DoD awards $50.4M for E-2D cockpit redesign, a sole-source contract with potential cost overruns

Contract Overview

Contract Amount: $50,408,376 ($50.4M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2020-08-30

End Date: 2023-06-30

Contract Duration: 1,034 days

Daily Burn Rate: $48.8K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: E-2D COCKPIT REDESIGN PHASE 1

Place of Performance

Location: MELBOURNE, BREVARD County, FLORIDA, 32904

State: Florida Government Spending

Plain-Language Summary

Department of Defense obligated $50.4 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: E-2D COCKPIT REDESIGN PHASE 1 Key points: 1. Contract awarded on a cost-plus-fixed-fee basis, which can lead to higher final costs than fixed-price contracts. 2. The contract was not competed, raising questions about price discovery and potential for inflated costs. 3. A significant portion of the contract value was awarded as a delivery order, indicating a phased approach to the project. 4. The contract duration of over 1000 days suggests a complex and lengthy development or modification process. 5. The contractor, Northrop Grumman, is a major defense contractor with extensive experience in aircraft systems. 6. The contract is for Phase 1 of the cockpit redesign, implying future phases and potential for additional spending.

Value Assessment

Rating: questionable

The contract's cost-plus-fixed-fee structure presents a risk of cost escalation, as the government bears the brunt of unforeseen expenses. Without a competitive bidding process, it is difficult to benchmark the pricing against market rates or similar projects. The initial award of $50.4 million is a baseline, but the final cost could be significantly higher due to the nature of the contract type. Further analysis would be needed to compare specific labor rates and material costs to industry standards.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning it was not open to competition from other potential bidders. This typically occurs when a specific contractor possesses unique capabilities or intellectual property essential for the project. The lack of competition limits the government's ability to leverage market forces to achieve the lowest possible price and may indicate a lack of available alternatives.

Taxpayer Impact: Sole-source awards can result in higher costs for taxpayers as there is no competitive pressure to drive down prices. This necessitates robust oversight to ensure fair pricing and prevent potential overspending.

Public Impact

The primary beneficiaries are the U.S. Navy, which operates the E-2D Advanced Hawkeye aircraft, receiving modernized cockpit systems. The contract delivers essential upgrades to the E-2D's cockpit, enhancing pilot situational awareness and operational effectiveness. The geographic impact is primarily within Florida, where the contractor is located, potentially supporting local jobs and the aerospace ecosystem. The contract supports a highly specialized workforce within Northrop Grumman, including engineers, technicians, and program managers.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost-plus-fixed-fee contract type increases the risk of cost overruns.
Sole-source award limits price competition and may lead to higher costs.
The contract is for Phase 1, suggesting potential for future, higher-cost phases.
Lack of detailed cost breakdowns makes independent value assessment challenging.
The contract value is substantial, indicating a significant investment with potential for large financial exposure.

Positive Signals

Contract addresses critical modernization needs for a key naval aviation platform.
Northrop Grumman is an established prime contractor with deep expertise in this domain.
The project aims to improve the performance and longevity of the E-2D aircraft.
The contract is managed by the Defense Contract Management Agency, indicating established oversight processes.

Sector Analysis

This contract falls within the aerospace and defense manufacturing sector, specifically focusing on aircraft modification and upgrade services. The market for defense avionics and cockpit modernization is highly specialized, dominated by a few large prime contractors like Northrop Grumman. Spending in this area is driven by the need to maintain the technological superiority and operational readiness of military fleets. Comparable spending benchmarks would involve other major aircraft upgrade programs within the DoD.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. Furthermore, the prime contractor is a large corporation, suggesting that subcontracting opportunities for small businesses may exist but are not explicitly mandated or prioritized within the contract's primary structure. The impact on the small business ecosystem would depend on Northrop Grumman's subcontracting strategy.

Oversight & Accountability

Oversight for this contract is provided by the Defense Contract Management Agency (DCMA), which is responsible for ensuring contractor performance and compliance. The cost-plus-fixed-fee nature of the award necessitates close monitoring of costs incurred by the contractor. Transparency is facilitated through contract reporting requirements, though detailed cost breakdowns may be proprietary. The Inspector General's office may conduct audits if specific concerns regarding waste, fraud, or abuse arise.

Related Government Programs

E-2D Advanced Hawkeye Program
Naval Aviation Modernization Programs
Defense Avionics Systems
Aircraft Cockpit Systems
Aerospace Manufacturing Contracts

Risk Flags

Sole-source award
Cost-plus-fixed-fee contract type
Phase 1 of a multi-phase project
Lack of competitive bidding

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $50.4 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. E-2D COCKPIT REDESIGN PHASE 1

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 (Defense Contract Management Agency).

What is the total obligated amount?

The obligated amount is $50.4 million.

What is the period of performance?

Start: 2020-08-30. End: 2023-06-30.

What is the track record of Northrop Grumman Systems Corporation on similar sole-source, cost-plus-fixed-fee contracts with the Department of Defense?

Northrop Grumman Systems Corporation has a long history of performing complex defense contracts, including sole-source and cost-plus-fixed-fee arrangements. Their extensive experience with naval aviation platforms, such as the E-2D, suggests a familiarity with the program's requirements and potential challenges. However, the inherent risks associated with cost-plus contracts, such as potential cost overruns and less stringent price controls compared to fixed-price contracts, are consistent across all such awards. Analyzing past performance on similar contracts would involve reviewing their historical cost performance, delivery timelines, and any documented disputes or overruns to assess their efficiency and reliability in managing such agreements. Without specific data on this contract's performance history, it's prudent to assume that the general risks associated with this contract type and contractor's profile apply.

How does the awarded amount of $50.4 million compare to the estimated cost of similar E-2D cockpit modernization efforts or comparable aircraft upgrades?

Benchmarking the $50.4 million award for the E-2D cockpit redesign is challenging without more detailed cost breakdowns and access to comparable contract data. However, major cockpit modernization programs for advanced military aircraft can range from tens to hundreds of millions of dollars, depending on the scope of upgrades, the complexity of the avionics, and the specific platform. Given that this is Phase 1 of a redesign, the total program cost could be substantially higher. The sole-source nature of this award further complicates direct price comparisons, as competitive bidding typically drives down costs. To provide a more precise comparison, one would need to analyze the specific technological advancements included in this redesign and compare them to the costs of similar upgrades on platforms like the F/A-18 Super Hornet or other advanced naval aircraft, considering factors like labor rates, material costs, and integration complexity.

What are the primary risk indicators associated with this specific contract, beyond the general risks of sole-source and cost-plus contracts?

Beyond the inherent risks of sole-source and cost-plus-fixed-fee contracts, specific risk indicators for this E-2D cockpit redesign include the complexity of integrating new avionics and displays into an existing airframe, which can lead to unforeseen technical challenges and delays. The contract's duration (over 1000 days) suggests a lengthy and potentially intricate process, increasing the likelihood of encountering issues. As this is Phase 1, there's a risk of scope creep or underestimation of the total effort required for the complete redesign, potentially leading to significant cost increases in subsequent phases. Furthermore, reliance on a single contractor for such a critical upgrade means any performance issues or delays by Northrop Grumman could have a substantial impact on the E-2D fleet's operational readiness.

What is the expected effectiveness or impact of the E-2D cockpit redesign on the aircraft's operational capabilities and mission success?

The E-2D Advanced Hawkeye is a critical airborne early warning and control (AEW&C) aircraft. A cockpit redesign is expected to significantly enhance its operational capabilities by improving pilot situational awareness, reducing workload, and potentially incorporating next-generation avionics and displays. Modernized cockpits often feature larger, higher-resolution screens, more intuitive interfaces, and integrated data links, which can lead to faster decision-making and improved mission effectiveness in complex threat environments. For the E-2D, this redesign likely aims to extend the aircraft's service life and ensure it can effectively counter evolving threats by providing pilots with the best possible tools and information. The ultimate impact will be measured by improved mission performance, reduced pilot error, and enhanced survivability.

How has historical spending on E-2D program modifications or similar cockpit upgrade programs evolved over the past five years?

Analyzing historical spending on E-2D program modifications and similar cockpit upgrades over the past five years requires access to detailed contract databases and budget reports. Generally, spending on major defense platforms like the E-2D tends to be consistent, with fluctuations driven by specific modernization initiatives, sustainment requirements, and new capability insertions. Cockpit redesigns are typically significant undertakings, often awarded as separate, large-value contracts or as major line items within broader platform upgrade programs. If historical data shows a trend of increasing investment in avionics modernization across naval aviation, it would suggest that this $50.4 million contract is part of a larger, ongoing effort to keep the E-2D fleet technologically relevant. Conversely, a decline in such spending might indicate budget constraints or a shift in modernization priorities.

Industry Classification

NAICS: Manufacturing › Aerospace Product and Parts Manufacturing › Other Aircraft Parts and Auxiliary Equipment Manufacturing

Product/Service Code: RESEARCH AND DEVELOPMENT › C – National Defense R&D Services

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

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

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

Financial Breakdown

Contract Ceiling: $50,408,376

Exercised Options: $50,408,376

Current Obligation: $50,408,376

Actual Outlays: $1,683,139

Subaward Activity

Number of Subawards: 27

Total Subaward Amount: $35,670,612

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: N0001920G0005

IDV Type: BOA

Timeline