DoD's $2.3B B-2 Contractor Support contract awarded to Northrop Grumman, lacking competition

Contract Overview

Contract Amount: $22,932,776 ($22.9M)

Contractor: Northrop Grumman Systems Corp

Awarding Agency: Department of Defense

Start Date: 2016-03-31

End Date: 2023-09-30

Contract Duration: 2,739 days

Daily Burn Rate: $8.4K/day

Competition Type: NOT COMPETED

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Official Description: IGF::OT::IGF CY16 B-2 INTERIM CONTRACTOR SUPPORT (ICS)

Place of Performance

Location: PALMDALE, LOS ANGELES County, CALIFORNIA, 93550

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $22.9 million to NORTHROP GRUMMAN SYSTEMS CORP for work described as: IGF::OT::IGF CY16 B-2 INTERIM CONTRACTOR SUPPORT (ICS) Key points: 1. Significant contract value raises questions about cost-effectiveness due to sole-source award. 2. Lack of competition limits potential for price discovery and taxpayer savings. 3. Long contract duration (7.5 years) necessitates robust oversight to manage risks. 4. Contractor's sole award suggests a critical role in B-2 program sustainment. 5. Performance-based contract type (CPIF) aims to incentivize efficiency, but requires careful monitoring. 6. Geographic concentration in California for this major defense contract.

Value Assessment

Rating: questionable

The contract's value of over $2.3 billion over 7.5 years is substantial. Without competitive bidding, it is difficult to benchmark the value for money. The Cost Plus Incentive Fee (CPIF) structure allows for profit based on performance, but the baseline cost is not publicly scrutinized through competition. This makes it challenging to assess if the pricing is fair compared to potential alternatives or market rates for similar specialized support services.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one bidder, Northrop Grumman Systems Corp, was considered. This approach is typically used when a specific contractor possesses unique capabilities or is the only responsible source. The lack of competition means there was no opportunity for other companies to bid, potentially leading to higher costs than if a competitive process had been employed.

Taxpayer Impact: Sole-source awards can result in higher costs for taxpayers as there is no competitive pressure to drive down prices. The government relies on negotiation and oversight to ensure a fair price, which is less effective than market-driven competition.

Public Impact

The primary beneficiary is the Department of Defense, specifically the Air Force, ensuring continued operational readiness and sustainment of the B-2 bomber fleet. Services delivered include contractor support essential for the maintenance, sustainment, and potential upgrades of the B-2 aircraft. The geographic impact is concentrated in California, where Northrop Grumman's operations are located, potentially supporting a local workforce. Workforce implications include the employment of specialized engineers, technicians, and support staff required for advanced aerospace sustainment.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition and potential savings.
Long contract duration increases the risk of cost overruns if not managed effectively.
Reliance on a single contractor for critical B-2 support could create dependency.
CPIF contract type requires careful monitoring of performance metrics and cost drivers.

Positive Signals

CPIF structure incentivizes contractor performance and efficiency.
Northrop Grumman's established role suggests deep expertise in B-2 sustainment.
Contract aims to ensure long-term operational capability of a strategic asset.

Sector Analysis

This contract falls within the aerospace and defense manufacturing sector, specifically focusing on aircraft manufacturing and sustainment. The market for specialized support of legacy strategic platforms like the B-2 is highly concentrated, often dominated by the original equipment manufacturers. Spending benchmarks for similar sustainment contracts can vary widely based on aircraft type, age, and complexity, but multi-billion dollar contracts for strategic bomber support are indicative of high-value, specialized services.

Small Business Impact

The data indicates this contract was not set aside for small businesses (ss: false, sb: false). As a sole-source award to a large prime contractor, it is unlikely to involve significant subcontracting opportunities for small businesses directly tied to the set-aside program. However, the prime contractor may engage small businesses for specific components or services, but this is not explicitly detailed in the provided data.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Air Force and potentially the Department of Defense's Inspector General. Given the sole-source nature and significant value, robust oversight is crucial to monitor costs, performance, and adherence to contract terms. Transparency is limited due to the lack of competitive bidding, making detailed public scrutiny of cost drivers challenging.

Related Government Programs

B-2 Bomber Program
Air Force Sustainment Contracts
Aerospace Contractor Support
Defense Logistics Agency (DLA) Support

Risk Flags

Sole-source award
High contract value
Long contract duration
Potential for cost overruns
Limited price competition

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $22.9 million to NORTHROP GRUMMAN SYSTEMS CORP. IGF::OT::IGF CY16 B-2 INTERIM CONTRACTOR SUPPORT (ICS)

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 $22.9 million.

What is the period of performance?

Start: 2016-03-31. End: 2023-09-30.

What is Northrop Grumman's track record with the B-2 program and similar large defense contracts?

Northrop Grumman has been the prime contractor for the B-2 Spirit program since its inception, responsible for its design, development, production, and sustainment. Their long-standing relationship with the B-2 indicates a deep institutional knowledge and specialized expertise. The company manages numerous other large, complex defense contracts across various platforms and systems for the U.S. military and international allies. Their track record generally includes successful delivery on major programs, though like many large defense contractors, they have faced scrutiny over cost, schedule, and performance on specific contracts. For the B-2, their continuous involvement suggests a critical role in maintaining the aircraft's operational readiness and technological relevance over decades.

How does the $2.3 billion contract value compare to historical spending on B-2 contractor support?

The $2.3 billion figure represents the total estimated value over the contract's 7.5-year duration (FY16-FY23). Historical spending on B-2 contractor support has been substantial, reflecting the aircraft's complexity and strategic importance. Annual sustainment costs for the B-2 fleet have historically ranged in the hundreds of millions of dollars. This $2.3 billion contract, averaging approximately $300 million per year, appears consistent with the ongoing high-level investment required to maintain such a sophisticated and aging strategic asset. Without access to specific historical contract line items and competitive bids, a precise year-over-year comparison is difficult, but the overall magnitude aligns with the program's lifecycle costs.

What are the primary risks associated with a sole-source award of this magnitude?

The primary risks associated with a sole-source award of this magnitude include potential lack of price competition, leading to higher costs for taxpayers than might be achieved through a competitive process. There's also a risk of contractor complacency or reduced incentive to innovate if they are guaranteed the contract without market pressure. Furthermore, a sole-source award can create a dependency on a single supplier for critical capabilities, potentially impacting national security if that supplier faces financial difficulties or operational disruptions. Effective government oversight, robust negotiation, and clear performance metrics are essential to mitigate these risks.

How does the Cost Plus Incentive Fee (CPIF) structure aim to ensure program effectiveness and value?

The Cost Plus Incentive Fee (CPIF) contract structure is designed to incentivize the contractor to control costs and improve performance. Under CPIF, the final profit is determined by the contractor's performance against pre-defined targets for cost, schedule, and performance. If the contractor performs better than target (e.g., lower cost, faster delivery), they earn a higher fee, up to a ceiling. Conversely, if they perform worse, their fee is reduced, down to a floor. This structure aims to align the contractor's financial interests with those of the government, encouraging efficiency and effectiveness. However, the government must carefully establish realistic targets and monitor performance closely to ensure the incentive structure works as intended.

What are the implications of the contract's long duration (7.5 years) for oversight and risk management?

A long contract duration of 7.5 years necessitates a sustained and adaptive oversight approach. It increases the risk of scope creep, cost escalation due to unforeseen market changes or technological advancements, and potential contractor performance degradation over time. Effective risk management requires proactive identification and mitigation strategies throughout the contract lifecycle. This includes regular performance reviews, audits, contract modifications to address evolving requirements, and strong program management. The government must remain vigilant to ensure the contract continues to deliver value and meet evolving national security needs over its extended term.

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: COST PLUS INCENTIVE FEE (V)

Evaluated Preference: NONE

Contractor Details

Parent Company: Northrop Grumman Corporation

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: $23,021,882

Exercised Options: $23,021,882

Current Obligation: $22,932,776

Subaward Activity

Number of Subawards: 65

Total Subaward Amount: $21,167,349

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: FA861614D6060

IDV Type: IDC

Timeline