Northrop Grumman received $20M for FHMUX spares, a contract awarded without competition

Contract Overview

Contract Amount: $20,021,386 ($20.0M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2007-08-14

End Date: 2011-03-02

Contract Duration: 1,296 days

Daily Burn Rate: $15.4K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: FREQUENCY HOPPING MULTIPLEXER SPARES (FHMUX).

Place of Performance

Location: CINCINNATI, BUTLER County, OHIO, 45246, UNITED STATES OF AMERICA

State: Ohio Government Spending

Plain-Language Summary

Department of Defense obligated $20.0 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: FREQUENCY HOPPING MULTIPLEXER SPARES (FHMUX). Key points: 1. The contract value of $20 million for Frequency Hopping Multiplexer Spares (FHMUX) appears to be a significant investment in specialized communication equipment. 2. Awarded to Northrop Grumman Systems Corporation, the contract's sole-source nature raises questions about potential price inflation and limited market engagement. 3. The duration of the contract (2007-2011) suggests a need for long-term support for the FHMUX system. 4. The absence of competition could indicate a lack of alternative suppliers or a strategic decision by the Department of Defense. 5. The contract type, Firm Fixed Price, aims to transfer cost risk to the contractor, but without competition, its effectiveness in ensuring value is diminished. 6. The specific nature of 'spares' implies ongoing maintenance and replacement needs for existing military hardware.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to its sole-source nature and the specialized equipment involved. Without competitive bids, it's difficult to ascertain if the $20 million price reflects fair market value. The lack of comparable contracts awarded through open competition makes it hard to assess if Northrop Grumman's pricing was optimal. The firm fixed-price structure suggests an attempt to control costs, but the absence of competitive pressure limits the ability to definitively state whether this represented excellent value for money.

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 Systems Corporation, was solicited. This approach bypasses the typical competitive bidding process. The lack of competition means that the Department of Defense did not benefit from multiple proposals, which could have driven down prices and spurred innovation. It suggests that either Northrop Grumman was the only capable provider, or there were specific justifications for not opening the contract to a wider pool of bidders.

Taxpayer Impact: Taxpayers may have paid a premium for these spares due to the absence of competitive pricing. The lack of competition limits the government's ability to ensure it received the best possible price for these essential components.

Public Impact

The primary beneficiaries are likely military units relying on the Frequency Hopping Multiplexer (FHMUX) system for secure and reliable communications. The services delivered include the provision of spare parts essential for the maintenance and operational readiness of the FHMUX system. The geographic impact is likely concentrated within Department of Defense operational theaters where the FHMUX system is deployed. Workforce implications may include specialized technical roles within Northrop Grumman for manufacturing and supplying these specific parts.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price discovery and potentially inflates costs for taxpayers.
Lack of competition raises concerns about whether alternative, potentially more cost-effective solutions were overlooked.
Specialized nature of spares might create a dependency on a single supplier, limiting future negotiation leverage.

Positive Signals

Firm Fixed Price contract structure aims to cap costs and transfer risk to the contractor.
Award to an established defense contractor like Northrop Grumman suggests a focus on reliability and proven capabilities.
The contract addresses a specific need for essential spare parts, contributing to the operational readiness of critical communication systems.

Sector Analysis

The contract falls within the 'Radio and Television Broadcasting and Wireless Communications Equipment Manufacturing' sector (NAICS 334220). This sector is characterized by the production of communication equipment, including wireless systems. The market for specialized military communication spares is often niche, with a limited number of large defense contractors capable of meeting stringent requirements. Spending in this area is driven by defense modernization efforts and the need to maintain the operational effectiveness of existing platforms. Comparable spending benchmarks are difficult to establish without more specific details on the FHMUX system itself.

Small Business Impact

This contract does not appear to have included a small business set-aside, as indicated by 'sb': false. Furthermore, the 'ss' field is also false, suggesting no specific small business subcontracting goals were mandated or reported. The sole-source nature of the award to a large prime contractor like Northrop Grumman typically limits opportunities for small businesses to participate directly, unless they are part of the prime's supply chain. Without explicit subcontracting plans, the direct impact on the small business ecosystem for this specific contract is likely minimal.

Oversight & Accountability

Oversight for this contract would have been managed by the Defense Contract Management Agency (DCMA), as indicated by 'sa'. Their role typically involves ensuring contractor compliance with contract terms, quality standards, and delivery schedules. Transparency regarding the sole-source justification and pricing details would be subject to government procurement regulations and potential Freedom of Information Act requests. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Military Communication Systems
Defense Procurement
Northrop Grumman Contracts
Specialized Electronic Equipment
Department of Defense Spares

Risk Flags

Sole-source award
Lack of competition
Potential for price inflation
Limited transparency on justification for sole-source

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $20.0 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. FREQUENCY HOPPING MULTIPLEXER SPARES (FHMUX).

Who is the contractor on this award?

The obligated recipient is NORTHROP GRUMMAN SYSTEMS CORPORATION.

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Contract Management Agency).

What is the total obligated amount?

The obligated amount is $20.0 million.

What is the period of performance?

Start: 2007-08-14. End: 2011-03-02.

What specific capabilities does the Frequency Hopping Multiplexer (FHMUX) system provide, and why was it critical enough to warrant a sole-source contract for spares?

The Frequency Hopping Multiplexer (FHMUX) system is a specialized communication technology designed for secure and robust data transmission in challenging electromagnetic environments. Its key feature is 'frequency hopping,' where the transmission signal rapidly changes carrier frequencies according to a pseudo-random sequence, making it highly resistant to jamming and interception. This capability is critical for military operations requiring secure command and control, intelligence gathering, and tactical data links, especially in contested or electronic warfare scenarios. The decision for a sole-source contract for spares likely stemmed from the proprietary nature of the FHMUX technology, potentially developed and patented by Northrop Grumman, or the need for exact, manufacturer-certified replacements to maintain system integrity and performance. Without competition, the government relied on Northrop Grumman's unique expertise and manufacturing capabilities to ensure the continued operational readiness of these vital communication assets.

How does the Firm Fixed Price (FFP) contract type interact with the sole-source award in terms of ensuring value for money?

A Firm Fixed Price (FFP) contract aims to provide cost certainty by fixing the price regardless of the contractor's actual costs. This shifts the cost risk from the government to the contractor. However, when combined with a sole-source award, the 'value for money' aspect is significantly compromised. Without competition, there is no market benchmark to validate the reasonableness of the fixed price. The government cannot be assured that the price set by Northrop Grumman reflects competitive market pressures or efficient cost management. While the FFP structure protects the government from cost overruns, it does not guarantee that the initial price was the best achievable. The absence of competitive proposals means the government lacked the leverage to negotiate a price that truly represents optimal value, potentially leading to a higher-than-necessary expenditure for the FHMUX spares.

What are the potential risks associated with relying on a single supplier for specialized military spares like FHMUX?

Relying on a single supplier, such as Northrop Grumman for FHMUX spares, presents several risks. Firstly, there's a risk of price escalation over time, as the contractor faces little to no competitive pressure to keep prices down. This can lead to significantly higher costs for the government in the long run, especially if the system remains in service for an extended period. Secondly, there's a dependency risk; if the sole supplier experiences production issues, financial difficulties, or decides to discontinue the product line, the government could face severe supply chain disruptions, impacting operational readiness. Thirdly, the lack of competition can stifle innovation, as the supplier may have less incentive to improve product design or manufacturing processes. Finally, the government's negotiating position weakens considerably, making it difficult to secure favorable terms or pricing for future procurements.

Given the contract was awarded in 2007 and ended in 2011, what is the likely current status of the FHMUX system and its spares?

The contract for FHMUX spares was active from August 2007 to March 2011. This timeframe suggests that the FHMUX system was operational and required support during that period. As of today, the system's current status depends on its technological relevance and the Department of Defense's modernization strategy. Military communication systems often have lifecycles ranging from 10 to 30 years or more. It's possible the FHMUX system has either been upgraded to newer technologies, replaced entirely, or continues to be supported through subsequent contracts, potentially also sole-source if the technology remains specialized and proprietary. The spares procured under this $20 million contract would have been intended to support the system during its operational life within that 2007-2011 window and potentially beyond, depending on inventory management and system sustainment plans.

What does the 'Frequency Hopping Multiplexer Spares (FHMUX)' designation imply about the nature of the equipment and its use?

The designation 'Frequency Hopping Multiplexer Spares (FHMUX)' indicates that the contract was for replacement parts ('spares') for a specific type of communication equipment. 'Multiplexer' suggests a device that combines multiple signals into one, likely for efficient transmission over a single channel. 'Frequency Hopping' is a spread spectrum technique where a transmitter and receiver hop between many different radio frequencies in a pseudo-random sequence. This method is crucial for secure military communications as it makes the signal difficult to detect, jam, or intercept. Therefore, these spares are essential components for maintaining the operational capability and security of advanced military communication systems that rely on this sophisticated anti-jamming and anti-interception technology. The need for 'spares' implies the system is in active use and subject to wear and tear or potential component failure.

Industry Classification

NAICS: Manufacturing › Communications Equipment Manufacturing › Radio and Television Broadcasting and Wireless Communications Equipment Manufacturing

Product/Service Code: COMM/DETECT/COHERENT RADIATION

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Titan II Inc. (UEI: 016435559)

Address: 460 W CRESCENTVILLE RD, CINCINNATI, OH, 45246

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $20,330,486

Exercised Options: $20,021,386

Current Obligation: $20,021,386

Contract Characteristics

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: W15P7T05DL608

IDV Type: IDC

Timeline