DoD's $41.6M B-2 Logistics Contract Awarded to Northrop Grumman Without Competition

Contract Overview

Contract Amount: $41,583,050 ($41.6M)

Contractor: Northrop Grumman Systems Corp

Awarding Agency: Department of Defense

Start Date: 2012-01-01

End Date: 2014-12-31

Contract Duration: 1,095 days

Daily Burn Rate: $38.0K/day

Competition Type: NOT COMPETED

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: CY12 B-2 PERFORMANCE BASED LOGISTICS (PBL) CONTRACTOR INVENTORY CONTROL POINT (CICP) SUSTAINMENT

Place of Performance

Location: PALMDALE, LOS ANGELES County, CALIFORNIA, 93550

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $41.6 million to NORTHROP GRUMMAN SYSTEMS CORP for work described as: CY12 B-2 PERFORMANCE BASED LOGISTICS (PBL) CONTRACTOR INVENTORY CONTROL POINT (CICP) SUSTAINMENT Key points: 1. Contract awarded on a cost-plus-fixed-fee basis, indicating potential for cost overruns. 2. Sole-source award raises concerns about price discovery and potential lack of competitive pressure. 3. Performance-based logistics (PBL) aims for improved readiness and reduced costs through contractor incentives. 4. Contract duration of 1095 days (3 years) suggests a long-term commitment to sustainment. 5. The contract falls under Aircraft Manufacturing (NAICS 336411), a specialized and high-value sector. 6. No small business set-aside or subcontracting was indicated, potentially limiting small business participation.

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 challenging without further data on cost drivers and profit margins. Benchmarking against similar PBL contracts for other high-value platforms would be necessary to determine if the pricing is competitive. The absence of competition suggests that the government may not have achieved the most favorable pricing.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning Northrop Grumman was the only bidder. 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 competitive pressure to drive down prices or encourage innovative solutions.

Taxpayer Impact: Taxpayers may have paid a premium due to the absence of competition. Without a competitive bidding process, there is a risk that the contract price is higher than it would have been in a more open market.

Public Impact

The primary beneficiaries are the U.S. Air Force and the B-2 bomber fleet, ensuring operational readiness. Services delivered include contractor inventory control point sustainment, crucial for maintaining the B-2's complex systems. The geographic impact is primarily within the United States, supporting critical defense infrastructure. Workforce implications include specialized technical roles within Northrop Grumman and potentially at DoD maintenance facilities.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing and potential innovation.
Cost-plus-fixed-fee structure can incentivize cost overruns if not managed tightly.
Lack of small business participation may not fully leverage the broader industrial base.

Positive Signals

Performance-based logistics (PBL) can drive efficiency and improve system availability.
Contractor has existing expertise with the B-2 platform, potentially ensuring continuity.
Sustaining a critical asset like the B-2 is vital for national security.

Sector Analysis

This contract operates within the aerospace and defense sector, specifically focusing on sustainment and logistics for a high-value, complex military aircraft. The market for such specialized services is often concentrated among a few prime contractors with the requisite expertise and security clearances. Spending benchmarks for aircraft sustainment can vary widely based on platform age, complexity, and operational tempo, but typically represent a significant portion of an aircraft's total lifecycle cost.

Small Business Impact

The contract details indicate no small business set-aside (ss=false) and no indication of subcontracting goals (sb=false). This suggests that the prime contract was not specifically targeted towards small businesses, and there is no explicit requirement for the prime contractor to engage small businesses for subcontracting opportunities. This could limit the participation of small businesses in this specific contract, although they may be involved further down the supply chain.

Oversight & Accountability

Oversight for this contract would typically fall under the Defense Contract Management Agency (DCMA), which is responsible for ensuring contractor performance and compliance. The contract type (Cost Plus Fixed Fee) necessitates close monitoring of costs and adherence to the fixed fee. Transparency is generally maintained through contract reporting requirements, but specific oversight mechanisms and inspector general jurisdiction would depend on the detailed terms of the contract and any associated task orders.

Related Government Programs

B-2 Bomber Sustainment Programs
Defense Logistics Agency (DLA) Contracts
Aerospace Contractor Support Services
Performance-Based Logistics (PBL) Contracts

Risk Flags

Sole-source award
Cost-plus-fixed-fee contract type
Lack of small business subcontracting requirements

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $41.6 million to NORTHROP GRUMMAN SYSTEMS CORP. CY12 B-2 PERFORMANCE BASED LOGISTICS (PBL) CONTRACTOR INVENTORY CONTROL POINT (CICP) 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 (Defense Contract Management Agency).

What is the total obligated amount?

The obligated amount is $41.6 million.

What is the period of performance?

Start: 2012-01-01. End: 2014-12-31.

What is the historical spending trend for B-2 Performance Based Logistics (PBL) Contractor Inventory Control Point (CICP) Sustainment contracts with Northrop Grumman?

Analyzing historical spending for this specific contract requires access to detailed contract databases that track awards over multiple fiscal years. However, generally, sustainment costs for major defense platforms like the B-2 are substantial and can fluctuate based on operational tempo, modernization efforts, and the availability of spare parts. Performance-based logistics contracts aim to stabilize these costs by incentivizing the contractor to meet specific performance metrics. Without specific historical data for this CICP sustainment contract, it's difficult to establish a precise trend, but it's reasonable to assume that sustainment costs for such a critical and aging platform would be significant and ongoing throughout its operational life.

How does the pricing structure (Cost Plus Fixed Fee) of this contract compare to industry benchmarks for similar sustainment services?

Cost Plus Fixed Fee (CPFF) contracts are common in complex, long-term sustainment efforts where the scope of work may evolve. The 'cost plus' component means the government reimburses the contractor for allowable costs, while the 'fixed fee' represents the contractor's profit, which is fixed regardless of the final cost. Benchmarking CPFF contracts is challenging as profit margins can vary based on risk, complexity, and negotiation. However, industry best practices suggest that CPFF contracts should be used judiciously and require robust oversight to prevent cost overruns. For sustainment, a higher proportion of fixed-price or performance-based elements is often preferred to incentivize efficiency. The fixed fee in this contract would need to be assessed against typical profit rates for similar defense sustainment services, which can range from 7-15% depending on factors like contract type and risk.

What are the specific performance metrics and incentives included in this Performance-Based Logistics (PBL) contract?

The provided data does not detail the specific performance metrics or incentives within this PBL contract. Performance-Based Logistics contracts are designed around measurable outcomes, such as aircraft availability rates, response times for parts delivery, or system uptime. Incentives are typically structured to reward the contractor for exceeding these metrics and disincentivize underperformance. To understand the effectiveness of this PBL contract, a review of the contract's Statement of Objectives (SOO) or Performance Work Statement (PWS) would be necessary to identify the key performance parameters (KPPs) and the associated incentive/disincentive clauses.

What is Northrop Grumman's track record in managing similar sustainment contracts for high-value military assets?

Northrop Grumman has a significant track record in managing complex sustainment and logistics programs for major defense platforms, including the B-2 Spirit bomber itself. Their experience encompasses integrated logistics support, supply chain management, maintenance, and repair services. While specific performance details for individual contracts are often proprietary or require deeper analysis, the company's long-standing role as a prime contractor for the B-2 program suggests a substantial level of established capability and institutional knowledge. Evaluating their performance on this specific contract would involve reviewing past performance evaluations, any contract disputes, and their ability to meet key performance indicators on similar PBL contracts.

What are the potential risks associated with a sole-source award for critical sustainment services like this?

A sole-source award for critical sustainment services carries several potential risks. Firstly, the absence of competition can lead to higher prices than might be achieved through a competitive bidding process, as the contractor faces less pressure to optimize costs. Secondly, it can reduce the incentive for innovation, as the contractor may not feel compelled to develop more efficient or cost-effective solutions. Thirdly, it can create vendor lock-in, making it difficult and costly to switch providers in the future. Finally, without competitive benchmarking, it can be harder for the government to ensure it is receiving the best possible value for its investment. Robust contract management and oversight are crucial to mitigate these risks.

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 FIXED FEE (U)

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: $41,583,050

Exercised Options: $41,583,050

Current Obligation: $41,583,050

Subaward Activity

Number of Subawards: 3

Total Subaward Amount: $208,449

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: F3365799D0028

IDV Type: IDC

Timeline