DoD's $10.2M contract for engineering services awarded to Northrop Grumman shows a significant subcontractor rate change

Contract Overview

Contract Amount: $10,230,561 ($10.2M)

Contractor: Northrop Grumman Space & Mission Systems Corp.

Awarding Agency: Department of Defense

Start Date: 2007-10-26

End Date: 2008-05-29

Contract Duration: 216 days

Daily Burn Rate: $47.4K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: COST PLUS AWARD FEE

Sector: Defense

Official Description: SUBCONTRACTOR RATE CHANGE

Place of Performance

Location: SAN BERNARDINO, SAN BERNARDINO County, CALIFORNIA, 92408

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $10.2 million to NORTHROP GRUMMAN SPACE & MISSION SYSTEMS CORP. for work described as: SUBCONTRACTOR RATE CHANGE Key points: 1. The contract's value of $10.2 million suggests a substantial investment in specialized engineering services. 2. Awarded under full and open competition, this contract indicates a competitive bidding process. 3. The subcontractor rate change warrants scrutiny to understand its impact on overall project costs. 4. The short duration of 216 days may point to a specific project phase or milestone. 5. The 'Cost Plus Award Fee' contract type introduces performance incentives, potentially driving efficiency. 6. The absence of small business set-aside suggests the scope may not have been tailored for smaller entities.

Value Assessment

Rating: fair

Benchmarking the $10.2 million award for engineering services is challenging without more detailed scope information. However, the 'Cost Plus Award Fee' structure implies that the final cost could deviate from the initial estimate based on performance. The subcontractor rate change is a key factor that needs further analysis to determine if it represents an increase in value or an escalation of costs.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under 'full and open competition,' suggesting that all responsible sources were permitted to submit bids. The presence of 2 bidders indicates a moderate level of competition for this engineering services contract. While competition is present, the specific number of bidders limits the ability to definitively assess if the pricing achieved the most competitive outcome possible.

Taxpayer Impact: A competitive award process generally benefits taxpayers by encouraging lower bids and better value. However, with only two bidders, the potential for significant cost savings may be constrained compared to scenarios with a larger pool of competitors.

Public Impact

The primary beneficiaries are likely the Department of the Air Force and potentially other Department of Defense entities requiring specialized engineering expertise. The services delivered are engineering services, crucial for complex defense projects and system development. The contract was awarded to a company with operations in California, suggesting a geographic concentration of work. The contract supports a specialized workforce within the aerospace and defense engineering sector.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

The subcontractor rate change requires detailed investigation to ensure it aligns with contract terms and doesn't inflate costs.
The 'Cost Plus Award Fee' structure necessitates careful monitoring to ensure award fees are justified by performance and not merely cost overruns.

Positive Signals

Awarded under full and open competition, indicating a commitment to a broad and fair bidding process.
The contractor, Northrop Grumman, is a major defense entity with a track record in complex systems, suggesting capability.
The contract type allows for performance incentives, which can drive efficiency and quality if managed effectively.

Sector Analysis

This contract falls within the Engineering Services sector, a critical component of the broader aerospace and defense industry. This sector is characterized by high technical expertise, significant R&D investment, and long-term government contracts. The market size for defense engineering services is substantial, driven by the continuous need for modernization and development of advanced military systems. This specific contract likely supports a niche requirement within a larger defense program.

Small Business Impact

The contract data indicates that this was not a small business set-aside, and the prime contractor is not a small business. This suggests that the scope of work was likely too large or specialized for small business participation as the prime. Further analysis would be needed to determine if subcontracting opportunities were made available to small businesses, which is a common practice in larger defense contracts.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of the Air Force's contracting and program management offices. Accountability measures are embedded within the 'Cost Plus Award Fee' structure, linking contractor compensation to performance metrics. Transparency would be facilitated through contract reporting requirements and potential audits by the Defense Contract Audit Agency (DCAA) or the Inspector General.

Related Government Programs

Defense Engineering Services
Aerospace and Defense Contracting
Northrop Grumman Contracts
Department of Defense IT and Engineering

Risk Flags

Subcontractor Rate Change
Limited Competition (2 bidders)
Cost Plus Award Fee Structure Oversight

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $10.2 million to NORTHROP GRUMMAN SPACE & MISSION SYSTEMS CORP.. SUBCONTRACTOR RATE CHANGE

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 $10.2 million.

What is the period of performance?

Start: 2007-10-26. End: 2008-05-29.

What is the specific nature of the 'subcontractor rate change' and its financial implications?

The provided data indicates a 'SUBCONTRACTOR RATE CHANGE' without specifying the direction (increase or decrease) or the magnitude beyond the total contract value. To assess its financial implications, further details are required. This would include the original subcontractor rates, the new rates, the effective dates of the change, and the justification provided by the contractor. If the rates increased, it could lead to a higher overall contract cost, impacting the taxpayer. Conversely, a decrease would be beneficial. Understanding the specific services provided by the subcontractor and the market conditions influencing these rates is crucial for a comprehensive analysis of the financial impact.

How does the 'Cost Plus Award Fee' (CPAF) structure influence contractor performance and cost control in this contract?

The CPAF contract type incentivizes the contractor to meet or exceed performance objectives by offering award fees in addition to cost reimbursement. This structure aims to align the contractor's interests with the government's objectives, encouraging efficiency and quality. For this contract, it means Northrop Grumman's potential profit is tied to achieving specific performance metrics defined in the contract. Effective oversight is crucial to ensure that award fees are genuinely earned through superior performance and not simply awarded due to cost overruns or weak performance evaluations. The government must clearly define performance standards and rigorously evaluate the contractor's achievement against them to ensure value for money.

What was the competitive landscape for this $10.2 million engineering services contract, given it was 'full and open' with 2 bidders?

The contract was awarded under 'full and open competition,' meaning all responsible sources were encouraged to bid. However, with only two bidders, the level of competition was limited. While 'full and open' is the preferred method, a low number of bids can sometimes indicate barriers to entry, lack of market interest, or a highly specialized requirement. This limited competition might have reduced the downward pressure on pricing that a larger number of bidders could exert. Further investigation could explore why only two companies submitted proposals, such as the complexity of the requirement, the contractor's existing relationship with the agency, or the specific technical expertise needed.

What is the typical duration for engineering services contracts of this magnitude within the Department of Defense?

The duration of engineering services contracts within the Department of Defense can vary significantly based on the project's scope, complexity, and phase. A 216-day (approximately 7-month) duration, as seen in this contract, is relatively short for a major engineering endeavor. This suggests the contract might be for a specific, well-defined task, a particular phase of a larger project, a study, or a specialized support function rather than a long-term system development effort. Longer-term engineering contracts can span several years, especially for major weapon system development or sustainment programs. The short duration here implies a focused objective.

What are the potential risks associated with awarding a Cost Plus Award Fee contract to a single large contractor like Northrop Grumman?

Awarding a CPAF contract to a large, established contractor like Northrop Grumman presents both potential benefits and risks. Benefits include leveraging their extensive experience, technical capabilities, and established infrastructure. However, risks include potential complacency due to their market position, leading to less aggressive cost management. The CPAF structure itself requires robust government oversight to prevent 'cost-plus' mentality from driving up expenses without commensurate performance gains. There's also a risk that the award fee criteria might be too easily met or not sufficiently challenging, diminishing the incentive for true innovation or exceptional performance. Ensuring fair and objective evaluation of performance against award criteria is paramount.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Architectural, Engineering, and Related Services › Engineering Services

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

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Offers Received: 2

Pricing Type: COST PLUS AWARD FEE (R)

Evaluated Preference: NONE

Contractor Details

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

Address: 1475 EAST HARRY SHEPPARD B, SAN BERNARDINO, CA, 33

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $19,902,249

Exercised Options: $19,902,249

Current Obligation: $10,230,561

Contract Characteristics

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: FA881806D0020

IDV Type: IDC

Timeline