DoD's $500M+ contract with Northrop Grumman, awarded in 1982, highlights long-term defense sustainment needs

Contract Overview

Contract Amount: $500,100,042 ($500.1M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 1982-04-15

End Date: 2004-12-23

Contract Duration: 8,288 days

Daily Burn Rate: $60.3K/day

Competition Type: NOT COMPETED

Pricing Type: FIXED PRICE INCENTIVE

Sector: Defense

Place of Performance

Location: REDONDO BEACH, LOS ANGELES County, CALIFORNIA, 90278

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $500.1 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: Key points: 1. Long-term sustainment contracts can offer predictable revenue but may lack flexibility for evolving needs. 2. The 'not competed' award suggests a sole-source justification, potentially limiting price competition. 3. The contract's duration (over 8000 days) indicates a significant, ongoing commitment to a specific system. 4. Fixed Price Incentive (FPI) contracts aim to balance cost control with performance incentives. 5. The lack of a specific Product Service Code (PSC) makes it difficult to benchmark against similar services. 6. The contract's significant value underscores the substantial investment in maintaining critical defense capabilities.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to its age, lack of specific service details, and 'not competed' status. Awarded in 1982, the $500M+ figure represents a substantial investment over its lifespan. Without comparable contracts or detailed performance metrics, assessing value-for-money is difficult. The Fixed Price Incentive (FPI) structure suggests an attempt to control costs while incentivizing performance, but the long duration and sole-source nature raise questions about whether the government secured the best possible price.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded as 'NOT COMPETED,' indicating a sole-source procurement. This means the agency identified a specific contractor deemed necessary for the requirement, bypassing the standard competitive bidding process. The lack of competition means there were no other bidders to compare against, and the government did not benefit from the price discovery that typically occurs in a competitive environment. This approach is usually reserved for situations where only one source can fulfill the need, such as unique capabilities or proprietary technology.

Taxpayer Impact: Sole-source awards can lead to higher prices for taxpayers as the government lacks the leverage of multiple competing offers. It also limits opportunities for other businesses to compete for this work.

Public Impact

The primary beneficiaries are likely the Department of Defense and its operational units relying on the sustained capability provided by this contract. The services delivered are critical for maintaining the readiness and effectiveness of specific defense systems. The geographic impact is primarily within the United States, supporting defense operations and potentially involving personnel at various military installations. Workforce implications include the employment of personnel by Northrop Grumman to fulfill the contract's technical and support requirements.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition raises concerns about potential overpricing and reduced innovation.
The extended duration of the contract may indicate a lack of agility in adapting to new technologies or requirements.
Absence of a specific PSC hinders detailed analysis and benchmarking.
The 'not competed' status requires strong justification to ensure taxpayer funds are used efficiently.

Positive Signals

The FPI contract type suggests an effort to align contractor incentives with government objectives.
Northrop Grumman's long-standing presence implies a deep understanding of the supported defense systems.
The significant award value indicates the critical nature of the services provided to national security.

Sector Analysis

This contract falls within the Defense Industrial Base sector, a critical component of national security. The market is characterized by high barriers to entry, specialized technologies, and long-term relationships between government and prime contractors. Spending in this sector is substantial, driven by the need to maintain and modernize complex weapon systems. Contracts like this, often for sustainment and support of legacy platforms, represent a significant portion of the defense budget, ensuring operational readiness.

Small Business Impact

The data indicates this contract was not competed and there is no explicit mention of small business set-asides or subcontracting goals. Given the prime contractor is Northrop Grumman, a large aerospace and defense company, it is likely that a portion of the work would be subcontracted. However, without specific details on subcontracting plans or set-asides, the direct impact on the small business ecosystem is unclear, though large prime contracts often do flow down to smaller suppliers.

Oversight & Accountability

Oversight for this contract would typically be managed by the Defense Contract Management Agency (DCMA), responsible for ensuring contractor performance and compliance. Accountability measures are embedded within the Fixed Price Incentive (FPI) contract structure, which links payment to performance targets. Transparency is limited by the sole-source nature and the age of the award; detailed public reporting on specific performance metrics or cost breakdowns may not be readily available.

Related Government Programs

Defense Logistics Agency (DLA) Support Contracts
Naval Sea Systems Command (NAVSEA) Contracts
Air Force Sustainment Contracts
Army Aviation and Missile Command (AMCOM) Contracts
Defense Contract Audit Agency (DCAA) Audits

Risk Flags

Long contract duration
Sole-source award
Lack of specific service details (PSC)
Potential for cost overruns in FPI contracts

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $500.1 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. See the official description on USAspending.

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 $500.1 million.

What is the period of performance?

Start: 1982-04-15. End: 2004-12-23.

What specific defense systems or platforms does this $500M+ contract with Northrop Grumman support?

The provided data does not specify the exact defense systems or platforms supported by this contract. The absence of a Product Service Code (PSC) and the contract's age (awarded in 1982) make it difficult to pinpoint the specific application without further investigation into Northrop Grumman's historical contracts with the Department of Defense during that era. Typically, such large, long-duration contracts are for sustainment, maintenance, repair, or upgrade services for major weapon systems, aircraft, or naval vessels, ensuring their operational readiness over extended periods.

How does the 'not competed' status impact the overall cost-effectiveness for the taxpayer?

A 'not competed' or sole-source award generally reduces cost-effectiveness for the taxpayer. In a competitive bidding process, multiple companies vie for the contract, driving down prices through negotiation and comparison. When a contract is sole-sourced, the government lacks this competitive leverage. While agencies must justify sole-source awards (e.g., unique capabilities, national security imperatives), there's an inherent risk that the price may be higher than what could have been achieved through competition. Robust negotiation and oversight are crucial to mitigate these risks, but the absence of competing offers inherently limits price discovery.

What are the typical risks associated with a Fixed Price Incentive (FPI) contract of this duration?

Fixed Price Incentive (FPI) contracts aim to share cost risks and rewards between the government and contractor. For a contract spanning over 8,000 days (over 22 years), risks include: 1) Cost Overruns: If the contractor's costs exceed estimates, they bear a portion, but significant overruns can still strain the budget. 2) Performance Shortfalls: If performance targets aren't met, incentives may not be earned, but the base price is still paid. 3) Scope Creep: Over such a long period, requirements can change, leading to costly modifications if not managed carefully. 4) Contractor Lock-in: The long duration can make it difficult and costly to switch providers, potentially reducing future negotiating power. 5) Incentive Ineffectiveness: If incentives are poorly designed or targets are too easily met/missed, they may not effectively drive desired outcomes.

Can we benchmark the $500M+ award value against similar defense sustainment contracts?

Benchmarking this $500M+ award value is extremely difficult with the provided data. Key information missing includes the specific services rendered, the type of defense system supported, the contract duration in years (though calculable from dates), and the Product Service Code (PSC). Contracts awarded in 1982 for sustainment are vastly different from modern contracts due to technological advancements, inflation, and evolving defense needs. Without knowing what the $500M+ procured (e.g., spare parts, depot maintenance, software support), direct comparison to other sustainment contracts is speculative and potentially misleading.

What does the contract end date of December 23, 2004, imply about its execution and potential follow-on actions?

The contract end date of December 23, 2004, indicates that this specific award period has concluded. Awarded in April 1982, the contract spanned over 22 years, suggesting a long-term sustainment or support role for a particular defense capability. The fact that it ended implies either the system reached its end-of-life, was replaced, or the support function transitioned to a new contract vehicle. It is highly probable that follow-on contracts or modifications existed to ensure continuous support, as defense systems often require sustainment for decades. Investigating subsequent contracts related to the same system or contractor would be necessary to understand the full lifecycle support picture.

Competition & Pricing

Extent Competed: NOT COMPETED

Pricing Type: FIXED PRICE INCENTIVE (L)

Contractor Details

Parent Company: Northrop Grumman Corporation

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

Business Categories: Black American Owned Business, Category Business, Minority Owned Business, Not Designated a Small Business

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Timeline