DoD awards $32.2M contract to Northrop Grumman for engineering services, raising value-for-money questions due to sole-source nature

Contract Overview

Contract Amount: $32,221,240 ($32.2M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2025-02-24

End Date: 2028-01-31

Contract Duration: 1,071 days

Daily Burn Rate: $30.1K/day

Competition Type: NOT COMPETED

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: TYPE 173 SOO BLOCK

Place of Performance

Location: ROLLING MEADOWS, COOK County, ILLINOIS, 60008

State: Illinois Government Spending

Plain-Language Summary

Department of Defense obligated $32.2 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: TYPE 173 SOO BLOCK Key points: 1. The contract's sole-source award suggests potential for higher costs compared to a competitive environment. 2. Lack of competition limits opportunities for price discovery and may indicate limited market availability. 3. The fixed-fee structure on a cost-plus basis requires careful monitoring to ensure cost control. 4. Performance duration of nearly three years necessitates robust oversight to ensure timely delivery and quality. 5. The contract falls within engineering services, a sector often characterized by specialized expertise and high barriers to entry. 6. The absence of small business set-aside flags potential missed opportunities for smaller firms in this contract.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging without comparable sole-source awards for similar engineering services. The cost-plus fixed-fee structure, while common for complex projects, carries inherent risks of cost overruns if not meticulously managed. Without competitive bids, it's difficult to ascertain if the fixed fee represents a fair market price. Further analysis of the cost components and historical performance of Northrop Grumman on similar contracts would be needed to provide a more definitive value assessment.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one vendor, Northrop Grumman Systems Corporation, was solicited. This approach bypasses the standard competitive bidding process. While sole-source awards can be justified for unique capabilities or urgent needs, they typically result in less favorable pricing for the government compared to full and open competition. The lack of multiple bidders means the government did not benefit from price negotiation driven by market forces.

Taxpayer Impact: Taxpayers may be paying a premium due to the absence of competition. Without a competitive process, there is less pressure on the contractor to offer the lowest possible price, potentially leading to higher overall expenditure for the government.

Public Impact

The Department of the Air Force is the primary beneficiary, receiving specialized engineering services. The contract supports critical defense engineering functions, likely contributing to national security objectives. Services are to be performed in Illinois, potentially impacting the local economy and workforce in that state. The duration of the contract suggests ongoing support for a significant program or system.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition and potentially increases costs for taxpayers.
Cost-plus fixed-fee contract requires diligent oversight to prevent cost escalation.
Lack of small business participation may limit opportunities for smaller, innovative firms.

Positive Signals

Northrop Grumman is a large, established defense contractor with significant experience.
The contract duration of nearly three years indicates a need for sustained, long-term support.
The specific engineering services provided are crucial for the Air Force's operational capabilities.

Sector Analysis

This contract falls within the Engineering Services sector (NAICS 541330), which is a significant segment of the federal procurement landscape, particularly for defense agencies. The market is characterized by a mix of large, established prime contractors and specialized smaller firms. Federal spending in engineering services often supports complex research, development, and sustainment activities. Comparable spending benchmarks are difficult to establish precisely due to the specialized nature of engineering tasks, but overall federal obligations for engineering services are in the tens of billions annually.

Small Business Impact

This contract was not awarded as a small business set-aside, nor does it appear to have specific subcontracting requirements for small businesses indicated in the provided data. The sole-source nature of the award further limits the direct inclusion of small businesses unless they are subcontractors to the prime. This represents a missed opportunity to leverage the capabilities of the small business industrial base and potentially foster innovation through subcontracting.

Oversight & Accountability

Oversight for this contract will primarily reside with the Department of the Air Force contracting and program management offices. Given the cost-plus fixed-fee structure, rigorous financial oversight and performance monitoring will be critical to ensure costs remain within acceptable bounds and that deliverables meet quality standards. Transparency may be limited due to the sole-source nature, but contract performance reports and audits by the agency's Inspector General would be key accountability mechanisms.

Related Government Programs

Defense Engineering Services
Air Force Research and Development
Aerospace Engineering Support
Cost-Plus Contracts
Sole-Source Procurements

Risk Flags

Sole-source award
Cost-plus contract type
Lack of competition

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $32.2 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. TYPE 173 SOO BLOCK

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 $32.2 million.

What is the period of performance?

Start: 2025-02-24. End: 2028-01-31.

What is Northrop Grumman's track record with the Department of Defense on similar engineering services contracts?

Northrop Grumman Systems Corporation is a major defense contractor with extensive experience across various branches of the U.S. military, including the Department of Defense (DoD). They have a long history of performing complex engineering, manufacturing, and support services. Analyzing their past performance on cost-plus fixed-fee contracts for engineering services within the DoD would be crucial. This would involve reviewing contract close-out data, past performance evaluations, and any documented issues related to cost control, schedule adherence, or quality. Without specific historical data on this contract or very similar ones, it's difficult to provide a precise assessment, but their status as a large, established prime suggests a generally capable, albeit potentially expensive, provider.

How does the pricing structure (Cost Plus Fixed Fee) compare to other contract types for similar engineering services?

Cost Plus Fixed Fee (CPFF) contracts are often used when the scope of work is well-defined but the exact costs are uncertain, or when the contractor needs to be incentivized to control costs while performing complex tasks. Compared to Firm-Fixed-Price (FFP) contracts, CPFF shifts more cost risk to the government, as the contractor is reimbursed for actual costs plus a fixed fee. However, the fixed fee provides some incentive for cost control, unlike Cost Plus Incentive Fee (CPIF) or Cost Plus Award Fee (CPAF) contracts which have variable fees. For highly specialized or R&D-intensive engineering services where scope is difficult to define upfront, CPFF can be appropriate. However, for more predictable services, FFP contracts generally offer better value and price certainty for the government.

What are the primary risks associated with a sole-source award for engineering services?

The primary risk associated with a sole-source award is the lack of price competition, which can lead to inflated costs for the government. Without competing bids, there is no market pressure to drive down prices, and the contractor may not feel compelled to offer the most competitive rate. Additionally, sole-source awards can stifle innovation by excluding potentially more capable or cost-effective solutions from other vendors. There's also a risk that the government may not fully understand the market landscape or available technologies if only one vendor is considered. This can lead to suboptimal technology choices or higher long-term sustainment costs.

What are the potential performance implications of a nearly three-year contract duration for engineering services?

A contract duration of nearly three years (1071 days) for engineering services suggests a need for sustained, long-term support for a specific program, system, or technology. This extended period allows for deeper integration of the contractor's expertise and potentially greater efficiency through familiarity with the project. However, it also increases the government's exposure to potential contractor performance issues, cost overruns, or technological obsolescence over the contract life. Robust contract management, regular performance reviews, and clear milestones are essential to mitigate risks and ensure the government receives value throughout the duration. It also implies a significant commitment from the contractor, potentially requiring dedicated resources.

How does the absence of small business participation impact the broader defense industrial base?

The absence of small business set-asides or explicit subcontracting goals in a large sole-source contract can have a negative impact on the broader defense industrial base. Small businesses often provide specialized expertise, innovative solutions, and agility that larger contractors may lack. By not actively engaging them, the government misses opportunities to foster competition, drive innovation, and support the growth of these smaller firms. This can lead to a less diverse and potentially less resilient industrial base in the long run. Furthermore, it limits the opportunities for small businesses to gain experience and build a track record with major defense programs, hindering their ability to scale and compete for future work.

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

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Northrop Grumman Corporation

Address: 600 HICKS RD, ROLLING MEADOWS, IL, 60008

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: $32,221,240

Exercised Options: $32,221,240

Current Obligation: $32,221,240

Subaward Activity

Number of Subawards: 7

Total Subaward Amount: $3,002,779

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: FA854019D0001

IDV Type: IDC

Timeline