DoD's $15.4M Initial Spares Contract Awarded to Northrop Grumman Raises Competition Concerns
Contract Overview
Contract Amount: $15,440,424 ($15.4M)
Contractor: Northrop Grumman Space & Mission Systems Corp.
Awarding Agency: Department of Defense
Start Date: 2008-10-01
End Date: 2009-09-30
Contract Duration: 364 days
Daily Burn Rate: $42.4K/day
Competition Type: NOT COMPETED
Number of Offers Received: 1
Pricing Type: COST PLUS INCENTIVE FEE
Sector: Defense
Official Description: INITIAL SPARES
Place of Performance
Location: SAN JOSE, SANTA CLARA County, CALIFORNIA, 95119
Plain-Language Summary
Department of Defense obligated $15.4 million to NORTHROP GRUMMAN SPACE & MISSION SYSTEMS CORP. for work described as: INITIAL SPARES Key points: 1. Significant spending on initial spares for complex systems. 2. Sole-source award to a major defense contractor. 3. Potential for cost overruns given the Cost Plus Incentive Fee contract type. 4. Focus on Search, Detection, Navigation, Guidance systems.
Value Assessment
Rating: questionable
The contract value of $15.4M for initial spares appears high, especially considering it was not competed. Benchmarking against similar sole-source spares procurements would be necessary to assess value.
Cost Per Unit: N/A
Competition Analysis
Competition Level: sole-source
This contract was awarded on a sole-source basis, indicating a lack of competition. This limits price discovery and potentially leads to higher costs for taxpayers.
Taxpayer Impact: The absence of competition for this $15.4M contract likely resulted in a higher price than could have been achieved through a competitive process.
Public Impact
Taxpayers may be paying a premium due to the lack of competition. The specific system supported by these spares is critical for Air Force operations. Reliance on a single contractor for essential components can create long-term dependencies.
Waste & Efficiency Indicators
Waste Risk Score: 50 / 10
Warning Flags
- Sole-source award
- Cost Plus Incentive Fee contract type
- Lack of competition
Positive Signals
- Awarded to a known defense contractor
- Supports critical navigation systems
Sector Analysis
This contract falls within the aerospace and defense sector, specifically for navigation and guidance systems. Spending on initial spares is common for new or complex platforms, but competitive sourcing is crucial for cost control.
Small Business Impact
This contract was awarded to Northrop Grumman, a large prime contractor, and there is no indication of small business participation. The focus on sole-source awards often bypasses opportunities for small businesses.
Oversight & Accountability
The sole-source nature of this award warrants scrutiny to ensure the government received fair value. Further oversight should confirm the necessity of this approach and explore future competitive opportunities.
Related Government Programs
- Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing
- Department of Defense Contracting
- Department of the Air Force Programs
Risk Flags
- Lack of competition
- Sole-source award justification
- Potential for cost overruns (CPIF)
- Limited price discovery
- No small business participation evident
Tags
search-detection-navigation-guidance-aer, department-of-defense, ca, delivery-order, 10m-plus
Frequently Asked Questions
What is this federal contract paying for?
Department of Defense awarded $15.4 million to NORTHROP GRUMMAN SPACE & MISSION SYSTEMS CORP.. INITIAL SPARES
Who is the contractor on this award?
The obligated recipient is NORTHROP GRUMMAN SPACE & MISSION SYSTEMS CORP..
Which agency awarded this contract?
Awarding agency: Department of Defense (Department of the Air Force).
What is the total obligated amount?
The obligated amount is $15.4 million.
What is the period of performance?
Start: 2008-10-01. End: 2009-09-30.
What was the justification for the sole-source award, and were alternative competitive strategies considered?
The justification for a sole-source award typically involves unique capabilities, urgent needs, or a lack of viable alternatives. Without specific documentation, it's difficult to ascertain the exact reasoning. However, the absence of competition inherently limits price discovery and suggests potential inefficiencies. Future procurements should prioritize competitive strategies to ensure cost-effectiveness and taxpayer value.
How does the Cost Plus Incentive Fee (CPIF) structure impact the contractor's incentive to control costs on this spares contract?
A CPIF contract aims to incentivize cost control by sharing savings or cost overruns between the government and the contractor based on pre-defined targets. However, the effectiveness depends heavily on the realism of the targets and the alignment of incentives. For spares, where usage and failure rates can be unpredictable, managing costs under CPIF can be challenging and may still lead to higher-than-expected expenditures if targets are not rigorously set and monitored.
What is the long-term strategic risk associated with procuring initial spares on a sole-source basis for critical navigation systems?
Procuring initial spares solely from one source can create a long-term dependency, potentially locking the government into higher prices for future sustainment and repairs. It also limits the government's ability to leverage competition for better pricing and innovation. This strategic risk is amplified for critical systems like navigation, where operational readiness is paramount, potentially leading to reduced flexibility and increased lifecycle costs.
Industry Classification
NAICS: Manufacturing › Navigational, Measuring, Electromedical, and Control Instruments Manufacturing › Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing
Product/Service Code: MAINT, REPAIR, REBUILD EQUIPMENT › MAINT, REPAIR, REBUILD OF EQUIPMENT
Competition & Pricing
Extent Competed: NOT COMPETED
Solicitation Procedures: ONLY ONE SOURCE
Offers Received: 1
Pricing Type: COST PLUS INCENTIVE FEE (V)
Evaluated Preference: NONE
Contractor Details
Parent Company: Northrop Grumman Corporation (UEI: 967356127)
Address: 6377 SAN IGNACIO AVE, SAN JOSE, CA, 95119
Business Categories: Category Business, Corporate Entity Not Tax Exempt, Not Designated a Small Business
Financial Breakdown
Contract Ceiling: $30,433,329
Exercised Options: $30,433,329
Current Obligation: $15,440,424
Contract Characteristics
Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED
Cost or Pricing Data: YES
Parent Contract
Parent Award PIID: FA852808D0013
IDV Type: IDC
Timeline
Start Date: 2008-10-01
Current End Date: 2009-09-30
Potential End Date: 2009-09-30 00:00:00
Last Modified: 2018-10-17
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