DoD awards Northrop Grumman $32.5M for NATO AGS relocation support, a sole-source aircraft manufacturing contract

Contract Overview

Contract Amount: $32,521,448 ($32.5M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2019-01-17

End Date: 2022-10-31

Contract Duration: 1,383 days

Daily Burn Rate: $23.5K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: RELOCATION IN SUPPORT OF NATO AGS PROGRAM

Place of Performance

Location: SIERRA VISTA, COCHISE County, ARIZONA, 85635

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $32.5 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: RELOCATION IN SUPPORT OF NATO AGS PROGRAM Key points: 1. Contract awarded to a single vendor suggests potential lack of competitive pricing. 2. Long contract duration (1383 days) may indicate complex logistical requirements. 3. Firm Fixed Price contract type shifts cost risk to the contractor. 4. Aircraft manufacturing sector spending is significant, but this contract is niche. 5. Geographic location in Arizona may have implications for local workforce and economy.

Value Assessment

Rating: questionable

Benchmarking value for this specific relocation support is challenging due to its unique nature and sole-source award. The firm fixed price structure is generally favorable for cost control, but without competition, it's difficult to ascertain if the price reflects true market value. Further analysis would require comparing the cost per day or per mile of relocation against similar, albeit likely dissimilar, logistical support contracts within the defense sector.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning it was not competed among multiple vendors. This approach is typically used when only one vendor possesses the necessary capabilities, technology, or security clearances. The lack of competition means that price discovery through market forces was bypassed, potentially leading to higher costs for the government.

Taxpayer Impact: Taxpayers may have paid a premium due to the absence of competitive bidding, as the government did not benefit from potential cost savings that arise from multiple offers.

Public Impact

The primary beneficiary is the Department of Defense, specifically the NATO AGS program, ensuring operational readiness. Services delivered include logistical support for the relocation of assets critical to the NATO Alliance Ground Surveillance program. Geographic impact is centered in Arizona, where the relocation activities are based. Workforce implications may include specialized logistics and transportation roles within the contractor's organization.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits opportunities for other businesses and potentially increases costs.
Lack of transparency in the procurement process due to non-competitive nature.
Long contract duration could mask inefficiencies if not closely monitored.

Positive Signals

Firm Fixed Price contract type provides cost certainty for the government.
Contract supports a critical NATO program, contributing to alliance security.
Northrop Grumman is a major defense contractor with extensive experience.

Sector Analysis

The aircraft manufacturing sector is a significant component of the defense industrial base. This contract, however, falls into a specialized niche of logistical support rather than direct aircraft production. Spending in this sector is generally high, driven by modernization efforts and global security requirements. Comparable spending benchmarks are difficult to establish for such a specific relocation task, but overall defense logistics spending is substantial.

Small Business Impact

This contract was not awarded to a small business, nor does it appear to have specific small business set-aside provisions. Subcontracting opportunities for small businesses are not explicitly detailed in the provided data. The impact on the small business ecosystem is likely minimal for this particular award, as it was a direct sole-source contract with a large prime contractor.

Oversight & Accountability

Oversight for this contract would typically fall under the Defense Contract Management Agency (DCMA), responsible for ensuring contractor performance and compliance. Accountability measures are inherent in the firm fixed price structure, which incentivizes the contractor to manage costs. Transparency is limited due to the sole-source nature of the award, but contract modifications and performance reports would be subject to internal government review.

Related Government Programs

NATO Alliance Ground Surveillance (AGS) Program
Department of Defense Logistics and Transportation Services
Aircraft Manufacturing and Support Contracts
Defense Contract Management Agency (DCMA) Oversight

Risk Flags

Sole-source award
Lack of competition
Potential for cost inefficiency

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $32.5 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. RELOCATION IN SUPPORT OF NATO AGS PROGRAM

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 $32.5 million.

What is the period of performance?

Start: 2019-01-17. End: 2022-10-31.

What is Northrop Grumman's track record with sole-source defense contracts of similar scope?

Northrop Grumman, as a major defense contractor, has a history of receiving sole-source awards, particularly for specialized systems or follow-on support where unique capabilities are required. Analyzing their past performance on similar sole-source contracts would involve reviewing contract histories for issues related to cost overruns, schedule delays, or performance deficiencies. Without specific data on this contract's execution, it's presumed that their extensive experience in defense logistics and aircraft programs provides a baseline level of capability. However, the absence of competition inherently reduces the external validation of their pricing and efficiency compared to a competed contract.

How does the firm fixed price (FFP) structure mitigate risk for the government in this sole-source scenario?

The Firm Fixed Price (FFP) contract structure is designed to transfer cost risk from the government to the contractor. Under an FFP agreement, the contractor is obligated to complete the work for a predetermined price, regardless of their actual costs. This provides the government with cost certainty and predictability, as they know the maximum amount they will pay. In a sole-source situation, while the initial price might be higher due to lack of competition, the FFP still ensures that the government is not liable for cost overruns incurred by the contractor. This is a significant advantage over cost-reimbursement contracts where the government bears the brunt of unexpected expenses.

What are the potential risks associated with a sole-source award for relocation support?

The primary risk of a sole-source award for relocation support is the potential for inflated pricing due to the absence of competitive pressure. Without competing bids, the government may not achieve the most cost-effective solution. Additionally, there's a risk of complacency from the contractor, as they face less pressure to innovate or optimize processes to reduce costs. The government also loses the opportunity to discover potentially more efficient or capable alternative solutions that might have emerged from a competitive bidding process. Ensuring adequate oversight and robust negotiation becomes even more critical in sole-source scenarios.

Can the value of this contract be benchmarked against other defense relocation efforts?

Benchmarking the value of this specific $32.5 million relocation contract is challenging due to its unique nature and sole-source award. Relocation support for major defense programs, especially those involving specialized assets like those for the NATO AGS program, often involves complex logistical, security, and regulatory considerations that differ significantly from standard moves. While general defense logistics spending can be analyzed, finding directly comparable contracts for similar-scale, sole-source relocations is difficult. The firm fixed price nature provides some cost control, but without competitive data, assessing whether the price represents optimal value for taxpayers remains an analytical challenge.

What is the historical spending pattern for aircraft manufacturing support by the Department of Defense?

The Department of Defense (DoD) consistently allocates substantial funding towards aircraft manufacturing and related support services, reflecting the critical role of air power in national security. Historical spending patterns show significant investments in acquiring new aircraft, modernizing existing fleets, and maintaining operational readiness through sustainment and support contracts. While specific figures fluctuate annually based on strategic priorities and budget allocations, aircraft-related spending is a multi-billion dollar category within the DoD budget. This particular contract, though focused on relocation support, falls under the broader umbrella of ensuring the operational readiness and strategic positioning of key assets like the NATO AGS program.

Industry Classification

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

Product/Service Code: MAINT, REPAIR, REBUILD EQUIPMENT › MAINT, REPAIR, REBUILD OF EQUIPMENT

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Northrop Grumman Corporation

Address: 4067 ENTERPRISE WAY, SIERRA VISTA, AZ, 85635

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $32,872,908

Exercised Options: $32,872,908

Current Obligation: $32,521,448

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline