Air Force awards $49.5M contract for AN/ASQ-230 support, raising questions about competition and value

Contract Overview

Contract Amount: $49,522,464 ($49.5M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2024-06-23

End Date: 2026-03-31

Contract Duration: 646 days

Daily Burn Rate: $76.7K/day

Competition Type: NOT COMPETED

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: SUPPORT AND SUSTAINMENT FOR AN/ASQ-230

Place of Performance

Location: SAN JOSE, SANTA CLARA County, CALIFORNIA, 95119

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $49.5 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: SUPPORT AND SUSTAINMENT FOR AN/ASQ-230 Key points: 1. Contract awarded on a 'not competed' basis, limiting price discovery and potentially increasing costs. 2. The contract's cost-plus-fixed-fee structure may incentivize higher spending without strict cost controls. 3. Limited competition raises concerns about whether the government secured the best possible value. 4. The duration of the contract (646 days) suggests a need for sustained support services. 5. The specific nature of AN/ASQ-230 support is critical for operational readiness, but details are scarce. 6. The award to Northrop Grumman Systems Corporation indicates a reliance on established prime contractors for complex systems.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to the lack of competitive bids and limited public data on the specific services provided. The cost-plus-fixed-fee (CPFF) pricing structure, while common for complex R&D or sustainment, can lead to higher costs if not managed rigorously. Without comparable contract data or a competitive bidding process, it's difficult to definitively assess if the $49.5 million represents a fair market price or optimal value for the taxpayer. The fixed fee component provides some cost certainty for the contractor's profit, but the cost reimbursement aspect leaves the government exposed to fluctuating direct costs.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded using a 'not competed' procedure, indicating that the Department of the Air Force did not solicit offers from multiple sources. This approach is typically used when only one source is capable of meeting the requirement, or in urgent situations. The lack of competition means that potential cost savings that could arise from a bidding process were not realized. It also limits the government's ability to explore alternative solutions or innovative approaches that might be offered by other qualified contractors.

Taxpayer Impact: Sole-source awards can lead to higher prices for taxpayers as there is no competitive pressure to drive down costs. This lack of competition also reduces transparency and accountability in the procurement process.

Public Impact

The primary beneficiaries are the Department of the Air Force, which receives critical support for its AN/ASQ-230 systems, ensuring operational readiness. Services delivered include sustainment and support, likely encompassing maintenance, repair, and technical assistance for the specified equipment. The geographic impact is primarily within the operational theaters and bases where the AN/ASQ-230 systems are deployed, with potential support activities in California where the contractor is located. Workforce implications include the employment of specialized technical personnel by Northrop Grumman to fulfill the contract requirements.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to inflated costs for taxpayers.
Cost-plus-fixed-fee structure offers limited incentive for contractor cost efficiency.
Limited transparency into the specific technical services and their necessity.
Reliance on a single contractor for critical system support poses a potential risk if performance falters.

Positive Signals

Award to an established contractor like Northrop Grumman suggests a high level of trust and proven capability.
The contract aims to ensure the sustainment of critical defense systems, contributing to national security.
The fixed fee component provides a degree of predictability regarding contractor profit.
The contract duration indicates a long-term need for these specialized support services.

Sector Analysis

The defense sector relies heavily on specialized technical services for the sustainment and modernization of complex weapon systems. Contracts for support and sustainment, like this one for the AN/ASQ-230, are crucial for maintaining operational readiness. The market for such services is often dominated by large, established defense contractors with the expertise and security clearances required. Spending in this category, 'All Other Professional, Scientific, and Technical Services,' can be substantial, reflecting the intricate nature of modern military technology. Benchmarking is difficult without specific system knowledge, but overall defense spending on sustainment represents a significant portion of the defense budget.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'ss': false and 'sb': false. The award is made directly to a large prime contractor, Northrop Grumman Systems Corporation. While large prime contractors are often required to subcontract a portion of their work to small businesses, the specific subcontracting plan for this contract is not detailed here. The absence of a direct small business set-aside means that opportunities for small businesses to compete directly for this specific work are limited.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Air Force's contracting and program management offices. The Inspector General of the Department of Defense would have jurisdiction to investigate any allegations of fraud, waste, or abuse. Transparency is limited due to the sole-source nature of the award and the proprietary details of the support services. Accountability would be managed through contract performance reviews and adherence to the terms of the Cost Plus Fixed Fee agreement.

Related Government Programs

Defense Logistics Agency (DLA) Support Contracts
Air Force Sustainment and Maintenance Contracts
Aerospace Systems Support Services
Command and Control Systems Maintenance
Intelligence, Surveillance, and Reconnaissance (ISR) Platform Support

Risk Flags

Sole-source award
Cost-plus-fixed-fee pricing
Lack of transparency in service details
Potential for cost overruns
Dependence on a single contractor

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $49.5 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. SUPPORT AND SUSTAINMENT FOR AN/ASQ-230

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 $49.5 million.

What is the period of performance?

Start: 2024-06-23. End: 2026-03-31.

What is the specific function and importance of the AN/ASQ-230 system that necessitates this sole-source support contract?

The AN/ASQ-230 is identified as part of the Advanced Tactical Targeting Network (ATN) system, which is crucial for enabling networked warfare capabilities. It facilitates the rapid and secure exchange of targeting data between various platforms, including aircraft, ground units, and command centers. Its importance lies in enhancing situational awareness, improving targeting accuracy, and reducing the time from target detection to engagement. The sustainment of such a critical system is paramount for maintaining the effectiveness of air operations and joint force integration. Without adequate support, the system's reliability and performance could degrade, impacting mission success and potentially jeopardizing personnel safety.

Given the 'not competed' status, what justification did the Air Force provide for not seeking other offers?

The provided data indicates the contract was 'NOT COMPETED'. Typically, justifications for sole-source or limited competition awards fall under specific exceptions in federal acquisition regulations (FAR). Common reasons include that only one responsible source can provide the required supplies or services, or that a compelling urgency dictates that the government cannot obtain full and open competition. For complex defense systems like those involving the AN/ASQ-230, the justification often centers on the unique capabilities, proprietary knowledge, or specialized facilities required, which may only be possessed by the incumbent contractor or a single entity. A formal Justification for Other Than Full and Open Competition (JOFOC) would have been required and should be publicly available through sources like the Federal Business Opportunities (now SAM.gov) archive.

How does the Cost Plus Fixed Fee (CPFF) contract type potentially impact the overall cost compared to other pricing structures?

The Cost Plus Fixed Fee (CPFF) contract type involves the government reimbursing the contractor for all allowable costs incurred, plus a predetermined fixed fee representing profit. This structure is often used when the scope of work is not precisely defined or involves significant uncertainty, such as research and development or complex system sustainment. While the fixed fee provides cost certainty for the contractor's profit margin, the government bears the risk of cost overruns if actual costs exceed estimates. This can potentially lead to higher overall costs for the government compared to fixed-price contracts, where the contractor assumes more risk for cost overruns. Effective oversight and cost controls are crucial to mitigate potential cost escalations under a CPFF arrangement.

What is Northrop Grumman Systems Corporation's track record with similar defense sustainment contracts?

Northrop Grumman Systems Corporation is a major defense contractor with extensive experience in providing sustainment, logistics, and technical support for a wide array of complex military systems, including aircraft, electronics, and command and control platforms. They have a long history of supporting various branches of the U.S. military. Their track record typically involves managing large-scale, long-term contracts that require specialized engineering, maintenance, and supply chain expertise. While specific performance metrics for individual contracts are often not publicly disclosed, their continued success in winning significant sole-source and competitive contracts suggests a generally positive performance history and a strong relationship with government agencies. However, like any large contractor, they may have faced past performance issues or contract disputes on specific programs.

Are there any publicly available benchmarks or historical spending data for AN/ASQ-230 support that could be used for comparison?

Publicly available, granular data specifically for the sustainment of the AN/ASQ-230 system is scarce, particularly for sole-source awards. Federal procurement databases like SAM.gov (formerly FedBizOpps) and the Federal Procurement Data System (FPDS) are the primary sources for contract information. While this award of $49.5 million over approximately 2 years (646 days) is documented, detailed breakdowns of costs per service or comparisons to previous contract periods or similar systems are not readily accessible. Benchmarking is further complicated by the system's specific nature and the lack of competitive bids. Without comparable contracts or detailed cost breakdowns, assessing whether this award represents a fair market price or optimal value is challenging.

What are the potential risks associated with relying on a single contractor for the sustainment of critical defense technology?

Relying on a single contractor for critical defense technology sustainment presents several risks. Firstly, it can lead to a lack of competitive pressure, potentially resulting in higher prices and reduced incentives for innovation or efficiency. Secondly, it creates vendor lock-in, making it difficult and costly to switch providers if performance issues arise or if market conditions change. Thirdly, the government becomes highly dependent on the contractor's financial stability, technical expertise, and continued willingness to perform. A contractor's business decisions, such as divesting a product line or facing financial difficulties, could directly impact the availability of essential support. Finally, a sole-source arrangement can reduce transparency and make it harder to verify the necessity and cost-effectiveness of the services provided.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Other Professional, Scientific, and Technical Services › All Other Professional, Scientific, and Technical Services

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

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Northrop Grumman Corporation

Address: 6379 SAN IGNACIO AVE, SAN JOSE, CA, 95119

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: $49,522,464

Exercised Options: $49,522,464

Current Obligation: $49,522,464

Subaward Activity

Number of Subawards: 5

Total Subaward Amount: $950,657

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: FA852822D0013

IDV Type: IDC

Timeline