$85 Billion Nuclear Missile Competition Gets Messier as Feds Investigate Northrop
(October 25, 2019) — Boeing is breaking up its ICBM team — just as the Federal Trade Commission begins looking into the company’s allegations that Northrop wasn’t playing fair.
The Pentagon’s effort to build a new ICBM just took another step toward a no-competition sole-source award — and the prospective lone bidder just came under federal investigation for anti-competitive behavior.
Two pieces of news broke late this week concerning the US Air Force’s Ground Based Strategic Deterrent program, whose total value has been estimated at $85 billion. First, the service stopped paying Boeing for ICBM-related technology-development work that began in 2017.
In response, the company has begun to break up the specialized team of engineers it brought together to create a replacement for the Cold War-era Minuteman III, according to a Boeing source close to the project.
Second, a Northrop Grumman filing revealed that the Federal Trade Commission is looking into allegations that the company is not abiding by an agreement that allowed its 2018 acquisition of Orbital ATK, one of just two US makers of solid rocket motors. Those terms required the company to sell rocket motors “on a non-discriminatory basis to all competitors for missile contracts.”
Until July, Boeing and Northrop had both been planning to bid on the ICBM contract. Then Boeing announced that it would withdraw, charging that it had been unfairly handicapped in the competition because Northrop had slow-rolled an agreement that would have paved the way for Boeing to buy rocket motors from Orbital ATK.
“One of the factors in Boeing’s decision not to bid for the US Air Force’s Ground based Strategic Deterrent program was our concern about Northrop Grumman’s compliance with a 2018 Federal Trade Commission order that prohibits it from discriminating in the sale of solid rocket motors,” Boeing spokesman Todd Blecher said in an emailed statement. “Northrop Grumman has now acknowledged that the FTC is questioning its compliance with that order. We stand ready to support the FTC inquiry.”
But Boeing is also moving on from its efforts to build a new ICBM. Employees working on the project are being reassigned to other projects within the company, people close to the project said. Stop-work orders have also been issued to suppliers.
“The program on our side is being unwound,” said the Boeing source.
Inquiry into Northrop
The FTC inquiry was revealed on Wednesday in a Northrop Grumman regulatory filing.
“In October 2019, the company received a civil investigative demand from the FTC requesting certain information relating to a potential issue of the company’s compliance with the Order in connection with a pending strategic missile competition,” the filing states. “The company is working to respond to the request. We believe the company has been and continues to be in full compliance with the Order, but we cannot predict any potential impact on the pending competition.”
There’s only one publicly known “strategic missile competition” right now: the Air Force’s effort to replace the Minuteman III with a new ICBM called the Ground Based Strategic Deterrent.
Northrop CEO Kathy Warden went a bit farther in an earnings call on Thursday, saying, “We do not currently expect any change to the Air Force acquisition strategy as a result of this inquiry.”
Air Force leaders have repeatedly refused to discuss the issue, citing a policy not to comment during the bid-solicitation process.
In September, Northrop announced its suppliers for the new ICBM, which includes most of the large US defense contractors, but not Boeing.
Boeing has argued that the government should create a ”national team” in which the Air Force chooses the suppliers, not an individual company.
“We are not receiving any pressure to engage in a national team, because I would point out that we do have…what we’re calling nationwide team that includes many large and small companies across the country, who are bringing strong capability that will support our GBSD bid,” Warden said.
Bids for the new ICBM are due in December.
Marcus Weisgerber is the global business editor for Defense One, where he writes about the intersection of business and national security. He has been covering defense and national security issues for more than a decade, previously as Pentagon correspondent for Defense News
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