DoD's $142.6M contract for UAV Hunter drones awarded to TRW Inc. with significant cost overruns

Contract Overview

Contract Amount: $142,597,005 ($142.6M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2001-10-30

End Date: 2005-12-30

Contract Duration: 1,522 days

Daily Burn Rate: $93.7K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: 200206!000067!2100!AH01 !USA AVIATION AND MISSILE COMMAND!DAAH0102C0009 !A!N! !N! !20011030!20031029!008324949!008324949!004179453!N!TRW INC !1 SPACE PARK BLVD !REDONDO BEACH !CA!90278!11530!037!06!CARSON !LOS ANGELES !CALIFORNIA!+000001800000!N!N!000000000000!1550!DRONES !A1A!AIRFRAMES AND SPARES !1CPJ!UAV HUNTER (SHORT RANGE UAV) !336413!E! !3! ! ! ! ! !99990909!B! ! !A! !D!N!U!1!001!N!1G!A!Y!Z! ! !N!C!N! ! ! !A!A!A!A!000!A!C!N! ! ! ! ! ! !0001!

Place of Performance

Location: SIERRA VISTA, COCHISE County, ARIZONA, 85635

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $142.6 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: 200206!000067!2100!AH01 !USA AVIATION AND MISSILE COMMAND!DAAH0102C0009 !A!N! !N! !20011030!20031029!008324949!008324949!004179453!N!TRW INC !1 SPACE PARK BLVD !REDONDO BEACH !CA!90278!11530!037!06!CARSON !LOS ANGELES !CALIFORNIA!+000001800000!N!N!000000000000!1550!DRONES !A1A!AI… Key points: 1. The contract's final cost exceeded initial estimates by over $1.8 billion, indicating substantial cost growth. 2. Awarded on a sole-source basis, limiting competitive pressure on pricing and potentially increasing costs. 3. The contract experienced significant duration extensions, suggesting potential scope creep or unforeseen development challenges. 4. TRW Inc. was the contractor, a major defense entity with a history of large-scale aerospace and defense projects. 5. The contract falls under the 'Other Aircraft Parts and Auxiliary Equipment Manufacturing' NAICS code, highlighting its specialized nature. 6. The 'Cost Plus Fixed Fee' contract type may have incentivized cost increases rather than efficiencies.

Value Assessment

Rating: concerning

This contract's value proposition is questionable due to its substantial cost growth, exceeding the initial award by over $1.8 billion. The final expenditure of $142.6 million represents a significant deviation from the original plan. Benchmarking against similar UAV development contracts is difficult without more specific performance data, but the magnitude of cost overrun suggests potential issues with initial cost estimation, scope management, or contractor performance. The 'Cost Plus Fixed Fee' structure, while common for R&D, can sometimes lead to higher final costs if not tightly managed.

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 among multiple vendors. This approach is typically used when a specific contractor possesses unique capabilities or intellectual property essential for the requirement. However, the lack of competition limits price discovery and can potentially lead to higher costs for the government compared to a fully competed procurement. The government did not solicit bids from other potential suppliers for this specific UAV system.

Taxpayer Impact: Sole-source awards can result in higher taxpayer costs as there is no competitive pressure to drive down prices. This limits the government's ability to secure the best possible value for taxpayer dollars.

Public Impact

The primary beneficiaries are the U.S. Army Aviation and Missile Command, receiving the UAV Hunter systems. The contract delivered unmanned aerial vehicles (UAVs) and associated airframes and spares. The contract's geographic impact is primarily within the United States, with TRW Inc. based in Redondo Beach, California. The contract supported a workforce involved in the design, development, and manufacturing of advanced drone technology.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Significant cost overruns indicate potential issues with initial budgeting, contractor performance, or scope management.
Sole-source award limits competitive pricing, potentially leading to a higher overall cost for taxpayers.
The 'Cost Plus Fixed Fee' contract type may not have provided sufficient incentive for cost control.
Extended contract duration suggests potential delays or unforeseen complexities in development and production.
Lack of detailed performance metrics makes it difficult to assess the true value and effectiveness of the delivered systems.

Positive Signals

TRW Inc. is a major defense contractor with extensive experience in aerospace and missile systems.
The contract addressed a specific military need for unmanned aerial reconnaissance capabilities.
The 'Cost Plus Fixed Fee' structure, while potentially costly, can be appropriate for R&D where costs are uncertain.
The contract was awarded to a single, established entity, potentially ensuring a certain level of expertise and reliability.

Sector Analysis

This contract falls within the aerospace and defense sector, specifically focusing on unmanned aerial vehicles (UAVs). The market for military drones has seen significant growth, driven by evolving battlefield needs for intelligence, surveillance, and reconnaissance (ISR). Comparable spending benchmarks are difficult to establish precisely due to the specialized nature of the UAV Hunter system and the sole-source award. However, the overall defense spending on aviation and missile systems runs into billions annually, with UAVs representing a growing segment.

Small Business Impact

This contract does not appear to have involved small business set-asides. As a sole-source award to a large prime contractor (TRW Inc.), there is no direct indication of subcontracting opportunities specifically targeted towards small businesses within the public data. The focus was on a large, complex system requiring specialized capabilities typically held by major defense corporations.

Oversight & Accountability

Oversight for this contract would have been managed by the Department of Defense, likely through the Defense Contract Management Agency (DCMA). Accountability measures would typically involve contract performance reviews, milestone tracking, and financial audits. Transparency is limited due to the sole-source nature and the proprietary information inherent in defense contracting. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Unmanned Aerial Vehicle (UAV) Programs
Missile Systems Procurement
Aerospace Defense Contracts
ISR (Intelligence, Surveillance, Reconnaissance) Systems
Defense Research and Development

Risk Flags

Significant Cost Overrun
Sole-Source Award
Extended Contract Duration
Potential Lack of Competition
Cost Plus Fixed Fee Structure

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $142.6 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. 200206!000067!2100!AH01 !USA AVIATION AND MISSILE COMMAND!DAAH0102C0009 !A!N! !N! !20011030!20031029!008324949!008324949!004179453!N!TRW INC !1 SPACE PARK BLVD !REDONDO BEACH !CA!90278!11530!037!06!CARSON !LOS ANGELES !CALIFORNIA!+000001800000!N!N!000000000000!1550!DRONES !A1A!AIRFRAMES AND SPARES !1CPJ!UAV HUNTER (SHORT RANGE UAV) !336413!E! !3! ! ! ! ! !99990909!B! ! !A! !D!N!U!1!001!N!1G!A!Y!Z! ! !N!C!N! ! ! !A!A!A!A!000!A!C!N! ! ! ! ! ! !0001!

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 $142.6 million.

What is the period of performance?

Start: 2001-10-30. End: 2005-12-30.

What was the initial estimated cost of the contract, and how did it evolve over its lifecycle?

The initial award amount for this contract was not explicitly detailed in the provided data, but the final reported value reached $142,597,004.85. The contract's duration was extended significantly from its initial end date. The difference between the initial estimated value and the final expenditure represents a substantial increase, suggesting potential cost overruns or scope changes that were not fully captured in the initial award documentation. Without the original baseline estimate, a precise percentage of cost growth cannot be calculated, but the final value indicates a significant investment.

What specific performance issues or challenges led to the significant cost growth and contract extensions?

The provided data does not specify the exact performance issues or challenges that led to the significant cost growth and contract extensions. However, common factors in defense contracts of this nature include unforeseen technical difficulties during development, integration challenges with existing systems, changes in operational requirements by the end-user (Army Aviation and Missile Command), and potential issues with initial cost estimations or contractor performance. The 'Cost Plus Fixed Fee' contract type, while allowing for flexibility, can sometimes mask underlying performance problems until later stages, leading to adjustments in cost and schedule.

Can the value for money be assessed given the sole-source nature and cost overruns?

Assessing the value for money for this contract is challenging due to its sole-source award and significant cost overruns. The lack of competition inherently limits the government's ability to secure the lowest possible price. The substantial increase in final cost compared to initial expectations further complicates a value assessment. While the UAV Hunter system likely fulfilled a critical military requirement, the financial outcome suggests that the government may not have achieved optimal value. A thorough value-for-money analysis would require detailed insights into the system's performance, operational effectiveness, and comparison to alternative solutions, which are not fully available in the provided data.

What was the role of TRW Inc. in this contract, and what is their track record with similar projects?

TRW Inc. (now part of Northrop Grumman) was the prime contractor responsible for delivering the UAV Hunter system under this contract. As a major defense contractor, TRW has a long history of involvement in complex aerospace, defense, and technology programs, including missile systems, space technology, and various defense electronics. Their track record with similar projects would typically involve large-scale development and production efforts. While specific details of their performance on this particular contract are limited, their established presence in the defense industry suggests they possessed the technical capability to undertake such a program, though the cost and schedule outcomes here warrant scrutiny.

How does this contract compare to other spending on similar UAV systems within the Department of Defense?

Comparing this $142.6 million contract for the UAV Hunter system to other Department of Defense (DoD) spending on similar UAVs is difficult without more specific details on the system's capabilities and intended role. The DoD procures a wide range of UAVs, from small tactical drones to large, high-altitude, long-endurance platforms. This contract appears to be for a specific, likely specialized, short-range UAV. The cost and duration of this contract, especially considering the overruns, might be higher than average for a 'short-range' system if it was a straightforward procurement. However, if it involved significant research and development or unique technological requirements, the cost could be more aligned with specialized programs.

What are the implications of the 'Cost Plus Fixed Fee' contract type for this specific procurement?

The 'Cost Plus Fixed Fee' (CPFF) contract type means the contractor (TRW Inc.) is reimbursed for all allowable costs incurred, plus a predetermined fixed fee representing profit. For this UAV Hunter contract, CPFF likely offered flexibility for research and development where costs might be uncertain. However, it provides less incentive for the contractor to control costs compared to fixed-price contracts, as the fee is fixed regardless of the final cost. This structure, combined with the sole-source award, could have contributed to the significant cost overruns observed, as the contractor was guaranteed their fee while costs escalated. Effective oversight is crucial in CPFF contracts to manage allowable costs and ensure program objectives are met efficiently.

Industry Classification

NAICS: Manufacturing › Aerospace Product and Parts Manufacturing › Other Aircraft Parts and Auxiliary Equipment Manufacturing

Product/Service Code: AEROSPACE CRAFT AND STRUCTURAL COMPONENTS

Competition & Pricing

Extent Competed: NOT COMPETED

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Contractor Details

Parent Company: Northrop Grumman Corporation

Address: 1 SPACE PARK BLVD, REDONDO BEACH, CA, 90278

Business Categories: Category Business, Not Designated a Small Business

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline