Air Force's $34M B-2 Logistics Contract Awarded to Northrop Grumman Raises Value Questions

Contract Overview

Contract Amount: $34,147,430 ($34.1M)

Contractor: Northrop Grumman Systems Corp

Awarding Agency: Department of Defense

Start Date: 2012-01-01

End Date: 2014-09-29

Contract Duration: 1,002 days

Daily Burn Rate: $34.1K/day

Competition Type: NOT COMPETED

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: CY12 B-2 PERFORMANCE BASED LOGISTICS (PBL) SUSTAINING ENGINEERING (SE) SUSTAINMENT

Place of Performance

Location: PALMDALE, LOS ANGELES County, CALIFORNIA, 93550

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $34.1 million to NORTHROP GRUMMAN SYSTEMS CORP for work described as: CY12 B-2 PERFORMANCE BASED LOGISTICS (PBL) SUSTAINING ENGINEERING (SE) SUSTAINMENT Key points: 1. Contract awarded on a sole-source basis, limiting price competition. 2. Performance-based logistics approach aims for efficiency but requires careful monitoring. 3. Sustaining engineering is critical for aging aircraft, indicating a necessary but potentially costly service. 4. The contract duration of over two years suggests a significant commitment. 5. Lack of competition raises concerns about potential overpayment and suboptimal value. 6. The specific services provided under sustaining engineering warrant further scrutiny for necessity and efficiency.

Value Assessment

Rating: questionable

The contract's value is difficult to benchmark due to its sole-source nature and the specialized services of sustaining engineering for the B-2 bomber. Without competitive bids, it's challenging to ascertain if the $34 million represents a fair market price. The cost-plus-fixed-fee structure, while common for complex services, can incentivize cost increases if not tightly managed. Comparing this to similar sustainment contracts for other high-value, low-production aircraft would be necessary for a more robust value assessment.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one vendor, Northrop Grumman Systems Corp, was considered. This approach bypasses the competitive bidding process, which typically drives down prices and encourages innovation. While sole-source awards are sometimes justified for unique capabilities or existing system knowledge, they inherently reduce price discovery and can lead to higher costs for the government.

Taxpayer Impact: The lack of competition means taxpayers may be paying a premium for these sustaining engineering services, as there was no market pressure to offer the lowest possible price.

Public Impact

The primary beneficiaries are the U.S. Air Force and its B-2 bomber fleet, ensuring operational readiness. Services include critical sustaining engineering to maintain the complex systems of the B-2. Geographic impact is primarily within the U.S. Air Force's operational bases and potentially Northrop Grumman's facilities. Workforce implications include specialized engineering roles at Northrop Grumman and support personnel within the Air Force.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure on pricing.
Cost-plus-fixed-fee contract type can lead to cost overruns if not managed stringently.
Lack of transparency in the justification for sole-source award.
Sustaining engineering for aging platforms can be inherently expensive.
Limited insight into the specific performance metrics driving the 'performance-based' aspect.

Positive Signals

Performance-based logistics (PBL) approach can incentivize contractor efficiency.
Sustaining engineering is crucial for maintaining the operational capability of a strategic asset like the B-2.
Northrop Grumman is the original equipment manufacturer, possessing unique system knowledge.
The contract aims to ensure the long-term viability of a critical defense platform.

Sector Analysis

The aerospace and defense sector is characterized by high R&D costs, long product lifecycles, and significant government procurement. Sustainment and logistics contracts are a substantial portion of defense spending, ensuring the readiness of complex weapon systems. This contract for the B-2 bomber falls within the specialized segment of aircraft manufacturing and maintenance, where original equipment manufacturers often hold a dominant position due to proprietary knowledge and intellectual property. Benchmarking is challenging due to the unique nature of the B-2 and its limited production numbers.

Small Business Impact

This contract does not appear to involve small business set-asides. As a sole-source award to a large prime contractor, the opportunities for small businesses would likely be limited to subcontracting roles, if any. The prime contractor's subcontracting plan, if applicable, would dictate the extent of small business participation. Without specific subcontracting data, the direct impact on the small business ecosystem is unclear, but it is unlikely to be a primary focus of this particular award.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Air Force's contracting and program management offices. Given the sole-source nature and the critical defense asset involved, oversight would likely be stringent, focusing on performance metrics, cost control, and adherence to the contract terms. Transparency may be limited due to the sensitive nature of the platform and the sole-source justification. Inspector General involvement would be contingent on allegations of fraud, waste, or abuse.

Related Government Programs

B-2 Bomber Sustainment Programs
Air Force Logistics and Maintenance Contracts
Defense Contractor Performance-Based Logistics
Aircraft Manufacturing and Support Services
Northrop Grumman Defense Contracts

Risk Flags

Sole-source award
Cost-plus-fixed-fee contract type
Lack of competitive bidding
Critical defense asset sustainment

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $34.1 million to NORTHROP GRUMMAN SYSTEMS CORP. CY12 B-2 PERFORMANCE BASED LOGISTICS (PBL) SUSTAINING ENGINEERING (SE) 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 $34.1 million.

What is the period of performance?

Start: 2012-01-01. End: 2014-09-29.

What specific sustaining engineering tasks are included in this contract, and how are they prioritized?

The contract details for 'CY12 B-2 PERFORMANCE BASED LOGISTICS (PBL) SUSTAINING ENGINEERING (SE) SUSTAINMENT' indicate a broad scope of services aimed at maintaining the operational readiness and longevity of the B-2 Spirit bomber fleet. Sustaining engineering typically encompasses a range of activities, including but not limited to, troubleshooting complex system issues, developing engineering change proposals (ECPs) for obsolescence or performance improvements, providing technical support for fielded systems, analyzing failure data, and recommending corrective actions. For the B-2, given its advanced and aging nature, these tasks are critical for ensuring the aircraft's continued functionality and safety. Prioritization would likely be driven by factors such as mission criticality, safety implications, operational impact, and the urgency of addressing component obsolescence or performance degradation. The specific breakdown and prioritization methodology would be detailed in the contract's Statement of Work (SOW) and associated performance metrics, which are not fully detailed in the provided data.

How does the cost-plus-fixed-fee (CPFF) structure compare to other contract types for similar defense sustainment services?

The Cost-Plus-Fixed-Fee (CPFF) contract type is often utilized for complex research, development, or specialized services where the scope of work is not precisely defined at the outset, or where significant uncertainties exist. In this case, for sustaining engineering on the B-2 bomber, CPFF allows the contractor (Northrop Grumman) to be reimbursed for allowable costs incurred, plus a predetermined fixed fee representing profit. This contrasts with fixed-price contracts, where the contractor bears more risk for cost overruns but also has a greater incentive to control costs to maximize profit. For defense sustainment, other common types include Performance-Based Logistics (PBL), which focuses on outcomes and availability, and various fixed-price arrangements for more defined services. While CPFF provides flexibility, it shifts cost risk to the government and requires robust oversight to prevent cost escalation. Its suitability depends heavily on the predictability of the services required and the government's ability to manage contractor costs effectively.

What is the historical spending trend for B-2 sustaining engineering and logistics support from Northrop Grumman?

Analyzing the historical spending trend for B-2 sustaining engineering and logistics support from Northrop Grumman is crucial for contextualizing the $34.15 million awarded in CY12. While the provided data snippet focuses on a single contract award, a comprehensive review would involve examining contract awards over several fiscal years. This would include looking at previous contracts for PBL, sustaining engineering, maintenance, and repair services specifically for the B-2 platform awarded to Northrop Grumman or its predecessors. Trends to observe would include the overall annual spend, the average value of individual contracts, the prevalence of sole-source versus competitive awards, and any significant fluctuations that might correlate with specific upgrade programs, operational tempo changes, or major sustainment initiatives. Understanding these historical patterns can reveal whether the CY12 award represents a typical expenditure, an increase, or a decrease, and whether spending has been consistently managed or has shown signs of escalation.

What are the key performance indicators (KPIs) associated with this Performance-Based Logistics (PBL) contract?

Performance-Based Logistics (PBL) contracts are designed to incentivize contractors to achieve specific, measurable outcomes rather than simply delivering goods or services. For a contract like the B-2 sustaining engineering support, key performance indicators (KPIs) would likely focus on metrics directly related to the operational readiness and availability of the B-2 fleet. Examples of relevant KPIs could include aircraft mission capable rates, system uptime percentages for critical components, turnaround times for repairs and maintenance, the number of deferred maintenance actions, or the successful implementation of engineering changes to enhance reliability. The 'performance-based' aspect suggests that a significant portion of the payment or contractor profit might be tied to meeting or exceeding these defined performance targets. Without access to the contract's Statement of Work (SOW) and Performance Work Statement (PWS), the exact KPIs and their associated thresholds remain unspecified in the provided data.

What is the justification for awarding this contract solely to Northrop Grumman, given the significant expenditure?

The justification for awarding this contract solely to Northrop Grumman Systems Corp stems from the unique and specialized nature of the B-2 Spirit bomber and its associated systems. Northrop Grumman, as the original equipment manufacturer (OEM) and prime contractor responsible for the B-2's development and production, possesses unparalleled knowledge, proprietary data, and technical expertise required for its sustainment. This includes access to intricate design specifications, specialized tooling, unique test equipment, and a deep understanding of the complex integration of the aircraft's various subsystems. For highly specialized and critical defense platforms like the B-2, competition may be limited due to factors such as industrial property rights, the need for continuity of expertise, or the lack of alternative sources capable of providing the required level of support. The government would typically document this justification through a Justification and Approval (J&A) document, outlining why full and open competition is not feasible or not in the best interest of the government.

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

Address: 3520 E AVE M, PALMDALE, CA, 93550

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $34,220,761

Exercised Options: $34,220,761

Current Obligation: $34,147,430

Subaward Activity

Number of Subawards: 45

Total Subaward Amount: $5,646,684

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: F3365799D0028

IDV Type: IDC

Timeline