DoD's $948M missile defense R&D contract awarded to TRW Inc. shows potential value concerns

Contract Overview

Contract Amount: $27,089,006 ($27.1M)

Contractor: Northrop Grumman Space & Mission Systems Corp.

Awarding Agency: Department of Defense

Start Date: 2001-09-24

End Date: 2005-09-24

Contract Duration: 1,461 days

Daily Burn Rate: $18.5K/day

Competition Type: FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES

Number of Offers Received: 5

Pricing Type: COST PLUS AWARD FEE

Sector: R&D

Official Description: 200112!001919!2100!SG60 !USA SPACE AND STRATEGIC DEF CDR !DASG6001C0091 !A!N!*!Y! !20010924!20030320!948183371!948183371!004179453!N!TRW INC !1475 EAST HARRY SHEPPARD B!SAN BERNARDINO !CA!92408!65000!071!06!SAN BERNARDINO !SAN BERNARDINO !CALIFORNIA!+000000500000!N!N!000000000000!AC23!RDTE/MISSILE AND SPACE SYSTEMS-ADV TECH DEV !A2 !MISSILE AND SPACE SYSTEMS !1CAA!BALLISTIC MISSILE DEFENSE SYS !541710!*!*!3! ! ! !*!*!*!B!*!*!A! !A !N!R!2!005!N!1B!Z!N!Z! ! !N!C!N! ! ! !Z!Z!A!A!000!A!C!N! ! ! ! ! ! !0001!

Place of Performance

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

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $27.1 million to NORTHROP GRUMMAN SPACE & MISSION SYSTEMS CORP. for work described as: 200112!001919!2100!SG60 !USA SPACE AND STRATEGIC DEF CDR !DASG6001C0091 !A!N!*!Y! !20010924!20030320!948183371!948183371!004179453!N!TRW INC !1475 EAST HARRY SHEPPARD B!SAN BERNARDINO !CA!92408!65000!071!06!SAN BERNARDINO !SAN B… Key points: 1. The contract's cost-plus-award-fee structure may incentivize cost overruns. 2. Limited competition, despite being advertised as 'full and open after exclusion of sources,' raises questions about price discovery. 3. The contractor, TRW Inc., has a significant track record, but performance on this specific contract needs scrutiny. 4. The contract's duration of nearly four years suggests a long-term commitment to this R&D effort. 5. The significant award value warrants a deep dive into the cost-effectiveness of the research and development. 6. The contract falls within the 'Research and Development in the Physical, Engineering, and Life Sciences' NAICS code, indicating a focus on advanced technological pursuits.

Value Assessment

Rating: questionable

The total award of $948,183,371 for a nearly four-year contract for missile and space systems R&D is substantial. While specific performance metrics and deliverables are not detailed here, the cost-plus-award-fee (CPAF) contract type can sometimes lead to higher costs compared to fixed-price contracts if not managed tightly. Benchmarking this against similar R&D contracts in missile defense would be crucial to assess if the pricing is competitive and reflects true value for money. Without detailed cost breakdowns and performance data, it's difficult to definitively assess value, but the potential for cost escalation under CPAF warrants careful consideration.

Cost Per Unit: N/A

Competition Analysis

Competition Level: limited

The contract was awarded under 'full and open competition after exclusion of sources,' which suggests that while the opportunity was initially advertised broadly, specific sources were later excluded. The data indicates there were 5 bidders, which is a moderate level of competition for a contract of this magnitude. However, the 'exclusion of sources' aspect needs further investigation to understand why certain potential bidders were removed from consideration. A moderate number of bidders can still lead to competitive pricing, but the exclusion could limit the range of innovative solutions and potentially impact the final price.

Taxpayer Impact: The exclusion of sources, even with multiple bidders, could mean taxpayers did not benefit from the full spectrum of competitive pricing and innovation that a truly open competition might have yielded.

Public Impact

The primary beneficiaries are the Department of Defense and its strategic defense initiatives, particularly in ballistic missile defense. The contract supports the development of advanced technologies for missile and space systems, enhancing national security. The geographic impact is centered in California, where TRW Inc. is located, potentially creating or sustaining high-tech jobs in the San Bernardino area. The contract directly impacts the defense technology sector, fostering innovation and expertise in a critical area of national security.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost-plus-award-fee structure may lead to higher costs than fixed-price contracts.
The 'exclusion of sources' in the competition process warrants further investigation to ensure maximum value for taxpayers.
Lack of detailed performance metrics makes it difficult to fully assess the value for money.
The long contract duration could indicate potential for scope creep or evolving requirements that impact final cost.

Positive Signals

Awarded to a reputable contractor (TRW Inc.) with experience in the field.
The contract aims to advance critical missile defense technologies, contributing to national security.
A moderate number of bidders (5) suggests some level of market interest and potential for competitive pricing.
The contract is for research and development, which inherently involves exploring new and potentially high-value solutions.

Sector Analysis

This contract falls within the Research and Development (R&D) sector, specifically focusing on advanced physical and engineering sciences related to missile and space systems. The North American Industry Classification System (NAICS) code 541710, 'Research and Development in the Physical, Engineering, and Life Sciences,' encompasses a broad range of scientific and technical services. The market for defense R&D is characterized by significant government investment, long development cycles, and a focus on cutting-edge technologies. Comparable spending benchmarks would involve looking at other large-scale R&D contracts within the Department of Defense for missile defense and space technologies.

Small Business Impact

The data indicates this contract was not set aside for small businesses (ss=false, sb=false). As a large-scale R&D contract for advanced defense systems, it is unlikely to have been a primary target for small business set-asides. However, the prime contractor, TRW Inc., may engage small businesses as subcontractors for specialized services or components. The extent of small business subcontracting is not detailed in this data, but it is a common practice in large defense contracts to meet certain socio-economic goals.

Oversight & Accountability

Oversight for this Department of Defense contract would typically be managed by the contracting agency (Department of the Army) and potentially the Defense Contract Management Agency (DCMA). The contract type (Cost Plus Award Fee) necessitates close monitoring of costs and performance to ensure the contractor is meeting objectives and not incurring excessive expenses. Transparency would be facilitated through contract reporting mechanisms, and the Inspector General's office for the Department of Defense would have jurisdiction to investigate any allegations of fraud, waste, or abuse.

Related Government Programs

Missile Defense Agency (MDA) Research and Development Programs
Advanced Technology Development Contracts
Space Systems Research and Development
Ballistic Missile Defense Systems
Department of Defense Research and Development Spending
Strategic Defense Initiatives

Risk Flags

Potential for cost overruns due to CPAF structure.
Limited competition due to 'exclusion of sources'.
Need for detailed performance metrics to assess value.
Contract duration may increase risk of scope creep.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $27.1 million to NORTHROP GRUMMAN SPACE & MISSION SYSTEMS CORP.. 200112!001919!2100!SG60 !USA SPACE AND STRATEGIC DEF CDR !DASG6001C0091 !A!N!*!Y! !20010924!20030320!948183371!948183371!004179453!N!TRW INC !1475 EAST HARRY SHEPPARD B!SAN BERNARDINO !CA!92408!65000!071!06!SAN BERNARDINO !SAN BERNARDINO !CALIFORNIA!+000000500000!N!N!000000000000!AC23!RDTE/MISSILE AND SPACE SYSTEMS-ADV TECH DEV !A2 !MISSILE AND SPACE SYSTEMS !1CAA!BALLISTIC MISSILE DEFENSE SYS !541710!*!*!3! ! ! !*!*!*!B!*!*!A!

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 Army).

What is the total obligated amount?

The obligated amount is $27.1 million.

What is the period of performance?

Start: 2001-09-24. End: 2005-09-24.

What was TRW Inc.'s performance history on similar missile defense R&D contracts prior to this award?

Assessing TRW Inc.'s performance history on comparable contracts is crucial for understanding their capability and reliability in executing complex R&D projects. While the provided data doesn't detail past performance, a thorough analysis would involve reviewing past contract awards to TRW Inc. in the missile defense and space systems domain. Key indicators to examine would include on-time delivery, adherence to budget, quality of deliverables, and any documented performance issues or commendations. A strong track record on similar, complex R&D efforts would suggest a lower risk for this contract, whereas a history of cost overruns or missed deadlines on comparable projects would raise concerns about the current contract's potential outcomes and value for money.

How does the per-unit cost or cost per research milestone compare to industry benchmarks for similar missile defense R&D?

Directly comparing the per-unit cost or cost per research milestone for this $948 million contract is challenging without detailed breakdowns of the R&D activities and their associated costs. However, industry benchmarks for missile defense R&D are typically very high due to the complexity, specialized expertise, and cutting-edge technology involved. To assess value, one would need to compare the cost of specific research phases or technological advancements achieved under this contract against similar efforts by other defense contractors or government labs. The cost-plus-award-fee structure means that costs are reimbursed plus an award fee based on performance, making direct cost benchmarking difficult without knowing the award fee criteria and achieved performance levels. Generally, R&D contracts of this scale aim for significant technological breakthroughs, and their 'value' is often measured by the strategic advantage gained rather than a simple per-unit cost.

What specific risks were identified during the source selection process, and how were they mitigated?

The data indicates the contract was awarded under 'full and open competition after exclusion of sources,' with 5 bidders. This suggests that while the initial solicitation may have been broad, certain sources were deemed ineligible or were excluded for specific reasons during the evaluation. The specific risks identified during this process are not detailed in the provided data. Typically, risks assessed during source selection for R&D contracts include technical feasibility, contractor capability, management approach, cost realism, and schedule adherence. Mitigation strategies would depend on the identified risks; for example, if a technical risk was high, the agency might require specific technical reviews or phased development. If a contractor's management approach was deemed weak, they might be required to submit a more detailed management plan. Understanding the 'exclusion of sources' is key to understanding potential risks that may have been avoided or, conversely, introduced by limiting the competitive pool.

What is the historical spending trend for ballistic missile defense systems R&D by the Department of the Army?

The provided data focuses on a single contract award and does not offer historical spending trends for ballistic missile defense (BMD) R&D by the Department of the Army. To analyze historical spending, one would need access to multi-year budget appropriations and contract award data for the Army's BMD programs. Generally, spending in this area tends to fluctuate based on perceived threats, technological advancements, and overall defense priorities. Significant investments are often made during periods of heightened geopolitical tension or when new threat assessments emerge. A comprehensive analysis would involve examining budget requests, enacted appropriations, and the total value of R&D contracts awarded for BMD over several fiscal years to identify patterns, growth, or reductions in investment.

How effective has the cost-plus-award-fee (CPAF) contract structure been in achieving R&D objectives for similar defense contracts?

The Cost-Plus-Award-Fee (CPAF) structure is frequently used for R&D contracts where the scope of work is not precisely defined at the outset, and performance outcomes are difficult to predict. Its effectiveness hinges on well-defined performance objectives and a robust award fee plan. When executed properly, CPAF can incentivize contractors to exceed minimum requirements and achieve superior results by linking a portion of the profit to performance. However, it also carries risks: if objectives are poorly defined or the award fee criteria are subjective, it can lead to disputes or inflate costs without commensurate gains in innovation or quality. For this specific contract, the effectiveness of CPAF will depend on how well the Army defined the R&D goals and how objectively the award fees were assessed against TRW Inc.'s performance in advancing missile and space systems technology.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Scientific Research and Development Services › Research and Development in the Physical, Engineering, and Life Sciences

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

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Offers Received: 5

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

Contract Characteristics

Cost or Pricing Data: NO

Timeline