DoD awards $147.5M to Northrop Grumman for Hunter UAS fleet support, a sole-source contract

Contract Overview

Contract Amount: $147,547,220 ($147.5M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2019-05-11

End Date: 2022-09-30

Contract Duration: 1,238 days

Daily Burn Rate: $119.2K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: THIS CONTRACT IS TO AWARD THE HUNTER UNMANNED AIRCRAFT SYSTEM FLEET SYSTEM SUPPORT FOR OPERATIONS, MAINTENANCE, ENGINEERING, RE-ENGINEERING AND RE-MANUFACTURING OF THE HUNTER.

Place of Performance

Location: SIERRA VISTA, COCHISE County, ARIZONA, 85635

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $147.5 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: THIS CONTRACT IS TO AWARD THE HUNTER UNMANNED AIRCRAFT SYSTEM FLEET SYSTEM SUPPORT FOR OPERATIONS, MAINTENANCE, ENGINEERING, RE-ENGINEERING AND RE-MANUFACTURING OF THE HUNTER. Key points: 1. Contract awarded for operations, maintenance, engineering, re-engineering, and re-manufacturing of the Hunter Unmanned Aircraft System (UAS) fleet. 2. Sole-source award indicates limited competition, potentially impacting price negotiation. 3. Contract duration of 1238 days suggests a long-term commitment to sustainment. 4. Cost Plus Fixed Fee (CPFF) contract type carries inherent risk of cost overruns. 5. Northrop Grumman Systems Corporation is the sole contractor, highlighting potential single-source dependency. 6. The contract is for aircraft manufacturing support, aligning with NAICS code 336411.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging without comparable sole-source sustainment contracts for the Hunter UAS. The Cost Plus Fixed Fee (CPFF) structure, while allowing for flexibility, can lead to higher costs compared to fixed-price contracts if not managed rigorously. The total obligated amount of $147.5 million over approximately 3.4 years suggests a significant investment in maintaining this specific UAS platform. Further analysis would require understanding the scope of services and the contractor's historical performance on similar contracts.

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 a specific contractor possesses unique capabilities, proprietary technology, or is the only source capable of meeting the requirement. The lack of competition limits the government's ability to leverage market forces to achieve the best possible pricing and terms.

Taxpayer Impact: Taxpayers may face higher costs due to the absence of competitive bidding. Without competing offers, the government cannot be assured it is receiving the most cost-effective solution available in the market.

Public Impact

The primary beneficiaries are the Department of the Army, which relies on the Hunter UAS for its operations. Services delivered include essential operations, maintenance, engineering, re-engineering, and re-manufacturing of the Hunter UAS fleet. The contract's geographic impact is primarily associated with the contractor's facility in Arizona (ST: AZ, SN: ARIZONA), where sustainment activities will likely occur. Workforce implications include the potential for sustained employment at Northrop Grumman's facilities involved in aircraft manufacturing and support.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure on pricing.
Cost Plus Fixed Fee (CPFF) contract type can incentivize cost growth.
Dependency on a single contractor for critical UAS sustainment.
Lack of transparency regarding the justification for sole-source award.

Positive Signals

Contract ensures continued operational readiness of the Hunter UAS fleet.
Northrop Grumman has established expertise in aircraft manufacturing and support.
Contract provides long-term sustainment, potentially leading to predictable operational capabilities.

Sector Analysis

The aircraft manufacturing sector (NAICS 336411) is characterized by high barriers to entry, significant capital investment, and complex technological requirements. This contract falls within the defense aerospace segment, focusing on the sustainment of a specific unmanned aircraft system. Spending in this area is driven by military modernization efforts and the increasing reliance on unmanned platforms for reconnaissance, surveillance, and other operational missions. Comparable spending benchmarks would typically involve other large-scale sustainment contracts for military aircraft or complex defense systems.

Small Business Impact

This contract was not set aside for small businesses, and there is no indication of subcontracting requirements for small businesses within the provided data. 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. Further investigation into subcontracting plans would be necessary to assess any indirect benefits to small businesses.

Oversight & Accountability

Oversight for this contract would primarily reside with the Department of the Army contracting and program management offices. Accountability measures are typically embedded within the CPFF contract terms, requiring the contractor to adhere to performance standards and cost controls. Transparency is limited due to the sole-source nature of the award. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse.

Related Government Programs

Unmanned Aircraft Systems (UAS) Procurement
Defense Logistics Agency (DLA) Support Contracts
Aircraft Maintenance and Repair Services
Northrop Grumman Defense Contracts

Risk Flags

Sole-source award
Cost-plus contract type
Lack of competition

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $147.5 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. THIS CONTRACT IS TO AWARD THE HUNTER UNMANNED AIRCRAFT SYSTEM FLEET SYSTEM SUPPORT FOR OPERATIONS, MAINTENANCE, ENGINEERING, RE-ENGINEERING AND RE-MANUFACTURING OF THE HUNTER.

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 (Department of the Army).

What is the total obligated amount?

The obligated amount is $147.5 million.

What is the period of performance?

Start: 2019-05-11. End: 2022-09-30.

What is the historical spending on the Hunter UAS program prior to this contract?

Detailed historical spending data for the Hunter UAS program prior to this specific $147.5 million contract is not provided in the given data. However, the existence of a multi-year sustainment contract suggests prior investment in the platform's acquisition and initial operational support. To understand the full historical context, one would need to access procurement databases and budget documents related to the Hunter UAS, potentially tracing back to its initial fielding. This would reveal trends in acquisition costs, operational expenditures, and previous sustainment contracts, allowing for a more comprehensive analysis of the program's lifecycle cost and the justification for continued investment.

What specific justification was provided for awarding this contract on a sole-source basis?

The provided data indicates the contract was 'NOT COMPETED,' signifying a sole-source award. However, the specific justification for this sole-source determination is not detailed. Typically, sole-source justifications are documented under specific federal acquisition regulations (e.g., FAR Part 6) and might cite reasons such as unique capabilities, proprietary technology, lack of market availability, or urgent and compelling needs where only one source can fulfill the requirement. Without access to the official justification document (e.g., a Justification and Approval - J&A), it is impossible to ascertain the precise rationale. This lack of transparency is a common concern with sole-source awards.

How does the Cost Plus Fixed Fee (CPFF) structure compare to other contract types for UAS sustainment in terms of cost control?

The Cost Plus Fixed Fee (CPFF) contract type reimburses the contractor for allowable costs incurred plus a fixed fee representing profit. While it offers flexibility for requirements that are not well-defined or involve significant uncertainty, it carries a higher risk of cost overruns compared to fixed-price contracts. The contractor has less incentive to control costs, as the government bears the majority of the financial risk. For UAS sustainment, fixed-price or incentive-based contracts might offer better cost control if the scope of work is clearly defined and performance metrics can be established. However, for complex engineering and re-manufacturing tasks, CPFF might be deemed necessary to accommodate unforeseen technical challenges.

What is Northrop Grumman's track record with similar UAS sustainment contracts?

Northrop Grumman Systems Corporation is a major defense contractor with extensive experience in aerospace and defense systems, including unmanned aircraft. While specific details of their track record on similar Hunter UAS sustainment contracts are not provided here, the company is known for producing and supporting a wide range of aircraft and defense platforms. Assessing their performance would require reviewing past contract performance evaluations (e.g., CPARS reports), any past performance issues, and their demonstrated capabilities in managing complex sustainment programs for other UAS or aircraft. Their established presence in the industry suggests a baseline capability, but detailed performance metrics are crucial for a thorough assessment.

What are the potential risks associated with relying on a single contractor for the Hunter UAS fleet's long-term support?

Relying on a single contractor, like Northrop Grumman in this case, for the Hunter UAS fleet's long-term support presents several risks. Firstly, it creates a dependency that can limit the government's leverage in future negotiations, potentially leading to higher prices or less favorable terms. Secondly, it reduces the incentive for the contractor to innovate or improve efficiency if there is no competitive pressure. Thirdly, if the contractor experiences financial difficulties, operational disruptions, or decides to exit the market, the government could face significant challenges in finding an alternative provider, potentially impacting the operational readiness of the UAS fleet. This single-source dependency necessitates robust contract management and oversight.

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: W58RGZ18R0144

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: $590,094,095

Exercised Options: $147,547,220

Current Obligation: $147,547,220

Actual Outlays: $4,360,357

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline