DoD's $386M engineering services contract awarded to Northrop Grumman, a sole-source procurement

Contract Overview

Contract Amount: $385,799,511 ($385.8M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2012-04-01

End Date: 2014-12-31

Contract Duration: 1,004 days

Daily Burn Rate: $384.3K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: ENGINEERING SERVICES

Place of Performance

Location: SAN DIEGO, SAN DIEGO County, CALIFORNIA, 92127

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $385.8 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: ENGINEERING SERVICES Key points: 1. Contract value of $386 million for engineering services represents a significant investment. 2. Sole-source award raises questions about competition and potential for overpayment. 3. Contract duration of 1004 days suggests a substantial, long-term need for these services. 4. The 'Cost Plus Fixed Fee' pricing structure can incentivize cost overruns. 5. Northrop Grumman's extensive experience in defense contracting positions them as a capable provider. 6. Lack of competition limits opportunities for other firms and potentially higher-value bids.

Value Assessment

Rating: questionable

Benchmarking the value of this $386 million engineering services contract is challenging without specific service details and comparable contract data. However, the sole-source nature and Cost Plus Fixed Fee (CPFF) structure warrant scrutiny. CPFF contracts, while offering flexibility, can lead to higher costs if not managed rigorously, as the contractor is reimbursed for all allowable costs plus a fixed fee. Without competitive bidding, it's difficult to ascertain if the fixed fee represents a fair profit margin or if the overall cost structure is optimized.

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 absence of competition means that price discovery through market forces was bypassed, potentially leading to less favorable pricing for the government compared to a competitive scenario.

Taxpayer Impact: Taxpayers may have paid a premium due to the lack of competitive pressure to drive down costs. The government missed an opportunity to leverage market competition to secure the best possible value.

Public Impact

The Department of Defense benefits from specialized engineering services crucial for its operations. This contract supports advanced technological development and maintenance within the defense sector. The geographic impact is primarily within California, where the contract was managed. The contract likely supports a highly skilled engineering workforce, contributing to specialized job creation.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing and potentially increases costs for taxpayers.
Cost Plus Fixed Fee (CPFF) contract type can incentivize higher spending if not closely monitored.
Lack of transparency in the sole-source justification process.
Potential for contractor lock-in, making future procurements more difficult to compete.
Limited visibility into the specific engineering tasks performed and their direct impact on mission readiness.

Positive Signals

Award to a large, established defense contractor like Northrop Grumman suggests a high likelihood of technical capability and delivery.
The contract duration indicates a sustained need for critical engineering expertise.
Northrop Grumman has a long history of supporting DoD programs, implying familiarity with requirements.
The fixed fee component of the CPFF contract provides some level of cost predictability for the government.

Sector Analysis

Engineering services are a critical component of the defense industrial base, encompassing design, development, testing, and sustainment of complex military systems. The market for these services is substantial, with significant government spending directed towards R&D and acquisition support. This contract fits within the broader category of defense acquisition support services, where specialized technical expertise is paramount. Comparable spending benchmarks would typically involve other large-scale engineering support contracts awarded by the DoD or other federal agencies for similar complex systems.

Small Business Impact

This contract was not set aside for small businesses, nor does it appear to have specific subcontracting requirements for small businesses indicated in the provided data. The award to a large prime contractor like Northrop Grumman suggests that the primary focus was on the prime's capabilities. This could limit opportunities for small businesses to participate directly unless they are part of Northrop Grumman's supply chain. The absence of explicit small business set-asides means the direct impact on the small business ecosystem for this specific contract is likely minimal.

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 ensure that costs are allowable and reasonable, and that the fixed fee is earned appropriately. Transparency in sole-source procurements can be limited, but the contract details and performance metrics should be available through federal procurement databases. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Defense Engineering Support Services
Aerospace Engineering Services
Systems Engineering Contracts
Northrop Grumman Defense Contracts
Department of Defense Major Procurements

Risk Flags

Sole-source award
Cost Plus Fixed Fee contract type
Lack of competition
Potential for cost overruns

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $385.8 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. ENGINEERING SERVICES

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 $385.8 million.

What is the period of performance?

Start: 2012-04-01. End: 2014-12-31.

What specific engineering services were provided under this contract, and how do they align with current defense priorities?

The provided data categorizes this contract under 'Engineering Services' (NAICS 541330). While the specific nature of the engineering tasks is not detailed, such services typically encompass a broad range of activities including system design, integration, testing, analysis, and technical support for complex defense platforms. Given the award by the Department of Defense, these services likely supported critical defense capabilities, potentially related to aircraft, naval vessels, ground systems, or advanced weapon systems. The alignment with current defense priorities would depend on the specific systems or programs the engineering services were applied to, such as modernization efforts, readiness improvements, or the development of new technologies to counter emerging threats.

How does the $386 million contract value compare to other engineering services contracts awarded by the DoD in similar timeframes?

Comparing this $386 million contract value requires access to a comprehensive database of DoD engineering services procurements between 2012 and 2014. However, for a contract of this magnitude awarded on a sole-source basis, it suggests a significant scope of work or a highly specialized requirement. Large-scale engineering support contracts for major defense platforms can easily reach hundreds of millions of dollars. Without specific comparable contracts for similar systems or services, it's difficult to definitively state if $386 million is high or low. However, the sole-source nature, as noted, means direct price comparison with competitive bids is not possible, making value assessment more complex.

What are the primary risks associated with a sole-source, Cost Plus Fixed Fee (CPFF) contract of this size?

The primary risks associated with a sole-source, CPFF contract of this magnitude are twofold. Firstly, the sole-source nature eliminates competitive pressure, which can lead to inflated pricing and reduced incentive for the contractor to achieve maximum efficiency. The government may not be getting the best possible value. Secondly, the CPFF structure, while providing flexibility, carries inherent risks of cost escalation. The contractor is reimbursed for all allowable costs plus a fixed fee. If cost controls are weak or if the scope of work expands without adequate adjustments to the fee, costs can significantly exceed initial estimates. Rigorous oversight and robust cost accounting standards are crucial to mitigate these risks.

What is Northrop Grumman's track record with similar DoD engineering services contracts?

Northrop Grumman is a major defense contractor with a long and extensive history of performing complex engineering services for the Department of Defense. They have a proven track record in areas such as aerospace, defense electronics, and information systems. While specific details of their past performance on contracts identical in scope and value to this one are not provided, their status as a prime contractor on numerous large-scale DoD programs indicates a substantial capacity and experience base. Their performance on previous contracts would be a key factor in the DoD's decision to award this contract sole-source, suggesting a confidence in their ability to deliver the required engineering solutions.

What historical spending patterns exist for engineering services within the Department of Defense, and how does this contract fit?

The Department of Defense consistently represents one of the largest federal spenders on engineering services, driven by the complexity and scale of its weapon systems, platforms, and infrastructure. Historical spending patterns show a significant allocation towards research, development, testing, and evaluation (RDT&E), as well as sustainment and modernization programs, all of which heavily rely on engineering expertise. This $386 million contract, awarded between 2012-2014, fits within this pattern as a substantial investment in specialized engineering capabilities. Its sole-source nature might indicate a specific, long-term project or a critical capability that the DoD deemed necessary to procure directly from a trusted provider, rather than through a broader competitive vehicle.

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 (UEI: 967356127)

Address: 17066 GOLDENTOP RD, SAN DIEGO, CA, 92127

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

Financial Breakdown

Contract Ceiling: $433,751,372

Exercised Options: $433,751,372

Current Obligation: $385,799,511

Subaward Activity

Number of Subawards: 2

Total Subaward Amount: $112,400

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline