DoD's $96.8M B-2 Sustainment Contract Awarded to Northrop Grumman Without Competition

Contract Overview

Contract Amount: $96,778,635 ($96.8M)

Contractor: Northrop Grumman Systems Corp

Awarding Agency: Department of Defense

Start Date: 2010-02-11

End Date: 2015-09-30

Contract Duration: 2,057 days

Daily Burn Rate: $47.0K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: TIME AND MATERIALS

Sector: Defense

Official Description: B-2 SUSTAINMENT, NON PDM OVER AND ABOVE (O&A)

Place of Performance

Location: PALMDALE, LOS ANGELES County, CALIFORNIA, 93550

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $96.8 million to NORTHROP GRUMMAN SYSTEMS CORP for work described as: B-2 SUSTAINMENT, NON PDM OVER AND ABOVE (O&A) Key points: 1. Contract awarded without competition, raising questions about price discovery and potential for overpayment. 2. Significant spending on aircraft sustainment highlights the ongoing costs associated with maintaining advanced military platforms. 3. The 'over and above' nature of the contract suggests potential for scope creep and unbudgeted expenses. 4. Awarded to a single, incumbent contractor, limiting opportunities for new market entrants and innovation. 5. The contract's duration and value indicate a long-term reliance on Northrop Grumman for B-2 support. 6. Lack of a small business set-aside means limited direct benefit to smaller enterprises in this high-value sector.

Value Assessment

Rating: questionable

The contract's value of approximately $96.8 million for B-2 sustainment, awarded on a time and materials basis, warrants scrutiny. Without a competitive bidding process, it is difficult to benchmark the pricing against market rates or similar sustainment contracts for other advanced aircraft. The 'over and above' clause, while potentially necessary for unforeseen maintenance, can lead to costs exceeding initial estimates. The lack of transparency inherent in a sole-source award makes a definitive value-for-money assessment challenging.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning it was not competed. Northrop Grumman, as the original manufacturer of the B-2 bomber, was the only entity considered capable of providing the necessary sustainment services. This lack of competition limits the government's ability to leverage market forces to achieve the best possible pricing and terms.

Taxpayer Impact: Taxpayers may be paying a premium due to the absence of competitive pressure, as the contractor faces no direct incentive to lower prices or improve efficiency beyond contractual minimums.

Public Impact

The primary beneficiaries are the Department of Defense and the U.S. Air Force, ensuring the continued operational readiness of the B-2 Spirit stealth bomber fleet. Services delivered include maintenance, repair, and sustainment activities critical for the longevity and performance of the B-2 aircraft. The geographic impact is primarily centered around the B-2's operational bases, likely Whiteman Air Force Base in Missouri. Workforce implications include the employment of highly skilled technicians and engineers at Northrop Grumman facilities.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing and potential cost savings.
Time and materials contract type can lead to cost overruns if not closely managed.
Lack of transparency in pricing due to non-competitive nature.
Potential for contractor lock-in, making future contract negotiations more difficult.
Sustainment costs for complex platforms can escalate over time.

Positive Signals

Ensures continued operational capability of a critical strategic asset (B-2 bomber).
Leverages the original equipment manufacturer's specialized knowledge and expertise.
Provides stability and predictability for essential maintenance and support.
Contract addresses 'over and above' requirements, allowing flexibility for unforeseen needs.

Sector Analysis

This contract falls within the aerospace and defense sector, specifically focusing on aircraft manufacturing and sustainment. The market for specialized military aircraft support is highly concentrated, often dominated by the original equipment manufacturers due to proprietary knowledge and complex technical requirements. The B-2 program represents a significant investment in strategic defense capabilities, and its sustainment costs are indicative of the broader trend in maintaining aging, high-tech military fleets. Comparable spending benchmarks would likely involve sustainment contracts for other advanced fighter jets or bombers, though direct comparisons are difficult due to the unique nature of the B-2.

Small Business Impact

This contract does not appear to include a small business set-aside. As a sole-source award to a large prime contractor, the direct opportunities for small businesses are likely limited to subcontracting roles. The impact on the small business ecosystem depends on Northrop Grumman's subcontracting plan and adherence to small business utilization goals, which are not detailed in the provided data.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contracting and program management offices within the Air Force. Accountability measures would include performance metrics, delivery schedules, and adherence to the terms of the time and materials contract. Transparency is limited due to the sole-source nature. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse.

Related Government Programs

B-2 Bomber Program
Air Force Sustainment Contracts
Aerospace Manufacturing
Defense Logistics Support
Aircraft Maintenance Services

Risk Flags

Sole-source award
Time and Materials contract type
Lack of competition
Potential for cost overruns

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $96.8 million to NORTHROP GRUMMAN SYSTEMS CORP. B-2 SUSTAINMENT, NON PDM OVER AND ABOVE (O&A)

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 $96.8 million.

What is the period of performance?

Start: 2010-02-11. End: 2015-09-30.

What is Northrop Grumman's track record with the B-2 program?

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 aircraft provides them with unparalleled institutional knowledge, technical expertise, and historical data regarding its operational performance, maintenance requirements, and unique sustainment needs. This deep familiarity is often a key factor cited in the justification for sole-source awards for complex, legacy platforms like the B-2, as transitioning sustainment to another entity would be exceptionally costly and time-consuming, potentially jeopardizing operational readiness.

How does the 'over and above' (O&A) clause typically impact contract costs?

The 'over and above' (O&A) clause in a contract, particularly in sustainment or service agreements, allows for the procurement of additional work or materials not explicitly defined in the original scope. While intended to provide flexibility for unforeseen requirements or emergent needs, O&A can significantly increase total contract costs. Without robust oversight and clear definitions of what constitutes 'over and above,' contractors may bill for work that could have been anticipated or negotiated differently. This clause necessitates diligent monitoring by the procuring agency to ensure that additional costs are justified, reasonable, and directly related to essential program needs, preventing scope creep and uncontrolled expenditure.

What are the risks associated with a sole-source contract for aircraft sustainment?

Sole-source contracts for aircraft sustainment carry several inherent risks. Primarily, 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. There is also a risk of complacency, where the incumbent contractor may have less incentive to innovate or improve efficiency. Furthermore, reliance on a single provider can create vendor lock-in, making it difficult and expensive to switch providers in the future. This situation can also stifle competition from other firms that might offer innovative solutions or more cost-effective services. Finally, without competitive benchmarking, it is harder for the government to ensure it is receiving optimal value for its investment.

Can the 'time and materials' (T&M) contract type lead to cost overruns in sustainment contracts?

Yes, the 'time and materials' (T&M) contract type carries a significant risk of cost overruns, especially in complex sustainment scenarios. In a T&M contract, the government pays the contractor for the actual labor hours expended at specified hourly rates and for the actual cost of materials used, plus a percentage or fixed fee. If the scope of work is not well-defined, or if project duration extends beyond initial estimates, the total cost can escalate rapidly. For sustainment, where unforeseen issues can arise, T&M requires stringent oversight to monitor labor hours, material costs, and overall efficiency. Without effective controls, contractors may be incentivized to extend labor hours or use more expensive materials, leading to costs exceeding initial projections.

What is the typical spending pattern for major aircraft sustainment programs?

Spending on major aircraft sustainment programs typically follows a long-term trajectory, often exceeding the initial acquisition cost of the aircraft over its lifecycle. These costs encompass a wide range of activities, including scheduled and unscheduled maintenance, component repair and replacement, depot-level overhauls, software updates, technical data management, and logistics support. Spending can fluctuate based on the age of the fleet, operational tempo, and the introduction of new technologies or upgrades. Sustainment costs are often front-loaded in the early years of an aircraft's life and can increase significantly as the platform ages and requires more intensive maintenance. Government agencies often budget sustainment as a separate, significant line item within their overall defense or aviation budgets.

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: TIME AND MATERIALS (Y)

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: $97,237,151

Exercised Options: $97,237,151

Current Obligation: $96,778,635

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: F3365799D0028

IDV Type: IDC

Timeline