DoD's $36M Northrop Grumman contract for ground subsystem support shows fair value, but limited competition raises concerns

Contract Overview

Contract Amount: $36,098,833 ($36.1M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2020-08-01

End Date: 2020-08-01

Competition Type: FULL AND OPEN COMPETITION

Pricing Type: COST PLUS AWARD FEE

Sector: Defense

Official Description: GROUND SUBSYSTEM SUPPORT CONTRACT (GSSC) - GENERAL SUSTAINMENT

Place of Performance

Location: MC LEAN, FAIRFAX County, VIRGINIA, 22102

State: Virginia Government Spending

Plain-Language Summary

Department of Defense obligated $36.1 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: GROUND SUBSYSTEM SUPPORT CONTRACT (GSSC) - GENERAL SUSTAINMENT Key points: 1. The contract's value appears reasonable when benchmarked against similar engineering services, though specific cost breakdowns are not publicly available. 2. Full and open competition was utilized, but only one bid was received, suggesting potential limitations in market engagement or contractor availability. 3. The cost-plus award fee structure allows for performance incentives but can lead to cost overruns if not managed tightly. 4. This contract supports critical Air Force ground systems, indicating a significant role in maintaining operational readiness. 5. Northrop Grumman's extensive experience in defense contracting positions them well for this type of complex support. 6. The lack of small business set-aside or subcontracting requirements may limit opportunities for smaller firms in this contract.

Value Assessment

Rating: fair

The total award amount of $36,098,833.33 for engineering services appears within a reasonable range for complex defense systems support. However, without detailed cost breakdowns or comparisons to highly similar, recently competed contracts, a precise value-for-money assessment is challenging. The cost-plus award fee structure, while incentivizing performance, carries inherent risks of cost escalation if oversight is insufficient. Benchmarking against industry standards for sustainment engineering services suggests the pricing is not exorbitant, but the lack of competitive pressure limits the ability to confirm optimal value.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, which is the preferred method for ensuring broad market access. However, the fact that only one bid was received is a significant indicator of limited actual competition. This could be due to several factors, including the specialized nature of the services required, the limited number of qualified contractors, or potentially a lack of outreach to the broader market. The limited number of bidders restricts price discovery and may indicate that the government did not achieve the most competitive pricing possible.

Taxpayer Impact: For taxpayers, a single bid scenario means less assurance that the price reflects the lowest possible cost. It increases the risk that the awarded price is higher than it might have been if multiple companies had vied for the contract.

Public Impact

The primary beneficiaries are the Department of the Air Force, ensuring the continued operational readiness of critical ground support systems. This contract delivers essential sustainment and engineering services, crucial for maintaining the functionality and longevity of complex defense infrastructure. The geographic impact is primarily within the United States, supporting Air Force installations where these ground systems are deployed. Workforce implications include the employment of specialized engineers and technical personnel by Northrop Grumman, contributing to the defense industrial base.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Limited competition despite full and open solicitation raises questions about market dynamics and potential barriers to entry for other firms.
Cost-plus award fee contracts require diligent oversight to prevent potential cost overruns and ensure true value for money.
The absence of specific small business subcontracting goals may limit opportunities for smaller, innovative companies within this contract's scope.

Positive Signals

Northrop Grumman is a large, established defense contractor with a proven track record in complex systems support.
The contract utilizes a full and open competition approach, theoretically allowing any qualified vendor to bid.
The award fee structure provides an incentive for the contractor to meet or exceed performance expectations.

Sector Analysis

This contract falls within the Engineering Services sector (NAICS 541330), a critical component of the broader aerospace and defense industry. The market for defense sustainment and support services is substantial, characterized by long-term relationships between government agencies and prime contractors. Spending in this area is often driven by the need to maintain aging platforms and complex systems, requiring specialized technical expertise. Comparable spending benchmarks are difficult to pinpoint without more specific details on the systems supported, but large-scale sustainment contracts can range from tens to hundreds of millions of dollars.

Small Business Impact

This contract does not appear to have specific small business set-aside provisions, nor are there explicit requirements for small business subcontracting mentioned in the provided data. This means that opportunities for small businesses to participate directly or indirectly in this contract are likely limited. While Northrop Grumman may engage small businesses as part of its broader supply chain, the absence of formal set-asides or subcontracting plans suggests a reduced focus on integrating the small business ecosystem into this specific procurement.

Oversight & Accountability

Oversight for this contract would primarily reside with the Department of the Air Force contracting and program management offices. Accountability measures are embedded within the Cost Plus Award Fee (CPAF) structure, which links a portion of the contractor's profit to performance metrics. Transparency regarding specific performance outcomes and cost details may be limited due to the sensitive nature of defense contracts. The Inspector General's office for the Department of Defense would have jurisdiction to investigate any allegations of fraud, waste, or abuse related to this contract.

Related Government Programs

Ground Support Equipment Maintenance Contracts
Aerospace Engineering Services
Defense Logistics Support
Air Force Sustainment Programs
Northrop Grumman Defense Contracts

Risk Flags

Limited Competition
Cost-Plus Award Fee Risks
Lack of Small Business Subcontracting

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $36.1 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. GROUND SUBSYSTEM SUPPORT CONTRACT (GSSC) - GENERAL SUSTAINMENT

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 $36.1 million.

What is the period of performance?

Start: 2020-08-01. End: 2020-08-01.

What is Northrop Grumman's track record with similar Department of Defense contracts?

Northrop Grumman Systems Corporation is a major defense contractor with a long history of performing complex engineering, manufacturing, and support services for the Department of Defense across various branches, including the Air Force. They have extensive experience with large-scale sustainment contracts, weapon system support, and advanced technology integration. While specific performance metrics for past contracts are often proprietary or not publicly detailed, their continued selection for significant programs indicates a generally satisfactory performance history and capability to meet DoD requirements. Analyzing their portfolio reveals a consistent presence in areas requiring high levels of technical expertise and program management, suggesting a strong capability relevant to the Ground Subsystem Support Contract (GSSC).

How does the awarded price compare to industry benchmarks for similar engineering services?

Benchmarking the $36 million award for the Ground Subsystem Support Contract (GSSC) is challenging without granular data on the specific systems supported and the scope of 'general sustainment.' However, engineering services for complex defense systems typically command significant investment. Industry reports and government databases for similar NAICS codes (like 541330) show a wide range, with large sustainment contracts often running into tens or hundreds of millions of dollars over their lifecycle. The Cost Plus Award Fee (CPAF) structure means the final cost can vary based on performance. Given Northrop Grumman's established role and the specialized nature of defense support, the price appears within a plausible range, though the lack of competitive bids prevents a definitive conclusion on whether it represents optimal value for money.

What are the primary risks associated with this Cost Plus Award Fee (CPAF) contract?

The primary risk with a CPAF contract is the potential for cost escalation. While the 'award fee' component incentivizes performance, the 'cost plus' element means the contractor is reimbursed for allowable costs plus a fee that can be adjusted based on performance. If cost-plus reimbursement is not tightly controlled and performance metrics are not rigorously defined and monitored, costs can exceed initial estimates. Another risk is the potential for the contractor to focus on maximizing allowable costs rather than achieving efficiencies. Effective oversight, clear performance standards, and robust auditing are crucial to mitigate these risks and ensure the government receives good value.

How effective is the 'full and open competition' designation when only one bid is received?

The designation of 'full and open competition' indicates the government's intent to solicit bids from all responsible sources capable of meeting the requirements. However, its effectiveness is significantly diminished when only one bid is submitted. This outcome suggests that either the market for this specific service is highly concentrated, the barriers to entry are substantial, or the solicitation process may not have effectively reached or encouraged a wider range of potential bidders. While technically compliant with competition rules, a single-bid scenario limits price discovery, reduces the government's leverage in negotiations, and raises concerns about whether the most competitive price was achieved. It prompts further investigation into market conditions and procurement strategies.

What is the historical spending pattern for ground subsystem support within the Department of the Air Force?

Historical spending on ground subsystem support within the Department of the Air Force, and the DoD more broadly, is substantial and generally consistent. These contracts are essential for maintaining the operational readiness of a vast array of complex systems, from aircraft launch and recovery equipment to communication networks and command and control infrastructure. Spending often involves long-term sustainment, upgrades, and lifecycle management. While specific figures fluctuate annually based on modernization priorities, budget allocations, and the aging of existing systems, the need for ongoing support services represents a significant and recurring expenditure category. Contracts like the GSSC are typical components of this larger, sustained investment in defense readiness.

What are the implications of the contract's duration and delivery order structure?

The provided data indicates the contract was awarded on 2020-08-01 with a start date of 2020-08-01, and the award type is 'DELIVERY ORDER'. This suggests the $36 million figure represents the value of a specific delivery order placed against a potentially larger indefinite-delivery/indefinite-quantity (IDIQ) contract or a contract with a defined period of performance. The duration of the underlying contract (not specified here) and the structure of delivery orders influence flexibility and long-term planning. Delivery orders allow agencies to procure services as needed, which can be efficient but also means the total spending can vary. Without knowing the total ceiling or duration of the parent contract, it's difficult to assess the long-term commitment or spending trajectory.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Architectural, Engineering, and Related Services › Engineering Services

Product/Service Code: MODIFICATION OF EQUIPMENT › MODIFICATION OF EQUIPMENT

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Pricing Type: COST PLUS AWARD FEE (R)

Evaluated Preference: NONE

Contractor Details

Parent Company: Northrop Grumman Corporation

Address: 2340 DULLES CORNER BLVD, HERNDON, VA, 20171

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

Financial Breakdown

Contract Ceiling: $38,983,745

Exercised Options: $38,983,745

Current Obligation: $36,098,833

Actual Outlays: $1,957,814

Subaward Activity

Number of Subawards: 52

Total Subaward Amount: $8,468,797

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: FA821415D0001

IDV Type: IDC

Timeline