DoD's $253M E-2D Aircraft Manufacturing Contract Awarded to Northrop Grumman

Contract Overview

Contract Amount: $252,990,380 ($253.0M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2013-09-26

End Date: 2020-10-30

Contract Duration: 2,591 days

Daily Burn Rate: $97.6K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Official Description: E-2D IN-FLIGHT REFUELING

Place of Performance

Location: MELBOURNE, BREVARD County, FLORIDA, 32904

State: Florida Government Spending

Plain-Language Summary

Department of Defense obligated $253.0 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: E-2D IN-FLIGHT REFUELING Key points: 1. Contract awarded for E-2D in-flight refueling aircraft manufacturing. 2. Significant investment in advanced military aviation capabilities. 3. Sole-source award raises questions about competition and potential cost savings. 4. Contract duration spans over seven years, indicating a long-term commitment. 5. Northrop Grumman's established role in defense manufacturing suggests technical expertise. 6. Focus on aircraft manufacturing aligns with broader defense modernization efforts.

Value Assessment

Rating: fair

The contract value of $252,990,380 for the E-2D in-flight refueling aircraft manufacturing appears substantial. Without specific details on the number of aircraft or the scope of work, direct comparison to similar contracts is challenging. However, given the specialized nature of military aircraft and the sole-source award, it is difficult to benchmark the pricing effectively against competitive market rates. Further analysis would be needed to determine if the cost-plus incentive fee structure adequately incentivizes cost control and value for money.

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 approach is typically used when a single source possesses unique capabilities or when urgency dictates. The lack of competition means that the government did not benefit from the price discovery mechanisms that multiple bidders would typically provide, potentially leading to higher costs than if the contract had been competed.

Taxpayer Impact: Taxpayers may have paid a premium due to the absence of competitive bidding. Without alternative offers, it's harder to ensure the most cost-effective solution was secured.

Public Impact

The primary beneficiaries are the U.S. Navy, which will receive advanced E-2D Hawkeye aircraft equipped for in-flight refueling. This contract supports the continued operation and modernization of critical naval surveillance and command and control capabilities. The geographic impact is primarily centered in Florida, where Northrop Grumman has significant operations. The contract supports jobs within the aerospace and defense manufacturing sector, particularly in specialized aircraft production.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition, potentially increasing costs for taxpayers.
Long contract duration (over 7 years) could lead to cost overruns if not managed tightly.
Cost-plus incentive fee contracts can sometimes incentivize higher spending if incentives are not well-aligned with cost savings.

Positive Signals

Northrop Grumman is an established defense contractor with proven experience in complex aircraft manufacturing.
The E-2D Hawkeye is a critical asset for naval operations, ensuring the contract addresses a vital defense need.
The incentive fee structure, if properly structured, can encourage efficiency and performance.

Sector Analysis

The aerospace and defense sector is characterized by high barriers to entry, significant R&D investment, and long product development cycles. This contract falls within the Aircraft Manufacturing sub-sector (NAICS 336411). The market for advanced military aircraft is dominated by a few large prime contractors. Spending in this area is driven by national security priorities and technological advancements, with contracts often being sole-source due to the specialized nature of the platforms and the existing industrial base.

Small Business Impact

This contract was not set aside for small businesses, nor does it appear to have specific subcontracting requirements for small businesses explicitly detailed in the provided data. As a sole-source award to a large prime contractor, the direct impact on small businesses is likely limited unless Northrop Grumman voluntarily includes them in its supply chain. Further investigation into subcontracting plans would be necessary to assess the broader impact on the small business ecosystem.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Defense's contracting and financial management oversight bodies, including the Defense Contract Management Agency (DCMA) and potentially the Department of Defense Inspector General (DoDIG). The cost-plus incentive fee structure implies performance metrics and financial targets that would be monitored. Transparency would depend on the level of detail made public regarding the contract's performance and expenditures.

Related Government Programs

E-2D Hawkeye Program
Naval Aviation Procurement
Advanced Military Aircraft Manufacturing
Defense Contractor Awards

Risk Flags

Sole-source award
Lack of competitive bidding
Potential for cost overruns in cost-plus contracts

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $253.0 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. E-2D IN-FLIGHT REFUELING

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 $253.0 million.

What is the period of performance?

Start: 2013-09-26. End: 2020-10-30.

What is the specific scope of work for this $253 million contract, and how many E-2D aircraft are included?

The provided data indicates the contract is for 'E-2D IN-FLIGHT REFUELING' aircraft manufacturing, awarded to Northrop Grumman Systems Corporation. However, the exact number of aircraft or the detailed breakdown of the scope of work (e.g., specific modifications, upgrades, or new production units) is not specified in the summary data. The contract value is $252,990,380, with an award date of September 26, 2013, and an expected completion date of October 30, 2020, spanning approximately seven years. Without more granular information, it's difficult to ascertain the precise deliverables beyond the general description of manufacturing E-2D aircraft with in-flight refueling capabilities.

How does the cost-plus incentive fee (CPIF) structure typically work, and what are the potential risks and benefits for the government in this contract?

A Cost-Plus Incentive Fee (CPIF) contract is a type of cost-reimbursement contract where the contractor is reimbursed for allowable costs and also receives a fee that is adjusted based on whether the final cost is below or above a pre-determined target cost. The target cost is established, and a target fee is set. If the final cost is lower than the target, both the contractor and the government share in the savings, with the contractor receiving a higher fee. Conversely, if the final cost exceeds the target, the contractor's fee is reduced. The benefit for the government is the potential for cost savings if the contractor performs efficiently. However, risks include the possibility that the target cost may be set too high, or that the contractor may take on excessive costs if the sharing arrangement is not sufficiently weighted towards cost reduction. Effective negotiation of the target cost and the sharing formula is crucial for CPIF contracts to achieve value for money.

What is Northrop Grumman's track record with the E-2D Hawkeye program or similar complex defense aircraft programs?

Northrop Grumman has a long and established history with the E-2D Hawkeye program, serving as the prime contractor responsible for its development and production. The company has been instrumental in delivering these advanced airborne early warning and control aircraft to the U.S. Navy. Their experience extends beyond the E-2D, encompassing a wide range of complex military aircraft and defense systems. This deep familiarity with the E-2D platform suggests a strong understanding of its technical requirements, manufacturing processes, and integration challenges, which is a positive indicator for contract performance. Their extensive background in the defense sector generally positions them as a capable provider for such specialized programs.

Given this was a sole-source award, what steps, if any, did the Department of the Navy take to ensure fair and reasonable pricing?

When a sole-source contract is awarded, the Department of the Navy (or any government agency) is still obligated to ensure fair and reasonable pricing. This typically involves conducting a thorough price analysis. Methods for price analysis can include comparing the proposed prices to historical prices for similar items, analyzing cost data submitted by the contractor (e.g., cost breakdowns, labor rates, material costs), using independent government cost estimates, or, in some cases, obtaining competitive proposals from other sources if feasible, even if not for the full contract award. For sole-source awards, especially for complex systems like military aircraft, detailed cost realism analyses are often performed to validate the contractor's proposed costs and ensure they align with the expected performance and scope of work. The specific price negotiation strategies and analyses conducted for this particular E-2D contract would be detailed in internal government documentation.

How does this contract fit into the broader context of U.S. Navy aviation modernization and surveillance capabilities?

This contract is integral to the U.S. Navy's ongoing efforts to modernize its fleet and enhance its airborne surveillance and command and control capabilities. The E-2D Hawkeye is a critical component of the Navy's carrier strike group, providing long-range detection and tracking of enemy aircraft, missiles, and ships. The 'in-flight refueling' capability specified in the contract likely enhances the aircraft's endurance and operational flexibility, allowing it to remain on station for longer periods or operate further from its base. By investing in the manufacturing and potential upgrades of the E-2D, the Navy is ensuring it maintains a technological edge in a complex threat environment and supports its strategic mission requirements for persistent surveillance and battle management.

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: COST PLUS INCENTIVE FEE (V)

Evaluated Preference: NONE

Contractor Details

Address: 2000 W NASA BLVD, MELBOURNE, FL, 32904

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

Financial Breakdown

Contract Ceiling: $256,316,704

Exercised Options: $256,316,704

Current Obligation: $252,990,380

Actual Outlays: $377,976

Subaward Activity

Number of Subawards: 1

Total Subaward Amount: $1,273,683

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline