DoD awards $171M contract for systems engineering services to Northrop Grumman, raising value-for-money questions

Contract Overview

Contract Amount: $17,130,514 ($17.1M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2005-05-05

End Date: 2012-05-31

Contract Duration: 2,583 days

Daily Burn Rate: $6.6K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: 200508!000325!5700!FA8102!OC-ALC/LAD !FA810205C0004 !A!N! !N! ! !20050505!20060410!091808832!008255408!016435559!N!NORTHROP GRUMMAN SYSTEMS CORPO!1580A NURSERY RD !LINTHICUM HEIG !MD!21090!47150!003!24!LINTHICUM HEIGHTS !ANNE ARUNDEL !MARYLAND !+000000133681!Y!N!000000814994!R414!SYSTEMS ENGINEERING SERVICES !A1C!OTHER AIRCRAFT EQUIPMENT !000 !* !336413!E! !3! ! ! ! ! !20200930!B! ! !A! !D!N!J!1!001!N!1G!Z!Y!A! ! !N!C!N! ! ! !A!A!A!A!000!A!C!N! ! ! ! ! ! !0001! !

Place of Performance

Location: LINTHICUM HEIGHTS, ANNE ARUNDEL County, MARYLAND, 21090

State: Maryland Government Spending

Plain-Language Summary

Department of Defense obligated $17.1 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: 200508!000325!5700!FA8102!OC-ALC/LAD !FA810205C0004 !A!N! !N! ! !20050505!20060410!091808832!008255408!016435559!N!NORTHROP GRUMMAN SYSTEMS CORPO!1580A NURSERY RD !LINTHICUM HEIG !MD!21090!47150!003!24!LINTHICUM HEIGHTS !ANNE… Key points: 1. Contract awarded on a sole-source basis, limiting price competition and potentially increasing costs. 2. Significant contract value suggests a critical role in supporting Air Force operations. 3. Long contract duration (over 7 years) may indicate a need for sustained support, but also risks of cost overruns or outdated services. 4. The 'Other Aircraft Parts and Auxiliary Equipment Manufacturing' NAICS code seems broad for 'Systems Engineering Services', warranting further investigation. 5. Lack of competition raises concerns about whether the government secured the best possible price. 6. The contract's value is substantial, requiring robust oversight to ensure effective use of taxpayer funds.

Value Assessment

Rating: questionable

The contract value of $171.3 million for systems engineering services appears high, especially given the sole-source award. Without competitive bidding, it's difficult to benchmark the pricing against market rates or similar contracts. The long performance period (over 7 years) also introduces risk. While Northrop Grumman is a major defense contractor, the lack of competition prevents a definitive assessment of value for money. Further analysis of the specific services rendered and their necessity would be required to fully evaluate the pricing.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning there was no open competition. This typically occurs when a specific contractor possesses unique capabilities or when urgency dictates a rapid award. The absence of multiple bidders means the government did not benefit from the price discovery mechanisms inherent in a competitive process, potentially leading to higher costs for taxpayers.

Taxpayer Impact: Sole-source awards mean taxpayers may not be getting the most competitive pricing. The lack of competition limits the government's leverage to negotiate lower rates.

Public Impact

The primary beneficiaries are likely the Department of the Air Force, which receives critical systems engineering support. Services provided are essential for the maintenance, sustainment, and potential upgrades of aircraft or related systems. The contract supports a significant workforce within Northrop Grumman, contributing to employment in Maryland. Geographic impact is concentrated in Linthicum Heights, Maryland, where the contractor is located.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing and value for money.
Long contract duration increases risk of cost escalation and service obsolescence.
Broad NAICS code assignment may not accurately reflect the specialized services procured.
Lack of transparency in the justification for sole-source award.

Positive Signals

Award to a large, established defense contractor suggests potential for reliable service delivery.
Systems engineering services are critical for complex defense systems, indicating a necessary procurement.
Contract supports ongoing operations and sustainment of Air Force assets.

Sector Analysis

This contract falls within the broader aerospace and defense sector, specifically focusing on systems engineering and support services. The market for such services is dominated by large, established defense contractors. While the NAICS code points to 'Other Aircraft Parts and Auxiliary Equipment Manufacturing,' the service description indicates a focus on engineering and technical support rather than direct manufacturing. Comparable spending benchmarks are difficult to establish without more specific service details and competitive data.

Small Business Impact

This contract does not appear to have a small business set-aside component, as it was awarded sole-source to a large corporation. There is no explicit information regarding subcontracting plans for small businesses. The focus on a large prime contractor may limit opportunities for small businesses to participate in this specific procurement.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of the Air Force's contracting and program management offices. Accountability measures would be defined in the contract terms and conditions. Transparency is limited due to the sole-source nature of the award, with justifications for the procurement method needing to be publicly accessible. Inspector General jurisdiction would apply to investigations of fraud, waste, or abuse.

Related Government Programs

Aircraft Maintenance and Repair
Aerospace Engineering Services
Defense Systems Integration
Air Force Sustainment Programs
Government Contracting

Risk Flags

Sole-source award lacks competitive transparency.
Potential for inflated pricing due to lack of competition.
Risk of service obsolescence due to long contract duration.
Broad NAICS code may obscure the true nature of services procured.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $17.1 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. 200508!000325!5700!FA8102!OC-ALC/LAD !FA810205C0004 !A!N! !N! ! !20050505!20060410!091808832!008255408!016435559!N!NORTHROP GRUMMAN SYSTEMS CORPO!1580A NURSERY RD !LINTHICUM HEIG !MD!21090!47150!003!24!LINTHICUM HEIGHTS !ANNE ARUNDEL !MARYLAND !+000000133681!Y!N!000000814994!R414!SYSTEMS ENGINEERING SERVICES !A1C!OTHER AIRCRAFT EQUIPMENT !000 !* !336413!E! !3! ! ! ! ! !202

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 (Department of the Air Force).

What is the total obligated amount?

The obligated amount is $17.1 million.

What is the period of performance?

Start: 2005-05-05. End: 2012-05-31.

What specific systems engineering services are being provided under this contract, and how do they align with the 'Other Aircraft Parts and Auxiliary Equipment Manufacturing' NAICS code?

The contract description lists 'SYSTEMS ENGINEERING SERVICES' (336413). The NAICS code 336413, 'Other Aircraft Parts and Auxiliary Equipment Manufacturing,' typically covers establishments primarily engaged in manufacturing aircraft parts and auxiliary equipment, such as engines, propellers, landing gear, and avionics. However, it can also encompass related repair and overhaul activities. For this contract, it's plausible that the systems engineering services are directly tied to the design, integration, modification, or sustainment of aircraft parts and auxiliary equipment, potentially involving complex technical analysis, testing, and support for manufacturing processes. The broadness of the NAICS code might be a legacy assignment or an attempt to categorize services closely linked to the physical components of aircraft systems. A more precise NAICS code might have been 'Computer Systems Design and Related Services' (541511) or 'Engineering Services' (541330), but the current assignment suggests a direct link to the physical hardware lifecycle.

What was the justification for awarding this contract on a sole-source basis instead of through full and open competition?

Sole-source awards are typically justified under specific circumstances outlined in federal acquisition regulations, such as when only one responsible source can provide the required supplies or services, or when there is a compelling urgency. For this contract, the justification for sole-source procurement is not detailed in the provided data. Common reasons in defense contracting include the proprietary nature of technology, unique contractor capabilities essential for national security, or the need for seamless integration with existing systems where only one contractor has the necessary expertise. Without the official justification document, it's impossible to determine the precise rationale, but it likely relates to Northrop Grumman's specific role or expertise concerning the systems involved.

How does the contract's duration of over 7 years (from May 2005 to May 2012) impact the assessment of value for money and the risk of service obsolescence?

A contract duration exceeding seven years presents a dual-edged sword for value for money. On one hand, it allows for sustained support and potential economies of scale for the contractor, which could translate to more stable pricing over the long term. It also ensures continuity of critical services for the government. However, it significantly increases the risk of service obsolescence, especially in rapidly evolving fields like systems engineering. Technology can advance rapidly, rendering the initially contracted services or methodologies outdated by the end of the performance period. Furthermore, long-term contracts can lock the government into potentially suboptimal pricing if market conditions change favorably for buyers. Robust contract management, including provisions for review and potential renegotiation, is crucial to mitigate these risks and ensure continued value.

What is Northrop Grumman's track record with similar systems engineering contracts for the Department of Defense?

Northrop Grumman Systems Corporation is a major defense contractor with extensive experience in systems engineering across various platforms and programs for the Department of Defense (DoD). They are known for their work on complex systems, including aircraft, spacecraft, and defense networks. Their track record typically involves large-scale, long-term contracts requiring sophisticated technical expertise, integration capabilities, and program management. While this specific contract's sole-source nature raises questions, Northrop Grumman's general history suggests they possess the technical capacity to perform complex systems engineering tasks. However, a detailed review of their past performance on similar sole-source awards, including any past performance issues or successes, would be necessary for a comprehensive assessment.

Are there any publicly available performance metrics or outcomes associated with this contract to gauge its effectiveness?

The provided data does not include specific performance metrics or outcomes for this contract. Federal contracts typically include performance standards, deliverables, and evaluation criteria, but these details are often not publicly accessible in summary databases. Assessing the effectiveness would require access to contract performance reports, government evaluations, or Inspector General findings related to this specific award. Without such information, it is difficult to definitively gauge the success or effectiveness of the systems engineering services provided by Northrop Grumman under this $171 million sole-source award.

Industry Classification

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

Product/Service Code: SUPPORT SVCS (PROF, ADMIN, MGMT) › PROFESSIONAL SERVICES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Northrop Grumman Corporation (UEI: 967356127)

Address: 1580A NURSERY RD, LINTHICUM HEIG, MD

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

Financial Breakdown

Contract Ceiling: $9,746,832

Exercised Options: $8,931,838

Current Obligation: $17,130,514

Contract Characteristics

Cost or Pricing Data: YES

Timeline