FTC Investigating Northrop Grumman Amid ICBM Spat with Boeing

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An unarmed U.S. Air Force Minuteman III intercontinental ballistic missile launches during an operational test May 3, 2017, at Vandenberg Air Force Base, Calif. (U.S. Air Force photo/Daniel Brosam)
An unarmed U.S. Air Force Minuteman III intercontinental ballistic missile launches during an operational test May 3, 2017, at Vandenberg Air Force Base, Calif. (U.S. Air Force photo/Daniel Brosam)

The Federal Trade Commission is investigating whether Northrop Grumman Corp. has unfairly discriminated against Boeing Co. over an Air Force project to replace the service's aging intercontinental ballistic missiles, according to a regulatory filing disclosed by Northrop.

The agency is probing whether Northrop violated the terms of an agreement it made to acquire Orbital ATK. Officials say it could be related to how Northrop bid for the ICBM project known as the Ground Based Strategic Deterrent program (GBSD), estimated to cost the Pentagon $85 billion.

Boeing announced in July it would withdraw from the next phase of the competition, citing partiality toward Northrop.

In 2018, Northrop paid $7.8 billion and assumed $1.4 billion in debt to acquire Orbital, which creates solid rocket motors and launch vehicles. The FTC allowed the deal to go through on the condition that Northrop provide "for solid rocket motors to be available on a non-discriminatory basis under certain circumstances and processes," according to an October filing.

Related: Boeing Withdraws from Competition to Build New Land-Based Nuclear Missile

"One of the factors in Boeing's decision not to bid for the U.S. 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 last week in an email statement. "Northrop Grumman has now acknowledged that the FTC is questioning its compliance with that order. We stand ready to support the FTC inquiry."

In 2017, the Air Force awarded two contracts to Northrop and Boeing for preliminary work on the GBSD program to replace its Minuteman III intercontinental ballistic missile system.

Known as the technology maturation and risk reduction (TMRR) phase, the two contracts were not to exceed $359 million each, the service said, though Boeing was awarded $349 million and Northrop received $328 million for the 36-month deal.

But roughly one week after the Air Force released its request for proposal (RFP) for the engineering and manufacturing development (EMD) phase for the GBSD, Boeing said the service's acquisition approach favored Northrop and opted not to bid on the next phase of the program.

While the service was always going to down-select and choose a single company to manufacture the next-generation ICBM, Boeing's exit could affect the cost of the final contract.

Last week, the Air Force informed Boeing it would cut off the company's funding to finish out the TMMR phase, in what Boeing called a disservice to the government.

"The Government's decision also prevents Boeing from completing the work left to be performed under the TMRR contract, including the major milestones of a successful Software System Review and Preliminary Design Review," according to an Oct. 16 letter the company sent the GBSD program office.

"We believe this work would provide substantial value to the Government, irrespective of the fact that Boeing will not participate as a prime offeror under the current EMD solicitation structure for the next phase of the GBSD program," according to the letter, as reported by Defense News.

The EMD phase RFP was released July 16. The Air Force Nuclear Weapons Center is scheduled to award the contract in the fourth quarter of fiscal 2020, according to the service.

-- Oriana Pawlyk can be reached at oriana.pawlyk@military.com. Follow her on Twitter at @Oriana0214.

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