DoD awards $387M for aircraft manufacturing, but competition was limited

Contract Overview

Contract Amount: $386,797,625 ($386.8M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2007-02-22

End Date: 2016-03-31

Contract Duration: 3,325 days

Daily Burn Rate: $116.3K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIXED PRICE INCENTIVE

Sector: Defense

Official Description: LRIP LOT 7 VOUGH&HEROUX LL

Place of Performance

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

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $386.8 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: LRIP LOT 7 VOUGH&HEROUX LL Key points: 1. Significant investment in aircraft manufacturing highlights a critical defense capability. 2. The contract's fixed-price incentive structure aims to balance cost control with performance. 3. Limited competition raises concerns about potential price inflation and reduced value for money. 4. The long duration of the contract suggests a sustained need for these aircraft components. 5. The award to a major defense contractor indicates a focus on established industry players. 6. The absence of small business set-asides may limit opportunities for smaller firms in this sector.

Value Assessment

Rating: fair

The total award of $386.8 million for aircraft manufacturing components is substantial. Without specific benchmarks for the components procured, a direct value-for-money assessment is challenging. However, the 'NOT COMPETED' status suggests that the government may not have achieved the most competitive pricing possible. Comparing this to similar sole-source or limited-competition contracts for aircraft parts would be necessary for a more robust evaluation of its value.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded under a 'NOT COMPETED' basis, indicating a sole-source procurement. This means that only one offeror was solicited and considered. While sole-source awards can be justified for specific reasons such as unique capabilities or urgent needs, they typically result in less price competition compared to full and open solicitations. The lack of multiple bidders limits the government's ability to negotiate the best possible price.

Taxpayer Impact: The absence of competition means taxpayers may not be benefiting from the most cost-effective pricing that could have been achieved through a competitive bidding process.

Public Impact

The primary beneficiaries are the Department of Defense, specifically the Air Force, which receives critical aircraft manufacturing components. The services delivered are essential for maintaining and potentially upgrading existing aircraft fleets. The geographic impact is concentrated in California, where the contractor is located. The contract supports jobs within the aerospace manufacturing sector, particularly at Northrop Grumman Systems Corporation.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to higher costs for taxpayers.
Sole-source awards can reduce transparency in pricing.
Long contract duration without competitive re-evaluation could mask inefficiencies.

Positive Signals

Award to a major defense contractor suggests access to established expertise and production capabilities.
Fixed-price incentive contract type can incentivize contractor performance.
The contract supports a critical defense manufacturing need.

Sector Analysis

This contract falls within the Aircraft Manufacturing sector, a key component of the broader aerospace and defense industry. This sector is characterized by high barriers to entry, significant R&D investment, and long production cycles. Spending in this area is often driven by national security requirements and technological advancements. Comparable spending benchmarks would typically involve other major aircraft component procurements or platform-specific sustainment contracts.

Small Business Impact

The data indicates that this contract was not set aside for small businesses (ss: false, sb: false). As a sole-source award to a large prime contractor, it is unlikely that significant subcontracting opportunities for small businesses were mandated or actively pursued through this specific award mechanism. This could limit the direct impact on the small business ecosystem within this particular procurement.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contracting and financial management oversight mechanisms. As a definitive contract, it is subject to standard audit and review processes. The specific Inspector General jurisdiction would likely be that of the Department of Defense Inspector General, responsible for investigating waste, fraud, and abuse in defense spending. Transparency is limited due to the sole-source nature of the award.

Related Government Programs

Aircraft Component Manufacturing
Defense Procurement
Air Force Sustainment Programs
Aerospace Industry Contracts

Risk Flags

Limited Competition
Sole-Source Award
Potential for Price Inflation
Lack of Transparency

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $386.8 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. LRIP LOT 7 VOUGH&HEROUX LL

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 $386.8 million.

What is the period of performance?

Start: 2007-02-22. End: 2016-03-31.

What is the specific nature of the aircraft components being manufactured under this contract?

The provided data indicates the North American Industry Classification System (NAICS) code is 336411, which corresponds to 'Aircraft Manufacturing'. While the specific components are not detailed, this NAICS code covers establishments primarily engaged in manufacturing complete aircraft, guided missiles, space vehicles, and their primary utilizing components. Given the contractor is Northrop Grumman Systems Corporation and the agency is the Department of the Air Force, these components are likely critical parts for military aircraft, potentially including airframes, engines, avionics, or other specialized systems essential for aircraft operation and sustainment. Further details would require access to the contract's statement of work or line item details.

How does the pricing structure of this Fixed Price Incentive (FPI) contract typically function?

A Fixed Price Incentive (FPI) contract is a type of cost-reimbursement contract where the contractor and the government share the costs or savings of deviations from estimated costs. It establishes a target cost, a target profit, and a target price. If the final cost is lower than the target cost, both parties share in the savings based on a pre-negotiated formula. Conversely, if the final cost exceeds the target cost, both parties share in the overrun up to a ceiling price. The incentive element encourages the contractor to control costs and meet performance objectives to achieve a higher profit, while the government benefits from potential cost savings if the contractor is efficient. The final price is adjusted based on the final incurred cost and the sharing formula.

What are the potential risks associated with a 'NOT COMPETED' contract of this magnitude?

A 'NOT COMPETED' contract, essentially a sole-source award, carries several risks. Primarily, the lack of competition can lead to inflated prices as the contractor faces no market pressure to offer the most cost-effective solution. This can result in reduced value for taxpayer money. Furthermore, it can stifle innovation from other potential suppliers who are not given an opportunity to bid. There's also a risk of complacency from the awarded contractor, as they may not feel the same pressure to perform at peak efficiency or quality compared to a competitive environment. Transparency in pricing and negotiation is also often lower in sole-source situations.

What does the contract duration of 3325 days imply for the program?

A contract duration of 3325 days, which is approximately 9.1 years, suggests a long-term requirement for the aircraft manufacturing components. This extended period could indicate a program involving the production of new aircraft, a lengthy sustainment or upgrade cycle for an existing fleet, or a requirement for components with a long lead time or complex manufacturing process. Such a long duration necessitates careful planning and management to ensure continued relevance, technological currency, and cost control over the life of the contract. It also implies a stable, ongoing need within the Department of the Air Force.

How does the location of the award in California potentially impact the contract?

The award being associated with California (st: CA) indicates that the primary performance or manufacturing location for Northrop Grumman Systems Corporation related to this contract is in that state. This has several implications. Economically, it means jobs and business activity will be generated within California's aerospace sector. It also means that state-specific regulations, labor costs, and business environments will influence the contract's execution. For the Department of Defense, operating within a major aerospace hub like California might offer advantages in terms of access to skilled labor, established supply chains, and technological expertise, but could also mean higher operational costs compared to other regions.

Industry Classification

NAICS: Manufacturing › Aerospace Product and Parts Manufacturing › Aircraft Manufacturing

Product/Service Code: AEROSPACE CRAFT AND STRUCTURAL COMPONENTS

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: FIXED PRICE INCENTIVE (L)

Evaluated Preference: NONE

Contractor Details

Parent Company: Northrop Grumman Corporation (UEI: 967356127)

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

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $387,948,934

Exercised Options: $387,948,934

Current Obligation: $386,797,625

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline