DoD awards $43.8M sole-source contract for E-2D aircraft parts, raising value-for-money questions

Contract Overview

Contract Amount: $43,830,377 ($43.8M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2021-09-07

End Date: 2027-03-30

Contract Duration: 2,030 days

Daily Burn Rate: $21.6K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: PROCUREMENT OF MDE-SME SPARES FOR THE JAPAN E-2D AIRCRAFT JAA1-JAA4.

Place of Performance

Location: MELBOURNE, BREVARD County, FLORIDA, 32904

State: Florida Government Spending

Plain-Language Summary

Department of Defense obligated $43.8 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: PROCUREMENT OF MDE-SME SPARES FOR THE JAPAN E-2D AIRCRAFT JAA1-JAA4. Key points: 1. Contract awarded on a sole-source basis, limiting price competition and potentially increasing costs. 2. The contract duration of over 5 years suggests a long-term need for these specialized parts. 3. Northrop Grumman, as the sole provider, likely possesses unique technical knowledge and manufacturing capabilities. 4. The absence of competition may hinder opportunities for innovation and cost reduction through alternative suppliers. 5. Performance risk appears moderate given the specialized nature of the parts and the established relationship with the contractor. 6. This contract falls within the broader category of aircraft parts manufacturing, a critical component of defense logistics.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to its sole-source nature and the highly specialized components for the E-2D aircraft. Without competitive bids, it's difficult to ascertain if the $43.8 million price reflects fair market value. The fixed-price structure offers some cost certainty, but the lack of competition means taxpayers may not be receiving the best possible price. Further analysis would require access to historical pricing for similar sole-source procurements of specialized aerospace components.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one vendor, Northrop Grumman Systems Corporation, was solicited. This approach is typically used when a product or service is available only from a single source, often due to proprietary technology, unique capabilities, or essential system integration. The lack of competition means there was no opportunity for other qualified companies to bid, which can limit price discovery and potentially lead to higher costs for the government.

Taxpayer Impact: The absence of competition means taxpayers are not benefiting from the potential cost savings that can arise from a competitive bidding process. This could result in a higher overall expenditure for these critical aircraft parts.

Public Impact

The primary beneficiaries are the U.S. Navy's E-2D Advanced Hawkeye aircraft fleet, ensuring operational readiness. The contract delivers essential spare parts, crucial for maintaining the functionality and longevity of these advanced surveillance aircraft. The geographic impact is primarily within Florida, where the contractor is located, potentially supporting local jobs and the aerospace supply chain. Workforce implications include the continued employment of skilled technicians and engineers at Northrop Grumman involved in the manufacturing and supply of these specialized parts.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition, potentially leading to higher costs for taxpayers.
Lack of competitive bidding may stifle innovation and prevent the exploration of alternative, potentially more cost-effective, suppliers.
Long contract duration (over 5 years) could lock the government into a specific pricing structure without regular re-evaluation.
Dependence on a single supplier creates a risk of supply chain disruption if the contractor faces production issues.

Positive Signals

Contract ensures the availability of critical spare parts for a vital national defense asset (E-2D aircraft).
Northrop Grumman's established expertise in E-2D systems suggests a high likelihood of receiving quality, compatible parts.
Fixed-price contract type provides cost predictability for the government, mitigating risks associated with cost overruns.
The contract supports the operational readiness of the U.S. Navy's advanced surveillance capabilities.

Sector Analysis

This contract falls within the aerospace and defense manufacturing sector, specifically focusing on aircraft parts. The market for specialized military aircraft components is often characterized by high barriers to entry due to complex engineering requirements, stringent quality standards, and proprietary technologies. Northrop Grumman is a major player in this sector, particularly in advanced aircraft systems. Comparable spending benchmarks would involve analyzing other sole-source procurements for unique military aircraft components, which are typically high-value and limited in competitive scope.

Small Business Impact

This contract does not appear to involve a small business set-aside, as indicated by the 'sb': false flag. Northrop Grumman Systems Corporation is a large defense contractor. There is no explicit information provided regarding subcontracting plans for small businesses. Without specific subcontracting goals or reporting, the direct impact on the small business ecosystem for this particular contract is likely minimal, though the prime contractor may engage small businesses in its broader supply chain.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy's contracting and program management offices. Accountability measures are embedded in the contract terms, including delivery schedules and specifications. Transparency is limited due to the sole-source nature and the proprietary aspects of the components. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse related to the contract's execution.

Related Government Programs

E-2D Advanced Hawkeye Aircraft Program
Naval Aviation Sustainment
Aerospace Parts Manufacturing
Defense Logistics and Maintenance

Risk Flags

Sole-source award
Lack of competition
Potential for cost overruns
Long-term contract duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $43.8 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. PROCUREMENT OF MDE-SME SPARES FOR THE JAPAN E-2D AIRCRAFT JAA1-JAA4.

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 $43.8 million.

What is the period of performance?

Start: 2021-09-07. End: 2027-03-30.

What is Northrop Grumman's track record with sole-source procurements for specialized military aircraft components?

Northrop Grumman Systems Corporation, as a major defense contractor, has a history of engaging in sole-source contracts, particularly for systems where they are the original equipment manufacturer or possess unique technological expertise. These contracts are often necessary for highly specialized components or integrated systems where competition is not feasible due to proprietary designs, extensive R&D investment, or critical system interdependencies. While sole-source awards can ensure access to critical capabilities and maintain system integrity, they also necessitate robust government oversight to ensure fair pricing and value. Analyzing past sole-source awards to Northrop Grumman for similar complex aerospace components would provide context on their pricing strategies and the government's negotiation outcomes in non-competitive environments.

How does the $43.8 million price compare to similar sole-source procurements for specialized aircraft parts?

Direct comparison of the $43.8 million price tag for these MDE-SME spares is difficult without access to proprietary pricing data or a database of comparable sole-source contracts for highly specialized military aircraft components. Sole-source procurements inherently lack the price discovery mechanism of competitive bidding, making external benchmarking challenging. Factors influencing this price likely include the complexity of the parts, the limited production runs, the specific technological requirements of the E-2D platform, and Northrop Grumman's established role as the prime contractor. To assess value, one would typically look at historical pricing trends for similar sole-source awards, analyze the contractor's cost breakdown (if available), and consider the criticality of the parts to the E-2D's mission readiness.

What are the primary risks associated with this sole-source contract for the Department of Defense?

The primary risk associated with this sole-source contract is the potential for inflated pricing due to the lack of competitive pressure. Without competing bids, the government may not be securing the most cost-effective solution. Another significant risk is vendor lock-in; the DoD becomes dependent on Northrop Grumman for these specific parts, potentially limiting future sourcing options or leverage in negotiations. Supply chain disruption is also a concern; if Northrop Grumman experiences production issues, the availability of critical spares for the E-2D fleet could be jeopardized. Furthermore, the absence of competition might reduce incentives for the contractor to innovate or improve efficiency over the contract's lifespan.

How does this contract contribute to the operational effectiveness of the E-2D Advanced Hawkeye aircraft?

This contract is crucial for maintaining the operational effectiveness of the E-2D Advanced Hawkeye aircraft fleet. The E-2D is a vital airborne early warning and control (AEW&C) platform, providing critical intelligence, surveillance, and reconnaissance capabilities to the U.S. Navy and its allies. Spare parts (MDE-SME spares) are essential consumables and replacements needed for routine maintenance, unscheduled repairs, and depot-level upkeep. Ensuring a steady and reliable supply of these specific, high-quality spare parts directly supports the aircraft's readiness rates, mission availability, and overall mission capability, thereby sustaining the Navy's AEW&C operational posture.

What are the historical spending patterns for E-2D aircraft spare parts, and how does this contract fit?

Historical spending patterns for E-2D aircraft spare parts would likely show consistent investment in sustainment and readiness, reflecting the platform's strategic importance. Procurements for specialized components like MDE-SME spares are often characterized by long-term contracts and sole-source awards due to the unique nature of the aircraft and its systems. This $43.8 million contract, spanning over five years, aligns with typical patterns for ensuring the availability of critical spares for advanced military platforms. It represents a significant, albeit necessary, investment in the lifecycle support of the E-2D fleet, ensuring that the aircraft remain operational and capable of fulfilling their demanding missions.

Industry Classification

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

Product/Service Code: AEROSPACE CRAFT COMPONENTS AND ACCESSORIES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

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: $43,830,377

Exercised Options: $43,830,377

Current Obligation: $43,830,377

Subaward Activity

Number of Subawards: 31

Total Subaward Amount: $16,871,558

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