DoD awards Northrop Grumman $72.5M for EW Systems Logistics Support, a sole-source contract

Contract Overview

Contract Amount: $72,499,070 ($72.5M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2022-05-01

End Date: 2026-04-30

Contract Duration: 1,460 days

Daily Burn Rate: $49.7K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: CONTRACTOR LOGISTICS SUPPORT FOR SPECIALIZED TACTICAL ELECTRONIC WARFARE SYSTEMS (STEWS)

Place of Performance

Location: MCLEAN, FAIRFAX County, VIRGINIA, 22102

State: Virginia Government Spending

Plain-Language Summary

Department of Defense obligated $72.5 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: CONTRACTOR LOGISTICS SUPPORT FOR SPECIALIZED TACTICAL ELECTRONIC WARFARE SYSTEMS (STEWS) Key points: 1. Contract awarded on a sole-source basis, limiting price competition. 2. Significant funding allocated for logistics support of specialized electronic warfare systems. 3. Contract duration extends over four years, indicating a long-term need. 4. Northrop Grumman is a major defense contractor with extensive experience in EW. 5. The contract type (Cost Plus Fixed Fee) may incentivize cost overruns. 6. Performance is in Virginia, a hub for defense contracting. 7. No small business set-aside, potentially limiting opportunities for smaller firms.

Value Assessment

Rating: fair

Benchmarking the value of this contract is challenging due to its sole-source nature and specialized equipment. The Cost Plus Fixed Fee structure, while common for complex R&D or services where costs are uncertain, can lead to higher overall expenditures compared to fixed-price contracts. Without competitive bids, it's difficult to ascertain if the pricing reflects optimal value for money. The awarded amount of $72.5 million over four years suggests a substantial investment in maintaining critical defense capabilities.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning it was not competed among multiple vendors. This typically occurs when a specific contractor possesses unique capabilities, proprietary technology, or is the only source capable of meeting the requirement. The lack of competition means that price discovery through market forces was not utilized, potentially leading to higher costs for the government.

Taxpayer Impact: Taxpayers may face higher costs due to the absence of competitive bidding, as the government did not benefit from potential price reductions that could arise from a competitive procurement process.

Public Impact

The primary beneficiaries are the U.S. Air Force units relying on the Specialized Tactical Electronic Warfare Systems (STEWS). Services delivered include essential logistics support, ensuring the operational readiness of critical EW systems. The geographic impact is primarily within Virginia, where the contractor is located and likely where services are performed or managed. Workforce implications include the potential for continued employment of specialized technical and logistics personnel at Northrop Grumman.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure on pricing.
Cost Plus Fixed Fee contract type can lead to cost escalation.
Lack of small business participation may reduce opportunities for smaller innovative firms.

Positive Signals

Northrop Grumman's established expertise in EW systems ensures specialized support.
Long-term contract provides stability for critical system maintenance.
Focus on logistics supports operational readiness of vital defense assets.

Sector Analysis

The defense logistics and support sector is a significant component of the broader aerospace and defense industry. This contract falls within the engineering services sub-sector, specifically supporting complex electronic warfare systems. The market for EW systems and their sustainment is characterized by high barriers to entry due to specialized technology and security requirements. Spending in this area is driven by evolving threat landscapes and the need for advanced capabilities, with major defense contractors like Northrop Grumman dominating the landscape.

Small Business Impact

This contract was not set aside for small businesses, and the prime contractor, Northrop Grumman, is a large corporation. There is no explicit information provided regarding subcontracting plans for small businesses. The absence of a small business set-aside means that opportunities for smaller, potentially more agile firms to compete for this specific work were not pursued through this procurement vehicle.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of the Air Force's contracting and program management offices. Northrop Grumman, as a major defense contractor, is subject to standard government oversight, including audits and performance reviews. Transparency is generally maintained through contract reporting mechanisms, though specific details of cost and performance may be sensitive. The Inspector General's office for the Department of Defense would have jurisdiction for investigating any potential fraud, waste, or abuse.

Related Government Programs

Defense Logistics Agency (DLA) Support Contracts
Air Force Materiel Command (AFMC) Sustainment Programs
Electronic Warfare Systems Procurement
Department of Defense Contractor Logistics Support

Risk Flags

Sole-source award
Cost-plus contract type
Lack of small business participation

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $72.5 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. CONTRACTOR LOGISTICS SUPPORT FOR SPECIALIZED TACTICAL ELECTRONIC WARFARE SYSTEMS (STEWS)

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 $72.5 million.

What is the period of performance?

Start: 2022-05-01. End: 2026-04-30.

What is Northrop Grumman's track record with similar logistics support contracts for electronic warfare systems?

Northrop Grumman has a long and extensive history of providing complex systems integration, logistics, and sustainment services for various U.S. military branches, including electronic warfare (EW) systems. They are a prime contractor on numerous programs involving advanced defense technologies. Their track record includes supporting major aircraft platforms and developing sophisticated EW suites. While specific contract details for similar STEWS logistics support are often proprietary, their overall performance in large-scale defense sustainment contracts is generally well-established, though subject to ongoing government oversight and performance evaluations. Past performance is a key factor in sole-source awards, suggesting a positive history with the Air Force for this type of work.

How does the Cost Plus Fixed Fee (CPFF) contract type compare to other options for this type of service in terms of value?

The Cost Plus Fixed Fee (CPFF) contract type is often used when the scope of work is not precisely defined, or when there is significant uncertainty in the costs associated with performance, such as in research, development, or complex sustainment. While it allows for flexibility and ensures the contractor is compensated for incurred costs plus a predetermined profit, it carries a higher risk of cost overruns for the government compared to fixed-price contracts. In a competitive environment, fixed-price incentive fee or firm-fixed-price contracts might offer better value by incentivizing the contractor to control costs more aggressively. However, for highly specialized and evolving systems like STEWS, where technical challenges can be unpredictable, CPFF might be deemed necessary to ensure contractor engagement and successful execution, albeit with a potential premium.

What are the primary risks associated with a sole-source award for defense logistics support?

The primary risk associated with a sole-source award for defense logistics support is the lack of competitive pressure, which can lead to inflated pricing and reduced incentive for the contractor to innovate or optimize costs. Without competing bids, the government may not achieve the best possible value for its investment. There's also a risk of vendor lock-in, where the government becomes overly reliant on a single provider, potentially hindering future flexibility or the adoption of alternative solutions. Furthermore, a sole-source award can limit opportunities for smaller, innovative businesses to enter the market and demonstrate their capabilities, potentially stifling competition in the long run. Effective oversight and robust negotiation are crucial to mitigate these risks.

What is the historical spending trend for logistics support of electronic warfare systems within the Department of Defense?

Historical spending on logistics support for electronic warfare (EW) systems within the Department of Defense (DoD) has been substantial and generally increasing. EW capabilities are critical for modern warfare, requiring continuous investment in maintenance, upgrades, and sustainment to counter evolving threats. The DoD consistently allocates significant portions of its budget to EW programs, encompassing research, development, procurement, and sustainment. Factors driving this spending include technological advancements, the proliferation of peer and near-peer adversaries, and the integration of EW across various platforms (air, sea, land, cyber). Specific figures fluctuate annually based on strategic priorities and budget allocations, but the overall trend indicates a sustained and significant commitment to maintaining and enhancing EW readiness.

How does the geographic location of performance (Virginia) impact the cost and efficiency of this contract?

Virginia is a major hub for the U.S. defense industry, hosting numerous government agencies, military bases, and defense contractors. This concentration can have mixed impacts on contract costs and efficiency. On one hand, proximity to the customer (Department of the Air Force) and a large pool of experienced defense personnel and subcontractors can streamline communication, reduce travel costs, and facilitate rapid problem-solving. This ecosystem can foster efficiency. On the other hand, the high cost of living and doing business in the Washington D.C. metropolitan area and surrounding regions of Virginia can lead to higher labor rates and overhead costs for contractors. Therefore, while the location offers strategic advantages, it may also contribute to a higher baseline cost for services compared to regions with lower operating expenses.

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: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Northrop Grumman Corporation

Address: 7575 COLSHIRE DR, MCLEAN, VA, 22102

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: $91,093,298

Exercised Options: $72,499,386

Current Obligation: $72,499,070

Subaward Activity

Number of Subawards: 243

Total Subaward Amount: $27,027,923

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline