DoD's $197.7M engineering services contract awarded to Northrop Grumman, a sole-source procurement

Contract Overview

Contract Amount: $197,696,799 ($197.7M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2012-10-13

End Date: 2014-10-15

Contract Duration: 732 days

Daily Burn Rate: $270.1K/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 $197.7 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: ENGINEERING SERVICES Key points: 1. Contract awarded on a cost-plus-fixed-fee basis, which can lead to cost overruns if not managed carefully. 2. The contract was not competed, raising questions about potential price efficiencies and market-driven value. 3. A significant duration of 732 days suggests a substantial scope of work or potential for contract modifications. 4. The contract was awarded to a large, established defense contractor, indicating a focus on specialized capabilities. 5. The absence of small business participation raises concerns about equitable distribution of federal contracting opportunities.

Value Assessment

Rating: questionable

Benchmarking the value of this $197.7 million engineering services contract is challenging due to its sole-source nature and cost-plus-fixed-fee structure. Without competitive bids, it's difficult to ascertain if the pricing reflects market rates or represents a fair value for the services rendered. The cost-plus-fixed-fee (CPFF) award type means the government reimburses Northrop Grumman for allowable costs plus a fixed fee, which can incentivize cost control but also carries risks of cost escalation if not rigorously overseen. Comparisons to similar sole-source engineering contracts within the DoD would be necessary for a more precise value assessment.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning it was not open to competition from other qualified vendors. This approach is typically employed when a specific contractor possesses unique capabilities, proprietary technology, or when urgent circumstances preclude a competitive process. The lack of competition means that price discovery through market forces was absent, potentially leading to higher costs for the government compared to a competed procurement. The rationale for sole-sourcing would need to be thoroughly documented and justified.

Taxpayer Impact: Taxpayers may have paid a premium for these engineering services due to the absence of competitive bidding. Without multiple offers, there was no downward pressure on price, and the government could not leverage market competition to secure the best possible value.

Public Impact

The Department of Defense benefits from specialized engineering services crucial for its operations and technological advancements. This contract supports the development and maintenance of complex defense systems, contributing to national security. The geographic impact is primarily within California, where Northrop Grumman Systems Corporation is located, though the services may support broader DoD initiatives. The contract likely supports a workforce of engineers and technical specialists within Northrop Grumman, contributing to high-skilled employment.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits opportunities for other businesses and potentially increases costs.
Cost-plus-fixed-fee contracts require stringent oversight to prevent cost overruns.
Lack of small business participation noted.
Long contract duration could indicate scope creep or inefficiencies if not managed.
Absence of competition hinders price discovery and value optimization.

Positive Signals

Award to a large, established contractor like Northrop Grumman suggests access to specialized expertise and proven capabilities.
Engineering services are critical for defense readiness and technological superiority.
The contract was awarded by the Department of Defense, a primary federal agency with significant oversight capabilities.

Sector Analysis

This contract falls within the Engineering Services sector, a critical component of the broader aerospace and defense industry. The market for defense engineering services is substantial, driven by the government's continuous need for advanced technological solutions, system upgrades, and maintenance. Major defense contractors like Northrop Grumman are key players in this sector, often holding significant portions of federal engineering contracts due to their specialized knowledge, security clearances, and established relationships. Spending in this area is benchmarked against the overall defense budget and specific program requirements.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by the 'sb' field being false. Furthermore, the 'ss' field is also false, suggesting no specific subcontracting goals for small businesses were mandated within this particular award. This means that opportunities for small businesses to participate in this significant $197.7 million contract were likely limited, potentially concentrating the benefits with the prime contractor and its larger subcontractors. This could impact the broader small business ecosystem within the defense supply chain.

Oversight & Accountability

Oversight for this contract would typically fall under the purview of 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 allowable costs and ensure the fixed fee remains appropriate. Transparency regarding the contract's performance metrics and any modifications would be crucial for accountability. Inspector General investigations could be initiated if any fraud, waste, or abuse is suspected.

Related Government Programs

Defense Engineering Services
Northrop Grumman Contracts
Department of Defense Procurements
Sole-Source Defense Contracts
Cost-Plus-Fixed-Fee Contracts

Risk Flags

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

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $197.7 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 $197.7 million.

What is the period of performance?

Start: 2012-10-13. End: 2014-10-15.

What is Northrop Grumman's track record with similar sole-source engineering services contracts awarded by the Department of Defense?

Northrop Grumman Systems Corporation, as a major defense contractor, has a history of receiving numerous sole-source contracts from the Department of Defense across various engineering and support services. Analyzing their past performance on similar sole-source procurements would involve reviewing contract modifications, cost performance reports, and any documented disputes or overruns. While sole-source awards are often justified by unique capabilities, a pattern of cost overruns or performance issues on such contracts could indicate a higher risk for future sole-source awards. Specific data on Northrop Grumman's sole-source engineering contracts would be needed to provide a detailed comparative analysis, but their extensive experience suggests a capacity to handle complex requirements, albeit at a potentially higher cost due to the lack of competition.

How does the $197.7 million value of this contract compare to other engineering services contracts awarded by the DoD in recent years?

The $197.7 million value places this contract within the mid-to-large range for engineering services procured by the Department of Defense. The DoD consistently awards billions of dollars annually for engineering and technical support across its various branches and programs. To benchmark this specific contract's value, one would compare it against the average award value for similar engineering services (NAICS code 541330) over the past 3-5 fiscal years. Factors such as contract duration, scope of work (e.g., R&D, sustainment, system design), and the specific defense systems involved would be critical for a meaningful comparison. Given its sole-source nature, this contract's value might be higher than a competitively procured equivalent, but without comparative data, it's difficult to definitively state if it represents a fair market price.

What are the primary risks associated with a sole-source, cost-plus-fixed-fee contract of this magnitude?

The primary risks associated with this sole-source, cost-plus-fixed-fee (CPFF) contract are twofold. Firstly, the sole-source nature eliminates competitive pressure, potentially leading to inflated pricing and reduced incentive for the contractor to achieve maximum cost efficiency. The government cannot be certain it received the best possible price without market validation. Secondly, the CPFF structure, while providing flexibility, carries inherent risks of cost escalation. The contractor is reimbursed for allowable costs plus a fixed fee, which can incentivize higher spending if oversight is not robust. Potential for scope creep, inadequate performance monitoring, and difficulties in accurately forecasting final costs are significant concerns that require diligent contract management and oversight from the awarding agency.

What specific engineering services are being provided under this contract, and how do they contribute to DoD's mission effectiveness?

The contract specifies 'Engineering Services' under NAICS code 541330. While the exact nature of these services is not detailed in the provided data, engineering services for the DoD typically encompass a wide range of activities critical to mission effectiveness. This can include research and development, system design and integration, testing and evaluation, technical support, lifecycle management, and specialized consulting for complex defense platforms (e.g., aircraft, naval vessels, communication systems, weapons platforms). These services are fundamental to maintaining technological superiority, ensuring the readiness and reliability of military assets, and developing next-generation capabilities to address evolving threats. The specific contribution to DoD's mission would depend on which defense programs or systems this contract supports.

What has been the historical spending trend for engineering services by the Department of Defense, and how does this contract fit within that trend?

The Department of Defense is consistently one of the largest federal agencies for procuring engineering services, with annual spending often in the tens of billions of dollars. This spending fluctuates based on defense budgets, modernization priorities, and the lifecycle stage of major weapon systems. Engineering services are a foundational element supporting R&D, acquisition, and sustainment across all military branches. This $197.7 million contract, while substantial for a single award, represents a relatively small fraction of the DoD's total annual expenditure on engineering support. Its significance lies more in its specific application and its sole-source, CPFF nature rather than its overall contribution to the historical spending volume. Understanding the specific program it supports would be key to assessing its strategic importance within the broader spending context.

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: $218,167,529

Exercised Options: $208,212,931

Current Obligation: $197,696,799

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline