Northrop Grumman Corp. (NOC:US) is in line to get a five-year U.S. Navy contract valued at as much as $3.86 billion to build new surveillance and reconnaissance aircraft, according to a Defense Department document.
The contract for 25 E-2D Advanced Hawkeye aircraft to be flown from aircraft carriers may be awarded by the end of the month, according to a May 29 notice to congressional defense committees from Frank Kendall, the Pentagon’s chief weapons buyer, that was obtained by Bloomberg News
Such multiyear deals are prized by defense contractors because they make cancellation unlikely and lock in a funding commitment. The aircraft to be built by Northrop, the fifth-biggest U.S. contractor, would extend the range at which a Navy carrier battle group can detect incoming enemy missiles or planes.
“No other program can provide the required capability for integrated air and cruise missile defense,” according to the letter explaining the contract’s rationale.
The contract will call for building five aircraft this fiscal year, four in 2015, five in 2016, six in 2017 and five in 2018, said the document. The aircraft was approved for full-rate production last year, with eventual production of as many as 75 aircraft.
Buying the aircraft in a five-year batch will save about $370 million over annual purchases, or 8.7 percent, according to the notice, which Congress requires for such multiyear commitments.
Randy Belote, a spokesman for Falls Church, Virginia-based Northrop, declined to comment and referred questions to the Navy.
“There is a multiyear procurement contract award in process,” Naval Air Systems Command spokesman Rob Koon said in an e-mailed statement. “We cannot release any details until the contract has been awarded,” Koon said.
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