DoD's $366M Ground Based Strategic Deterrent contract awarded to Northrop Grumman shows cost-plus risks

Contract Overview

Contract Amount: $366,531,200 ($366.5M)

Contractor: Northrop Grumman Systems Corp

Awarding Agency: Department of Defense

Start Date: 2017-08-21

End Date: 2020-09-08

Contract Duration: 1,114 days

Daily Burn Rate: $329.0K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 3

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: IGF::OT::IGF GROUND BASED STRATEGIC DETTERENT TECHNOLOGY MATURATION AND RISK REDUCTION

Place of Performance

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

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $366.5 million to NORTHROP GRUMMAN SYSTEMS CORP for work described as: IGF::OT::IGF GROUND BASED STRATEGIC DETTERENT TECHNOLOGY MATURATION AND RISK REDUCTION Key points: 1. Contract awarded using cost-plus fixed fee, which can lead to cost overruns. 2. Limited competition dynamics may impact price discovery and value for money. 3. Contract duration of 1114 days suggests a significant, long-term project. 4. Northrop Grumman's role as a major defense contractor positions them well for this work. 5. The contract falls under engineering services, a critical but potentially high-cost sector. 6. Lack of small business involvement raises questions about broader economic impact.

Value Assessment

Rating: fair

The cost-plus fixed fee (CPFF) contract type introduces inherent risk for cost control. While the total award amount is substantial, without detailed cost breakdowns or comparisons to similar technology maturation efforts, a precise value-for-money assessment is challenging. Benchmarking CPFF contracts in advanced engineering services is difficult due to proprietary data, but the potential for cost growth necessitates close oversight.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that multiple bidders were likely considered. However, the specific number of bids received and the evaluation process details are not provided. A competitive process is generally favorable for price discovery, but the nature of highly specialized defense technology can limit the pool of qualified bidders.

Taxpayer Impact: Taxpayers benefit from a competitive process that aims to secure the best possible price for complex engineering services. However, the cost-plus nature of the contract means that cost efficiencies achieved through competition are crucial to prevent overspending.

Public Impact

This contract supports the Department of Defense's strategic deterrence capabilities. It involves technology maturation and risk reduction for critical defense systems. The primary beneficiaries are national security and the U.S. military. Work is likely concentrated in areas with significant defense industry presence, potentially impacting the aerospace and defense workforce.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost-plus fixed fee contract type increases risk of cost overruns.
Limited visibility into specific cost drivers and profit margins.
Potential for scope creep in technology maturation projects.
Dependence on a single large contractor for critical defense technology.

Positive Signals

Awarded through full and open competition, suggesting a competitive process.
Focus on risk reduction and technology maturation is crucial for long-term defense readiness.
Northrop Grumman is a recognized leader in aerospace and defense systems.

Sector Analysis

This contract falls within the aerospace and defense engineering services sector, a highly specialized and capital-intensive industry. The market is characterized by a few large prime contractors and numerous subcontractors. Spending in this area is driven by government defense priorities and technological advancements. Comparable spending benchmarks are difficult to ascertain due to the unique nature of strategic deterrent systems.

Small Business Impact

The data indicates that small business participation was not a stated requirement or focus for this contract (ss: false, sb: false). This suggests that the prime contractor, Northrop Grumman, is expected to handle the majority of the work. Opportunities for small businesses would likely be through subcontracting, but the extent of this is not detailed. This approach may limit the direct economic impact on the small business defense ecosystem for this specific award.

Oversight & Accountability

Oversight for this contract would typically fall under the Defense Contract Management Agency (DCMA), which is responsible for ensuring contractor performance and compliance. The cost-plus fixed fee structure necessitates rigorous financial oversight to monitor expenditures and prevent unjustified cost growth. Transparency is often limited in defense contracts of this nature due to national security considerations.

Related Government Programs

Ground-Based Strategic Deterrent (GBSD) Program
ICBM Modernization Programs
Department of Defense Research and Development Spending
Aerospace Engineering Services Contracts

Risk Flags

Cost-Plus Contract Type Risk
Limited Competition Potential
Long Contract Duration
Technology Maturation Uncertainty

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $366.5 million to NORTHROP GRUMMAN SYSTEMS CORP. IGF::OT::IGF GROUND BASED STRATEGIC DETTERENT TECHNOLOGY MATURATION AND RISK REDUCTION

Who is the contractor on this award?

The obligated recipient is NORTHROP GRUMMAN SYSTEMS CORP.

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Contract Management Agency).

What is the total obligated amount?

The obligated amount is $366.5 million.

What is the period of performance?

Start: 2017-08-21. End: 2020-09-08.

What is the historical spending pattern for Northrop Grumman on similar strategic deterrent technology maturation contracts?

Analyzing Northrop Grumman's historical spending on similar strategic deterrent technology maturation contracts requires access to detailed contract databases and financial reports. Generally, large defense contractors like Northrop Grumman engage in numerous long-term, high-value contracts for strategic systems. These often involve significant R&D, engineering services, and production phases. Historical data would likely show a pattern of substantial investment in these areas, often utilizing cost-plus contract types due to the inherent uncertainties in developing cutting-edge defense technologies. Specific figures would depend on the exact nature of the technology, the program phase, and the competitive landscape at the time of award. Without direct access to proprietary or classified spending data, a precise historical comparison is not feasible, but the scale of this $366 million award is consistent with major defense modernization efforts.

How does the cost-plus fixed fee (CPFF) structure compare to other contract types for this type of engineering service?

The Cost-Plus Fixed Fee (CPFF) contract type is common in research and development or complex engineering projects where the scope and costs are not precisely definable at the outset. In a CPFF contract, the contractor is reimbursed for allowable costs plus a fixed fee representing profit. This contrasts with Firm-Fixed-Price (FFP) contracts, where the price is set regardless of actual costs, offering greater cost certainty to the government but potentially higher initial bids to account for contractor risk. Cost-Plus-Incentive-Fee (CPIF) contracts share costs and profits based on performance targets. For technology maturation and risk reduction, CPFF can incentivize the contractor to perform the necessary work to achieve objectives, but it places the burden of cost control and oversight heavily on the government to prevent excessive spending. Other types like Time and Materials (T&M) are generally used for smaller, less defined efforts.

What are the key performance indicators (KPIs) being tracked for this contract?

Specific Key Performance Indicators (KPIs) for this 'Ground Based Strategic Deterrent Technology Maturation and Risk Reduction' contract are not publicly detailed in the provided data. However, for technology maturation and risk reduction efforts within the Department of Defense, typical KPIs would likely include: technical milestones achieved (e.g., successful component testing, system integration progress), adherence to development schedules, demonstration of key technologies meeting performance specifications, identification and mitigation of technical risks, and potentially cost performance metrics if the contract includes such elements beyond the fixed fee. The Defense Contract Management Agency (DCMA) would be responsible for monitoring these KPIs to ensure the contractor is meeting the contract's objectives and managing risks effectively.

What is the potential impact of this contract on the broader strategic deterrent capabilities of the US?

This contract is directly aimed at maturing technology and reducing risks associated with the Ground Based Strategic Deterrent (GBSD) program. The GBSD is intended to replace the aging Minuteman III intercontinental ballistic missile (ICBM) system, which forms a crucial part of the U.S. nuclear triad. Therefore, the successful execution of this contract is vital for ensuring the long-term viability, reliability, and effectiveness of the U.S.'s land-based strategic nuclear deterrent. It contributes to maintaining a credible deterrent posture by incorporating modern technologies and addressing potential vulnerabilities in the existing system, thereby supporting national security objectives.

Are there any known performance issues or concerns with Northrop Grumman on similar large-scale defense engineering contracts?

Northrop Grumman, as a major defense contractor, has a long history of executing large-scale defense engineering contracts. While specific performance issues are often not publicly disclosed unless they lead to significant disputes or contract terminations, large programs invariably face challenges. These can include cost overruns, schedule delays, and technical hurdles, which are common in complex, long-term defense development projects. Publicly available information might include reports from the Government Accountability Office (GAO) or Inspector General (IG) offices that highlight areas for improvement in contractor performance or program management on specific programs. However, without direct data on this particular contract or closely related ones, a definitive statement on performance issues is speculative. The CPFF structure itself suggests an acknowledgment of inherent risks that require careful management.

Industry Classification

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

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

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: FA821916RGBSD

Offers Received: 3

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Northrop Grumman Corporation

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

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

Financial Breakdown

Contract Ceiling: $366,542,270

Exercised Options: $366,542,270

Current Obligation: $366,531,200

Actual Outlays: $25,882,508

Subaward Activity

Number of Subawards: 97

Total Subaward Amount: $152,058,993

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline