Northrop Grumman CEO Wes Bush Copyright Alex Wong, Getty Images

Northrop Grumman CEO Wes Bush

Northrop Air-War Planning System Soars in Price, Slips by Years

The development phase of the network is now estimated to cost $745 million, up from the original $374 million, according to a “Critical Change Report” submitted to Congress.

Northrop Grumman Corp.’s (IW 500/47) program to develop an upgraded, cyber-hardened network for major air operations has almost doubled in cost and a key deadline has slipped by more than three years, according to the U.S. Air Force.

The development phase of the network is now estimated to cost $745 million, up from the original $374 million, according to a “Critical Change Report” submitted to Congress last week and obtained by Bloomberg News. Including procurement and support, the system -- for use in air operations centers to orchestrate combat, counterterrorism and humanitarian missions -- has a projected price tag of $2.98 billion.

The Air Force has set December 2019 as the date to decide whether to fully deploy the AOC 10.2 system worldwide, according to the report. That’s 41 months past the original July 2016 decision date. Meeting the new deadline depends on the system passing tests that have been marred so far by defects.

The air-operations network “is essential to national security,” according to the report, and must be modernized “to address today’s evolving cyber environment,” command-and-control mission changes “and accelerating technological advancements.”

Northrop has said the new system will convert “raw data into actionable information that is used to direct battlefield activities.” The current version, deployed globally since 2006, is a conglomeration of 43 software applications.

Northrop’s Prospects

For Northrop, picked by the Air Force last year to develop its new $80 billion bomber, the overrun and delays on the air-support network could undercut its prospects in future defense competitions because past performance is often among the criteria in the selection process.

The Air Force issued notices about unsatisfactory performance to the Falls Church, Va.-based contractor in 2014 and 2015. The program’s troubles also were used in the Air Force’s official performance assessment report of Northrop in 2015, the service said in a statement.

Northrop “initially placed insufficient priority on information assurance requirements, and, coupled with a slow staffing” increase, that “resulted in the program falling behind schedule,” according to the Air Force report.

“While there have been some challenges,” the company and the Air Force “have forged a strong partnership that is working together to address the issues” facing the system, Northrop spokesman Randy Belote said in an e-mail. “Northrop Grumman is dedicated to ensuring that the AOC 10.2 successfully provides for the security of the system including against future threats it will face.”

Underestimated Complexity

For its part, the Air Force “underestimated the complexity of integrating numerous third-party” software applications and information assurance requirements, and didn’t budget enough money, according to the service’s report.

That “put the program in a situation where the required content could not be completed within the program’s original schedule and funding profile,” Captain Michael Hertzog, an Air Force spokesman, said in an e-mail.

As of early August, Northrop had fixed 102 “urgent” problem reports, leaving 116 open ones that the company must fix, according to Major Jeremiah B.B. Sanders, the Air Force’s program manager for the system.

Sanders said Northrop Grumman is on an incentive-fee type contract, so its profit will be reduced by a percentage of the overrun.

By Tony Capaccio

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