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Industry Giant Northrop Grumman Wins Big, Fat Contract For Big, Fat US Air Force Bomber

The US Air Force announced that Northrop Grumman has beat out a Lockheed Martin / Boeing team - and at stake, there's a $70 billion dollar pie.
October 27, 2015, 11:15pm
Photo by Kenny Holston

Tuesday, the Pentagon has announced Christmas will come a little early for Northrop Grumman, in the form of a gigantic contract for the US Air Force's new and evocatively-named Long Range Strike Bomber, also known as LRS-B. Northrop Grumman beat out a joint bid from Lockheed Martin and Boeing.

Because nothing costing tens of billions of dollars is ever simple, the costs for this plane have some qualifiers. But, if you take all the engineering, the manufacturing, and all that, and assume that they'll spread the cost out over the planned 100 aircraft, the total comes to $72.5 billion dollars (in 2010 dollars). The first planes are expected to be deployed and ready for use is 2025.

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Many of the details about the plane -- what it looks like, what it's called, what kind of engines it has -- are either secret, undecided, or both. But the top secret technical details don't hold a candle to the obscure and byzantine stuff that goes on around the industry side of this contract.

To start, because this is a big chunk of cash, there's decent odds that the Lockheed Martin + Boeing team will probably raise a protest, after issuing a disappointed statement on Tuesday. But that's just the tip of the iceberg for the weird defense-industrial ecosystem which mixes defense industry, money, and politics.

During the 1990s a number of defense companies merged and consolidated in the aftermath of sharp post-Cold War defense cuts. For the most part, this was an effort to improve efficiencies and control costs.

Today there are just three major defense companies that are able to take the lead role in bringing together the legion of companies that get wrapped into any major aerospace defense contract. Those three companies (also called "prime contractors") are Boeing, Lockheed Martin, and Northrop Grumman, all of whom were involved in bids for the LRS-B contract.

Related: Is the Air Force's Next Nuclear Bomber Trying to Get Itself Fired?

The problem is though at the same time the defense industry has consolidated into just a couple behemoth companies, the programs themselves have gotten really, really drawn out.

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Before, you could win a few, lose a few, and call it a day. Assuming that this program lives a long, natural life and goes to completion, the LRS-B will probably be only one of two US bomber contracts this century. It doesn't matter how well you plan, if you're shut out of a particular product line for half a century or so, you're pretty much shut out for good.

Whether you like it or not, the defense industry has become so consolidated that any of the big heavy hitters are perilously close to "too big to fail" sizes, and are clearly pretty far from the days when a whole field of competitors fought for the government dollar.

Had Northrop Grumman lost the LRS-B bid, there's a reasonable chance it would have been edged out of the prime contractor slot. The most recent Northrop contract was for the B-2 bomber, which wrapped up production in 2000. Lockheed Martin has the lucrative and gigantic contract for the controversial F-35 fighter, and Boeing is head honcho on the existing F-15 and F-18 aircraft.

Now, most of the time, a bad day for a gigantic defense company is not going to bring a tear to too many eyes, but in the case of the defense industry it creates problems. Among other things, it means the base of technical and industrial skills available to make complex, flightworthy defense stuff gets very narrow indeed. But since countries still love it when all their cool high-tech war stuff is made at home, a collapsing defense industry can end up needing big subsidies to keep afloat.

Now the thing to watch for is how Northrop writes the history (or at least the subcontracts). Typically, a winning prime contractor will throw a part of the contract to the losing bidder to leverage their particular strengths and to spread the wealth around a bit. This keeps companies solvent, the industry healthy, and the Pentagon's future options wide open.

But once you start getting down to just a handful of prime contractors left on the island, the competition can always get a little meaner and a little more bloodthirsty. Now, the Pentagon will very rarely admit that industrial base considerations are a big factor in a contract, but it certainly can't escape notice that each and every major combat aircraft contract being awarded today is going to cast a very long shadow among the handful of big defense contractors left standing.

Follow Ryan Faith on Twitter: @Operation_Ryan

Photo via Flickr