Northrop Grumman declines to bid on GPS 3 contract

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WASHINGTON — Northrop Grumman executives said April 25 that the company declined to submit a proposal for the next set of GPS 3 satellites, all but guaranteeing that Lockheed Martin will win the competition.

In an earnings call with analysts, Kathy Warden, president and chief operating officer of Northrop Grumman, said the decision not to bid on a contract for up to 22 GPS satellites, as well as a separate no-bid decision for components for the F-35 program, was the outcome of a “very disciplined” company process to select those programs that offer the most benefit to the company.

“We determined that they were not attractive to us,” she said. “We believe that applying strict assessment criteria in selecting our business pursuits is critical to long-term sustained performance.”

Wes Bush, chairman and chief executive of the company, elaborated on that choice later in the call, saying that the decision not to bid on the GPS 3 contract had nothing to do with problems with work Northrop is performing on the James Webb Space Telescope or reports that the company was to blame for the failed launch of the classified Zuma payload in January.

“The GPS decision had absolutely nothing to do with anything else going on in the space portfolio, other than a relative comparison of the attractiveness of the different opportunities we’re pursuing there,” he said. “It’s how individual opportunities stack up relative to our other opportunities, and what’s the best use of our resources to go and pursue those.” He didn’t elaborate on the other opportunities the company was pursuing in space.

Northrop’s announcement comes a week after Boeing confirmed that it, too, declined to bid on the GPS 3 contract. Those two companies, along with incumbent Lockheed Martin, received study contracts in 2016 valued at up to $6 million each to demonstrate the ability to build future GPS satellites, in preparation for a planned competition.

Lockheed Martin, under contract to build the first 10 GPS 3 satellites, confirmed April 17 that it submitted a proposal for that next set of satellites, which it called GPS 3F. Company executives said in an April 24 conference call that they felt “very confident” about winning the competition. They may now win the contract by default, barring any proposals from dark-horse competitors.

In the earnings call, Northrop Grumman addressed recent delays with JWST. NASA announced March 27 that the launch of the giant space observatory, being assembled at a Northrop facility in California, would slip from the spring of 2019 to approximately May 2020, a launch date the agency expects to refine by June. NASA said the latest delays were largely to do with problems with thrusters on the spacecraft bus for JWST, as well as deployment tests of its large sunshield.

“It’s a one-of-a-kind and a first-of-a-kind. It’s a real technological leap,” Warden said of JWST, after earlier saying the company was making “good progress” on the spacecraft. “It’s important for us that mission assurance is the top priority, that we continue to work diligently with NASA to make sure that when we launch, we have full mission success.”

“Doing something for the first time does come with some inherent risk,” she added. “We and NASA are partnering to identify that and successfully mitigate it so that we can get this successfully launched.”

Northrop Grumman is also awaiting regulatory approval for its acquisition of Orbital ATK, a $9.2 billion deal announced last September. Executives said they expect the deal to close in the first half of this year. The European Commission approved the acquisition in February, but the U.S. Federal Trade Commission has yet to offer its own approval.

As the companies wait on that deal, they are continuing to work on integration planning, Warden said, including various synergies the companies expect to realize once the deal closes.

Bush said he was still excited about the combination of the two companies, including the potential of adding Orbital’s expertise on smaller spacecraft to Northrop’s experience on larger spacecraft.

“It’s a very complementary match,” he said. That is particularly important, he argued, in a “contested” space environment where space assets are under increasing threats. “Our ability to bring to the customer set a full range of offerings will be significantly enhanced with this coming together of the companies.”