DoD's $465.7M Northrop Grumman contract for Aircraft Manufacturing shows significant cost and competition concerns

Contract Overview

Contract Amount: $465,728,463 ($465.7M)

Contractor: Northrop Grumman Systems Corp

Awarding Agency: Department of Defense

Start Date: 2008-08-15

End Date: 2013-03-14

Contract Duration: 1,672 days

Daily Burn Rate: $278.5K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: RMP LRIP

Place of Performance

Location: PALMDALE, LOS ANGELES County, CALIFORNIA, 93550

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $465.7 million to NORTHROP GRUMMAN SYSTEMS CORP for work described as: RMP LRIP Key points: 1. The contract's cost structure and lack of competition raise questions about value for money. 2. Sole-source procurement limits price discovery and potentially inflates costs. 3. The extended duration and cost-plus contract type increase financial risk. 4. Performance context is limited due to the lack of competitive benchmarking. 5. This contract falls within the Defense sector, specifically Aircraft Manufacturing. 6. The absence of small business participation is noted.

Value Assessment

Rating: questionable

Benchmarking this contract is challenging due to its sole-source nature and the specific nature of the 'RMP LRIP' (likely a Low-Rate Initial Production for a specific system). However, the cost-plus fixed fee (CPFF) structure, combined with a lack of competition, often leads to higher costs than competitively bid fixed-price contracts. Without comparable contract data or detailed cost breakdowns, it's difficult to definitively assess value, but the indicators suggest potential overspending.

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 source is capable of meeting the government's needs, or for reasons of urgency or national security. The lack of competition means that the government did not benefit from multiple bidders vying for the contract, which can lead to less favorable pricing and terms.

Taxpayer Impact: Taxpayers may have paid a premium due to the absence of competitive pressure. The government had limited leverage to negotiate the best possible price.

Public Impact

The primary beneficiary is the Department of Defense, which receives critical aircraft manufacturing capabilities. The contract supports the production and delivery of specific aircraft components or systems. The geographic impact is concentrated in California, where Northrop Grumman Systems Corp. is located. This contract likely supports a specialized workforce within the aerospace and defense industry.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing and value.
Cost-plus contract type can incentivize cost overruns.
Extended contract duration increases exposure to cost fluctuations.
Lack of transparency in cost elements due to CPFF structure.
No indication of small business participation or subcontracting goals.

Positive Signals

Awarded to a known, established defense contractor (Northrop Grumman).
Contract supports critical national defense capabilities.
Specific system production likely meets a defined military requirement.

Sector Analysis

The Aircraft Manufacturing sector within the defense industry is characterized by high barriers to entry, significant R&D investment, and long production cycles. Contracts are often awarded to a limited number of large, specialized firms. This contract represents a portion of the broader defense spending allocated to maintaining and modernizing the nation's air fleet, fitting within a market dominated by a few key players.

Small Business Impact

This contract does not appear to have a small business set-aside component, nor is there information suggesting significant subcontracting opportunities for small businesses. The sole-source nature further limits the potential for integrating small businesses into the supply chain for this specific award.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Defense's contracting and program management offices. Inspector General reports may be relevant if specific issues of fraud, waste, or abuse arise. Transparency is limited by the sole-source award and the CPFF structure, making detailed public scrutiny of cost justifications difficult.

Related Government Programs

Aircraft Production Contracts
Defense Manufacturing Programs
Northrop Grumman Defense Contracts
Air Force Procurement
Sole-Source Defense Awards

Risk Flags

Sole-source award
Cost-plus contract type
Lack of competition
Potential for cost overruns
Limited transparency

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $465.7 million to NORTHROP GRUMMAN SYSTEMS CORP. RMP LRIP

Who is the contractor on this award?

The obligated recipient is NORTHROP GRUMMAN 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 $465.7 million.

What is the period of performance?

Start: 2008-08-15. End: 2013-03-14.

What specific aircraft system or component does this 'RMP LRIP' contract pertain to, and what is the justification for its sole-source award?

The provided data abbreviates the contract as 'RMP LRIP' and identifies the North American Industry Classification System (NAICS) code as 336411 (Aircraft Manufacturing). However, the specific aircraft system or component is not detailed. Sole-source justifications typically cite factors such as unique technical capabilities, urgent needs, or the unavailability of other sources. Without further documentation, the precise reason for this contract being sole-sourced remains unspecified, though it is common in highly specialized defense manufacturing where only one entity possesses the necessary technology or production capacity.

How does the Cost Plus Fixed Fee (CPFF) contract type influence the potential for cost overruns compared to other contract types for aircraft manufacturing?

The Cost Plus Fixed Fee (CPFF) contract type is designed to cover all allowable costs incurred by the contractor plus a predetermined fixed fee. While it allows for flexibility and can be used when cost estimates are uncertain, it shifts much of the financial risk to the government. If costs increase, the government pays more, while the contractor's fee remains fixed. This can incentivize contractors to be less cost-conscious than under fixed-price contracts, potentially leading to cost overruns. For aircraft manufacturing, where complexity and unforeseen issues are common, CPFF can be appropriate but requires robust government oversight to manage costs effectively.

What is the historical spending trend for similar aircraft manufacturing contracts awarded by the Department of the Air Force?

Analyzing historical spending trends for similar aircraft manufacturing contracts requires access to a broader dataset of Air Force procurements. However, it is generally understood that aircraft manufacturing contracts, especially for major platforms or upgrades, represent significant investments. Spending can fluctuate based on modernization cycles, geopolitical needs, and budget allocations. Contracts like this one, particularly if they are for LRIP (Low-Rate Initial Production), often precede larger, full-rate production contracts. Without specific comparative data points for 'RMP LRIP' or similar systems, a precise trend analysis is not feasible from this single data point.

What are the implications of awarding a contract of this magnitude ($465.7M) on a sole-source basis for the defense industrial base?

Awarding a contract of this magnitude on a sole-source basis can have several implications for the defense industrial base. It can reinforce the market dominance of the awarded contractor, potentially limiting opportunities for competitors to enter or expand. While it ensures the government secures a specific capability, it may reduce overall market dynamism and innovation driven by competition. It also raises concerns about long-term pricing and the government's ability to leverage competition for future procurements or upgrades within that specific system's lifecycle.

Are there any publicly available performance metrics or quality assessments for Northrop Grumman Systems Corp. related to this specific contract or similar aircraft manufacturing efforts?

Publicly available performance metrics and quality assessments for specific defense contracts are often limited due to security classifications and proprietary information. While Northrop Grumman Systems Corp. is a major defense contractor with a track record, detailed performance data tied directly to this 'RMP LRIP' contract is unlikely to be publicly accessible. Government performance evaluations (like Contractor Performance Assessment Reporting System - CPARS) exist but are typically not fully disclosed. General industry reputation and past performance on other programs would be the primary indicators available to the public.

Industry Classification

NAICS: Manufacturing › Aerospace Product and Parts Manufacturing › Aircraft Manufacturing

Product/Service Code: AEROSPACE CRAFT AND STRUCTURAL COMPONENTS

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Northrop Grumman Corporation

Address: 3520 E AVE M, PALMDALE, CA, 93550

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $472,366,802

Exercised Options: $472,366,802

Current Obligation: $465,728,463

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: F3365799D0028

IDV Type: IDC

Timeline