Northrop Got $1.1 Billion From Air Force for ‘Degraded’ Services

  • Some missions affected by lack of planes, audit shows
  • Air Force may press for return of $7.6 million in bonus

The U.S. Air Force paid Northrop Grumman Corp. $1.1 billion over about four years to maintain its aging fleet of air-to-ground surveillance aircraft even as costs for the planes increased and their combat capability declined, according to a Pentagon Inspector General audit.

Between May 2011 and October 2015 the Air Force spent money “for a degraded mission capability,” Jacqueline Wicecarver, assistant for acquisition, said in a redacted Nov. 1 report to Air Force officials marked “For Official Use Only.” In addition, some of the Air Force unit’s jets, known as JSTARS, had their missions affected “because aircraft were not available” when needed, according to the report.

Air Force JSTARS aircraft have been used since the 1991 Gulf War to monitor enemy ground movements and pass on locations for airstrikes and overall intelligence. The aircraft are flying over Iraq monitoring Islamic State terrorists. They use modified Boeing Co. 707-300 airframes crammed with radar, sensors and moving target indicators which were already 32 years old at time of purchase.

Even without the management flaws, the Air Force “is faced with significant challenges” to keep the aircraft available for missions, it said. The service will soon launch an $8 billion winner-take-all competition to replace them with 16 new jets, likely pitting Northrop against Boeing and Lockheed Martin Corp.

Oversight Flaws

The report doesn’t say Northrop’s JSTARS maintenance work was poor, although maintenance at the company’s Lake Charles, Louisiana, facility “was rarely completed within” the contracted days. Air Force oversight flaws included mismanagement of the bonus fee pool, paying some fees in spite of cost overruns. The service also allowed Northrop to determine whether it should proceed with costly maintenance work over and above contract terms without Air Force oversight, the audit said.

“I think it’s fair to say that no single issue caused the problem, but an aging airframe, inadequate Air Force engineering oversight and factors within the contractors’ control contributed to” the aircraft’s reduced availability for training and combat missions, as well as rising costs, Kathie Scarrah, a spokeswoman for the inspector general, said via e-mail.

As a result of the audit, the Air Force is reviewing whether to force Northrop to return $7.6 million, or 15 percent of an award fee bonus paid in a recent period “that could have been put to better use,” the service said in written comments in the report. The excess was paid because the contracting officer “mismanaged the award fee pool,” the audit said.

$7 Billion Contract

Northrop Grumman is performing maintenance on JSTARS aircraft under a $7 billion “total system support contract” awarded in September 2000 that had a six-year base with 16 annual options. Unless major management improvements occur the service “will continue to pay Northrop Grumman reimbursable expenses and award fees” without receiving what it paid for, it said.

Company spokesman Randy Belote said via e-mail that “Northrop Grumman is committed to continuous quality, safety, and mission-readiness” programs and added that the aircraft system has been “operating at surge levels since 2011 and has flown more than 125,000 combat hours since 9/11.”

“We will continue to work with the Air Force, as we have for 30 years on this program, on a long-term sustainment plan that safely and affordably keeps the E-8C fleet flying until the recapitalized Joint STARS fleet is fielded,” Belote wrote.

Bonus Decision

Colonel Raymond Wier III, an official with the Air Force Life Cycle Command, in written responses in the report, said the service largely agreed with the findings and he outlined corrective action, such as greater and more regular reviews of the Northrop contract.

The Air Force “will consult legal counsel to determine” if it’s appropriate to recover the $7.6 million, he wrote.

Northrop is paid an award fee for meeting or exceeding metrics in four areas, but the Air Force contracting officer failed to establish a “performance incentive” that would motivate Northrop “to be more efficient,” the audit said.

Until new aircraft enter the fleet, the service needs to improve its management of the current contract, to include better oversight over Northrop’s proposed costs and the criteria for awarding bonuses, the audit said.

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