Northrop Grumman's $54.5M EGI-M contract for advanced navigation systems shows potential for cost overruns
Contract Overview
Contract Amount: $54,527,058 ($54.5M)
Contractor: Northrop Grumman Systems Corporation
Awarding Agency: Department of Defense
Start Date: 2017-03-31
End Date: 2019-09-03
Contract Duration: 886 days
Daily Burn Rate: $61.5K/day
Competition Type: NOT COMPETED
Pricing Type: COST PLUS FIXED FEE
Sector: Defense
Official Description: IGF::OT::IGF EMBEDDED GLOBAL POSITIONING (GPS) / INERTIAL NAVIGATION SYSTEM (INS) - MODERNIZED (EGI-M) TECHNOLOGY MATURATION RISKY REDUCTION (TMRR)
Place of Performance
Location: WOODLAND HILLS, LOS ANGELES County, CALIFORNIA, 91367
Plain-Language Summary
Department of Defense obligated $54.5 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: IGF::OT::IGF EMBEDDED GLOBAL POSITIONING (GPS) / INERTIAL NAVIGATION SYSTEM (INS) - MODERNIZED (EGI-M) TECHNOLOGY MATURATION RISKY REDUCTION (TMRR) Key points: 1. The contract's Cost Plus Fixed Fee (CPFF) structure carries inherent risk for cost escalation. 2. Limited competition raises concerns about optimal pricing and value for taxpayer dollars. 3. The technology maturation and risk reduction phase suggests early-stage development with potential for unforeseen challenges. 4. This contract is part of the broader modernization efforts within the Department of the Air Force for critical navigation systems. 5. The duration of the contract (886 days) indicates a significant undertaking in technology development.
Value Assessment
Rating: questionable
The CPFF pricing structure, while common for R&D, offers less incentive for cost control compared to fixed-price contracts. Benchmarking this specific technology maturation contract is difficult due to its specialized nature. However, the lack of robust competition suggests that the government may not have achieved the most favorable pricing. The total award amount of $54.5M for a technology maturation phase requires careful monitoring to ensure it aligns with expected developmental milestones and does not exceed reasonable cost projections for this phase of development.
Cost Per Unit: N/A
Competition Analysis
Competition Level: sole-source
This contract was not competed, indicating a sole-source award. The absence of a competitive bidding process means that the government did not explore offers from multiple vendors. This can occur for various reasons, including the unique capabilities of a specific contractor or the early stage of technology development where only one entity possesses the necessary expertise. However, it limits the government's ability to leverage market competition to drive down costs and ensure the best possible value.
Taxpayer Impact: Sole-source awards mean taxpayers do not benefit from the price reductions typically achieved through competitive bidding. This can lead to higher overall costs for the government and, consequently, for taxpayers.
Public Impact
The primary beneficiaries are the Department of the Air Force, which will receive modernized EGI-M technology. This contract supports the development of advanced positioning, navigation, and timing (PNT) capabilities essential for military operations. The geographic impact is primarily within California, where Northrop Grumman Systems Corporation is located, though the end-use systems will be deployed globally. The contract supports highly skilled jobs in aerospace engineering and systems development within the defense sector.
Waste & Efficiency Indicators
Waste Risk Score: 50 / 10
Warning Flags
- Cost Plus Fixed Fee (CPFF) contract type can lead to cost overruns if not managed diligently.
- Sole-source award limits price discovery and potentially increases the cost to taxpayers.
- Technology maturation phase inherently carries risks of unforeseen technical challenges and schedule delays.
- Lack of competition may reduce the incentive for the contractor to optimize performance and cost efficiency.
Positive Signals
- Contract supports critical modernization of essential military navigation systems.
- Northrop Grumman is an established defense contractor with significant experience in aerospace and defense technologies.
- The contract focuses on technology maturation and risk reduction, aiming to de-risk future production phases.
Sector Analysis
This contract falls within the aerospace and defense manufacturing sector, specifically focusing on navigation and guidance systems. The NAICS code 334511 covers Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing. The market for such advanced systems is highly specialized, often dominated by a few large defense contractors. Spending in this area is driven by national security requirements and the need for technological superiority. Comparable spending benchmarks are difficult to establish precisely due to the proprietary nature of defense technologies, but significant investment is typical for advanced military hardware development.
Small Business Impact
This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. Furthermore, the award was made directly to Northrop Grumman Systems Corporation, a large prime contractor. There is no explicit information provided regarding subcontracting plans for small businesses. Without specific subcontracting goals or reporting, the direct impact on the small business ecosystem for this particular contract is likely minimal, though large prime contractors often engage small businesses for specialized components or services.
Oversight & Accountability
Oversight for this contract would typically fall under the Department of Defense's contracting and program management offices, potentially including the Defense Contract Management Agency (DCMA). Given the nature of the work (technology maturation), oversight would focus on technical progress, cost tracking, and adherence to the contract's fixed fee and cost ceilings. Inspector General (IG) jurisdiction would apply if any fraud, waste, or abuse were suspected. Transparency is generally limited for defense contracts of this nature due to national security considerations.
Related Government Programs
- Global Positioning System (GPS) modernization programs
- Inertial Navigation System (INS) development
- Advanced Avionics Systems
- Defense Research and Development Programs
- Air Force Navigation Modernization Initiatives
Risk Flags
- Sole-source award
- Cost Plus Fixed Fee contract type
- Technology maturation phase risks
- Potential for cost overruns
Tags
defense, department-of-the-air-force, northrop-grumman-systems-corporation, sole-source, cost-plus-fixed-fee, technology-maturation, navigation-systems, avionics, california, research-and-development, risk-reduction
Frequently Asked Questions
What is this federal contract paying for?
Department of Defense awarded $54.5 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. IGF::OT::IGF EMBEDDED GLOBAL POSITIONING (GPS) / INERTIAL NAVIGATION SYSTEM (INS) - MODERNIZED (EGI-M) TECHNOLOGY MATURATION RISKY REDUCTION (TMRR)
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 $54.5 million.
What is the period of performance?
Start: 2017-03-31. End: 2019-09-03.
What is the specific technology maturation and risk reduction (TMRR) objective for the EGI-M system under this contract?
The TMRR phase for the EGI-M (Embedded Global Positioning/Inertial Navigation System - Modernized) technology aims to mature critical components and reduce technical risks associated with the next-generation navigation system. This involves demonstrating the feasibility and reliability of key technologies, such as advanced inertial sensors, modernized GPS receivers, and integrated processing capabilities. The objective is to ensure that the system meets stringent performance requirements for accuracy, integrity, and availability in challenging operational environments before proceeding to full-scale production. Successful completion of this phase de-risks the program for subsequent development and procurement, ensuring a more predictable outcome for the Air Force's PNT capabilities.
How does the Cost Plus Fixed Fee (CPFF) contract structure compare to other contract types for technology maturation efforts?
The CPFF structure is commonly used for research and development (R&D) and technology maturation efforts where the scope of work is not fully defined, and costs are difficult to estimate precisely upfront. In a CPFF contract, the contractor is reimbursed for allowable costs plus a fixed fee, representing their profit. This structure incentivizes the contractor to control costs to some extent, as the fee is fixed, but it places the cost risk primarily on the government. Compared to Firm-Fixed-Price (FFP) contracts, CPFF offers more flexibility for evolving R&D but less cost certainty. Compared to Cost Plus Incentive Fee (CPIF) contracts, CPFF lacks specific incentives tied to cost or performance targets, potentially offering less motivation for exceptional cost management.
What are the potential risks associated with a sole-source award for advanced defense technology?
Sole-source awards for advanced defense technology, like the EGI-M contract, carry several potential risks. Primarily, the absence of competition can lead to higher prices than might be achieved in a competitive environment, as the government lacks the leverage of multiple bids. It can also reduce the incentive for the sole-source provider to innovate aggressively or optimize efficiency, as there is no direct market pressure. Furthermore, it may limit the government's access to alternative solutions or technologies that other capable firms might offer. This reliance on a single provider can also create supply chain vulnerabilities and reduce strategic flexibility if the contractor faces performance issues or business challenges.
What is the expected impact of the modernized EGI-M system on the Air Force's operational capabilities?
The modernized EGI-M system is expected to significantly enhance the U.S. Air Force's operational capabilities by providing more accurate, reliable, and resilient Positioning, Navigation, and Timing (PNT) services. This is crucial for a wide range of missions, including strike operations, intelligence, surveillance, and reconnaissance (ISR), airlift, and command and control. The modernization aims to improve resistance to jamming and spoofing, ensure continuous operation in GPS-denied environments through enhanced inertial navigation integration, and provide higher accuracy for precision-guided munitions and complex flight maneuvers. Ultimately, a robust and secure PNT capability is a foundational element for modern air and space power projection.
Are there any known track record issues with Northrop Grumman Systems Corporation regarding similar navigation system contracts?
Northrop Grumman Systems Corporation is a major defense contractor with extensive experience in developing and producing complex aerospace and defense systems, including navigation and guidance technologies. While specific performance details for every contract are not publicly available, the company has a long history of delivering sophisticated systems for military applications. Issues can arise in any large-scale, technologically advanced program, but Northrop Grumman's established presence and track record suggest a capacity to manage complex projects. A thorough review would involve examining specific program performance metrics, delivery schedules, and cost performance on prior, comparable navigation system contracts managed by the company.
Industry Classification
NAICS: Manufacturing › Navigational, Measuring, Electromedical, and Control Instruments Manufacturing › Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing
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 (UEI: 967356127)
Address: 21240 BURBANK BLVD, WOODLAND HILLS, CA, 91367
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: $54,527,058
Exercised Options: $54,527,058
Current Obligation: $54,527,058
Subaward Activity
Number of Subawards: 351
Total Subaward Amount: $153,248,808
Contract Characteristics
Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED
Cost or Pricing Data: YES
Parent Contract
Parent Award PIID: FA854014D0001
IDV Type: IDC
Timeline
Start Date: 2017-03-31
Current End Date: 2019-09-03
Potential End Date: 2019-09-03 00:00:00
Last Modified: 2019-07-23
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