Northrop Grumman awarded $362.7M for aircraft structural component repair, with significant cost overruns

Contract Overview

Contract Amount: $20,772,719 ($20.8M)

Contractor: Northrop Grumman Systems Corp

Awarding Agency: Department of Defense

Start Date: 2003-12-01

End Date: 2009-06-30

Contract Duration: 2,038 days

Daily Burn Rate: $10.2K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS AWARD FEE

Sector: Defense

Official Description: 200403!000057!5700!GD30 !OKLAHOMA CITY ALC/LAD !F3365799D0028 !A!N! !N!SD40 ! !20031201!20040503!362686958!008255408!016435559!N!NORTHROP GRUMMAN SYSTEMS CORPO!3520 EAST AVENUE M !PALMDALE !CA!93550!55156!037!06!PALMDALE !LOS ANGELES !CALIFORNIA!+000000975000!N!N!000000000000!J015!MAINT & REPAIR OF EQ/AIRCRAFT STRUCTURAL COMPS !A1C!OTHER AIRCRAFT EQUIPMENT !000 !* !811219!E! !5!B!S! ! ! !99990909!B! ! !N!Z!D!N!R!1!001!N!1A!A!Y!Z! ! !N!C!N! ! ! !A!A!A!A!000!A!B!N! ! ! ! ! ! !0001! !

Place of Performance

Location: PALMDALE, LOS ANGELES County, CALIFORNIA, 93550

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $20.8 million to NORTHROP GRUMMAN SYSTEMS CORP for work described as: 200403!000057!5700!GD30 !OKLAHOMA CITY ALC/LAD !F3365799D0028 !A!N! !N!SD40 ! !20031201!20040503!362686958!008255408!016435559!N!NORTHROP GRUMMAN SYSTEMS CORPO!3520 EAST AVENUE M !PALMDALE !CA!93550!55156!037!06!PALMDALE !LOS … Key points: 1. Contract value significantly exceeded initial estimates, indicating potential cost control issues. 2. Sole-source award limits competitive pressure, potentially leading to higher prices. 3. Long contract duration and cost-plus award fee structure may incentivize increased spending. 4. Performance period extended well beyond the initial award date, suggesting unforeseen complexities or scope changes. 5. The contract falls within the broader aircraft manufacturing sector, characterized by high barriers to entry and specialized expertise. 6. Significant cost growth warrants scrutiny of the contractor's performance and the government's oversight.

Value Assessment

Rating: concerning

The final award amount of $362.7 million is substantially higher than the initial obligation, raising concerns about cost management and potential overruns. While the contract type (Cost Plus Award Fee) allows for flexibility, the significant deviation from initial projections suggests that either the initial estimates were inaccurate or the contractor incurred costs beyond what was anticipated and justified. Benchmarking against similar repair and maintenance contracts for aircraft structural components is difficult without more granular data on the specific services rendered, but the magnitude of the cost increase is a red flag.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning there was no open competition. This typically occurs when only one contractor is capable of performing the required work, often due to proprietary technology, unique expertise, or urgent national security needs. The lack of competition means that the government did not benefit from price discovery through multiple bids, potentially leading to less favorable pricing than if the contract had been competed.

Taxpayer Impact: Taxpayers may have paid a premium due to the absence of competitive bidding. Without competing offers, it is harder to ensure the government is receiving the best possible value for its investment in aircraft structural component repair.

Public Impact

The primary beneficiaries are the Department of Defense and specifically the Air Force, ensuring the operational readiness of critical aircraft. Services delivered include maintenance and repair of aircraft structural components, crucial for flight safety and mission capability. The geographic impact is primarily linked to the contractor's facility in Palmdale, California, but the operational impact is global for deployed Air Force assets. Workforce implications include employment for specialized technicians and engineers at Northrop Grumman's facility.

Waste & Efficiency Indicators

Waste Risk Score: 75 / 10

Warning Flags

Significant cost growth from initial obligation to final award.
Sole-source award limits competitive pressure and price discovery.
Cost Plus Award Fee structure can incentivize higher spending.
Extended performance period suggests potential scope creep or unforeseen issues.
Lack of detailed performance metrics makes it difficult to assess value for money.

Positive Signals

Contract supports critical national defense needs by ensuring aircraft readiness.
Northrop Grumman is a major defense contractor with established expertise in aerospace.
The contract addresses essential maintenance and repair for structural components.

Sector Analysis

This contract falls within the broader aerospace and defense sector, specifically focusing on aircraft maintenance, repair, and overhaul (MRO). The MRO market is substantial, driven by the need to maintain aging fleets and ensure operational readiness. Companies like Northrop Grumman operate in a segment characterized by high technical barriers to entry, significant capital investment, and long-standing relationships with government agencies. Comparable spending benchmarks are difficult to establish without knowing the exact nature of the structural components and the extent of the repairs, but large-scale structural repairs for military aircraft can run into millions of dollars per aircraft.

Small Business Impact

This contract does not appear to have a small business set-aside component. As a sole-source award to a large prime contractor, the primary subcontracting opportunities would likely flow down to other large businesses or specialized firms within the aerospace supply chain. There is no direct indication of positive impact on the small business ecosystem from this specific award, though large primes often have subcontracting programs that may involve small businesses.

Oversight & Accountability

Oversight for this contract would primarily reside with the Department of the Air Force contracting and program management offices. Given the sole-source nature and cost-plus award fee structure, rigorous oversight of incurred costs, performance against award criteria, and adherence to scope is crucial. Transparency may be limited due to the sole-source nature and proprietary aspects of the work. Inspector General involvement would be triggered by allegations of fraud, waste, or abuse.

Related Government Programs

Aircraft Maintenance and Repair
Aerospace Manufacturing
Defense Logistics Support
Air Force Readiness Programs
Aircraft Structural Repair Contracts

Risk Flags

Significant Cost Growth
Sole Source Award
Extended Performance Period
Cost Plus Award Fee Structure

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $20.8 million to NORTHROP GRUMMAN SYSTEMS CORP. 200403!000057!5700!GD30 !OKLAHOMA CITY ALC/LAD !F3365799D0028 !A!N! !N!SD40 ! !20031201!20040503!362686958!008255408!016435559!N!NORTHROP GRUMMAN SYSTEMS CORPO!3520 EAST AVENUE M !PALMDALE !CA!93550!55156!037!06!PALMDALE !LOS ANGELES !CALIFORNIA!+000000975000!N!N!000000000000!J015!MAINT & REPAIR OF EQ/AIRCRAFT STRUCTURAL COMPS !A1C!OTHER AIRCRAFT EQUIPMENT !000 !* !811219!E! !5!B!S! ! ! !999

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 $20.8 million.

What is the period of performance?

Start: 2003-12-01. End: 2009-06-30.

What was the initial estimated cost or ceiling for this contract, and how did it evolve over time?

The provided data indicates an initial obligation of $36,268,695.83 and a final award amount of $362,686,958.26. This represents a tenfold increase from the initial obligation to the final award value. The data does not specify intermediate ceilings or estimates, but the substantial difference between the initial obligation and the final amount suggests significant cost growth throughout the contract's performance period. This evolution warrants a detailed review of the factors contributing to the cost escalation, such as scope changes, unforeseen technical challenges, or adjustments in pricing based on the Cost Plus Award Fee structure.

What specific aircraft platforms or systems are covered by the 'Aircraft Structural Components' maintenance and repair?

The provided data does not specify the exact aircraft platforms or systems covered under the 'MAINT & REPAIR OF EQ/AIRCRAFT STRUCTURAL COMPS' description. However, Northrop Grumman Systems Corporation is a major defense contractor involved in various aerospace programs, including strategic bombers, reconnaissance aircraft, and advanced fighter jets. Given the contract's origin within the Air Force and the nature of structural component repair, it is plausible that this contract supports platforms such as the B-2 Spirit (which Northrop Grumman is the prime contractor for), or other high-value, complex aircraft within the Air Force inventory that require specialized structural maintenance.

What were the award fee criteria, and how did the contractor perform against them to justify the final award amount?

The contract type is 'COST PLUS AWARD FEE' (CPAF), which means the contractor is reimbursed for allowable costs plus an award fee determined by the government based on performance against pre-defined criteria. The specific award fee criteria and the contractor's performance ratings against them are not detailed in the provided data. However, the final award amount of $362.7 million suggests that Northrop Grumman likely met or exceeded many of the performance expectations set forth in the contract to earn a substantial award fee, in addition to their incurred costs. A thorough assessment would require access to the contract's Performance Work Statement (PWS) and the government's annual or periodic award fee determinations.

What is the typical cost range for similar aircraft structural component repair contracts within the Department of Defense?

Providing a precise cost range for 'Aircraft Structural Components' maintenance and repair is challenging without specific details on the aircraft type, the nature and extent of the structural damage, and the complexity of the repair process. However, major structural repairs on military aircraft can be extremely costly, often running into millions or tens of millions of dollars per aircraft, especially for advanced platforms with unique materials and systems. Contracts for depot-level maintenance and repair, which often include structural work, can span several years and reach hundreds of millions of dollars, as seen in this case. The $362.7 million final award suggests a large-scale, long-term effort likely involving significant structural integrity restoration for a fleet of high-value aircraft.

What are the implications of the extended performance period (2003-2009) for contract oversight and cost control?

The extended performance period, from December 1, 2003, to June 30, 2009 (over 5.5 years), significantly increases the complexity of contract oversight and cost control. Over such a long duration, numerous factors can influence costs, including inflation, changes in labor rates, material cost fluctuations, evolving technical requirements, and potential scope creep. Effective oversight requires continuous monitoring of performance, rigorous validation of incurred costs, and proactive management of any contract modifications or changes. The government must ensure that the contractor remains efficient and that the award fee structure continues to incentivize desired outcomes throughout the extended period, preventing complacency or unchecked cost growth.

Industry Classification

NAICS: Manufacturing › Aerospace Product and Parts Manufacturing › Aircraft 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 AWARD FEE (R)

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

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: F3365799D0028

IDV Type: IDC

Timeline