DoD's $38.5M sustainment contract for aircraft manufacturing awarded to Northrop Grumman without competition

Contract Overview

Contract Amount: $38,547,969 ($38.5M)

Contractor: Northrop Grumman Systems Corp

Awarding Agency: Department of Defense

Start Date: 2011-01-01

End Date: 2016-08-14

Contract Duration: 2,052 days

Daily Burn Rate: $18.8K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: TIME AND MATERIALS

Sector: Defense

Official Description: CY11 PERFORMANCE BASED LOGISTICS (PBL) SUSTAINING ENGINEERING SUSTAINMENT

Place of Performance

Location: PALMDALE, LOS ANGELES County, CALIFORNIA, 93550

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $38.5 million to NORTHROP GRUMMAN SYSTEMS CORP for work described as: CY11 PERFORMANCE BASED LOGISTICS (PBL) SUSTAINING ENGINEERING SUSTAINMENT Key points: 1. The contract's value of $38.5 million over its duration suggests a significant investment in sustaining engineering. 2. Awarded on a sole-source basis, the lack of competition raises questions about potential price overruns and limited market leverage. 3. The contract's performance-based logistics (PBL) nature indicates a focus on outcomes rather than specific deliverables, which can be effective if well-defined. 4. The duration of the contract (over 5 years) implies a long-term need for these sustainment services. 5. The use of 'TIME AND MATERIALS' pricing, while common for sustainment, can introduce cost uncertainty if not closely managed. 6. The absence of small business set-asides or subcontracting requirements means potential benefits for small businesses are not explicitly captured. 7. The contract falls under the Aircraft Manufacturing NAICS code, aligning with significant defense sector spending.

Value Assessment

Rating: questionable

Benchmarking the value of this $38.5 million contract is challenging without specific performance metrics or comparable sole-source sustainment contracts. However, the lack of competition inherently limits the ability to assess if the pricing reflects market rates or if a more competitive process could have yielded better value. The 'TIME AND MATERIALS' pricing structure, while flexible, requires robust oversight to ensure costs remain reasonable and aligned with the services provided. Without a competitive baseline, it's difficult to definitively state if this represents excellent value for money.

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. This typically occurs when only one responsible source is available or when a compelling justification exists for not seeking competition. The lack of multiple bidders means there was no direct price comparison or incentive for offerors to submit their most competitive proposals. This can lead to higher prices than might be achieved in a competitive environment.

Taxpayer Impact: For taxpayers, a sole-source award means there is a reduced likelihood of achieving the lowest possible price for the services rendered. The absence of competition limits the government's bargaining power and potentially increases the overall cost to the federal budget.

Public Impact

The primary beneficiaries are the Department of Defense (specifically the Air Force) and Northrop Grumman Systems Corp, which provides sustainment engineering services. The services delivered are critical for maintaining the operational readiness and longevity of aircraft, ensuring the Air Force's fleet remains functional. The geographic impact is primarily tied to the locations where Northrop Grumman performs sustainment activities, likely within California where the contract is noted as 'CA'. Workforce implications include the employment of engineers and technical staff at Northrop Grumman who are responsible for the sustainment tasks.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price discovery and potentially increases costs for taxpayers.
Time and Materials pricing can lead to cost overruns if not strictly managed.
Lack of competition means no direct comparison to market rates for similar services.
Absence of small business considerations means missed opportunities for economic inclusion.
Performance-based logistics can be opaque if metrics are not clearly defined and tracked.

Positive Signals

Contract focuses on sustainment engineering, crucial for long-term asset viability.
Performance-based logistics (PBL) aims to align contractor incentives with desired outcomes.
Northrop Grumman is a major defense contractor with established capabilities in this area.
The contract supports critical Air Force readiness and operational capabilities.

Sector Analysis

This contract falls within the broader aerospace and defense sector, specifically focusing on sustainment engineering for aircraft. The market for aircraft sustainment is substantial, driven by the long operational lifecycles of military and commercial aircraft. Companies like Northrop Grumman are key players, offering specialized services to maintain complex systems. Comparable spending benchmarks would typically involve analyzing other sustainment contracts, particularly those with PBL elements and sole-source awards, to gauge cost-effectiveness.

Small Business Impact

This contract does not appear to include any specific small business set-aside provisions, nor is there explicit mention of subcontracting requirements aimed at small businesses. As a sole-source award to a large prime contractor, the direct impact on the small business ecosystem is likely minimal unless Northrop Grumman voluntarily engages small businesses for specific components or services. This represents a missed opportunity to leverage small business capabilities and promote economic participation.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Air Force's contracting and program management offices. Given it's a sole-source award, oversight is critical to ensure the 'TIME AND MATERIALS' pricing is reasonable and that the contractor is meeting performance expectations. Transparency is limited due to the lack of a competitive bidding process. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Aircraft Sustainment Programs
Defense Logistics Agency Contracts
Air Force Readiness and Sustainment Initiatives
Northrop Grumman Defense Contracts
Performance-Based Logistics Contracts

Risk Flags

Sole-source award may lead to higher costs.
Time and Materials pricing introduces cost uncertainty.
Lack of competition limits market-based price discovery.
Potential for performance issues if PBL metrics are not robust.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $38.5 million to NORTHROP GRUMMAN SYSTEMS CORP. CY11 PERFORMANCE BASED LOGISTICS (PBL) SUSTAINING ENGINEERING 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 (Department of the Air Force).

What is the total obligated amount?

The obligated amount is $38.5 million.

What is the period of performance?

Start: 2011-01-01. End: 2016-08-14.

What is Northrop Grumman's track record with similar sole-source sustainment contracts for the Department of Defense?

Northrop Grumman has a long history of performing sustainment and logistics services for various Department of Defense platforms. As a major defense contractor, they frequently engage in sole-source or limited-competition contracts for specialized sustainment engineering, particularly for complex systems where they possess unique knowledge or manufacturing capabilities. Analyzing their past performance on similar contracts, including any cost overruns, schedule delays, or performance issues, would provide context for this specific award. Publicly available contract data and DoD Inspector General reports can offer insights into their performance history, though detailed evaluations of sole-source awards are often less transparent than competed ones.

How does the 'TIME AND MATERIALS' pricing structure compare to other sustainment contracts in the aerospace sector?

Time and Materials (T&M) pricing is a common contract type for sustainment and support services where the scope of work can be variable or difficult to define precisely upfront. In the aerospace sector, T&M is often used for engineering support, repairs, and maintenance where the exact labor hours and material costs are not predictable. However, T&M contracts carry inherent risks of cost escalation if not managed rigorously. Compared to fixed-price contracts, T&M offers flexibility but requires strong government oversight to monitor labor rates, material markups, and overall hours expended to ensure value for money. Benchmarking T&M rates against industry standards and historical data for similar services is crucial for effective cost control.

What are the specific performance metrics used to evaluate the success of this sustainment engineering contract?

The provided data indicates this is a Performance-Based Logistics (PBL) contract, which implies that success is measured against predefined performance outcomes rather than just inputs or tasks. Specific metrics for sustainment engineering could include aircraft availability rates, mean time between failures (MTBF), mean time to repair (MTTR), supply chain responsiveness, and cost-per-flying-hour. The effectiveness of the PBL approach hinges on the clarity, measurability, and attainability of these metrics, as well as the alignment of contractor incentives with achieving them. Without access to the contract's Performance Work Statement (PWS) and associated metrics, a detailed assessment of performance evaluation is not possible.

What is the historical spending pattern for aircraft sustainment engineering within the Department of the Air Force?

The Department of the Air Force consistently allocates significant portions of its budget to aircraft sustainment engineering, reflecting the large and aging fleet it operates. Historical spending patterns show a continuous need for services that ensure aircraft readiness, maintainability, and modernization. This spending is often characterized by a mix of competed contracts for major overhauls and upgrades, and sole-source or limited-competition contracts for specialized sustainment, depot-level maintenance, and long-term support, especially for unique or legacy platforms. Factors influencing spending include operational tempo, new aircraft procurements, and evolving threat environments. The $38.5 million for this specific contract represents a component of this larger, ongoing investment.

Are there any known risks associated with Northrop Grumman's performance on sustainment contracts of this nature?

While Northrop Grumman is a reputable contractor, risks associated with sustainment contracts, particularly sole-source ones, can include potential cost growth due to the T&M structure, scope creep if requirements are not tightly managed, and potential for performance degradation if incentives are misaligned. Past performance reviews, DoD audits, and IG reports might highlight specific areas of concern or success. For instance, challenges in managing complex supply chains, integrating new technologies into legacy systems, or meeting stringent readiness metrics could pose risks. A thorough review would involve examining specific contract histories and any documented issues related to cost, schedule, or performance on similar PBL or sustainment contracts.

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: $38,867,474

Exercised Options: $38,867,474

Current Obligation: $38,547,969

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: F3365799D0028

IDV Type: IDC

Timeline