DoD's $285M aircraft manufacturing contract with Northrop Grumman shows long-term commitment

Contract Overview

Contract Amount: $285,483,717 ($285.5M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2004-03-31

End Date: 2012-08-21

Contract Duration: 3,065 days

Daily Burn Rate: $93.1K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIXED PRICE INCENTIVE

Sector: Defense

Place of Performance

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

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $285.5 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: Key points: 1. Contract awarded for aircraft manufacturing, indicating a significant investment in defense capabilities. 2. The sole-source nature of this award warrants scrutiny regarding potential price inflation and limited market engagement. 3. A long contract duration of 3065 days suggests a need for sustained production and potential for evolving requirements. 4. The fixed-price incentive contract type aims to balance cost control with performance incentives for the contractor. 5. Awarded to a single, large defense contractor, potentially limiting opportunities for smaller, innovative firms. 6. The contract's focus on aircraft manufacturing places it within a critical and high-value defense sector.

Value Assessment

Rating: fair

Benchmarking the value of this $285 million contract is challenging without specific performance metrics and detailed cost breakdowns. However, given the sole-source nature and the long duration, there's a risk that the pricing may not reflect the most competitive market rates. The fixed-price incentive structure suggests an attempt to manage costs, but the overall value proposition depends heavily on the contractor's efficiency and the government's oversight of performance against targets.

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 potential suppliers. This approach is typically used when a specific contractor possesses unique capabilities or when there are compelling reasons to avoid a competitive process. The lack of competition means that price discovery through market forces was absent, potentially leading to higher costs for the government compared to a fully competed award.

Taxpayer Impact: Taxpayers may have paid a premium due to the absence of competitive bidding. The government did not benefit from the cost-saving pressures that typically arise when multiple companies vie for a contract.

Public Impact

The primary beneficiaries are the Department of Defense, which receives critical aircraft manufacturing capabilities. This contract supports the production of advanced aircraft, essential for national security and military operations. The contract's impact is primarily national, bolstering the U.S. defense industrial base. It sustains high-skilled jobs within the aerospace and defense manufacturing sector, particularly at Northrop Grumman's facilities.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure, potentially increasing costs.
Long contract duration increases risk of cost overruns and scope creep.
Lack of transparency in sole-source justification requires careful review.
Dependence on a single contractor can create supply chain vulnerabilities.

Positive Signals

Award to a major defense contractor suggests access to advanced technology and expertise.
Fixed-price incentive contract type aims to align contractor and government interests on cost and performance.
Long-term nature indicates a strategic commitment to a critical defense capability.
Contract supports a vital sector of the U.S. industrial base.

Sector Analysis

The aircraft manufacturing sector within the defense industry is characterized by high barriers to entry, significant R&D investment, and long production cycles. This contract falls within a segment of the aerospace and defense market focused on producing complex military aircraft. Spending in this area is substantial, driven by evolving geopolitical threats and the need for technological superiority. Comparable spending benchmarks would typically involve other large-scale military aircraft procurement programs, often awarded to a limited number of prime contractors.

Small Business Impact

As a sole-source award to a large prime contractor, this contract does not appear to include specific small business set-asides. There is no explicit indication of subcontracting goals for small businesses within the provided data. This suggests that opportunities for small businesses may be limited to those that can secure subcontracts directly from Northrop Grumman, rather than through direct government allocation.

Oversight & Accountability

Oversight for this contract would primarily reside with the Department of Defense contracting officers and program managers. Accountability measures are embedded within the fixed-price incentive contract structure, which links contractor profit to performance against cost and schedule targets. Transparency is limited due to the sole-source nature, but contract modifications, performance reports, and audits would be subject to internal DoD review and potentially Inspector General oversight.

Related Government Programs

F-35 Lightning II Program
B-2 Spirit Program
Advanced Tactical Aircraft Programs
Defense Production Act Investments

Risk Flags

Sole-source award
Long contract duration
Potential for cost overruns
Limited transparency

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $285.5 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. See the official description on USAspending.

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 $285.5 million.

What is the period of performance?

Start: 2004-03-31. End: 2012-08-21.

What specific aircraft or aircraft systems are being manufactured under this contract?

The provided data does not specify the exact aircraft or aircraft systems covered by this contract. The North American Industry Classification System (NAICS) code 336411 indicates 'Aircraft Manufacturing,' which is a broad category. To understand the specific deliverables, one would need to consult the contract's statement of work or associated documentation. This could range from entire aircraft platforms to major subassemblies or specialized components critical for aviation.

How does the $285 million value compare to similar aircraft manufacturing contracts awarded by the DoD?

Direct comparison of the $285 million value is difficult without knowing the specific aircraft type and quantity. However, major military aircraft programs often run into billions of dollars over their lifecycle. This $285 million figure likely represents a portion of a larger program or a contract for a specific set of aircraft or components. For context, the F-35 program alone is valued in the hundreds of billions. This contract's value is significant but likely falls within the mid-to-large tier for specific production runs or development phases within the broader defense aerospace sector.

What are the key performance indicators (KPIs) and incentives within the Fixed Price Incentive (FPI) contract type for this award?

A Fixed Price Incentive (FPI) contract aims to share the risks and rewards of cost performance between the government and the contractor. Key performance indicators typically revolve around meeting production schedules, quality standards, and cost targets. The 'incentive' aspect means that if the contractor achieves lower costs than the target cost, both the government and contractor share in the savings (up to a ceiling). Conversely, if costs exceed the target, the contractor absorbs a larger portion of the overrun up to a certain point. Specific KPIs would be detailed in the contract's Statement of Work and would likely include metrics like on-time delivery, defect rates, and adherence to technical specifications.

What is the historical spending trend for aircraft manufacturing by the Department of the Air Force with Northrop Grumman?

The provided data only details this specific contract (2004-2012). To assess historical spending trends, a broader analysis of past contracts between the Department of the Air Force and Northrop Grumman for aircraft manufacturing would be necessary. This would involve querying historical contract databases for similar NAICS codes and contract types over multiple fiscal years. Such an analysis could reveal patterns of increasing or decreasing investment, shifts in technology focus, or changes in contracting strategies over time.

What are the potential risks associated with a sole-source award of this magnitude and duration?

Sole-source awards of this magnitude and duration carry several inherent risks. Firstly, the lack of competition can lead to inflated prices as the contractor faces less pressure to optimize costs. Secondly, there's a risk of complacency or reduced innovation from the contractor, knowing they are the sole provider. Thirdly, the long duration (3065 days) increases the potential for scope creep, cost overruns due to unforeseen market changes (e.g., material costs, labor), and technological obsolescence. Finally, it creates a significant dependency on a single supplier, which can be a vulnerability if the contractor faces financial, operational, or geopolitical challenges.

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

Offers Received: 1

Pricing Type: FIXED PRICE INCENTIVE (L)

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, Manufacturer of Goods, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $54,204,265

Exercised Options: $54,204,265

Current Obligation: $285,483,717

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline