining the E-8C JSTARS aircraft. Services provided include engineering support crucial for the continued operation and readiness of the JSTARS fleet. The geographic impact is primarily in Florida, where the contract is performed. This contract supports a specialized segment of the aerospace and defense workforce involved in intelligence, surveillance, and reconnaissance (ISR) platforms.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition, potentially leading to higher costs for taxpayers.
Cost Plus Fixed Fee contract type may incentivize increased spending if costs are not tightly controlled.
Lack of transparency in the bidding process due to sole-source nature.
Potential for contractor lock-in given the specialized nature of JSTARS support.

Positive Signals

Northrop Grumman is an established defense contractor with significant experience in complex systems.
The contract ensures continued support for a critical intelligence, surveillance, and reconnaissance platform.
The fixed fee component of the CPFF contract provides some level of cost predictability for the government.

Sector Analysis

The aerospace and defense sector is characterized by high R&D costs, long product lifecycles, and significant government procurement. Contracts for specialized aircraft support, like that for the JSTARS E-8C, often involve sole-source or limited competition due to the unique nature of the platforms and the expertise required. The total addressable market for such specialized support services is substantial, driven by ongoing military modernization and sustainment needs. Benchmarking is challenging without comparable sole-source awards.

Small Business Impact

This contract was not set aside for small businesses, nor does it appear to have specific subcontracting requirements for small businesses mentioned in the provided data. This means that the prime contract value does not directly contribute to the small business contracting goals. While Northrop Grumman may engage small businesses as subcontractors, the primary award does not leverage the small business industrial base.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of the Air Force's contracting and program management offices. The Inspector General of the Department of Defense would have jurisdiction for audits and investigations. Transparency is limited due to the sole-source nature of the award, but contract performance and financial reporting would be subject to standard government oversight mechanisms.

Related Government Programs

JSTARS Program
E-8C Aircraft Sustainment
ISR Platform Support
Department of Defense Engineering Services

Risk Flags

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

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $75.1 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. JSTARS PROGRAM SUPPORT OF THE E-8C

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 $75.1 million.

What is the period of performance?

Start: 2021-11-01. End: 2022-10-31.

What is Northrop Grumman's track record with similar sole-source defense contracts?

Northrop Grumman Systems Corporation has a long history of securing large sole-source and competitively awarded contracts within the Department of Defense and other federal agencies. Their portfolio includes extensive work on complex aerospace platforms, electronic systems, and defense logistics. While specific details on past sole-source awards for aircraft support services would require deeper analysis of historical contract data, the company's size and established position in the defense industry suggest they are frequently a primary or sole provider for specialized systems where unique capabilities or prior development efforts create barriers to entry for competitors. Evaluating their performance on previous sole-source contracts would involve examining metrics such as on-time delivery, cost overruns, quality of service, and any audit findings or disputes.

How does the Cost Plus Fixed Fee (CPFF) contract type compare to other options for this type of service in terms of value?

The Cost Plus Fixed Fee (CPFF) contract type is often used when the scope of work is not precisely defined, or when there is significant uncertainty in the costs associated with performance, such as in research and development or complex engineering services. In a CPFF contract, the contractor is reimbursed for allowable costs plus a fixed fee, which represents profit. Compared to fixed-price contracts (like Firm-Fixed Price - FFP), CPFF offers less cost certainty for the government, as the final price is not known upfront and can increase if costs rise. However, it can be advantageous when innovation or flexibility is paramount and defining a fixed price upfront would be impractical or stifle performance. For sustainment and engineering services where requirements might evolve, CPFF can ensure continued support, but it places a greater burden on government oversight to manage costs effectively and ensure value.

What are the primary risks associated with sole-source awards for major defense programs?

The primary risks associated with sole-source awards for major defense programs include reduced competition, which can lead to inflated prices and suboptimal value for taxpayer money. Without competing bids, there is less incentive for the awarded contractor to innovate or reduce costs aggressively. There's also a risk of contractor 'lock-in,' where the government becomes dependent on a single provider for critical systems, making it difficult and costly to switch providers later. Furthermore, the lack of transparency inherent in a sole-source process can obscure potential inefficiencies or performance issues. Effective oversight and robust negotiation are crucial to mitigate these risks, but they cannot fully replicate the benefits of a competitive environment.

What is the historical spending trend for JSTARS program support, and how does this contract fit?

Historical spending on JSTARS program support, particularly for the E-8C aircraft, has been substantial over the years, reflecting the platform's critical role in intelligence, surveillance, and reconnaissance (ISR). The JSTARS fleet has undergone various sustainment, upgrade, and operational support contracts. This $751 million contract represents a significant, albeit potentially annual, investment in maintaining the operational readiness and engineering support for the E-8C. Without access to detailed historical contract databases, it's difficult to pinpoint exact year-over-year spending trends. However, such large-dollar support contracts are typical for aging, complex military aircraft platforms that require continuous maintenance, upgrades, and specialized engineering services to remain effective.

Are there any known performance issues or concerns with Northrop Grumman's past support for the JSTARS program or similar platforms?

Information regarding specific performance issues or concerns with Northrop Grumman's past support for the JSTARS program or similar platforms is not readily available in the provided data. A comprehensive assessment would require delving into contract performance reports, past performance reviews, Government Accountability Office (GAO) protests, and Inspector General (IG) reports related to Northrop Grumman's contracts. Generally, large defense contractors like Northrop Grumman handle numerous complex programs, and performance can vary. The sole-source nature of this particular award means that past performance, while a factor in sole-source justifications, is not subject to direct comparison with competitors' past performance in a competitive bid scenario.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Architectural, Engineering, and Related Services › Engineering Services

Product/Service Code: MAINT/REPAIR SHOP EQPT

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: 2000 W NASA BLVD, MELBOURNE, FL, 32902

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $126,268,449

Exercised Options: $126,268,449

Current Obligation: $75,100,085

Subaward Activity

Number of Subawards: 63

Total Subaward Amount: $10,348,086

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: F0960300D0210

IDV Type: IDC

Timeline