Air Force's $37M B-2 Software Sustainment contract awarded to Northrop Grumman, raising questions about competition

Contract Overview

Contract Amount: $37,021,330 ($37.0M)

Contractor: Northrop Grumman Systems Corp

Awarding Agency: Department of Defense

Start Date: 2014-01-01

End Date: 2014-12-31

Contract Duration: 364 days

Daily Burn Rate: $101.7K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: IGF::OT::IGF B-2 PERFORMANCE-BASED LOGISTICS (PBL) B-2 CY14 SOFTWARE SUSTAINMENT (SWS)

Place of Performance

Location: PALMDALE, LOS ANGELES County, CALIFORNIA, 93550

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $37.0 million to NORTHROP GRUMMAN SYSTEMS CORP for work described as: IGF::OT::IGF B-2 PERFORMANCE-BASED LOGISTICS (PBL) B-2 CY14 SOFTWARE SUSTAINMENT (SWS) Key points: 1. Contract awarded on a sole-source basis, limiting potential cost savings from competition. 2. Performance-based logistics (PBL) approach aims for efficiency but requires careful monitoring. 3. Software sustainment is critical for B-2 operations, indicating a high-stakes service. 4. The contract duration of one year suggests a focus on immediate operational needs. 5. Lack of competition may lead to higher prices than a more open bidding process. 6. Geographic location in California for a major defense contract warrants attention.

Value Assessment

Rating: questionable

The contract value of $37 million for one year of software sustainment for the B-2 program appears significant. Without competitive bidding, it is difficult to benchmark the pricing against market rates or similar contracts. The sole-source nature raises concerns about whether the Air Force secured the best possible value. Further analysis would be needed to determine if the fixed price adequately reflects the services rendered and if performance metrics were met to justify the expenditure.

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 bypasses the competitive process, which typically drives down prices and encourages innovation. While sole-source awards can be justified for unique capabilities or existing systems, they inherently reduce price discovery and may result in higher costs for the government.

Taxpayer Impact: Taxpayers may be paying a premium due to the absence of competition, as the government did not benefit from multiple offers to choose from.

Public Impact

The primary beneficiaries are the U.S. Air Force and the B-2 bomber program, ensuring continued operational readiness. Services delivered include software sustainment, crucial for the functionality and security of the B-2's complex systems. The geographic impact is concentrated in California, where Northrop Grumman is located. Workforce implications include the employment of specialized software engineers and support staff at Northrop Grumman.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition and potential savings.
Lack of transparency in the justification for sole-source award.
Potential for cost overruns if performance metrics are not strictly enforced.
Dependence on a single contractor for critical software sustainment.

Positive Signals

Performance-based logistics (PBL) approach can incentivize efficiency.
Northrop Grumman is an established contractor with experience on the B-2 program.
Software sustainment is vital for maintaining the operational capability of a strategic asset.

Sector Analysis

The aerospace and defense sector is characterized by long-term, high-value contracts, often with significant barriers to entry. Software sustainment for complex military platforms like the B-2 represents a specialized niche within this sector. Spending in this area is driven by the need to maintain aging fleets and adapt to evolving technological threats. Comparable spending benchmarks are difficult to establish due to the unique nature of the B-2 platform and the sole-source award.

Small Business Impact

This contract does not appear to involve a small business set-aside, as it was awarded to a large prime contractor, Northrop Grumman. There is no explicit information provided regarding subcontracting plans for small businesses. The absence of a set-aside or clear subcontracting goals could limit opportunities for small businesses within the defense industrial base for this specific contract.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of the Air Force's contracting and program management offices. The Inspector General of the Department of Defense may also conduct audits or investigations into the contract's execution and value. Transparency is limited by the sole-source nature of the award, making public scrutiny of the bidding process impossible. Accountability relies heavily on the Air Force's internal controls and performance monitoring.

Related Government Programs

B-2 Bomber Program
Aircraft Software Sustainment
Defense Logistics Contracts
Northrop Grumman Defense Contracts

Risk Flags

Sole-source award
Lack of competitive bidding
Potential for inflated pricing
Critical system sustainment dependency

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $37.0 million to NORTHROP GRUMMAN SYSTEMS CORP. IGF::OT::IGF B-2 PERFORMANCE-BASED LOGISTICS (PBL) B-2 CY14 SOFTWARE SUSTAINMENT (SWS)

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 $37.0 million.

What is the period of performance?

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

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

Northrop Grumman has a long-standing and deeply integrated history with the B-2 Spirit program, serving as the prime contractor responsible for its development, production, and sustainment. Their track record includes extensive experience in maintaining the complex avionics, software, and structural integrity of the aircraft. This includes various sustainment contracts, upgrades, and modernization efforts over the decades. Given their sole-source position, their performance on previous B-2 sustainment contracts would be a key factor in the Air Force's decision to award this specific software sustainment contract without competition. Historical performance data, including on-time delivery, system reliability, and cost management, would be crucial for assessing their capability and value proposition, though this data is not publicly detailed for this specific contract.

How does the $37 million cost compare to similar software sustainment contracts for other major defense platforms?

Directly comparing the $37 million cost for one year of B-2 software sustainment to other major defense platforms is challenging due to several factors. Firstly, the B-2 is a unique, highly advanced, and aging strategic bomber, meaning its software sustainment needs are likely specialized and complex. Secondly, this contract was awarded sole-source, which inherently removes the competitive benchmarking that typically informs cost comparisons. Contracts for other platforms might be competed, involve different sustainment models (e.g., full system vs. just software), or cover different durations and scopes. Generally, software sustainment for complex military systems can range from millions to tens of millions annually, depending on the system's criticality, age, and the level of support required. Without competitive bids or detailed scope breakdowns for comparable systems, this $37 million figure is difficult to definitively label as high or low, but the lack of competition raises a flag regarding potential value.

What are the primary risks associated with a sole-source award for critical software sustainment?

The primary risks associated with a sole-source award for critical software sustainment are multifaceted. Firstly, there is a significant risk of paying a premium price, as the absence of competition removes the downward pressure on costs that multiple bidders would typically exert. Secondly, there's a risk of complacency from the contractor; without the threat of losing future business to competitors, the incentive to innovate or provide exceptional service might diminish. Thirdly, the government becomes highly dependent on a single entity, creating a vulnerability if the contractor faces financial difficulties, operational issues, or decides to exit the market. This dependence can also stifle the development of alternative solutions or the growth of a competitive ecosystem for such services. Finally, the lack of transparency in the procurement process can obscure potential inefficiencies or questionable pricing strategies.

How effective is the Performance-Based Logistics (PBL) approach in ensuring value for money in this context?

The Performance-Based Logistics (PBL) approach aims to ensure value for money by shifting the focus from acquiring specific parts or services to achieving desired outcomes or performance levels. In the context of B-2 software sustainment, a PBL contract would ideally tie payments to metrics such as software uptime, bug resolution time, security patch deployment, and system availability. When executed effectively, PBL can incentivize the contractor (Northrop Grumman) to improve efficiency, reduce costs, and enhance system performance because their profit is linked to achieving these predefined goals. However, the effectiveness hinges critically on the clarity and measurability of the performance metrics, the robustness of the government's oversight and data collection, and the contractor's ability and willingness to meet or exceed these targets. A poorly defined PBL contract, especially when awarded sole-source, might not fully deliver on its promise of value.

What are the historical spending patterns for B-2 software sustainment, and how does this $37M contract fit?

Historical spending on B-2 software sustainment is likely substantial, given the platform's long operational life and complexity. The B-2 program has undergone numerous upgrades and sustainment efforts since its introduction. While specific annual figures for software sustainment alone are not readily available in the public domain, the total sustainment costs for the B-2 fleet are known to be in the billions of dollars over its lifecycle. This $37 million contract for CY14 represents a portion of that ongoing sustainment expenditure. Its value suggests a significant but not unprecedented annual investment in keeping the B-2's software infrastructure operational and secure. Without access to historical breakdowns, it's difficult to determine if this specific amount represents an increase, decrease, or stable spending trend compared to prior years, especially given the sole-source nature which could influence the price.

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

Offers Received: 1

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: $37,021,330

Exercised Options: $37,021,330

Current Obligation: $37,021,330

Subaward Activity

Number of Subawards: 22

Total Subaward Amount: $88,301,635

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: F3365799D0028

IDV Type: IDC

Timeline