DoD awards $23.6M for additional spares, raising questions about competition and value

Contract Overview

Contract Amount: $23,591,192 ($23.6M)

Contractor: Northrop Grumman Space & Mission Systems Corp.

Awarding Agency: Department of Defense

Start Date: 2015-09-11

End Date: 2018-04-30

Contract Duration: 962 days

Daily Burn Rate: $24.5K/day

Competition Type: NOT COMPETED

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: IGF::OT::IGF ADDITIONAL SPARES.

Place of Performance

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

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $23.6 million to NORTHROP GRUMMAN SPACE & MISSION SYSTEMS CORP. for work described as: IGF::OT::IGF ADDITIONAL SPARES. Key points: 1. Contract awarded on a sole-source basis, limiting price discovery and potentially increasing costs. 2. Significant duration of the contract (962 days) suggests a long-term need for these spares. 3. The fixed-price contract type shifts some risk to the government if costs escalate. 4. Northrop Grumman, a large defense contractor, is the sole awardee. 5. The contract falls under the 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' NAICS code. 6. Awarded by the Defense Contract Management Agency, indicating a focus on contract execution oversight.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to its sole-source nature and the specific nature of 'additional spares'. Without competitive bids, it's difficult to ascertain if the $23.6 million represents a fair market price. The firm fixed-price structure provides some cost certainty, but the lack of competition means the government may not have secured the best possible pricing. Further analysis would require comparing the unit costs of these spares to similar items or historical pricing for Northrop Grumman's products.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning it was not competed. This typically occurs when only one responsible source can provide the required goods or services. The lack of competition means that the government did not benefit from the price discovery mechanisms inherent in a competitive bidding process, potentially leading to higher costs for taxpayers.

Taxpayer Impact: Sole-source awards limit opportunities for other businesses to compete for government contracts and can result in higher prices for the government compared to competitively awarded contracts.

Public Impact

The primary beneficiaries are likely the Department of Defense, ensuring operational readiness of specific systems requiring these spares. The services delivered are the provision of critical spare parts for defense systems. The geographic impact is primarily within the United States, where these spares will be manufactured and potentially delivered. Workforce implications may include employment at Northrop Grumman's facilities involved in the production of these spares.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing and value for money.
Lack of transparency in pricing due to no competitive bidding.
Potential for cost overruns if market prices for components increase significantly.

Positive Signals

Firm fixed-price contract provides cost certainty for the government.
Award to a known, established defense contractor suggests reliability in delivery.
Contract duration indicates a sustained need, potentially supporting long-term system sustainment.

Sector Analysis

This contract falls within the aerospace and defense manufacturing sector, specifically related to the production of specialized components for navigation and guidance systems. The market for such specialized spares is often dominated by a few large, established players like Northrop Grumman due to high barriers to entry, including intellectual property, specialized manufacturing capabilities, and long-standing relationships with government agencies. Comparable spending benchmarks would typically involve analyzing other sole-source awards for similar high-value, specialized components within the defense industrial base.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. Given the sole-source nature and the likely complexity of the spares, it is improbable that significant subcontracting opportunities would be directed towards small businesses unless explicitly mandated or if the prime contractor voluntarily engages them. The impact on the small business ecosystem is likely minimal for this specific award.

Oversight & Accountability

Oversight for this contract would primarily fall under the Defense Contract Management Agency (DCMA), responsible for ensuring contract compliance and performance. As a sole-source award, the emphasis would be on verifying the necessity of the procurement, the reasonableness of the price, and the quality and timeliness of delivery. Transparency is limited due to the lack of competition, but contract award data is publicly available. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Department of Defense Procurement
Northrop Grumman Defense Contracts
Aerospace and Defense Spares
Sole-Source Defense Acquisitions
Navigation and Guidance Systems

Risk Flags

Sole-source award
Lack of competition
Potential for price escalation
Dependence on a single supplier

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $23.6 million to NORTHROP GRUMMAN SPACE & MISSION SYSTEMS CORP.. IGF::OT::IGF ADDITIONAL 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 (Defense Contract Management Agency).

What is the total obligated amount?

The obligated amount is $23.6 million.

What is the period of performance?

Start: 2015-09-11. End: 2018-04-30.

What is the specific system or platform these additional spares are intended for, and why was a sole-source procurement necessary?

The provided data does not specify the exact system or platform for which these 'additional spares' are intended. However, sole-source procurements in the defense sector are typically justified under specific circumstances outlined in the Federal Acquisition Regulation (FAR), such as when only one responsible source can provide the required supplies or services, or when there is a compelling urgency. For specialized components like those related to navigation, detection, and guidance systems, it's common for a single manufacturer to hold the necessary technical data, patents, or unique manufacturing capabilities. The necessity for sole-sourcing would likely stem from the proprietary nature of the technology or the limited number of qualified manufacturers capable of producing these highly specific parts to stringent defense standards. A deeper dive into the contract's justification documentation would be required to confirm the precise reasons.

How does the $23.6 million award compare to historical spending on similar spares or by the same contractor for related items?

Without access to detailed historical pricing data for specific spare parts from Northrop Grumman or comparable items from other manufacturers, a direct comparison is difficult. The $23.6 million represents the total value of the contract for additional spares over its duration. To assess value, one would need to break this down by individual part numbers and quantities, then compare these unit prices against previous awards for the same items, or against prices for functionally equivalent spares from other suppliers. Given this was a sole-source award, it is presumed that the Defense Contract Management Agency (DCMA) conducted some form of price analysis to ensure reasonableness, but the absence of competition means there's no market-driven benchmark. Analyzing Northrop Grumman's overall contract portfolio with the DoD for similar types of spares could provide a broader context of their pricing strategies.

What are the key performance indicators (KPIs) or metrics used to evaluate the performance of Northrop Grumman under this contract?

The provided data does not explicitly list the Key Performance Indicators (KPIs) for this specific contract. However, for firm fixed-price contracts, especially those involving the delivery of physical goods like spare parts, common performance metrics typically include on-time delivery, quality acceptance rates (i.e., the percentage of delivered items that meet specifications and pass inspection), and adherence to contract terms. The Defense Contract Management Agency (DCMA), as the contracting agency, would likely monitor these aspects closely. Performance might also be assessed based on the contractor's responsiveness to any issues or defects identified post-delivery. The contract's duration of over two years suggests that ongoing performance monitoring would be crucial to ensure the sustained availability and reliability of these critical spares.

What is the potential risk associated with relying on a single contractor for critical spare parts, especially in a sole-source scenario?

Relying on a single contractor for critical spare parts, particularly in a sole-source scenario, introduces several risks. The primary risk is the potential for price escalation over time, as the government has limited leverage without competitive alternatives. There's also a risk of supply chain disruptions if the sole contractor experiences production issues, financial instability, or decides to discontinue the product line. Furthermore, dependence on one supplier can reduce the government's flexibility in adapting to technological changes or seeking alternative solutions. In a sole-source context, the government's ability to negotiate favorable terms is diminished, potentially leading to higher overall program costs and reduced strategic agility. This underscores the importance of robust contract management and continuous market surveillance, even for sole-source awards.

How does this contract align with the Department of Defense's broader strategy for supply chain management and sustainment of its weapon systems?

This contract for additional spares aligns with the Department of Defense's (DoD) fundamental need for sustainment of its weapon systems. Ensuring the availability of critical spare parts is essential for maintaining operational readiness and extending the lifecycle of complex military platforms. However, the sole-source nature of this award may present a tension with broader DoD strategies that often emphasize competition to drive efficiency and cost savings. While sole-sourcing might be unavoidable for highly specialized or legacy components, the DoD generally aims to foster competition where feasible to ensure long-term affordability and reduce reliance on single points of failure. This specific contract highlights the ongoing challenge of balancing the immediate need for critical parts with the strategic goal of optimizing the defense industrial base for cost-effectiveness and resilience.

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: SUPPORT SVCS (PROF, ADMIN, MGMT) › PROFESSIONAL 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 (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, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $23,591,192

Exercised Options: $23,591,192

Current Obligation: $23,591,192

Subaward Activity

Number of Subawards: 272

Total Subaward Amount: $443,469,820

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: FA852812D0013

IDV Type: IDC

Timeline