DoD's $51.6M Northrop Grumman contract for ASIP upgrades saw no competition, raising value concerns

Contract Overview

Contract Amount: $51,630,484 ($51.6M)

Contractor: Northrop Grumman Space & Mission Systems Corp.

Awarding Agency: Department of Defense

Start Date: 2011-12-09

End Date: 2020-02-25

Contract Duration: 3,000 days

Daily Burn Rate: $17.2K/day

Competition Type: NOT COMPETED

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: ACAT III, ASIP UPGRADES, INCR 1

Place of Performance

Location: SAN JOSE, SANTA CLARA County, CALIFORNIA, 95119

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $51.6 million to NORTHROP GRUMMAN SPACE & MISSION SYSTEMS CORP. for work described as: ACAT III, ASIP UPGRADES, INCR 1 Key points: 1. The contract's lack of competition suggests potential overpayment and limited price discovery. 2. Performance risks are moderate given the contractor's established role in similar programs. 3. The contract's duration and fixed-price nature aim to control costs, but without competition, true value is uncertain. 4. This spending falls within the broader category of defense communications equipment, a critical but often opaque sector. 5. The absence of small business set-asides means limited direct benefit to smaller enterprises in this specific award.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to the sole-source nature and lack of publicly available comparable data. The $51.6 million awarded over nearly 8.5 years for ASIP upgrades suggests a significant investment. Without competitive bids, it's difficult to ascertain if the price reflects fair market value or if taxpayers received the best possible deal. The fixed-price contract type offers some cost control, but the absence of competition limits the government's leverage in price negotiation.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one vendor, Northrop Grumman, was considered. This approach bypasses the standard competitive bidding process, which typically involves multiple companies vying for the contract. While sole-source awards can be justified in specific circumstances (e.g., unique capabilities, national security), they inherently limit price discovery and can lead to higher costs for the government compared to a competed contract.

Taxpayer Impact: Sole-source awards mean taxpayers may not benefit from the cost savings typically achieved through competitive bidding, potentially leading to less efficient use of public funds.

Public Impact

The primary beneficiary is the Department of Defense, specifically the Air Force, receiving upgraded ASIP systems. Services delivered include upgrades to existing systems, enhancing their functionality and lifespan. The geographic impact is primarily within the operational theaters and bases served by the Air Force. Workforce implications are likely concentrated within Northrop Grumman's engineering and manufacturing divisions.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition raises concerns about potential overpricing and reduced value for taxpayer money.
Sole-source awards can stifle innovation by not encouraging new market entrants or alternative solutions.
Limited transparency in the justification for sole-source procurement hinders public and congressional oversight.
The long duration of the contract (over 8 years) increases the risk of cost overruns or scope creep if not managed tightly.

Positive Signals

The contract utilizes a firm fixed-price structure, which generally helps in controlling costs and provides predictability.
Northrop Grumman is an established defense contractor with experience in similar upgrade programs, suggesting technical capability.
The contract specifies upgrades, implying an effort to modernize and extend the life of existing critical assets.

Sector Analysis

This contract falls within the defense electronics and communications sector, specifically focusing on upgrades for existing systems. The market for defense communications equipment is substantial, characterized by long-term relationships between government agencies and major defense contractors. Spending in this area is driven by the need for technological superiority and maintaining operational readiness. Comparable spending benchmarks are difficult to establish precisely due to the specialized nature of ASIP upgrades and the sole-source award.

Small Business Impact

This contract did not include small business set-asides, nor is there information indicating significant subcontracting opportunities for small businesses. The award to a large prime contractor like Northrop Grumman suggests that the primary focus was on leveraging established capabilities rather than fostering small business participation. This means the direct economic impact on the small business ecosystem from this specific award is likely minimal.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Air Force's contracting and program management offices. Given its sole-source nature, justification documentation and any subsequent modifications would be key areas for scrutiny. Transparency is limited due to the lack of a competitive process. Inspector General involvement would typically be triggered by specific allegations of fraud, waste, or abuse, rather than routine oversight.

Related Government Programs

Air Force Communications Systems
Defense Electronics Procurement
Northrop Grumman Defense Contracts
ASIP Program Funding
Sole-Source Defense Contracts

Risk Flags

Lack of Competition
Potential for Overpricing
Limited Transparency
Long Contract Duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $51.6 million to NORTHROP GRUMMAN SPACE & MISSION SYSTEMS CORP.. ACAT III, ASIP UPGRADES, INCR 1

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 $51.6 million.

What is the period of performance?

Start: 2011-12-09. End: 2020-02-25.

What is the specific nature of the ASIP upgrades being procured under this contract?

The data indicates the contract is for 'ASIP UPGRADES, INCR 1'. ASIP typically refers to the Air Force Satellite Communications (SATCOM) Augmentation and Improvement Program, or similar systems focused on enhancing communication capabilities. 'INCR 1' likely denotes the first increment or phase of these upgrades. These upgrades are crucial for maintaining the effectiveness and security of critical communication networks used by the Air Force, ensuring reliable data transmission for command and control, intelligence, and operational support. The exact technical specifications of the upgrades are proprietary but generally involve modernizing hardware, software, or encryption to meet evolving threats and operational requirements.

Why was this contract awarded on a sole-source basis instead of being competed?

The provided data explicitly states the contract was 'NOT COMPETED' and is categorized as 'sole-source'. While the specific justification for this sole-source award is not detailed in the provided data snippet, common reasons include situations where only one responsible source possesses the unique capability, technology, or proprietary data necessary to fulfill the requirement. This could be due to specialized knowledge of existing systems, unique manufacturing processes, or critical security considerations. Without further documentation (like a Justification and Approval document), it's impossible to confirm the exact rationale, but the lack of competition inherently limits the government's ability to explore alternative solutions or achieve potential cost savings through a bidding process.

How does the $51.6 million cost compare to similar defense communication upgrade contracts?

Direct comparison of the $51.6 million cost is difficult without knowing the precise scope and technical details of the ASIP upgrades and without access to pricing data from competitive contracts for similar systems. However, for a contract spanning nearly 8.5 years (December 2011 to February 2020) involving complex system upgrades for a major defense contractor like Northrop Grumman, this figure is within a plausible range for significant defense procurements. The key concern is not necessarily the absolute dollar amount, but whether this amount represents fair value, which is hard to determine due to the sole-source nature. Competitive contracts for comparable upgrades might yield lower prices, but the specific technological requirements and contractor expertise could justify this investment.

What are the potential risks associated with a sole-source contract of this magnitude and duration?

Sole-source contracts, especially those of significant value and long duration like this $51.6 million, carry inherent risks. The primary risk is the lack of price competition, which can lead to the government paying more than necessary. There's also a reduced incentive for the contractor to innovate or improve efficiency once the contract is secured. For long-duration contracts, risks include potential cost overruns if initial estimates were inaccurate, scope creep if requirements evolve without proper re-negotiation, and technological obsolescence if the upgrades do not keep pace with advancements. Furthermore, reliance on a single source can create dependency and potential supply chain vulnerabilities.

What is Northrop Grumman's track record with the Department of Defense for similar contracts?

Northrop Grumman is a major defense contractor with an extensive history of performing complex programs for the Department of Defense, including the Air Force. They have a well-established presence in areas such as aerospace, defense electronics, and information systems. Their track record typically involves large-scale development, integration, and sustainment contracts. While specific performance metrics for this particular ASIP upgrade contract are not detailed here, Northrop Grumman generally possesses the technical expertise and infrastructure required for such endeavors. However, like any large contractor, they may have faced scrutiny or challenges on other programs regarding cost, schedule, or performance, which would be detailed in broader contract performance databases.

How has spending on defense communications equipment evolved over the period this contract was active (2011-2020)?

Spending on defense communications equipment during the 2011-2020 period generally remained robust, driven by ongoing military operations, modernization efforts, and the increasing importance of secure, high-bandwidth communication networks. While overall defense budgets fluctuated, investments in C4ISR (Command, Control, Communications, Computers, Intelligence, Surveillance, and Reconnaissance) capabilities, including satellite communications and related upgrades, were consistently prioritized. This contract aligns with that trend of maintaining and enhancing critical communication infrastructure. The period saw a shift towards more networked warfare concepts and cyber resilience, necessitating continuous upgrades to legacy systems like those addressed by this ASIP contract.

Industry Classification

NAICS: Manufacturing › Communications Equipment Manufacturing › Other Communications Equipment Manufacturing

Product/Service Code: RESEARCH AND DEVELOPMENT › C – National Defense R&D Services

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Northrop Grumman Corporation

Address: 6377 SAN IGNACIO AVE, SAN JOSE, CA, 95119

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Manufacturer of Goods, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $52,138,820

Exercised Options: $52,138,820

Current Obligation: $51,630,484

Subaward Activity

Number of Subawards: 15

Total Subaward Amount: $943,675

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: FA862008G3007

IDV Type: IDC

Timeline