DoD awards $495M sole-source contract for aircraft manufacturing logistics support

Contract Overview

Contract Amount: $495,185,498 ($495.2M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2012-10-30

End Date: 2019-09-30

Contract Duration: 2,526 days

Daily Burn Rate: $196.0K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: CONTRACTOR LOGISTIC SUPPORT FOR HUNTER FY13

Place of Performance

Location: SIERRA VISTA, COCHISE County, ARIZONA, 85635

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $495.2 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: CONTRACTOR LOGISTIC SUPPORT FOR HUNTER FY13 Key points: 1. Contract awarded on a sole-source basis, raising questions about price discovery and potential for overpayment. 2. Significant duration of over 2500 days suggests a long-term need for these specialized services. 3. The contract's cost-plus-fixed-fee structure may incentivize cost overruns, requiring robust oversight. 4. Awarded to a single large contractor, potentially limiting opportunities for smaller, specialized firms. 5. The contract's value places it among substantial federal procurements in the defense sector. 6. Lack of competition suggests potential barriers to entry or a highly specialized market.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to its sole-source nature and specific focus on logistics support for the Hunter aircraft. Without competitive bids, it's difficult to ascertain if the fixed fee adequately reflects market rates or if the cost-plus component has led to inflated expenses. The total award of nearly half a billion dollars over its duration indicates a significant investment, and the absence of comparative pricing makes a definitive value-for-money assessment difficult.

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 among multiple vendors. This typically occurs when only one vendor possesses the necessary unique capabilities, proprietary technology, or when urgent circumstances preclude a competitive process. The lack of competition means that price discovery through market forces was bypassed, potentially leading to higher costs for the government.

Taxpayer Impact: Taxpayers may have paid a premium due to the absence of competitive pressure to lower prices. The government did not benefit from the potential cost savings that a competitive bidding process could have yielded.

Public Impact

The primary beneficiaries are the Department of Defense, ensuring continued operational readiness of the Hunter aircraft. Services delivered include essential contractor logistic support, maintaining the functionality and availability of critical aviation assets. The geographic impact is primarily centered in Arizona, where the contract is managed and likely where services are performed. Workforce implications include the employment of skilled personnel in logistics, maintenance, and technical support roles within the defense industry.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure, potentially increasing costs for taxpayers.
Cost-plus-fixed-fee contract type can incentivize higher spending if not closely monitored.
Lack of transparency in the bidding process makes it difficult to assess fair pricing.
Long contract duration may indicate a lack of viable alternatives or market consolidation.

Positive Signals

Ensures continued operational readiness and support for critical defense assets.
Awarded to a major defense contractor with established experience in the field.
Contract provides long-term stability for essential logistics services.

Sector Analysis

This contract falls within the aerospace and defense manufacturing sector, specifically focusing on aircraft support. The market for specialized logistics and maintenance for military aircraft is often dominated by a few large, established contractors due to high barriers to entry, including security clearances, specialized knowledge, and existing relationships with the government. Comparable spending benchmarks are difficult to establish precisely due to the unique nature of specific aircraft platforms, but multi-year, high-value contracts for aircraft support are common within the Department of Defense's budget.

Small Business Impact

This contract was not set aside for small businesses and was awarded to a large corporation. There is no indication of subcontracting plans specifically targeting small businesses within the provided data. The sole-source nature of the award further limits the potential for small business participation, as opportunities to compete for prime contracts or significant subcontracting roles are diminished.

Oversight & Accountability

Oversight for this contract would typically fall under the Defense Contract Management Agency (DCMA), responsible for ensuring contractor performance and compliance. The cost-plus-fixed-fee structure necessitates rigorous financial oversight to manage costs and prevent overruns. Transparency is limited due to the sole-source nature, but contract modifications, performance reports, and audits would serve as accountability measures. The Inspector General's office within the Department of Defense would have jurisdiction for investigating any potential fraud, waste, or abuse.

Related Government Programs

Aircraft Manufacturing
Defense Logistics Support
Contractor Logistics Support Services
Hunter Aircraft Program

Risk Flags

Sole-source award
Cost-plus contract type
Lack of competitive bidding

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $495.2 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. CONTRACTOR LOGISTIC SUPPORT FOR HUNTER FY13

Who is the contractor on this award?

The obligated recipient is NORTHROP GRUMMAN SYSTEMS CORPORATION.

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Contract Management Agency).

What is the total obligated amount?

The obligated amount is $495.2 million.

What is the period of performance?

Start: 2012-10-30. End: 2019-09-30.

What is the track record of Northrop Grumman Systems Corporation in providing contractor logistic support for defense assets?

Northrop Grumman Systems Corporation is a major defense contractor with extensive experience in aerospace and defense systems, including logistics support. They have a long history of supporting various military platforms for the U.S. Department of Defense and allied nations. Their track record includes managing complex supply chains, providing maintenance and repair services, and ensuring the operational readiness of aircraft and other defense equipment. While specific performance metrics for this particular contract are not detailed here, Northrop Grumman's overall profile suggests a capacity to handle large-scale, long-term support requirements. However, like any large contractor, they have faced scrutiny and reviews on various contracts regarding cost, performance, and schedule adherence over their extensive history.

How does the $495 million award compare to similar contracts for aircraft logistics support?

Comparing this $495 million award requires context regarding the specific aircraft platform, its operational tempo, and the scope of logistics support. The Hunter aircraft is a specific type of unmanned aerial vehicle (UAV), and contracts for its support may differ significantly from those for larger, manned aircraft. However, for major defense platforms, multi-year contracts in the hundreds of millions of dollars for comprehensive logistics, maintenance, and sustainment are not uncommon. The value is substantial, reflecting the complexity and duration of supporting advanced military hardware. Without access to a database of comparable sole-source contracts for similar UAV logistics, a precise benchmark is difficult, but the figure is consistent with significant defense sustainment programs.

What are the primary risks associated with a sole-source, cost-plus-fixed-fee contract for logistics support?

The primary risks associated with a sole-source, cost-plus-fixed-fee (CPFF) contract are twofold. Firstly, the sole-source nature eliminates competitive pressure, which can lead to higher prices than might be achieved in a competitive environment. The government does not benefit from market forces driving down costs. Secondly, the CPFF structure, while providing flexibility, can incentivize the contractor to incur more costs, as their fee is a percentage of those costs. This increases the risk of cost overruns if not managed with stringent oversight. For taxpayers, the risk is paying more than necessary for the services rendered and potentially funding inefficiencies. Robust government oversight, detailed auditing, and clear performance metrics are crucial to mitigate these risks.

What is the historical spending pattern for contractor logistic support for the Hunter aircraft program?

Analyzing the historical spending for contractor logistic support for the Hunter aircraft program requires access to historical contract data beyond this single award. This specific contract, awarded in 2012 and ending in 2019, represents a significant portion of spending during that period. To understand the full pattern, one would need to examine prior contracts for the Hunter's support, including any earlier sole-source awards or competed efforts, as well as any subsequent contracts awarded after 2019. Without this broader dataset, it's impossible to determine if this $495 million award represents an increase, decrease, or consistent level of spending compared to previous periods or if it aligns with the program's lifecycle cost projections.

How does the lack of competition impact the government's ability to negotiate favorable terms?

The lack of competition significantly hampers the government's ability to negotiate favorable terms. In a competitive bidding process, multiple vendors vie for the contract, driving down prices and encouraging the inclusion of beneficial terms and conditions to win the award. When a contract is sole-source, the government negotiates with a single entity, which holds considerable leverage. The contractor is aware that the government has limited alternatives, potentially leading to less aggressive pricing and fewer concessions on terms related to intellectual property, liability, or performance guarantees. This power imbalance can result in less advantageous contract terms for the government and, consequently, for taxpayers.

Industry Classification

NAICS: Manufacturing › Aerospace Product and Parts Manufacturing › Aircraft Manufacturing

Product/Service Code: AEROSPACE CRAFT AND STRUCTURAL COMPONENTS

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: W58RGZ12R0265

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Northrop Grumman Corporation

Address: 4067 ENTERPRISE WAY, SIERRA VISTA, AZ, 85635

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $495,185,498

Exercised Options: $495,185,498

Current Obligation: $495,185,498

Subaward Activity

Number of Subawards: 166

Total Subaward Amount: $116,529,286

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline