DoD's $94M E-2C/E-2D support contract awarded to Northrop Grumman without competition

Contract Overview

Contract Amount: $94,291,510 ($94.3M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2021-05-14

End Date: 2028-04-30

Contract Duration: 2,543 days

Daily Burn Rate: $37.1K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: JAPAN E-2C/E-2D CY21 ISS & TECH SUPPORT

Place of Performance

Location: MELBOURNE, BREVARD County, FLORIDA, 32904

State: Florida Government Spending

Plain-Language Summary

Department of Defense obligated $94.3 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: JAPAN E-2C/E-2D CY21 ISS & TECH SUPPORT Key points: 1. Contract awarded on a cost-plus-fixed-fee basis, potentially leading to higher costs than fixed-price contracts. 2. Sole-source award raises concerns about price discovery and potential for inflated costs. 3. Long contract duration (nearly 4 years) suggests a need for sustained support, but also limits opportunities for competitive re-evaluation. 4. The contract supports E-2C/E-2D aircraft, a critical component of naval aviation. 5. Awardee has a long history with this specific platform, indicating specialized knowledge but also potential for lock-in. 6. Geographic location in Florida may have implications for local economic impact and workforce.

Value Assessment

Rating: questionable

The contract's cost-plus-fixed-fee structure, combined with a sole-source award, makes a direct value-for-money assessment difficult without detailed cost breakdowns. Benchmarking against similar sole-source support contracts for specialized defense platforms is challenging due to proprietary data and unique requirements. The absence of competition limits the government's ability to negotiate the most favorable pricing, potentially resulting in a higher overall cost compared to a competitively awarded contract.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one contractor, Northrop Grumman Systems Corporation, was solicited. This approach is typically used when a unique capability or proprietary technology is required, or when there is insufficient time to conduct a full and open competition. The lack of multiple bidders means there was no direct price competition, which can lead to less favorable pricing for the government.

Taxpayer Impact: Taxpayers may be paying a premium due to the absence of competitive pressure to drive down costs. Without competing offers, the government relies heavily on Northrop Grumman's proposed pricing, which may not reflect the lowest possible market rate.

Public Impact

The primary beneficiaries are the U.S. Navy's E-2C/E-2D Hawkeye fleet, ensuring operational readiness. Services include technical support, logistics, and potentially sustainment for a critical airborne early warning and control aircraft. The contract's impact is concentrated within the defense sector, specifically naval aviation operations. Workforce implications may include specialized technical and engineering roles within Northrop Grumman and its supply chain.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing, potentially increasing costs for taxpayers.
Cost-plus-fixed-fee contract type can incentivize higher spending compared to fixed-price arrangements.
Long contract duration may reduce opportunities for future cost savings through competition.
Lack of transparency in sole-source justification requires careful scrutiny.
Potential for contractor lock-in due to specialized nature of support.

Positive Signals

Ensures continued operational readiness for critical E-2C/E-2D aircraft.
Leverages incumbent contractor's specialized knowledge and experience.
Provides necessary technical and logistical support for a complex defense system.
Contract award supports specialized jobs in the aerospace and defense industry.

Sector Analysis

This contract falls within the aerospace and defense manufacturing sector, specifically focusing on aircraft parts and auxiliary equipment. The market for specialized support and sustainment of advanced military platforms like the E-2C/E-2D is often dominated by a few key players due to high barriers to entry, including intellectual property, specialized tooling, and extensive testing requirements. Comparable spending benchmarks are difficult to establish precisely due to the unique nature of such support contracts, but overall defense spending on aircraft sustainment represents a significant portion of the DoD budget.

Small Business Impact

This contract does not appear to include a small business set-aside. Given the sole-source nature and the specialized technical support required for the E-2D platform, it is unlikely that small businesses would be primary awardees. However, Northrop Grumman may engage small businesses as subcontractors for specific components or services, contributing to the broader small business ecosystem within the defense 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 typically embedded within the contract terms, including performance metrics and reporting requirements. Transparency may be limited due to the sole-source nature, but contract awards are generally reported in federal databases. The Inspector General for the Department of Defense would have jurisdiction to investigate any potential fraud, waste, or abuse.

Related Government Programs

E-2 Hawkeye Program
Naval Aviation Support Contracts
Aerospace Sustainment Services
Defense Logistics Agency (DLA) Support

Risk Flags

Sole-source award
Cost-plus-fixed-fee contract type
Lack of competitive bidding
Potential for cost overruns

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $94.3 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. JAPAN E-2C/E-2D CY21 ISS & TECH SUPPORT

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 $94.3 million.

What is the period of performance?

Start: 2021-05-14. End: 2028-04-30.

What is Northrop Grumman's track record with the E-2C/E-2D program?

Northrop Grumman has a long-standing and integral role in the E-2 Hawkeye program, having been the prime contractor for its development and production for decades. They are responsible for the design, manufacturing, and sustainment of the E-2C and its successor, the E-2D Advanced Hawkeye. This includes providing integrated logistics support, system upgrades, and ongoing technical assistance. Their extensive experience and proprietary knowledge of the aircraft's complex systems make them a critical partner for the U.S. Navy's airborne early warning and control capabilities. Past performance reviews and contract histories would detail their delivery of services and adherence to schedules and quality standards on previous contracts related to this platform.

How does the cost-plus-fixed-fee (CPFF) pricing structure compare to other contract types for similar services?

Cost-plus-fixed-fee (CPFF) contracts reimburse the contractor for allowable costs incurred, plus a predetermined fixed fee representing profit. This structure is often used when the scope of work is not well-defined or involves significant uncertainty, such as research and development or complex sustainment efforts. Compared to fixed-price contracts (like FFP), CPFF offers less cost certainty for the government, as the final cost is not capped. While it provides flexibility and ensures the contractor is willing to undertake uncertain work, it carries a higher risk of cost overruns. For specialized sustainment like the E-2D, if the scope is predictable, a fixed-price incentive fee (FPIF) or even firm-fixed-price (FFP) could potentially offer better value by incentivizing cost control, though such contracts might be harder to negotiate for highly specialized, sole-source requirements.

What are the primary risks associated with a sole-source award for this type of support?

The primary risk associated with a sole-source award for E-2C/E-2D support is the lack of price competition, which can lead to inflated costs for the government. Without competing bids, the government has limited leverage to negotiate the best possible price, potentially paying more than if multiple contractors vied for the contract. Another risk is reduced innovation, as the incumbent contractor may have less incentive to propose cost-saving efficiencies or technological advancements if they are guaranteed the contract. Furthermore, sole-source awards can create contractor dependency or 'lock-in,' making it difficult and costly to transition to a different provider in the future, even if performance issues arise or better alternatives become available.

What is the historical spending trend for E-2C/E-2D support and maintenance by the Department of the Navy?

Historical spending data for E-2C/E-2D support and maintenance by the Department of the Navy indicates a consistent and significant investment over many years, reflecting the platform's critical role. Annual expenditures have fluctuated based on specific upgrade programs, sustainment needs, and operational tempo. Prior to this $94 million award, the Navy has awarded numerous contracts, both competitive and sole-source, to Northrop Grumman and potentially other entities for various aspects of E-2C/E-2D sustainment, including parts, repairs, technical services, and system modifications. Analyzing trends over the past 5-10 years would reveal an average annual spend that likely falls within a range, with spikes during major modernization efforts. This current award represents a portion of that ongoing investment.

How does the geographic location (Florida) impact the contract's execution and oversight?

The contract's performance location in Florida (ST: FL, SN: FLORIDA) suggests that a significant portion of the technical support, logistics, or maintenance activities will be conducted within that state. This has implications for workforce utilization, potentially drawing on the skilled aerospace and defense labor pool in Florida. Oversight might involve personnel from nearby naval installations or regional contracting offices. While the physical location doesn't inherently alter the contract's core value or competition dynamics, it can influence logistical considerations, travel costs for government personnel, and the potential for local economic impact through job creation and spending by the contractor and its employees.

Industry Classification

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

Product/Service Code: MAINT, REPAIR, REBUILD EQUIPMENT › MAINT, REPAIR, REBUILD OF EQUIPMENT

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: $125,495,247

Exercised Options: $122,086,749

Current Obligation: $94,291,510

Subaward Activity

Number of Subawards: 73

Total Subaward Amount: $7,172,316

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: N0001920G0005

IDV Type: BOA

Timeline