Northrop CEO: GAO decision reveals company's focus on affordability

Northrop Grumman CEO Wes Bush said Wednesday the recently released Government Accountability Office decision on the Air Force's B-21 bomber contract award reveals important insight about the company's work to develop a more disciplined bidding approach and drive affordability through corporate investments as well as reduced labor costs.

The 52-page decision was issued last February, detailing GAO's reasons for denying Boeing's protest of the B-21 bomber award to Northrop. A heavily redacted version of the decision went public Oct. 25. The decision reveals some new detail about affordability measures Northrop built into its bid as well as the Air Force's process for weighing risk between the two companies' proposals.

Bush said the company has taken a disciplined approach to determining which defense projects it will bid for, noting that Northrop walked away from the KC-46 tanker re-bid when it determined the fixed-price contract structure wasn't an acquisition approach that would work for the company. Boeing eventually won that contract.

"We've declined to bid on a number of other programs over the years for the same reasons," Bush said.

For the B-21 competition, Northrop's design was affordability-driven from the beginning, Bush said, noting that corporate investment and the decision to reduce its labor rate structure and pension program allowed the company to propose a lower cost.

"We had to work really hard to bring down our overhead rates," Bush said, noting "a lot of things have to come together to create an environment where affordability really fits."

Of note, the GAO decision revealed that both Boeing and Northrop so severely underbid the Air Force's cost estimates that the service initially rejected their projections as unrealistic.