Navy awards $1.09B contract to Northrop Grumman for F-18 Hornet aircraft equipment, highlighting sole-source procurement

Contract Overview

Contract Amount: $108,726,413 ($108.7M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2002-07-29

End Date: 2013-06-12

Contract Duration: 3,971 days

Daily Burn Rate: $27.4K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: 200212!005543!1700!AA4M0 !NAVAL AIR SYSTEMS COMMAND !N0001902C3043 !A!N! !N! !20020729!20070430!938535028!008255408!016435559!N!NORTHROP GRUMMAN SYSTEMS CORPO!ONE HORNET WAY !EL SEGUNDO !CA!90245!22412!037!06!EL SEGUNDO !LOS ANGELES !CALIFORNIA!+000000922500!Y!N!000000000000!1510!AIRCRAFT FIXED WING !A1C!OTHER AIRCRAFT EQUIPMENT !2AFX!F-18 HORNET !488190!E! !3! ! ! ! ! !99990909!B! ! !A! !D!N!U!1!001!N!1A!A!N!Z! ! !N!C!N! ! ! !B!B!A!A!* !A!B!N! ! ! !Y! ! !0001!

Place of Performance

Location: EL SEGUNDO, LOS ANGELES County, CALIFORNIA, 90245

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $108.7 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: 200212!005543!1700!AA4M0 !NAVAL AIR SYSTEMS COMMAND !N0001902C3043 !A!N! !N! !20020729!20070430!938535028!008255408!016435559!N!NORTHROP GRUMMAN SYSTEMS CORPO!ONE HORNET WAY !EL SEGUNDO !CA!90245!22412!037!06!EL SEGUNDO !LOS A… Key points: 1. Contract awarded on a sole-source basis, raising questions about potential price overruns and limited market exploration. 2. Significant contract value suggests a critical role for Northrop Grumman's specialized aircraft equipment in naval aviation. 3. Long contract duration (over 10 years) indicates a sustained need for these components, potentially impacting long-term budget planning. 4. The 'Other Support Activities for Air Transportation' classification suggests a broad scope of services beyond simple parts provision. 5. Lack of competition may limit opportunities for innovation and cost savings that could arise from a more open bidding process. 6. Contractor's established relationship with the Navy for this specific equipment likely influenced the sole-source decision.

Value Assessment

Rating: questionable

The contract's value of approximately $1.09 billion over its extended period raises concerns regarding value for money, especially given the sole-source nature. Without competitive bidding, it is difficult to benchmark pricing against market alternatives or assess if the government secured the best possible terms. The cost-plus-fixed-fee (CPFF) contract type, while allowing for flexibility, can also lead to higher costs if not rigorously managed, as contractor incentives are geared towards cost recovery and a fixed profit margin rather than strict cost control.

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 is typically justified when only one responsible source is available or when there is a compelling urgency. The lack of competition means there were no other companies vying for this work, which can limit price discovery and potentially lead to higher costs for the government compared to a fully competed contract.

Taxpayer Impact: Taxpayers may be paying a premium due to the absence of competitive pressure. The government did not benefit from the potential for lower prices or innovative solutions that multiple bidders might have offered.

Public Impact

The primary beneficiaries are the U.S. Navy's F-18 Hornet fleet, ensuring continued operational readiness and support. Services delivered likely include maintenance, repair, overhaul, and potentially the supply of specialized equipment for the F-18 aircraft. Geographic impact is concentrated around Northrop Grumman's facilities in El Segundo, California, and naval aviation bases utilizing the F-18. Workforce implications include continued employment for specialized engineers, technicians, and support staff at Northrop Grumman.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing and potential cost savings.
Cost-plus-fixed-fee structure may incentivize higher costs if not closely monitored.
Long contract duration could lock in potentially suboptimal pricing over time.
Lack of transparency in the sole-source justification process.

Positive Signals

Ensures continued support for critical naval aviation assets (F-18 Hornets).
Leverages contractor's established expertise and infrastructure for specialized aircraft equipment.
Provides long-term stability for a key defense contractor and its workforce.

Sector Analysis

This contract falls within the aerospace and defense sector, specifically focusing on aircraft support and sustainment. The market for specialized aircraft components and support services is often dominated by a few large, established prime contractors due to high barriers to entry, including intellectual property, specialized manufacturing capabilities, and security clearances. The F-18 Hornet, a long-serving naval fighter jet, requires continuous support, making contracts like this essential for maintaining fleet readiness. Comparable spending benchmarks are difficult to establish precisely due to the sole-source nature and specific scope, but overall defense spending on aircraft sustainment runs into billions annually.

Small Business Impact

This contract does not appear to involve a small business set-aside. Given the sole-source nature and the prime contractor being Northrop Grumman, a large aerospace corporation, the focus is likely on direct award to the prime. Subcontracting opportunities for small businesses may exist within Northrop Grumman's supply chain, but these are not explicitly detailed in the provided data. The impact on the broader small business ecosystem is indirect, relying on the prime contractor's procurement practices.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy's contracting and program management offices. Accountability measures are typically embedded within the contract terms, including performance metrics, reporting requirements, and payment schedules tied to milestones. Transparency is limited due to the sole-source award, but contract details and modifications are generally available through federal procurement databases. Inspector General jurisdiction would apply to investigations of fraud, waste, or abuse related to the contract.

Related Government Programs

F/A-18 Hornet Sustainment Programs
Naval Aviation Readiness Programs
Aerospace Defense Contracting
Aircraft Component Manufacturing
Defense Logistics Support

Risk Flags

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

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $108.7 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. 200212!005543!1700!AA4M0 !NAVAL AIR SYSTEMS COMMAND !N0001902C3043 !A!N! !N! !20020729!20070430!938535028!008255408!016435559!N!NORTHROP GRUMMAN SYSTEMS CORPO!ONE HORNET WAY !EL SEGUNDO !CA!90245!22412!037!06!EL SEGUNDO !LOS ANGELES !CALIFORNIA!+000000922500!Y!N!000000000000!1510!AIRCRAFT FIXED WING !A1C!OTHER AIRCRAFT EQUIPMENT !2AFX!F-18 HORNET !488190!E! !3! ! ! ! ! !99990909!B

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 Navy).

What is the total obligated amount?

The obligated amount is $108.7 million.

What is the period of performance?

Start: 2002-07-29. End: 2013-06-12.

What is Northrop Grumman's track record with the F-18 program and similar sole-source contracts?

Northrop Grumman has a long-standing history as a key partner in the F-18 Hornet program, particularly in developing and manufacturing major airframe sections and integrated systems. Their extensive experience with this platform provides a strong basis for their sole-source position. Regarding similar sole-source contracts, large defense contractors like Northrop Grumman frequently receive sole-source awards for specialized systems or sustainment services where they are the original equipment manufacturer or possess unique capabilities. These awards are often justified by factors such as proprietary technology, existing infrastructure, or the need for seamless integration with existing platforms. While this provides continuity, it necessitates robust government oversight to ensure fair pricing and performance, as competitive benchmarking is inherently limited.

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

The Cost Plus Fixed Fee (CPFF) contract type is often used for complex research, development, or specialized support services where costs are difficult to estimate precisely upfront. In this structure, the contractor is reimbursed for allowable costs plus a fixed fee representing profit. Compared to fixed-price contracts, CPFF offers more flexibility for the government if requirements evolve but can potentially lead to higher costs if the contractor's cost control is weak, as the profit is fixed regardless of the final cost. For sustainment services like aircraft equipment support, CPFF can be advantageous if it allows the contractor to focus on technical execution without undue cost-cutting that might compromise quality. However, it requires diligent government oversight to monitor costs and ensure the fixed fee remains reasonable relative to the work performed. Competitive bidding, even for CPFF contracts, typically yields better price discovery than a sole-source award.

What are the primary risks associated with a sole-source award of this magnitude for aircraft equipment?

The primary risks associated with a sole-source award of this magnitude ($1.09 billion) for aircraft equipment are significant. Firstly, the lack of competition can lead to inflated pricing, as the contractor faces no market pressure to offer the lowest possible cost. The government may end up paying more than it would in a competitive environment. Secondly, there's a reduced incentive for the contractor to innovate or improve efficiency beyond what is contractually required, as they have a guaranteed customer. Thirdly, the government's negotiating position is weakened, potentially resulting in less favorable terms and conditions. Finally, sole-source awards can create a dependency on a single supplier, making it difficult and costly to switch providers in the future, even if performance or pricing becomes unsatisfactory.

What is the historical spending pattern for F-18 Hornet support equipment by the Department of the Navy?

Historical spending patterns for F-18 Hornet support equipment by the Department of the Navy indicate a consistent and substantial investment over the aircraft's lifecycle. The F-18 platform has been a cornerstone of naval aviation for decades, necessitating ongoing funding for sustainment, upgrades, and component replacements. While specific figures for 'support equipment' can vary based on classification, total contract obligations for F-18 sustainment, including parts, maintenance, and related services, have historically amounted to billions of dollars annually across the fleet. Contracts for major components or systems, like the one awarded to Northrop Grumman, often span multiple years and represent significant portions of this annual spend. The trend generally reflects the aging of the fleet and the increasing complexity of maintaining advanced aircraft systems, leading to sustained or increasing demand for specialized support.

How does the geographic location of the contractor (El Segundo, CA) impact logistics and delivery timelines for the Navy?

The geographic location of Northrop Grumman's facility in El Segundo, California, has several implications for logistics and delivery timelines for the Navy. Being located on the West Coast, it is relatively proximate to major naval air stations on the Pacific coast, potentially facilitating direct shipments and reducing transit times for certain deliveries. However, the Navy operates globally, with significant presence on both the Atlantic and Pacific coasts, as well as overseas. Therefore, while proximity might offer advantages for some operations, extensive logistical planning and potentially longer shipping routes would still be necessary for deployments and bases located further from California. The contractor's established infrastructure and distribution networks would play a crucial role in mitigating any potential delays associated with its specific location, regardless of the final destination.

What are the potential implications of this contract on future defense procurement strategies for similar aircraft sustainment?

This contract's sole-source nature and significant value could have several implications for future defense procurement strategies for similar aircraft sustainment. It may reinforce the trend of awarding large, long-term sustainment contracts to incumbent prime contractors, particularly for legacy platforms like the F-18 where deep integration and specialized knowledge reside. This approach prioritizes continuity and leverages existing expertise but potentially at the cost of competition and innovation. Defense agencies might face continued pressure to justify sole-source awards, potentially leading to more rigorous reviews or requirements for comprehensive market research to demonstrate the lack of viable alternatives. Conversely, it could also spur efforts to foster greater competition in the sustainment market through modular designs, open systems architectures, or by actively developing alternative sources for critical components, although this is a long-term endeavor.

Industry Classification

NAICS: Transportation and Warehousing › Support Activities for Air Transportation › Other Support Activities for Air Transportation

Product/Service Code: AEROSPACE CRAFT AND STRUCTURAL COMPONENTS

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Northrop Grumman Corporation (UEI: 967356127)

Address: ONE HORNET WAY, EL SEGUNDO, CA, 36

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

Contract Characteristics

Cost or Pricing Data: NO

Timeline