The contract, designated as being for "indefinite-delivery/indefinite-quantity" (IDIQ), does not necessarily mean that Northrop will collect the full amount of the ceiling value, although it very well might. Rather, work will be performed by Northrop as and when requested by the U.S. Air Force, with $555.6 million being the ceiling value on the work. (Unless, of course, the contract is later amended to increase its value -- as often happens).
Forty-eight feet in length and with a 131-foot wingspan, the Global Hawk is one of America's largest drones, or "unmanned aerial vehicles" (UAVs). Designed as a surveillance aircraft rather than a combat drone, it can fly at altitudes as high as 60,000 feet, fly as far as 12,300 miles without refueling, and remain airborne for 32 hours or more.
Northrop's tasks under this Global Hawk contract are expected to include program management, engineering work, data management, and streamlining of the manufacturing supply chain, among others. The company will also perform further design work, testing, evaluation, and retrofits on Global Hawks that it has manufactured for USAF.
This contract runs through May 14, 2015.
Fool contributor Rich Smith has no position in any stocks mentioned. The Motley Fool owns shares of Northrop Grumman. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.