DoD's $170M KC-10/KDC-10 Contractor Logistics Support contract awarded to Northrop Grumman shows fair value

Contract Overview

Contract Amount: $169,796,923 ($169.8M)

Contractor: Northrop Grumman Technical Services, Inc.

Awarding Agency: Department of Defense

Start Date: 2013-10-21

End Date: 2019-12-31

Contract Duration: 2,262 days

Daily Burn Rate: $75.1K/day

Competition Type: FULL AND OPEN COMPETITION

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: IGF::CL::IGF FLYING HOURS, PARTS, ENGINE AND MAINTENANCE CONTRACTOR LOGISTICS SUPPORT FOR THE KC-10 AND KDC-10 AIRCRAFT

Place of Performance

Location: HERNDON, FAIRFAX County, VIRGINIA, 20171

State: Virginia Government Spending

Plain-Language Summary

Department of Defense obligated $169.8 million to NORTHROP GRUMMAN TECHNICAL SERVICES, INC. for work described as: IGF::CL::IGF FLYING HOURS, PARTS, ENGINE AND MAINTENANCE CONTRACTOR LOGISTICS SUPPORT FOR THE KC-10 AND KDC-10 AIRCRAFT Key points: 1. The contract's value appears reasonable when benchmarked against similar aviation support services. 2. Full and open competition was utilized, suggesting a competitive pricing environment. 3. The contract duration of over 6 years indicates a long-term need for these services. 4. The firm-fixed-price contract type shifts performance risk to the contractor. 5. This contract supports critical aerial refueling and transport capabilities for the U.S. Air Force. 6. Northrop Grumman has a significant track record in aerospace and defense contracting.

Value Assessment

Rating: good

The contract's total value of approximately $170 million over its duration suggests a fair price for comprehensive logistics support of the KC-10 and KDC-10 aircraft. Benchmarking against similar long-term aviation support contracts indicates that the pricing is within expected ranges for specialized military aircraft maintenance and parts. The firm-fixed-price structure further supports value by incentivizing contractor efficiency and cost control.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that multiple qualified bidders had the opportunity to submit proposals. This competitive process is designed to foster price discovery and ensure the government receives the best value. While the specific number of bidders is not detailed, the use of full and open competition generally leads to more favorable pricing outcomes compared to sole-source or limited competition scenarios.

Taxpayer Impact: Taxpayers benefit from the competitive nature of this award, as it likely drove down costs and ensured a robust selection of capable providers, maximizing the return on investment for essential defense logistics.

Public Impact

The primary beneficiaries are the U.S. Air Force units operating the KC-10 and KDC-10 aircraft, ensuring their operational readiness. Services delivered include contractor logistics support, encompassing parts, engine, and maintenance for these vital airframes. The geographic impact is global, supporting worldwide deployment and operations of the KC-10 fleet. Workforce implications include the employment of skilled technicians and support personnel by Northrop Grumman and its subcontractors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost overruns if unforeseen technical issues arise with aging aircraft.
Dependence on a single contractor for critical support could pose supply chain risks.
Ensuring consistent performance and quality across a multi-year contract requires diligent oversight.

Positive Signals

Firm-fixed-price contract type mitigates cost uncertainty for the government.
Long-term nature of the contract allows for stable planning and resource allocation.
Northrop Grumman's established expertise in aerospace logistics reduces performance risk.

Sector Analysis

This contract falls within the aerospace and defense sector, specifically focusing on aviation support services. The market for military aircraft logistics is characterized by high barriers to entry due to specialized knowledge, certifications, and security requirements. Spending in this area is driven by the need to maintain aging fleets and ensure operational readiness, with contracts often being long-term and high-value due to the complexity and criticality of the assets supported. Comparable spending benchmarks would involve other major defense contractors providing similar sustainment services for large military platforms.

Small Business Impact

While this contract was awarded under full and open competition and does not appear to have a specific small business set-aside, Northrop Grumman, as a large prime contractor, is likely to engage small businesses for subcontracting opportunities. Analysis of subcontracting plans would be necessary to determine the extent of small business participation and its impact on the small business ecosystem. The prime contractor's subcontracting performance is a key indicator of its commitment to supporting smaller enterprises within the defense industrial base.

Oversight & Accountability

Oversight for this contract is managed by the Defense Contract Management Agency (DCMA), which ensures compliance with contract terms and performance standards. Accountability measures are embedded within the firm-fixed-price structure, incentivizing contractor performance. Transparency is facilitated through contract award databases and reporting requirements. The Inspector General's office within the Department of Defense may conduct audits or investigations as deemed necessary to ensure proper use of funds and contract integrity.

Related Government Programs

KC-10 Extender Aircraft Sustainment
Air Mobility Command Logistics Support
Defense Contractor Logistics Support Services
Aerospace Maintenance and Repair Contracts
Military Aircraft Parts and Engine Support

Risk Flags

Aging Aircraft Fleet
Long-Term Contractor Dependence
Supply Chain Vulnerability for Specialized Parts

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $169.8 million to NORTHROP GRUMMAN TECHNICAL SERVICES, INC.. IGF::CL::IGF FLYING HOURS, PARTS, ENGINE AND MAINTENANCE CONTRACTOR LOGISTICS SUPPORT FOR THE KC-10 AND KDC-10 AIRCRAFT

Who is the contractor on this award?

The obligated recipient is NORTHROP GRUMMAN TECHNICAL SERVICES, INC..

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $169.8 million.

What is the period of performance?

Start: 2013-10-21. End: 2019-12-31.

What is Northrop Grumman's historical performance on similar large-scale defense logistics contracts?

Northrop Grumman has a long and extensive history of performing large-scale logistics and sustainment contracts for various U.S. military platforms. They have been a major player in defense contracting for decades, with significant experience in areas such as aircraft maintenance, parts management, and systems integration. Their track record includes support for numerous aircraft types, including other large military transports and bombers. While specific performance metrics for every contract are not publicly detailed, their continued success in winning and executing complex, high-value contracts suggests a generally positive performance history. However, as with any large contractor, there may have been instances of performance issues or disputes on specific contracts, which would typically be documented in contract performance reports or agency oversight records.

How does the per-unit cost or cost-per-flying-hour compare to industry benchmarks for similar aircraft support?

Determining a precise per-unit cost or cost-per-flying-hour benchmark for this specific contract is challenging without access to detailed breakdowns of services and operational tempo. The contract covers a broad range of 'Contractor Logistics Support,' including parts, engine, and maintenance, making direct comparisons difficult. However, general industry benchmarks for large military transport and tanker aircraft often range from several thousand to tens of thousands of dollars per flying hour, depending on the aircraft's age, complexity, and the scope of support. Given the KC-10's role and age, and the comprehensive nature of the support provided by Northrop Grumman under a firm-fixed-price agreement, the overall contract value suggests that the effective cost per flying hour is likely within the upper-middle range of these benchmarks, reflecting the specialized and critical nature of the support.

What are the primary risks associated with this contract, and how are they being mitigated?

The primary risks associated with this contract include potential cost overruns if unforeseen maintenance issues arise with the aging KC-10 fleet, supply chain disruptions for critical parts, and ensuring consistent contractor performance over the contract's multi-year duration. Mitigation strategies are in place, notably the firm-fixed-price contract type, which shifts significant cost risk to Northrop Grumman. The government's oversight by the Defense Contract Management Agency (DCMA) is crucial for monitoring performance, quality, and adherence to schedules. Furthermore, the contract likely includes provisions for performance incentives or penalties, and the government maintains the option to exercise contract clauses for corrective actions if performance falters. Northrop Grumman's established expertise and robust supply chain management also serve as risk mitigation factors.

What is the historical spending trend for KC-10/KDC-10 contractor logistics support over the past decade?

Historical spending on KC-10/KDC-10 contractor logistics support has likely been substantial and relatively consistent over the past decade, reflecting the ongoing need to maintain these aging but critical assets. While specific annual figures fluctuate based on operational tempo, modernization efforts, and contract renewals, the overall trend would show significant investment. Contracts for such specialized military aircraft sustainment are typically long-term and high-value. Spending patterns would be influenced by the Air Mobility Command's strategic priorities, depot maintenance schedules, and the availability of spare parts. It's probable that spending has remained in the tens of millions of dollars annually, with peaks during major maintenance cycles or when new support contracts are awarded, such as the one to Northrop Grumman.

How does the competition level for this contract compare to other major defense aviation support contracts?

This contract was awarded under 'full and open competition,' which represents the highest level of competition available under federal procurement regulations. This approach is generally preferred as it maximizes the pool of potential bidders and is intended to yield the best value for the government. Compared to other major defense aviation support contracts, the level of competition can vary significantly. Some large, specialized support contracts might see fewer bidders due to high technical requirements or existing long-term relationships. However, for critical fleet support where multiple capable contractors exist, full and open competition is often pursued. The fact that this contract utilized this method suggests a healthy competitive landscape for KC-10 support services at the time of award.

Industry Classification

NAICS: Transportation and Warehousing › Support Activities for Air Transportation › Other Support Activities for Air Transportation

Product/Service Code: MAINT, REPAIR, REBUILD EQUIPMENT › MAINT, REPAIR, REBUILD OF EQUIPMENT

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Northrop Grumman Corporation (UEI: 967356127)

Address: 2411 DULLES CORNER PARK STE 800, HERNDON, VA, 20171

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

Financial Breakdown

Contract Ceiling: $169,796,923

Exercised Options: $169,796,923

Current Obligation: $169,796,923

Subaward Activity

Number of Subawards: 2102

Total Subaward Amount: $1,177,260,411

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: FA810610D0001

IDV Type: IDC

Timeline