DoD's $40M Northrop Grumman contract for B-2 sustainment lacked competition, raising value concerns

Contract Overview

Contract Amount: $39,968,311 ($40.0M)

Contractor: Northrop Grumman Systems Corp

Awarding Agency: Department of Defense

Start Date: 2015-01-01

End Date: 2016-09-21

Contract Duration: 629 days

Daily Burn Rate: $63.5K/day

Competition Type: NOT COMPETED

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: IGF::OT::IGF CY15 B-2 PERFORMANCE BASED LOGISTICS (PBL) SUSTAINING ENGINEERING (SE) SUSTAINMENT.

Place of Performance

Location: PALMDALE, LOS ANGELES County, CALIFORNIA, 93550

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $40.0 million to NORTHROP GRUMMAN SYSTEMS CORP for work described as: IGF::OT::IGF CY15 B-2 PERFORMANCE BASED LOGISTICS (PBL) SUSTAINING ENGINEERING (SE) SUSTAINMENT. Key points: 1. The contract was awarded on a sole-source basis, limiting price discovery and potentially increasing costs. 2. Performance-based logistics (PBL) and sustaining engineering (SE) are critical for maintaining complex aircraft. 3. The duration of the contract (over 1.5 years) suggests a significant operational need. 4. The lack of competition is a key risk indicator for value for money. 5. The contract falls under aircraft manufacturing, a sector with high technical barriers to entry. 6. The award was a delivery order against a larger contract vehicle.

Value Assessment

Rating: questionable

Benchmarking the value of this sole-source contract is challenging due to the absence of competitive bids. Without comparison to other offers or market rates, it's difficult to definitively assess if the $39.97 million price represents fair market value. The sole-source nature inherently reduces the pressure on the contractor to offer the most competitive pricing. Further analysis would require access to the contractor's cost breakdown and historical pricing for similar sustainment services.

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 Corp, was solicited. This approach bypasses the standard competitive bidding process. While sole-source awards can be justified for unique capabilities or existing systems where only one vendor can provide the necessary support, it significantly limits price discovery and can lead to higher costs for the government compared to a fully competed contract.

Taxpayer Impact: The lack of competition means taxpayers may not have received the best possible price for these sustainment services. Without competing offers, there's less incentive for the contractor to minimize costs, potentially leading to a less efficient use of taxpayer funds.

Public Impact

The primary beneficiaries are the U.S. Air Force units operating the B-2 bomber fleet, ensuring its operational readiness. The services delivered include sustaining engineering and performance-based logistics, crucial for maintaining the complex systems of the B-2. The geographic impact is likely concentrated around B-2 operating bases, though sustainment activities may be managed from specific Northrop Grumman facilities. Workforce implications include specialized engineering and logistics personnel required for advanced aircraft maintenance.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition, potentially leading to overpayment.
Lack of transparency in pricing due to no competitive bidding.
Dependence on a single contractor for critical sustainment services.

Positive Signals

Performance-based logistics (PBL) can incentivize contractor efficiency and outcomes.
Sustaining engineering is vital for maintaining the longevity of complex platforms like the B-2.
Northrop Grumman is the original equipment manufacturer, possessing unique knowledge of the B-2 system.

Sector Analysis

This contract falls within the aerospace and defense sector, specifically focusing on the sustainment of a high-value, complex military aircraft. The market for such specialized sustainment services is often dominated by the original equipment manufacturers (OEMs) due to proprietary knowledge and technical expertise. Comparable spending benchmarks would involve analyzing other sustainment contracts for major defense platforms, though direct comparisons are difficult due to the unique nature of each platform and its support requirements.

Small Business Impact

This contract does not appear to have a small business set-aside component, as it was awarded to Northrop Grumman Systems Corp, a large defense contractor. There is no explicit information regarding subcontracting plans for small businesses within this specific delivery order. The focus on a sole-source award to a prime contractor typically means that opportunities for small businesses would be determined by the prime's subcontracting strategy, rather than direct government set-aside requirements.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contracting and financial management systems. The Air Force's contracting officers are responsible for monitoring performance and ensuring compliance with the contract terms. Inspector General (IG) jurisdiction would apply if any fraud, waste, or abuse were suspected. Transparency is limited due to the sole-source nature, but contract award data is publicly available through federal procurement databases.

Related Government Programs

B-2 Bomber Program
Air Force Sustainment Contracts
Defense Logistics Agency (DLA) Contracts
Performance-Based Logistics (PBL) Programs
Aircraft Maintenance and Repair Contracts

Risk Flags

Sole-source award
Lack of competition
Potential for cost overruns
Limited transparency

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $40.0 million to NORTHROP GRUMMAN SYSTEMS CORP. IGF::OT::IGF CY15 B-2 PERFORMANCE BASED LOGISTICS (PBL) SUSTAINING ENGINEERING (SE) SUSTAINMENT.

Who is the contractor on this award?

The obligated recipient is NORTHROP GRUMMAN SYSTEMS CORP.

Which agency awarded this contract?

Awarding agency: Department of Defense (Department of the Air Force).

What is the total obligated amount?

The obligated amount is $40.0 million.

What is the period of performance?

Start: 2015-01-01. End: 2016-09-21.

What is Northrop Grumman's track record with B-2 sustainment contracts?

Northrop Grumman Systems Corp, as the original equipment manufacturer (OEM) for the B-2 Spirit stealth bomber, has a long-standing and exclusive relationship with the U.S. Air Force for its sustainment. Their track record is intrinsically tied to the operational history of the B-2 itself. This includes providing a wide range of services from depot maintenance, component repair, software updates, to performance-based logistics (PBL) initiatives aimed at ensuring aircraft availability and readiness. Given the B-2's unique and highly classified nature, Northrop Grumman is the sole entity possessing the deep technical knowledge, specialized tooling, and security clearances necessary for its comprehensive sustainment. Historical data would likely show consistent, albeit high-cost, support provision, reflecting the specialized demands of maintaining such an advanced and aging platform.

How does the pricing of this contract compare to similar sustainment contracts for other major defense platforms?

Direct price comparison is challenging due to the unique nature of each major defense platform and the specific services rendered. However, sustainment contracts for high-value, complex platforms like the F-22, F-35, or strategic missile systems often involve significant annual expenditures, frequently in the tens to hundreds of millions of dollars. The key differentiator here is the sole-source award for the B-2 sustainment, which inherently limits the ability to benchmark against competitive pricing. While the $39.97 million for this specific delivery order over approximately 20 months might appear reasonable in isolation for a platform like the B-2, the lack of competition prevents a definitive value-for-money assessment against potential alternatives or market-driven pricing.

What are the primary risks associated with a sole-source sustainment contract for critical military assets?

The primary risks associated with a sole-source sustainment contract for critical military assets are multifaceted. Firstly, there is a significant risk of 'vendor lock-in,' where the government becomes overly dependent on a single provider, making it difficult and costly to switch even if performance or pricing becomes unsatisfactory. Secondly, the lack of competition can lead to inflated prices and reduced incentives for the contractor to innovate or improve efficiency, as there is no market pressure. Thirdly, sole-source awards can sometimes mask underlying issues with the asset's design or maintenance requirements, as the contractor may have less incentive to identify and resolve root causes if they are being paid for ongoing repairs. Finally, there's a potential for reduced transparency in cost structures and profit margins, making it harder for the government to ensure fair pricing.

How effective are Performance-Based Logistics (PBL) contracts in ensuring the readiness of aging aircraft fleets?

Performance-Based Logistics (PBL) contracts are generally considered an effective strategy for ensuring the readiness of aging aircraft fleets. Unlike traditional cost-plus contracts, PBL shifts the focus from the contractor's effort to the contractor's results, typically measured by key performance metrics such as system availability, response times, and turnaround times for repairs. This incentivizes the contractor to proactively manage supply chains, optimize maintenance processes, and invest in reliability improvements to meet the agreed-upon performance outcomes. For aging fleets, where parts availability and obsolescence can be major challenges, PBL can encourage contractors to find innovative solutions, such as developing remanufacturing capabilities or identifying alternative parts sources, thereby enhancing overall fleet readiness and potentially controlling long-term sustainment costs more effectively than traditional approaches.

What is the historical spending trend for B-2 sustainment by the Department of Defense?

Historical spending on B-2 sustainment by the Department of Defense has been substantial, reflecting the complexity and strategic importance of the aircraft. While specific annual figures fluctuate based on program needs, upgrades, and maintenance cycles, total spending over the life of the B-2 program for sustainment, operations, and support has amounted to billions of dollars. Contracts for sustainment, including performance-based logistics and engineering support, are typically awarded to Northrop Grumman, the OEM. Annual obligations have often ranged from tens of millions to over a hundred million dollars, depending on the scope of work, such as major depot maintenance events or system upgrades. The trend generally shows a consistent need for significant investment to maintain the operational readiness of this unique, aging fleet.

Industry Classification

NAICS: Manufacturing › Aerospace Product and Parts Manufacturing › Aircraft Manufacturing

Product/Service Code: SUPPORT SVCS (PROF, ADMIN, MGMT) › PROFESSIONAL SERVICES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Northrop Grumman Corporation (UEI: 967356127)

Address: 3520 E AVE M, PALMDALE, CA, 93550

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

Financial Breakdown

Contract Ceiling: $39,968,311

Exercised Options: $39,968,311

Current Obligation: $39,968,311

Subaward Activity

Number of Subawards: 34

Total Subaward Amount: $7,050,578

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: FA861614D6060

IDV Type: IDC

Timeline