DoD awards Northrop Grumman $272M for EW Systems, raising concerns about competition and value
Contract Overview
Contract Amount: $272,035,115 ($272.0M)
Contractor: Northrop Grumman Systems Corporation
Awarding Agency: Department of Defense
Start Date: 2001-10-03
End Date: 2012-07-31
Contract Duration: 3,954 days
Daily Burn Rate: $68.8K/day
Competition Type: NOT COMPETED
Number of Offers Received: 1
Pricing Type: COST PLUS AWARD FEE
Sector: Defense
Official Description: 200603!000048!5700!FA8523!WR-ALC-LSK EW SYSTEMS !F0960302C0332 !A!N! !N! !P00018!20051003!20060930!005128988!008255408!016435559!N!NORTHROP GRUMMAN SYSTEMS CORPO!600 HICKS RD !ROLLING MEADOW !IL!60008!65338!031!17!ROLLING MEADOWS !COOK !ILLINOIS !+000003583684!N!N!000000000000!5865!ELCT CNTRMSRS, CNTR-CNTR-MSRS & QCK RCTN CPBLTY EQ!A7 !ELECTRONICS AND COMMUNICATION EQUIP !000 !NOT DISCERNABLE !334419!E! !3! ! !C! ! !99990909!B! ! !A! !D!N!R!1!001!N!1G!A!Y!Z! ! !N!C!N! ! ! !A!A!A!A!000!A!C!N! ! ! ! ! !FA8523!0001! !
Place of Performance
Location: ROLLING MEADOWS, COOK County, ILLINOIS, 60008
State: Illinois Government Spending
Plain-Language Summary
Department of Defense obligated $272.0 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: 200603!000048!5700!FA8523!WR-ALC-LSK EW SYSTEMS !F0960302C0332 !A!N! !N! !P00018!20051003!20060930!005128988!008255408!016435559!N!NORTHROP GRUMMAN SYSTEMS CORPO!600 HICKS RD !ROLLING MEADOW !IL!60008!65338!031!17!ROLLING MEADOWS !COOK… Key points: 1. Significant contract value of $272M awarded to a single large business. 2. Lack of competition raises questions about price discovery and potential overpayment. 3. The contract type (Cost Plus Award Fee) can incentivize cost overruns. 4. The sector is Electronics and Communication Equipment, a critical area for defense.
Value Assessment
Rating: questionable
The contract value of $272M for EW Systems is substantial. Without competitive bidding, it's difficult to assess if this price is reasonable compared to market rates or similar government contracts.
Cost Per Unit: N/A
Competition Analysis
Competition Level: sole-source
This contract was not competed, indicating a sole-source award. This significantly limits price discovery and may lead to higher costs for taxpayers as there was no market pressure to offer the best price.
Taxpayer Impact: The lack of competition on a contract of this magnitude means taxpayers may be paying a premium for these EW systems.
Public Impact
Taxpayers may be overpaying for essential electronic warfare systems due to a lack of competitive bidding. The long contract duration (2001-2012) suggests a long-term reliance on these systems, making the initial pricing even more critical. The award to a single large corporation concentrates significant defense spending within one entity.
Waste & Efficiency Indicators
Waste Risk Score: 50 / 10
Warning Flags
- Lack of competition
- Cost-plus contract type
- High contract value
- Long contract duration
Positive Signals
- Awarded to a known defense contractor
- Supports critical EW systems
Sector Analysis
The Electronics and Communication Equipment sector is vital for national defense, encompassing advanced systems for surveillance, communication, and electronic warfare. Benchmarks for such specialized systems are often difficult to establish due to proprietary technology and unique requirements.
Small Business Impact
This contract was awarded to Northrop Grumman Systems Corporation, a large defense contractor. There is no indication of small business participation in this specific award, suggesting a missed opportunity for small business engagement.
Oversight & Accountability
The sole-source nature of this award warrants close oversight to ensure the government is receiving fair value. The cost-plus award fee structure requires diligent monitoring of performance and costs to control expenditures.
Related Government Programs
- Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing
- Department of Defense Contracting
- Defense Contract Management Agency Programs
Risk Flags
- Potential for overpayment due to lack of competition.
- Cost-plus contract type can lead to uncontrolled spending.
- Lack of transparency in pricing justification.
- Limited opportunity for small business involvement.
- Long-term commitment to a potentially non-competitive solution.
Tags
search-detection-navigation-guidance-aer, department-of-defense, il, definitive-contract, 100m-plus
Frequently Asked Questions
What is this federal contract paying for?
Department of Defense awarded $272.0 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. 200603!000048!5700!FA8523!WR-ALC-LSK EW SYSTEMS !F0960302C0332 !A!N! !N! !P00018!20051003!20060930!005128988!008255408!016435559!N!NORTHROP GRUMMAN SYSTEMS CORPO!600 HICKS RD !ROLLING MEADOW !IL!60008!65338!031!17!ROLLING MEADOWS !COOK !ILLINOIS !+000003583684!N!N!000000000000!5865!ELCT CNTRMSRS, CNTR-CNTR-MSRS & QCK RCTN CPBLTY EQ!A7 !ELECTRONICS AND COMMUNICATION EQUIP !000 !NOT DISCERNABLE !334419!E! !3! ! !C! ! !999
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 $272.0 million.
What is the period of performance?
Start: 2001-10-03. End: 2012-07-31.
What was the justification for awarding this contract on a sole-source basis?
The justification for a sole-source award typically involves unique capabilities, urgent needs, or a lack of viable alternatives. Without further documentation, it's impossible to determine the specific rationale, but it's crucial for ensuring the government wasn't foregoing potential cost savings from competition.
How were costs controlled and value ensured under the Cost Plus Award Fee structure?
Cost Plus Award Fee contracts aim to incentivize contractor performance by linking a portion of the fee to achieving specific performance metrics. Effective oversight by the contracting agency is essential to scrutinize costs, validate performance against award criteria, and ensure the overall value delivered aligns with taxpayer investment.
What is the long-term strategic impact of awarding such a large contract without competition?
Awarding large, long-term contracts without competition can stifle innovation and create vendor lock-in. It may also reduce the government's leverage in future negotiations and potentially lead to higher sustainment costs if the initial system is not cost-effectively designed or procured.
Industry Classification
NAICS: Manufacturing › Navigational, Measuring, Electromedical, and Control Instruments Manufacturing › Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing
Product/Service Code: COMM/DETECT/COHERENT RADIATION
Competition & Pricing
Extent Competed: NOT COMPETED
Solicitation Procedures: ONLY ONE SOURCE
Offers Received: 1
Pricing Type: COST PLUS AWARD FEE (R)
Evaluated Preference: NONE
Contractor Details
Parent Company: Northrop Grumman Corporation (UEI: 967356127)
Address: 500 HICKS RD 600, ROLLING MEADOW, IL, 60008
Business Categories: Category Business, Not Designated a Small Business
Financial Breakdown
Contract Ceiling: $272,035,115
Exercised Options: $272,035,115
Current Obligation: $272,035,115
Contract Characteristics
Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED
Cost or Pricing Data: YES
Timeline
Start Date: 2001-10-03
Current End Date: 2012-07-31
Potential End Date: 2012-07-31 00:00:00
Last Modified: 2016-12-21
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